ORLANDO PREDATORS ENTERTAINMENT INC, 10KSB/A, 1999-08-19

ORLANDO PREDATORS ENTERTAINMENT INC
10KSB/A, 1999-08-19
MEMBERSHIP SPORTS & RECREATION CLUBS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB/A

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)
[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]

For the fiscal year ended December 31, 1998 or [ ]

[ [ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]

For the transition period from _______________ to________________

Commission File No. 001-13217

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
--------------------------------------------
(Name of Small Business Issuer in its Charter)

Florida 91-1796903
- ------------------------------- ---------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

400 West Church Street
Orlando, Florida 32801
- --------------------------------------- ---------------------
(Address of principal executive offices) (Zip Code)

Issuer's telephone number: (407) 648-4444

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

No Par Value Class A Common Stock
Redeemable Class A Common Stock Purchase Warrants
-------------------------------------------------
(Title of Class)

<PAGE>

Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
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
----- -----

As of March 22, 1999, 5,130,166 shares of the Registrant's no par value
Class A Common Stock were outstanding. As of March 22, 1999, the market value of
the Registrant's no par value Class A Common Stock, excluding shares held by
affiliates, was $12,837,663 based upon a closing bid price of $4.75 per share of
Class A Common Stock on the NASDAQ SmallCap Market.

Check if there is no disclosure contained herein of delinquent filers in
response to Item 405 of Regulation S-B, and will not be contained, to the best
of the Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ X ]

The Registrant's revenues for its most recent fiscal year were $3,559,329.

The following documents are incorporated by reference into Part III, Items
9 through 12 hereof: None.

<PAGE>
PART I

ITEM 1. DESCRIPTION OF BUSINESS
- --------------------------------

The following is a summary of certain information contained in this Report
and is qualified in its entirety by the detailed information and financial
statements that appear elsewhere herein. Except for the historical information
contained herein, the matters set forth in this Report include 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 and uncertainties are detailed throughout the Report and
will be further discussed from time to time in the Company's periodic reports
filed with the Commission. The forward-looking statements included in the Report
speak only as of the date hereof.

Introduction

The Company is in the sports entertainment business and (i) owns and
operates the Orlando Predators (the "Predators" or the "team"), a professional
arena football team of the Arena Football League (the "AFL" or the "League") and
(ii) owns an additional 10.5% net revenue interest in the League (in addition to
its League ownership through the Predators). Arena football is played in an
indoor arena on a padded 50 yard long football field using eight players on the
field for each team. Most of the game rules are similar to college or other
professional football game rules with certain exceptions intended to make the
game faster and more exciting.

Strategy

The Company's strategy is to participate through the operation of the
Predators and through its League ownership in what the Company believes will be
the continued significant growth of the AFL which in turn is expected to result
in increased revenue to the Company generated from (i) national (League) and
regional (team) broadcast contracts, (ii) national League sponsorship contracts,
(iii) the sale of additional League Membership fees, and (iv) increased fan
attendance at AFL games including Predators' games, together with appreciation
in the value of the Predators as an AFL team. The trend toward ongoing League
growth was recently evidenced by a February 1999 announcement by the National
Football League ("NFL") that it had obtained an option to purchase up to 49.9%
of the League.

At the team level, the Company's strategy is to increase fan attendance at
Predators' home games, expand the Predators' advertising and sponsorship base,
and contract with additional local and regional broadcasters to broadcast
Predators' games.

The Company believes that fan attendance will increase based upon the game
winning success (if any) of the Predators in the AFL and by increasing media
exposure of the team in the central Florida area. Game winning success requires
the ongoing recruitment of superior players. In order to recruit players, the
Company employs a recruiting team which includes the Company's head coach and

<PAGE>

Director of Player Personnel. In order to increase media exposure to the team in
central Florida, and expand the Company's sponsorship base, the Company employs
a marketing representative who calls upon the media, corporate sponsors and
other central Florida organizations. This marketing representative also calls
directly upon central Florida businesses to solicit advertising and sponsorship
funds on behalf of the team. The Predators participate in a number of charitable
events during the year as a part of a community relations and recognition
program and maintain an Internet website at www.orlpredators.com. The Company
also employs ten to 15 part-time telemarketing personnel prior to commencement
of the AFL season to assist in ticket sales.

In a broader sense, the Company's strategy also includes maintaining and
building community support for, and recognition of, the team as an ongoing
valuable entertainment institution in central Florida and throughout the state.
The Company believes that the value of the Predators as a sports team will
increase if community support and recognition are maintained. In this regard,
the Predators completed their eighth AFL season in 1998, have played in the
Arena Bowl for the AFL championship on four occasions and won the Arena Bowl XII
championship ending the 1998 season. The Predators hold one of the best all-time
win-loss records among current and former AFL teams and have recorded the
highest announced average AFL per game attendance in a number of prior seasons.

History

The AFL is a nonprofit membership corporation organized to govern the arena
football teams that comprise the League and to sell team memberships
("Memberships") in major United States markets. The AFL's first season commenced
in 1987. Between 1987 and 1999, the League grew from four teams to 15 teams with
teams in Los Angeles and New Orleans expected to begin play in 2000 and 2001,
respectively. The membership fees for the next team joining the AFL has
increased from $125,000 in 1995 to $5 million for the 2000 season. Since 1992,
announced League attendance has grown from 736,000 to over 1.1 million
(including play-off games). Game broadcasts during this period have included
local, regional, ESPN, ESPN 2 and ABC coverage. For the 1999 season, 20 games
are scheduled to be broadcast on national cable television stations, including
ABC's live broadcast of Arena Bowl XIII. From 11 million television households
in 1994, the AFL reached 27.5 million households in 1998.

Currently, the Company derives its revenue from the arena football
operations of the Predators and its 10.5% net revenue interest in the AFL.
Revenue from football operations results from the sale of tickets to the
Predators' home games, the sale of advertising and promotions to Predator
sponsors, the sale of local and regional broadcast rights to Predators' games,
the sale of merchandise carrying the Predators' logos, and concession sales at
Predators' home games. Revenue from the Company's League ownership results from
the Company's share of all League revenue, primarily consisting of League
contracts with national media organizations, expansion team Membership fees,
national corporate sponsorships and League merchandising sales.

In April, 1998, the NFL amended its by-laws to allow its owners to purchase
additional professional football teams. Subsequently, in May 1998, the owner of
the New Orleans Saints became the first NFL owner to also own an Arena Football
team. The AFL New Orleans franchise will play in the 2001 season.

<PAGE>

As indicated above, in February 1999 the NFL was granted a three year
option to purchase up to 49.9% of the League. Should the NFL exercise its
option, this shared ownership will improve the AFL's ability to negotiate
national media contracts, to develop new league corporate sponsorships and to
sell AFL merchandise.

Arena Football and the Arena Football League

In 1985, Jim Foster, a professional football marketing executive,
formulated a plan for an indoor professional football game that included a
50-yard playing field, an eight player single platoon system and the use of drop
kicks and rebound nets. The first Arena Football game was played in Rockford,
Illinois on April 26, 1986 with a second game played on February 26, 1987 in
Chicago, Illinois.

In March 1987 the U.S. Patent Office issued a U.S. Patent ("Patent") to
Gridiron Enterprises, Inc. an Illinois corporation ("Gridiron") for the Arena
Football Game System and rules of play as well as trademarks for the logo and
names associated with Arena Football. In December 1991, the AFL was incorporated
as a non-profit membership corporation in the state of Delaware. Also in 1991,
Gridiron entered into an exclusive licensing agreement with the AFL to organize,
operate and market Arena Football throughout the United States by selling team
memberships in major markets across the United States. In August 1998 the AFL
purchased all patent and other rights to the Arena Football Game System from
Gridiron for $4,000,000. Pursuant to the licensing agreement, the AFL granted to
Gridiron a per team royalty of $20,000 per year in return for using the game
system and rules of play of Arena Football. In January 1991, the AFL sold a
Membership to the Predators which allowed the Predators to operate and market
Arena Football within a seventy-five mile radius of Orlando, Florida. All names
and logos of the Orlando Predators were owned by and registered to Gridiron.

Four teams were fielded for the League's inaugural 1987 season. By 1991,
the League had eight teams and had played exhibition games in London and Paris.
In 1992 and 1993, the League fielded 12 teams and 10 teams, respectively, with
some games televised on the ESPN cable network. During the 1998 season, the
League consisted of 14 teams including expansion teams in New York, New Jersey
and Nashville. In the 1999 season, a Buffalo team will commence play, and in
2000 and 2001 expansion teams in Los Angeles and New Orleans, respectively, are
expected to commence play.

AFL games are generally played in an indoor basketball/hockey sports arena
which offers fans climate-controlled conditions and a more intimate view of the
game. As a result of the smaller playing field, the rebound nets and a general
emphasis on offensive play, Arena Football games are generally high scoring,
fast-paced action contests.

<PAGE>

Game attendance has risen consistently over the AFL's ten seasons of play
with over 1.1 million in total fan attendance announced for the 1998 season. Per
game announced attendance averaged approximately 10,700 during the 1998 season.
"Announced" game attendance represents attendance figures provided by League
teams to the League and the media and cannot be independently verified.
Approximately 66% of AFL viewers are male and 34% are female with 60% of such
viewers under the age of 35 and 40% over the age of 35. In terms of education,
47% have college or graduate degrees, 28% have some college attendance and 12%
hold high school diplomas.

The membership fee for new teams joining the AFL has grown from $120,000
for the 1990 season to $5,000,000 for the Los Angeles franchise expected to
begin play in the 2000 season. There are approximately 27 million households
with AFL teams in their metropolitan areas, up from 11 million households in
1994. During the 1998 season, ESPN, ESPN 2 and ABC broadcast a total of 23 games
including four playoff games and the Arena Bowl.

AFL team salaries for the 1998 season ranged from $350,000 to $650,000.
Players' salaries range from $8,400 to $60,000 per season together with a
housing provision which averages approximately $400 per month per player. AFL
players sign one-year contracts with an additional one-year option season
granted to the team. Following the contract year, if the team and a player
cannot agree on the option season salary, the player must either play for the
original option year salary or stay out during the option season, after which
the player is free to negotiate with any team in the League. There are no player
drafts, although expansion teams are allowed to draw from a pool of players
designated by existing AFL teams.

Each player is provided a $500,000 occupational health, accidental death
and disability insurance policy. Each team is required to pay the first $35,000
of claims for an injured player up to an aggregate of $356,000 for the three
Florida based AFL teams.

Rules of Arena Football

Arena Football is played in an indoor arena on a field which consists of a
padded surface 85 feet wide and 50 yards long with eight-yard end zones. The
endzone goalposts are nine feet wide with a cross-bar height of 15 feet compared
to NFL goalposts which are 18 1/2 feet wide with a cross-bar height of 10 feet.
Eight feet above each endzone are goal-side rebound nets which are 30 feet wide
by 32 feet high.

There are eight players on the field for each team as part of a 24-man
roster. Players play both offense and defense with the exception of the kicker,
quarterback, an offensive specialist, two defensive specialists and a kick
returner.

The game is played using an NFL-size football in four 15-minute quarters
with a 15-minute halftime. The game clock stops for out of bounds plays or
incomplete passes only in the last minute of each half, when necessary for
penalties, injuries and time-outs or following points after touchdowns, field
goals and safeties. Accordingly, the average AFL football game is played in
approximately two hours and 25 minutes compared to approximately three hours and
five minutes for an NFL game.

<PAGE>

Four downs are allowed to advance the ball ten yards for a first down or to
score. Scoring consists of six points for a touchdown, one point for a
conversion by placekicking after a touchdown, two points for a conversion by
dropkick and two points for a successful run or pass after a touchdown. Three
points are awarded for a field goal by placement or four points for a field goal
by dropkick, with two points for a safety. Punting is illegal. On fourth down a
team may attempt a first down, touchdown or field goal. The receiving team may
field any kickoff or missed field goal that rebounds off the rebound nets.

Although passing rules for the AFL are similar as to outdoor NCAA football,
a unique exception involves the rebound nets. A forward pass that rebounds off a
rebound net is a live ball and is in play until it touches the playing surface.

Overtime periods are 15 minutes during the regular season and the playoffs.
Each team has one possession to score. If, after each team has had one
possession and one team is ahead, that team wins. If the teams are tied after
each has had a possession, the next team to score wins.

AFL Teams

For the 1999 season, the AFL will consist of the following 15 teams,
aligned into two conferences, with two divisions in each conference:

American Conference

Western Division Central Division
---------------- ----------------
Arizona Rattlers Iowa Barnstormers
Portland Forest Dragons Milwaukee Mustangs
San Jose SaberCats Houston ThunderBears
Grand Rapids Rampage

National Conference

Eastern Division Southern Division
---------------- -----------------
Albany Firebirds Florida Bobcats
New England Sea Wolves Nashville Kats
New Jersey Red Dogs Orlando Predators
Buffalo Destroyers Tampa Bay Storm

Regular Season and Playoffs

Following two pre-season games, the regular AFL season extends from April
to August, with each team playing a total of 14 games against teams from both
conferences. Half of the games are played at home, and half are played away. At

<PAGE>

the end of the regular season, the four division champions along with the four
teams with the best winning records, qualify for the AFL playoffs to determine
the AFL's Arena Bowl champion for that season. The playoffs consist of three
single elimination rounds with the third round matching the two remaining teams
playing in the Arena Bowl to determine the League champion. Each round is played
in the home arena of the team with the best winning record.

Gate Receipts, AFL Assessments and Distributions

AFL teams are entitled to keep all gate receipts from pre-season home
games, regular season home games and playoff home games. Teams do not receive
any gate receipts from away games except that visiting teams are reimbursed for
hotel expenses by the home team. Each team is required to pay an annual
assessment to the AFL which is generally equal to the team's share of the
League's annual operating costs and each team is contingently liable for other
team membership purchases, team repurchases by the League and League litigation.
Each team's assessment is generally funded by its share of revenue derived from
the League's national television contracts, from the sale of AFL licensed
merchandise and from revenues generated by the League's sale of expansion team
franchises. Each visiting team participating in the playoffs is reimbursed for
hotel expenses and receives a fixed payment of $45,000 for the first playoff
round, $45,000 for the second playoff round and $50,000 for the Arena Bowl.

AFL Licensing

The AFL operates a League licensing program on behalf of its teams. Under
the program, product manufacturers sign agreements allowing them to use the
names and logos of all AFL teams, the AFL itself and AFL's special events
(including playoffs and the Arena Bowl) in exchange for royalty and guarantee
payments. For the year ended December 31, 1998, the Company's share of net
revenues from licensing was negligible and was credited against the Team's
assessment for that year. The Company's share of net revenue from the League
(the "Team Share") was equal to 1/16 of the AFL's net revenue for the 1998
season. The Team Share is equal to the AFL's net revenue divided by the total
number of League teams (15 including Buffalo, which will begin playing in 1999)
and one Gridiron Team Share. League assessments are also based upon the Team
Share. Each team is also permitted to license its club identified products
locally for sale at its arena, at team owned and operated stores and through
team catalogs. The Company purchased two non-voting equity interests in 1998 and
beginning in August 1998 the Team Share was 1/19 together with 2/19 for its two
non-voting equity interests.

<PAGE>

League Governance

The AFL is generally responsible for regulating the conduct of its member
teams. The AFL establishes the regular season and playoff schedules of the
teams, and negotiates, on behalf of its members, the League's national and
network broadcast contracts. Each of the AFL's members is, in general, liable on
a pro rata basis for the AFL's liabilities and obligations and shares pro rata
in its profits. Under the Bylaws of the AFL, League approval is required to
complete a public offering of any team's securities and for the sale or
relocation of a team.

The AFL is governed by a Board of Directors, which consists of one
representative from each team. Brett L. Bouchy, the Company's Chief Executive
Officer, serves as the Predator's representative on the AFL Board of Directors.
The Board of Directors selects the AFL Commissioner, who administers the daily
affairs of the AFL including interpretation of playing rules and arbitration of
conflicts among member teams. The Commissioner also has the power to impose
sanctions, including fines and suspensions, for violations of League rules.
David Baker has been the Commissioner of the AFL since 1996.

Restrictions on Ownership

The AFL Charter and Bylaws contain provisions which may prohibit a person
from acquiring the Common Stock and affect the value of the Common Stock. In
general, any acquisition of shares of Common Stock which will result in a person
or a group of persons holding 5% or more of the Company's outstanding Common
Stock will require the prior approval of the AFL, which may be granted or
withheld in the sole discretion of the AFL. The prospective purchaser would be
required to submit an AFL application, in form prescribed by the AFL, providing
certain information relating to that person's background. Upon receipt of such
application, the AFL has the right to conduct an investigation of the
prospective purchaser. In addition, the AFL may condition its approval upon the
execution, delivery and performance by the prospective purchaser of such
documents as the Charter or Bylaws shall prescribe. If a prospective purchaser
obtains the AFL's consent to acquire a 5% or more interest in the Company, such
prospective purchaser will be required to acknowledge that the purchaser will be
bound by the applicable provisions of the AFL Charter and Bylaws.

In addition, no person who directly or indirectly owns any interest in an
AFL team, may own, directly or indirectly, a 5% or more interest in any other
team, without the prior approval of the AFL. The AFL Bylaws also contain
provisions which prohibit team owners from engaging in certain activities, such
as wagering on any game in which an AFL team participates. AFL players and
referees and employees of the AFL and its member clubs (other than the Company)
are not eligible to purchase or hold Common Stock. The AFL could in the future
adopt different or additional restrictions which could adversely affect the
shareholders.

The grant of a security interest in any of the assets of the Company or the
Predators or any direct or indirect ownership interest in the Company, of 5% or
more, requires the prior approval of the AFL, which may be withheld in the AFL's
sole discretion. AFL rules limit the amount of debt that may be secured by the

<PAGE>

assets of, or ownership interests in, an AFL team and require that the parties
to any secured loan that is approved execute an agreement limiting the rights of
the lenders and the team (or stockholder) under certain circumstances, including
upon an event of default or foreclosure. These limitations may adversely affect
the rights of the team (or stockholder) under certain circumstances.

Failure by a holder of a 5% or more interest in the Company to comply with
these restrictions may result in a forced sale of such holder's interest in the
Company or the repurchase of such interests by the Company. The Company's Bylaws
provide that the Company may redeem, at the lower of fair market value or cost,
shares held by any person or entity who becomes the owner of 5% or more of the
Company's Common Stock without the approval of the AFL. These restrictions are
and will continue to be contained in a legend on each certificate issued
evidencing shares of Class A Common Stock.

Neither the AFL, any of its affiliates or members nor any of their
respective officers, employees or representatives, other than the Company,
assume any responsibility for the accuracy of any representations made by the
Company in this Report.

Current Operations of the Company

The Company derives substantially all of its revenue from the Arena
Football operations of the Predators and its 10.5% net revenue interest in the
League. 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 Company's share of League media contracts, Membership fees paid
by expansion teams and League licensing sales, and (v) the sale of merchandise
carrying the Predators' logos.

In March 1998, the Company entered into an agreement with the AFL pursuant
to which it agreed to purchase an additional revenue interest in the League
(which would represent two "Revenue Interests" or a 2/19 interest in the
League's revenue) for $6,000,000. Under the terms of the agreement, the Company
will receive the greater of $480,000 per year or 2/19 of the League's gross
revenue until the Company receives an aggregate of $6,000,000. If the entire
$6,000,000 is paid by August 14, 1999, one of the Revenue Interests will be
canceled and the Company will thereupon receive 1/19 of the League's net
revenues, without a minimum guarantee.

Ticket Sales. The Predators played seven home games and seven away games
during the 1998 AFL regular season together with one home and one away
pre-season exhibition game. Under the AFL Bylaws, the Company receives all
revenue from the sale of tickets to regular season and pre-season home games and
no revenue from the sale of tickets to regular season and pre-season away games.

The Predators play all home games at the Orlando Arena, which holds
approximately 16,000 spectators. In the 1998 season, the Company sold
approximately 7,000 season tickets and had an average paid attendance of
approximately 8,600 per game. Ticket prices for regular season home games during

<PAGE>

the 1998 season at the Orlando Arena ranged from $10 to $100 per game with an
average paid ticket price of approximately $22.15. The Company expects ticket
sales to improve as a result of its Arena Bowl championship in 1998 and the
institution of telemarketing techniques for ticket sales.

The following table sets forth certain information relating to the
Predators' regular season revenue generated by the sale of tickets for the 1997
and 1998 seasons:

Number of Average Average Paid Average
Season Per Game Paid Ticket Ticket Revenue
Season Tickets Attendance Price Per Game
- ------ ------- ---------- ----- --------

1998 7,055 8,661 $22.15 $191,805

1997 5,401 8,521 $22.63 $192,822

Advertising and Promotion. The Company generates revenue from the sale of
advertising displayed on signs located throughout the Orlando Arena, and through
other promotions utilizing the team's name or logos. In addition, the Company
markets team "sponsorships" to local and regional businesses which provide a
combination of advertising rights, promotional rights and VIP ticket privileges.
Advertising rights include the use of corporate logos within the Orlando Arena,
commercials on radio and television, advertisements in the ArenaBall magazine,
display of the sponsor's name on the Jumbotron (a large, four sided electronic
sign located in the center of the Orlando Arena, public address announcements,
the inclusion of customer names on team posters and the like. Promotional rights
include banners displayed in the team's VIP room at the Orlando Arena),
availability of blocks of seats in the upper bowl endzone for specific games,
the use of the team's logos and autographed helmets. VIP privileges include high
priority seating selections, parking passes, VIP room passes and travel
packages, which include attendance at team away games.

Local and Regional Television, Cable and Radio Broadcasts. In March 1998,
the Company entered into a three-year television contract with the Sunshine
Network for the 1998, 1999 and 2000 seasons providing for the Company to receive
approximately $70,000 per season. The Company also entered into a one-year radio
contract with Clear Channel, Inc. providing for the Company to receive
approximately $20,000 in 1998. Most of the proceeds from the two media contracts
are paid in the form of bartered commercial television and radio time made
available to the Company.

National Television. In February 1998, the AFL reached a two-year national
broadcast agreement with ESPN, ESPN 2 and ABC providing for the networks to
televise 20 AFL games, a majority of which will be live rather than tape delayed
(including 10 games in prime time), four playoff games and ABC's telecast of the
Arena Bowl.

<PAGE>

Sale of Merchandise. The Company generates additional revenue from the sale
of merchandise carrying the Predator logos (primarily athletic clothing such as
sweatshirts, T-shirts, jackets and caps) at the Orlando Arena and at the
Company's corporate offices in downtown Orlando. Revenue from the sale of such
merchandise was approximately $90,000 for the 1998 season.

Telemarketing. In addition to using telemarketing techniques to improve the
Predators' ticket sales, the Company has signed an agreement to use its
telemarketing personnel to sell tickets and merchandise for the Tampa Bay Storm
of the AFL. During 1998, the Company also earned $130,600 in telemarketing
revenue from Sunwest P.E.O. Inc., a related party. The Company intends to
further develop its telemarketing techniques in order to offer telemarketing
ticket services for other collegiate and professional sports teams.

Summary of League Revenue and Expense

The following table summarizes the Company's share of the revenue derived
from the AFL as well as AFL assessments incurred during the last two regular
seasons:

SEASON
1997 1998
---- ----
Revenue:
Expansion team membership fees $181,250 $ 799,916

Assessments:
Operating assessment 125,000 120,0000
Other costs 99,622 --
-------- --------
Total assessments 224,622 120,000
-------- --------
Net revenue (assessments) $(43,372) $ 679,916
======== =========

<PAGE>

Performance

The following table describes the performance of the Predators during the
last three AFL seasons:

Season Record Finish in Division Playoff Results
------------- ------------------ ---------------

1995 7-5 2nd Lost in Arena Bowl

1996 9-5 2nd Lost in first playoff
game
1997 10-4 1st Lost in second playoff
game
1998 9-5 2nd Won Arena Bowl
Championship

Coaches

Jay Gruden, age 32, was retained by the Company as the Predators' head
coach in August 1997. Coach Gruden replaced Perry Moss who had been the team's
head coach for the previous seven seasons. Coach Gruden quarterbacked the Tampa
Bay Storm for six seasons from 1991 to 1996. During his tenure, he set AFL
records for career pass completions (1,182), passing yards (15,514) and passing
touchdowns (280). He led Tampa Bay to Arena Bowl championships four times,
including back-to-back titles in 1995 and 1996. A two-time All-Arena selection,
Coach Gruden also was the League's Most Valuable Player in 1992.

Coach Gruden was hired in 1996 to become offensive coordinator of the AFL
expansion Nashville Kats. Nashville won an expansion team record 10 games and
qualified for the AFL playoffs. Coach Gruden was credited with developing
Nashville's quarterback, Andy Kelly, into one of the League's top quarterbacks.
Kelly finished the season with an AFL-leading 82 touchdown passes and was the
League's fifth rated quarterback. Under Coach Gruden, the Nashville offense
finished third in the AFL in scoring at 52.9 points per game and was fourth in
total offense at 285.2 yards per game. Coach Gruden's offenses produced
victories in the 1997 season over eventual league champion Arizona (56-49), two
wins over the Predators (45-36 in Orlando and 74-55 at Nashville) and wins over
two other playoff teams.

A Tampa native, Coach Gruden began his professional career with the NFL
Arizona Cardinals in 1989. He moved to the World League of American Football in
1990, where he played for the Sacramento Surge and the Barcelona Dragons, before
signing with Tampa Bay in 1991.

In his final season as quarterback for Tampa Bay in 1996, he completed 70
touchdown passes, while setting career highs for attempts (447), completions
(275) and yards (3,626). In six post-season campaigns as Tampa Bay's

<PAGE>

quarterback, Coach Gruden delivered four championship titles and led Tampa Bay
to an overall record of 12-2. He completed 253 of 425 post-season passes (60%),
for 4,410 yards and 52 touchdowns. Coach Gruden was Arena Bowl Most Valuable
Player in 1993. As Tampa Bay's quarterback, he compiled an overall record of
68-17 (.800) - the best six-year winning percentage in AFL history.

At the University of Louisville under Head Coach Howard Schnellenberger,
Coach Gruden set school passing marks in a number of categories and won Most
Valuable Player honors in both 1987 and 1988. Following his senior season, he
accepted invitations to both the East-West Shrine Game and the Blue-Gray
All-Star Games.

Coach Gruden's staff includes five other assistant coaches including
offensive and defensive coaches, a director of player personnel and an
administrative coach.

Players

In general, the rules of the AFL permit each team to maintain an active
roster of 24 players during the regular season. The following table sets forth
certain information concerning the Predators' roster for the 1998 season.
<TABLE>
<CAPTION>

No Name Position(1) Ht. Wt. Birthdate Years in AFL
- -- ---- ----------- --- --- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
3 David Cool K 5-11 207 05/23/69 Rookie
4 John Clark FB/LB 6-3 250 08/16/68 4th Season
5 Chris Barber DS 6-1 190 01/15/64 6th Season
7 Kevin Gaines DS 6-1 190 08/07/71 Rookie
8 Chad Johnson QB 6-3 210 03/19/74 Rookie
9 Connell Maynor QB/WR 6-0 180 01/21/69 5th Season
15 Ty Law OS 6-1 180 11/27/71 3rd Season
17 Pat O'Hara QB 6-4 212 09/27/68 3rd Season
21 Bruce LaSane WR/LB 6-4 225 08/30/66 6th Season
23 Corris Ervin DS 5-11 185 08/30/66 2nd Season
26 Bret Cooper WR/DB 6-0 190 12/18/70 5th Season
28 Damon Mason DS 5-9 175 03/21/74 Rookie
33 Tommy Dorsey FB/LB 6-3 235 03/05/79 Rookie
42 Rick Hamilton FB/LB 6-2 241 04/19/70 Rookie
46 Bill Hall FB/LB 6-1 238 12/05/70 Rookie
65 Eric Drakes OL/DL 6-5 265 01/24/69 6th Season
78 Webbie Burnett OL/DL 6-3 285 11/07/67 6th Season
82 Barry Wagner WR/DB 6-3 215 11/24/67 6th Season
83 James Crockett DS 5-10 190 11/26/74 Rookie
84 Robert Gordon OS 5-10 185 06/07/68 Rookie
87 Victor Hall OL/DL 6-2 265 12/04/68 4th Season

<PAGE>

90 Reggie Lee OL/DL 6-2 280 12/21/67 Rookie
93 Kelvin Ingram OL/DL 6-2 285 10/25/70 Rookie
97 Howard Smothers OL/DL 6-3 280 11/16/73 Rookie
98 Matt Storm OL/DL 6-3 320 09/02/72 Rookie
99 Connell Spain OL/DL 6-2 285 06/09/74 Rookie
</TABLE>

(1) WR-Wide Receiver; DB-Defensive Back; FB-Fullback; LB-Lineback; DS-
Defensive Specialist; OS-Offensive Specialist; QB-Quarterback; OL-Offensive
Line; DL-Defensive Line

Player salaries range from $8,400 to $60,000 per season together with a
housing provision which averages approximately $400 per month per player. AFL
players sign one-year contracts with an additional one-year option season
granted to the team. Following the contract year, if a team and player cannot
agree on the option season salary, the player must either play for the original
option year salary or stay out during the option season, after which he is free
to negotiate with any team in the League. There are no player drafts, although
expansion teams are allowed to draw from a pool of players designated by each
AFL team.

Orlando Arena

The Predators have played in the Orlando Arena, which has a seating
capacity of approximately 16,000, since 1991. In March 1998, the Company signed
a new five-year lease (with an additional five-year option) with the Orlando
Arena commencing in the 1998 season at approximately the same per game rental as
its previous lease, but which provides the Company with an approximately 20%
share of revenue generated from food and beverage concessions in exchange for
the Company reducing ticket prices by approximately 10% to 20%, depending upon
seat location. The Company will also receive a rebate against rent of $3 per
person (up to $10,000) for games in which attendance exceeds 9,000 persons.
Under the terms of the Predators' previous lease, which expired at the end of
the 1997 season, the Predators paid a rental that was the higher of $7,500 per
game or 8.5% of ticket sales for such game, up to a maximum of $15,000 per game.
The team did not share in any other arena revenue, such as parking fees or
concession sales.

Competition

The Predators compete for sports entertainment dollars with other
professional sports teams and with college athletics and other sports-related
entertainment. During portions of the AFL season, the Predators compete with
professional basketball (NBA and WNBA) in the city of Orlando and with
professional hockey and professional baseball in the state of Florida. In
addition, the colleges and universities in central Florida, as well as public
and private secondary schools, offer a full schedule of athletic events
throughout the year. The Predators also compete for attendance and advertising
revenue with a wide range of other entertainment and recreational activities
available in central Florida. On a broader scale, AFL teams compete with
football teams fielded by high schools and colleges, the Professional Indoor
Football League (a fledgling indoor style football league established in 1997
with teams operating in eight markets), the NFL, the Canadian Football League
and NFL Europe.

<PAGE>

Employees

In addition to its active football players, the Company employs eight
football personnel and 24 non-football personnel. During the AFL season, the
Company also uses volunteer part-time employees from time to time. None of the
Company's employees, including its players, are covered by collective bargaining
agreements. The Company considers its relations with its employees to be good.

Proposed Hockey Acquisition

In March 1999 the Company entered into a non-binding letter of intent to
purchase a majority interest in two minor league hockey teams for an as yet
undetermined amount of cash and the Company's Class A Common Stock. A definitive
agreement has not yet been completed and would be subject to a number of
significant contingencies.

ITEM 2. DESCRIPTION OF PROPERTY
- --------------------------------

The Company leases its executive offices in Orlando, Florida from First
Union Bank on a month-to-month basis. The rental rate, valued at $4,167 per
month, is satisfied through a trade-out with First Union Bank for Predator
season tickets and other advertising considerations. In April 1999, the Company
will move its corporate office and telemarketing facility to 400 West Church
Street in Orlando, Florida pursuant to a two year lease covering 4800 square
feet for $900 per month. The Company has agreed to contribute approximately
$40,000 in leasehold improvements.

ITEM 3. LEGAL PROCEEDINGS
- --------------------------

In December 1998, Jack Youngblood, the Company's former President, filed
suit against the Company in the Circuit Court of the Ninth Judicial Circuit in
and for Orange County, Florida captioned Youngblood vs. The Orlando Predators
Entertainment, Inc., et al. (Case No. C98-10027- 35). Mr. Youngblood alleges
that the Company breached its employment agreement with Mr. Youngblood by
terminating his employment for job abandonment and by issuing defamatory press

<PAGE>

releases. The Company believes Mr. Youngblood's claims are without merit and is
vigorously defending the action.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------

Not applicable.

<PAGE>

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
- ------- --------------------------------------------------------

The Company's Class A Common Stock commenced trading on the NASDAQ SmallCap
Market under the symbol "PRED" on December 11, 1997. The following table sets
forth for the quarters indicated the range of high and low closing prices of the
Company's Class A Common Stock as reported by NASDAQ but does not include retail
markup, markdown or commissions.

PRICE RANGE OF CLASS A COMMON STOCK

Closing Price
-------------
By Quarter Ended: High Low
- ----------------
March 31, 1999 (through March 22, 1999) ................ $5.375 $4.50
December 31, 1998 ...................................... $3.38 $3.25
September 30, 1998 ..................................... $3.88 $3.38
June 30, 1998 .......................................... $5.25 $3.63
March 31, 1998 ......................................... $4.25 $2.94
December 31, 1997 ...................................... $4.25 $3.12

As of March 10, 1999, the Company had approximately 900 record and
beneficial stockholders.

Class A and Class B Common Stock

The Company is authorized to issue 15,000,000 shares of no par value Common
Stock ("Common Stock"), of which 5,130,166 shares of Class A Common Stock are
outstanding as of the date of this Report. In addition, the Company has issued
1,000 shares of no par value Class B Common Stock to The Monolith Limited
Partnership (925 shares) and Alan N. Gagleard (75 shares), the Company's two
principal shareholders. The Class A Common Stock and Class B Common Stock are
identical in all respects except that each share of Class A Common Stock is
entitled to one vote and each share of Class B Common Stock is entitled to
10,000 votes. The Class B Common Stock was issued to satisfy certain control
requirements of the AFL. See "Arena Football-Restrictions on Ownership" and
"Item 12." Upon issuance, shares of Common Stock are not subject to further
assessment or call. Subject to the prior rights of any series of preferred stock
which may be issued by the Company in the future, holders of Common Stock are
entitled to receive ratably such dividends that may be declared by the Board of
Directors out of funds legally available therefor, and, in the event of the

<PAGE>

liquidation, dissolution or winding up of the Company, are entitled to share
ratably in all assets remaining after payment of liabilities. Holders of Common
Stock have no preemptive rights or rights to convert their Common Stock into any
other securities. The outstanding Common Stock is validly issued, fully paid and
nonassessable. The holders of the Class B Common Stock are entitled to convert
each share of Class B Common Stock into one share of Class A Common Stock.

Redeemable Warrants

Each Warrant represents the right to purchase one share of Class A Common
Stock at an initial exercise price of $7.50 per share until December 10, 2002.
The exercise price and the number of shares issuable upon exercise of the
Warrants are subject to adjustment in certain events, including the issuance of
Class A Common Stock as a dividend on shares of Class A Common Stock,
subdivisions or combinations of the Class A Common Stock or similar events. The
Warrants do not contain provisions protecting against dilution resulting from
the sale of additional shares of Class A Common Stock for less than the exercise
price of the Warrants or the current market price of the Company's securities.

Warrants may be redeemed in whole or in part, at the option of the Company,
upon 30 days' notice, at a redemption price equal to $.01 per Warrant if the
closing price of the Company's Class A Common Stock on NASDAQ is at least $7.50
per share for 20 consecutive trading days, ending not earlier than five days
before the Warrants are called for redemption.

Holders of Warrants may exercise their Warrants for the purchase of shares
of Class A Common Stock only if a current prospectus relating to such shares is
then in effect and only if such shares are qualified for sale, or deemed to be
exempt from qualification, under applicable state securities laws. The Company
will use its best efforts to maintain a current prospectus relating to such
shares of Class A Common Stock at all times when the market price of the Class A
Common Stock exceeds the exercise price of the Warrants until the expiration
date of the Warrants, although there can be no assurance that the Company will
be able to do so.

The shares of Class A Common Stock issuable upon exercise of the Warrants
will be, when issued in accordance with the Warrants, fully paid and
non-assessable. The holders of the Warrants have no rights as stockholders until
they exercise their Warrants.

For the life of the Warrants, the holders thereof are given the opportunity
to profit from a rise in the market for the Company's Class A Common Stock, with
a resulting dilution in the interest of all other stockholders. So long as the
Warrants are outstanding, the terms on which the Company could obtain additional
capital may be adversely affected. The holders of the Warrants might be expected
to exercise them at a time when the Company would, in all likelihood, be able to
obtain any needed capital by a new offering of securities on terms more
favorable than those provided by the Warrants.

The Warrants are also listed on the NASDAQ SmallCap Market.

19
<PAGE>

Preferred Stock

The Company is authorized to issue 1,500,000 shares of preferred stock, no
par value (the "Preferred Stock"). The Preferred Stock may, without action by
the stockholders of the Company, be issued by the Board of Directors from time
to time in one or more series for such consideration and with such relative
rights, privileges and preferences as the Board may determine. Accordingly, the
Board has the power to fix the dividend rate and to establish the provisions, if
any, relating to voting rights, redemption rate, sinking fund, liquidation
preferences and conversion rights for any series of Preferred Stock issued in
the future.

It is not possible to state the actual effect of any other authorization of
Preferred Stock upon the rights of holders of Common Stock until the Board
determines the specific rights of the holders of any other series of Preferred
Stock. The Board's authority to issue Preferred Stock also provides a convenient
vehicle in connection with possible acquisitions and other corporate purposes,
but could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock. Accordingly, the issuance of
Preferred Stock may be used as an "anti-takeover" device without further action
on the part of the stockholders of the Company, and may adversely affect the
holders of the common stock. The Company has not issued any Preferred Stock.

Transfer Agent and Warrant Agent

The Company has appointed Corporate Stock Transfer, Inc., 370 17th Street,
Suite 2350, Denver, Colorado 80202, as its transfer agent and warrant agent.

Dividends

The Company has not paid dividends on its Class A and Class B Common Stock
since inception and does not plan to pay dividends in the foreseeable future.
Earnings, if any, will be retained to finance growth.

Limitation on Liability

The Company's bylaws provide that a director shall not be personally liable
to the Company or its stockholders for any action taken or any failure to act to
the full extent permitted by the Florida Business Corporation Act. The effect of
this provision in the bylaws is to eliminate the rights of the Company and its
stockholders, through stockholders' derivative suits on behalf of the Company,
to recover monetary damages from a director for breach of the fiduciary duty of
care as a director including breaches resulting from negligent or grossly
negligent behavior. This provision does not limit or eliminate the rights of the
Company or any stockholder to seek non-monetary relief such as an injunction or
rescission in the event of a breach of a director's duty of care or to seek
monetary damages for (i) a violation of criminal law, (ii) unlawful payment of
dividends or other distribution under Florida law, (iii) a transaction in which
a director derived an improper personal benefit, (iv) willful misconduct, or (v)
reckless, malicious or wanton acts.

<PAGE>

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
- ------------------------------------------------------------------

Introduction

The Orlando Predators Entertainment, Inc. (the "Company") was formed in March
1997 to acquire and operate the Orlando Predators (the "Predators" or the
"team"), a professional Arena Football team of the Arena Football League (the
"AFL" or the "League"). The AFL is a nonprofit corporation organized to govern
the Arena Football teams, which comprise the League.

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.

Prospective investors should read the following information in conjunction with
the Company's audited financial statements and should carefully consider such
information as well as other information contained in this Report before making
an investment in the Company's securities. Information contained herein contains
"forwarding-looking statements" which can be identified by the use of
forward-looking terminology such as `believes," "expects," "may," "should" or
"anticipates" or the negative thereof or other variations heron or comparable
terminology, or by discussions of strategy. No assurance can be given that the
future results covered by the forward-looking statements will be achieved. Many
factors (including intense competition, possible need for additional capital,
the Company's business concentration, risks associated with the Orlando Arena
lease, dependence on key personnel, competitive success of the Predators,
possible increase in players' salaries, risk of players' injuries, risks
associated with AFL membership and uncertainties regarding game attendance and
broadcast contracts) could also cause actual results to vary materially for the
future results covered in such forward-looking statements.

Amended Form 10-KSB
- -------------------
This amended Form 10-KSB reflects the effect of a put agreement entered into by
Monolith Limited Partnership ("Monolith"), a major shareholder of the Company.
In August 1998, whereby Monlith arranged for the sale to a third party of
1,000,000 shares of the Company's Class A Common Stock for $2,000,000 and agreed
to repurchase 600,000 of those shares for $4,000,000, at the third party's
option, through May 1999. The agreement was amended in May 1999 to extend the
period of exercise through March 2001. The third party is also a partner in
Monolith. As a result of this transaction, the Company ]has recorded a capital
contribution from Monolith of $2,802,000 and a corresponding charge to
accumulated deficit capital, in the accompanying financial statements. There was
no effect on income as a result of this transaction. The calculation of earnings
per share has also been amended to reflect an addition to net loss, in computing
the loss attributable to common stockholders, as the charge to accumulated
deficit is treated similar to a preferred stock dividend. On July 13, 1999, the
option agreement was exercised for 275,000 of the 600,000 shares. In
consideration for $550,000 paid by Monolith to the third party as a cancellation
fee, the third party agreed to terminate the put right for the remaining shares.

The Company has made the following additional adjustments to the accompanying
financial statements, resulting in a net reduction of the net loss previously
reported of $971,214 to $884,341:

* Reclassified amounts received from the AFL, originally reported as interest
income and reduction of amounts receivable, to expansion revenue.

* Accrued sales commission in accordance with the terms of an employment
contract.

* Recorded a loss from the disposal of equipment.

* Wrote-off certain sponsorship receivables.

* Reclassified certain general and administrative expenses to selling and
promotional expenses and operations expenses.

<PAGE>

Results of Operations

Year Ended December 31, 1998 Compared to Period Ended December 31, 1997

Revenues. Revenues for the period ended December 31, 1998 were $3,719,329
which represented a increase of $1,021,435 or 38% as compared to revenue of
$2,697,894 for the period ended December 31, 1997.

Season ticket prices for the 1998 season decreased by an average of 10%.
However, the number of season ticket holders increased by 1,889, which
represented an increase in season ticket holders of over 38% for the year.

The Company operated under the first year of a new lease agreement with the
Orlando Arena that allowed the Company to participate in concession revenue for
the first time. For the year ended December, 31, 1998, the Company generated
$122,866 in concession revenue for the nine home games played compared to the
prior period when no concession revenue was generated.

Playoff game revenue was $225,762, an increase of $40,444 or 22% for the
year ended December 31, 1998 compared to $185,318 for the period ended December,
31, 1997. Playoff game revenue sharing increased by $50,000 due to the team
playing an extra game and winning the Arena Bowl XII championship.

Sponsorship revenue was $769,267 for the year ended December 31, 1998, an
increase of $124,738 or 19% compared to $644,529 for the period ended December
31, 1997.

League revenues were $779,916 for the year ended December 31, 1998, an
increase of $618,666 or 341% compared to $181,250 for the period ended December
31, 1997 due to the two, non-voting equity interests in the AFL that the Company
purchased in August 1998. The expansion Los Angeles team paid the League a fee
of $5,000,000 in November, 1998.

Telemarketing revenue is a new segment for the Company this year and it
generated revenue of $130,600 for the period ended December 31, 1998. It
produces commissions based on the number of sales made through an employee
leasing company, which is owned by a related party. The Company anticipates the
expansion of this division in the future and will continue to use it to generate
sales of season tickets.

Operating Expenses. Operating expenses of $2,007,747 increased $313,818 or
19% as compared to the prior period of $1,693,929. The increase was due
primarily to the increase in medical costs related to post season surgeries and
increased salaries.

Playoff Expenses. Playoff expenses of $357,121 for the year ended December
31, 1998 increased by $127,618 compared to $229,503 for the period ended
December 31, 1997. This was due to the additional championship away game. In the
prior year, the Company had two playoff games compared to three games for the
current year.

Selling and Promotional Expenses. Selling and promotional expenses of
$625,937 for the year ended December 31, 1998 increased $239,580 or 62% as
compared to $386,357for the period ended December 31, 1997 primarily due to (i)
an increase in an advertising campaign of print and radio, and (ii) increased
commissions paid to Orlando Predator season ticket telemarketers.

League Assessments. League assessments of $120,000 for the year ended
December 31, 1998 decreased $104,622 or (47%) as compared to $224,622 for the
period ended December 31, 1997. This decrease is due to a reduction in expenses
associated with legal settlements and legal bills with former teams as well as
other claims. The AFL is comprised of a number of teams who share in all league
expenses and revenues. League assessments are based upon the team's share of
league operating expenses and other league expenses such as legal settlements.

General and Administrative Expenses. General and administrative expenses of
$1,239,172 for the year ended December 31, 1998 increased $367,966 or 42%
compared to $871,206 for the period ended December 31, 1997. This increase can
be attributed to increased payroll costs of $235,894 due to an increase in the
number of employees. It can also be attributed to the shorter prior period.
Other increases included office operations costs of $82,301, printing expenses
of $70,619, offering costs from a discontinued offering of $57,046, bridge loan
fees of $95,000 and legal costs of $36,568.

Telemarketing Expense. Due to the addition of the new telemarketing
services segment, the Company incurred expenses in the amount of $220,107. These
costs were associated with operating this segment.

<PAGE>

Interest Expense. Interest expense was $29,162 for the period ended
December 31, 1998 compared to $2,520 for the period ended December 31, 1997.
Related party interest expense was $34,256 for the year ended December 31, 1998
compared to $104,083 for the period ended December 31, 1997. The interest
expense and the related party interest expense during the twelve months ended
December, 1998 were related to bridge loans of $2,000,000, which were used in
the initial down payment for $3,500,000 used to secure the two equity interests
in the AFL. The interest expense during the period ended December 31, 1997 was
related to the debt assumed in the purchase of the Company and additional
advances for operations made by stockholders of the Company.

Interest Income. Interest income for the year ended December 31, 1998 was
$207,640 compared to $12,601 for the period ended December 31, 1997. The
increase can be attributed to the proceeds received from the initial public
offering and the interest related to the receivable recorded from the League.

Period Ended December 31, 1997 Compared to Year Ended December 31, 1996

The Company recognizes game revenue and expenses over the course of the
season (April through August). Therefore, revenue and operating expenses, other
than selling, general and administrative expenses of the Company, are comparable
to the predecessor company (Orlando Predators, a division of Orlando Predators,
Ltd.)

Revenue. Revenue for the period ended December 31, 1997 was $2,697,894,
which represented a decrease of $191,489, or 6.6%, as compared to revenue for
the year ended December 31, 1996 of $2,889,383. The decrease for the period
ended December 31, 1997 was directly attributable to a decrease in ticket sales
of $328,462 as well as decreases in sponsorship and miscellaneous revenue of
$171,812. The decrease in ticket sales and sponsorship revenue resulted from a
decrease in season ticket sales efforts prior to the beginning of the 1997
season. The team was sold in March 1997 to the Company, and the former owners
did not market season tickets and sponsorship sales as they had done in prior
years. For the 1998 season, the Company began marketing efforts in September
1997. The decrease in ticket and sponsorship revenue was offset by increases in
League revenue of $163,467 and playoff revenue of $145,318.

The Company expects that revenue will increase during the 1998 season as a
result of (i) increased ticket sales for the 1998 season and (ii) the Company's
new lease with the Orlando Arena which provides the Company with a 20% share of
concession revenue at Predators' home games and a rebate against rent of $3 per
person (up to $10,000) for games in which attendance exceeds 9,000 persons.
However, a portion of this revenue will be offset by slightly lower ticket
prices. See "Business - Properties."

Operating Expenses. Operating expenses (including playoff expenses) were
$1,923,432, a decrease of $270,325 or 12.3% as compared to the prior year
operating expenses of $2,193,757. The decreases were a result of decreases in
player related costs, including payroll, medical and housing costs. These
decreases were offset by increased expenses of approximately $159,000 related to
an additional home playoff game.

Selling and Promotional Expenses. Selling and promotional expenses were
$386,357, a decrease of 12.8%, or $57,048, as compared to the prior year
primarily due to the decreased preseason marketing efforts.

League Assessments. League assessments were $224,622, an increase of
$73,243, or 48%, as compared to the prior year of $151,379. League assessments
increased primarily due to costs associated with legal settlements with former
teams. The AFL is comprised of a number of teams who share in all the League
expenses and some League revenues. Assessments are based upon the team's share
of League operating expenses and other League expenses such as legal
settlements.

<PAGE>

General and Administrative Expenses. General and administrative expenses
were $871,206, an increase of $245,569, or 39.3%, as compared to the prior year
of $625,637. This increase can be attributed to an increase in payroll costs and
professional fees.

Interest Expense. Interest expense during the period ended December 31,
1997 was $104,083. The interest expense was related to the debt assumed in the
purchase of the Company and additional advances for operations made by
stockholders of the Company. This debt was paid using proceeds of the IPO.

Amortization and Depreciation. Amortization and depreciation increased
$45,061 as compared to the prior year due to the increase in the cost of the
assets acquired by the Company in February 1997.

Liquidity and Capital Resources

Historically, the Company has financed net operating losses primarily with
loans from the team's former managing general partners and the sale of its
securities.

During April 1998, the Company completed an offering of 40 units, with each
unit consisting of one $450,000 promissory note 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 were due on the earlier of December 31, 2001 or the
closing date of a public offering in excess of $5,000,000. A commission of
$95,000 was paid in connection with the transaction. Of the $2,000,000 (40
units) promissory notes, $1,050,000 (21 units) were sold to current stockholders
or directors, including $850,000 (17 units) to Monolith. Notes of $755,000 and
accrued interest of $5,573 were converted to 304,229 shares of the Company's
Class A Common Stock in the August 31, 1998 private placement. The remaining
notes payable and accrued interest of $1,295,774 were paid on September 1, 1998.

On August 11, 1998, the Company completed a private placement of 1,250,000
shares of its class A Common Stock for $2,500,000 ($2.00 per share) with no
offering costs. These proceeds were used to complete the purchase of the equity
interests in the Arena Football League.

On August 31, 1998, the Company completed a private placement of 1,200,000
shares of its Class A Common Stock for $3,000,000 ($2.50 per share) and paid
offering costs of $749,557. Proceeds from this private placement were used to
pay off the outstanding bridge loans and interest. The remaining proceeds were
used for working capital needs.

In October, 1998, the Company completed another private placement offering.
It consisted of one investor totaling $250,000 ($2.50 per share), with
commissions of 15% or $37,500 paid for 100,000 shares of Class A common stock.
These proceeds were used to fund current operations.

The reduction of indebtedness using proceeds of the private placements
improved the Company's liquidity by reducing indebtedness required to be paid in
the future. The Company believes that cash flows from operations, along with
distributions related to the recent purchase of two equity interests in the AFL
will enhance the Company's future cash flows and satisfy the Company's
anticipated working capital requirements for at least the next 12 months. This
will be accomplished by the requirement that the AFL make a minimum principal
and interest payment to the Company in the amount of $480,000 annually.

On November 5, 1998, the Company received a payment from the League in the
amount of $672,791. This payment represented expansion revenue from the Los
Angeles expansion team.

In January and February, 1999, the Company completed another private
placement offering. It consisted of three investors totaling $145,000
($2.50-$3.00 per share), with commissions of 15% or $21,750 paid for 75,000
shares of Class A common stock. These proceeds were used to fund current
operations.

<PAGE>

Year 2000 Issue

Many computer systems and other equipment with embedded chips or
microprocessors may not be able to appropriately interpret dates after December
31, 1999 because such systems use only two digits to indicate a year in the date
field rather than four digits. If not corrected, many computers and computer
applications could fail or create miscalculations, causing disruptions to the
Company's operations. In addition, the failure of customer and supplier computer
systems could result in interruption of sales and deliveries of key supplies or
utilities. Because of the complexity of the issues and the number of parties
involved, the Company cannot reasonably predict with certainty the nature or
likelihood of such impacts.

Using internal staff and outside consultants, the Company is actively
addressing this situation and anticipates that it will not experience a material
adverse impact to its operations, liquidity or financial condition related to
systems under its control. The Company is addressing the Year 2000 issue in four
overlapping phases: (i) identification and assessment of all critical software
systems and equipment requiring modification or replacement prior to 2000; (ii)
assessment of critical business relationships requiring modification prior to
2000; (iii) corrective action and testing of critical systems; (iv) development
of contingency and business continuation plans to mitigate any disruption to the
Company's operations arising from the Year 2000 issue.

The Company is in the process of implementing a plan to obtain information
from its external service providers, significant suppliers and customers, and
financial institutions to confirm their plans and readiness to become Year 2000
compliant, in order to better understand and evaluate how their Year 2000 issues
may affect the Company's operations. The Company currently is not in a position
to assess this aspect of the Year 2000 issue; however, the Company plans to take
the necessary steps to provide itself with reasonable assurance that its service
providers, suppliers, customers and financial institutions are Year 2000
compliant. This phase is 50% complete to date.

The Company is developing contingency plans to identify and mitigate
potential problems and disruptions to the Company's operations arising from the
Year 2000 issue. This phase is expected to be completed by May, 1999. The total
cost to achieve Year 2000 compliance is currently estimated at $39,000.
Approximately $34,000 has been spent to date on a new networked computer system.

While the Company believes that its own internal assessment and planning
efforts with respect to its external service providers, suppliers, customers and
financial institutions are and will be adequate to address its Year 2000
concerns, there can be no assurance that these efforts will be successful or
will not have a material adverse effect on the Company's operations.

<PAGE>

ITEM 7. FINANCIAL STATEMENTS

INDEX

Page

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
Independent Auditors' Report F-2
Financial Statements:
Balance Sheet F-3
Statements of Operations F-5
Statement of Changes in Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8

F-1

<PAGE>

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
The Orlando Predators Entertainment, Inc.
Orlando, Florida

We have audited the accompanying balance sheet of The Orlando Predators
Entertainment, Inc. as of December 31, 1998, and the related statements of
operations, changes in stockholders' equity and cash flows for the year then
ended and for the period February 14, 1997 (inception) to December 31, 1997.
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 audits.

We conducted our audits 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 audits provide 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 The Orlando Predators
Entertainment, Inc. as of December 31, 1998 and the results of its operations
and its cash flows for the year then ended and for the period February 14, 1997
(inception) to December 31, 1997, in conformity with generally accepted
accounting principles.

AJ. ROBBINS, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
AND CONSULTANTS

Denver, Colorado
March 17, 1999, except for Note 5 G,
to which the date is July 13, 1999

F-2

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
BALANCE SHEET
DECEMBER 31, 1998
-----------------

ASSETS

CURRENT ASSETS:
Cash $ 117,188
Accounts receivable, sponsorships 214,816
Accounts receivable, related party 106,734
AFL receivable, current portion 42,944
Accrued interest receivable, AFL 150,454
Inventory 20,585
Receivable from employees 45,135
Prepaid expenses 256,561
-------------
Total Current Assets 954,417

PROPERTY AND EQUIPMENT, at cost, net 230,214

EQUITY INVESTMENT IN AFL 4,032,650

AFL RECEIVABLE, net of current portion 1,923,027

MEMBERSHIP COST, net 1,894,512

OTHER INTANGIBLES, net 34,474

RESTRICTED INVESTMENT 100,000

OTHER ASSETS 2,544
------------

$ 9,171,838
============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-3

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
BALANCE SHEET (Continued)
DECEMBER 31, 1998
-----------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 322,070
Accounts payable and accrued expenses, related parties 25,661
Accrued interest, related party 6,671
Deferred revenue 643,672
-----------

Total Current Liabilities 998,074
-----------

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; 5,050,000 issued and
outstanding 9,867,150
Class B Common Stock, 1,000 shares
authorized, 1,000 issued 5,000
and outstanding
Additional paid-in capital 2,879,940
Accumulated (deficit) (4,578,326)
-----------

Total Stockholders' Equity 8,173,764
-----------

$ 9,171,838
===========

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-4

<PAGE>
<TABLE>
<CAPTION>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FEBRUARY 14 TO DECEMBER 31, 1997
-----------------------------------------------

1998 1997
----------- -----------
<S> <C> <C>
REVENUES:
Ticket revenues $ 1,534,440 $ 1,542,577
Concession income 122,866 --
Play-off game ticket revenues 130,762 140,318
Play-off game revenue sharing 95,000 45,000
Local television and radio broadcast rights 76,752 87,632
Advertising and promotions 669,267 644,529
Advertising and promotions, related party 100,000 50,000
League revenue 799,916 181,250
Telemarketing income, related party 130,600 --
Other 59,726 6,588
----------- -----------

Total Revenues 3,719,329 2,697,894
----------- -----------

COSTS AND EXPENSES:
Operations 2,007,747 1,693,929
Operations, related party 11,197 5,362
Playoff expenses 357,121 229,503
Selling and promotional expenses 625,937 386,357
League assessments 120,000 224,622
General and administrative 1,239,172 871,206
Telemarketing expenses 220,107 --
Amortization 70,432 52,496
Depreciation 43,610 32,402
Loss from disposal of equipment 13,783 --
----------- -----------

Total Costs and Expenses 4,709,106 3,495,877
----------- -----------

OPERATING (LOSS) (989,777) (797,983)
----------- -----------

OTHER INCOME (EXPENSE):
Interest expense (29,162) (2,520)
Interest expense, related party (34,256) (104,083)
Interest income 57,186 12,601
Interest income, AFL 150,454 --
Loss from equity investment in AFL (38,786) --
----------- -----------
Net Other Income (Expense) 105,436 (94,002)
----------- -----------

NET (LOSS) (884,341) (891,985)

EFFECT OF MONOLITH LIMITED PARTNERSHIP PUT AGREEMENT (2,802,000) --
----------- -----------

NET LOSS ATTRIBUTABLE TO COMMON STOCKHOLDERS $(3,686,341) $ (891,985)
=========== ===========

NET (LOSS) PER SHARE $ (1.09) $ (.61)
=========== ===========

Weighted Average Number of Common Shares Outstanding 3,374,836 1,463,796
=========== ===========

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-5

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD ENDED DECEMBER 31, 1997
--------------------------------------

Class A Common Stock Class B Common Stock Additional
----------------------- ---------------------- Paid-In Accumulated
Shares Amount Shares Amount Capital (Deficit) Total
---------- ----------- --------- ----------- ------- --------- -----------

Class A Common Stock
issued in exchange
for ownership of the
Predators 1,276,500 $ 438,087 -- $ -- $ -- $ -- $ 438,087

Class A Common Stock
issued for cash 103,500 49,709 -- -- -- -- 49,709

Class B Common Stock
issued for conversion of
accrued interest payable -- -- 1,000 5,000 -- -- 5,000

Class A Common Stock
issued net of offering
cossts of $1,126,089 1,100,000 4,373,911 -- -- -- -- 4,373,911

Net (loss) -- -- -- -- -- (891,985) (891,985)
----------- ----------- ----------- ----------- ----------- ----------- -----------

Balances, 2,480,000 4,861,707 1,000 5,000 -- (891,985) 3,974,722
December 31, 1997

Class A Common Stock
issued in private placemments,
net of offering
costs of $794,556 2,570,000 5,005,443 -- -- -- -- 5,005,443

Stock options issued
to consultants -- -- -- -- 77,940 -- 77,940

Effect of Monolith
Limited Partnership
Put Agreement -- -- -- -- 2,802,000 (2,802,000) --

Net (loss) -- -- -- -- -- (884,341) (884,341)
----------- ----------- ----------- ----------- ----------- ----------- -----------

Balances, 5,050,000 $ 9,867,150 1,000 $ 5,000 $ 2,879,940 $(4,578,326) $ 8,173,764
December 31, 1998
=========== =========== =========== =========== =========== =========== ===========

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-6

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT,INC.
STATEMENTS OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1998 AND
FOR THE PERIOD FEBRUARY 14 TO DECEMBER 31, 1997

1998 1997
------------ ------------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net (loss) $ (884,341) $ (891,985)
Adjustments to reconcile net (loss)
to net cash from operating activities:
Loss from disposal of equipment 13,783 --
Depreciation and amortization 114,042 84,898
Loss from equity interest in AFL 38,787 --
Stock options issued to consultants 77,940 --
Changes in assets and liabilities:
Accounts receivable, sponsorships (214,816) 688,956
Accrued interest receivable (150,454) --
Employee receivables 6,582 (46,256)
Inventory (5,926) 5,326
Prepaid expenses (162,427) (1,693)
Accounts receivable, related party (106,734) --
Other assets (1,636) (908)
Accounts payable (29,062) 109,182
Accrued expenses 183,777 15,612
Accounts payable, related party (54,447) 80,108
Accrued expenses, related party (86,839) 104,083
Due to AFL -- (8,000)
Deferred revenue 186,029 (830,544)
----------- -----------

Net Cash (Used) by Operating Activities (1,075,742) (691,221)
----------- -----------

CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Purchase of equipment (25,758) (27,130)
Sale of equipment 548 --
Investment in AFL (4,071,437) --
Issuance of AFL receivable (1,965,971) --
Collections on AFL receivable -- --
Investment in certificate of deposit -- (100,000)
Payments for contract purchase -- (62,054)
----------- -----------

Net Cash (Used) by Investing Activities (6,062,618) (189,184)
----------- -----------

CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from loans from stockholders 316,000 1,080,000
Proceeds from issuance of notes payable to related parties 1,050,000 --
Repayments of loans from stockholders (316,000) (2,317,828)
Repayment of notes payable (200,000) --
Proceeds from issuance of notes payable 950,000 --
Proceeds from issuance of Class A Common Stock 5,039,426 5,500,000
Repayment of notes payable to related parties (1,045,000) --
Payment of offering costs (794,556) (1,126,089)
----------- -----------

Net Cash Provided by Financing Activities 4,999,870 3,136,083
----------- -----------

INCREASE (DECREASE) IN CASH (2,138,490) 2,255,678

CASH, beginning of period 2,255,678 --
----------- -----------

CASH, end of period $ 117,188 $ 2,255,678
=========== ===========

CASH PAID FOR INTEREST $ 149,857 $ --
=========== ===========

Supplementary information:
See Note 6

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-7

</TABLE>

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Activity
- --------
The Orlando Predators Entertainment, Inc. (the Company) was formed on March 27,
1997, to acquire, own and operate the Orlando Predators, a Division of Orlando
Predators, Ltd. (Predators). The Predators are a professional Arena Football
team and a member of the Arena Football League (AFL or League). The AFL
membership was purchased by Monolith Limited Partnership (Monolith) as an agent
for the Company on February 13, 1997 from the Orlando Predators, Ltd.. During
March 1997, Monolith organized the Company and transferred ownership of the
Predators to the Company in exchange for 1,276,500 shares of the Company's
common stock. 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.

Management's Plan
- -----------------
The Company had a net loss of $892,000 in 1997 and $884,000 in 1998 and an
accumulated deficit of $4,578,000 as of December 31, 1998. Current liabilities
exceed current assets by $44,000 as of December 31, 1998.

The majority stockholder of the Company, Monolith, has agreed that they will
continue to use their best efforts to financially support the Company with any
cash flow deficiencies they may have in their calendar year end 1999.

Cash and Cash Equivalents
- -------------------------
Cash and equivalents consists primarily of cash in banks and highly liquid
investments with original maturities of 90 days or less.

Inventory
- ----------
Inventory consists of team merchandise available for sale. Inventory is stated
at the lower of cost (first-in, first-out) or market.

Property and Equipment
- ----------------------
Property and equipment is recorded at cost. Depreciation expense is provided on
a straight-line basis using the estimated useful lives of 5-10 years.
Maintenance and repairs are charged to expense as incurred. When assets are
retired or otherwise disposed of, the property accounts are relieved of costs
and accumulated depreciation and any resulting gain or loss is credited or
charged to operations. Depreciation expense for the periods ended December 31,
1998 and December 31, 1997 was $43,610 and $32,402, respectively.

Restricted Investment
- ---------------------
Restricted investment consists of an interest bearing certificate of deposit
with a financial institution, which also provides a letter of credit to the
Company. The certificate of deposit was a condition of awarding the letter of
credit.

F-8

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Membership Cost
- ---------------
The AFL membership is recorded at cost of $1,989,860 and is being amortized on a
straight-line basis over 40 years. Amortization expense for the periods ended
December 31, 1998 and December 31, 1997 was $49,747 and $45,601, respectively.

Impairment of Long Lived Assets
- -------------------------------
The Company evaluates its long lived assets by measuring the carrying amount of
the assets against the estimated undiscounted future cash flows associated with
them. At the time such evaluations indicate the future undiscounted cash flows
of certain long lived assets are not sufficient to cover the carrying value of
such assets, the assets are adjusted to their fair values. No adjustment to the
carrying value of the assets have been made.

Other Intangible Assets
- -----------------------
The remainder of the new head coach's contract and other costs from his former
employer were purchased for $62,054 and are being amortized on a straight-line
basis over the term of his contract with the Company, 3 years. Amortization
expense for the periods ended December 31, 1998 and December 31, 1997 was
$20,685 and $6,895, respectively.

Football Operations
- -------------------
Revenues, principally ticket sales and television and radio broadcasting fees
are recorded as revenues at the time the related game is played. The Company is
entitled to keep all gate receipts from home games but does not share in the
gate receipts from away games. Team expenses (principally player and coaches
salaries, fringe benefits, insurance, game expenses, arena rentals and travel)
are recorded as expenses on the same basis. Accordingly, income and expenses not
earned or incurred are recorded as deferred revenues and prepaid expenses and
are amortized ratably as regular season games are played. General,
administrative, selling and promotional expenses are charged to operations as
incurred.

Use of Estimates
- ----------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

The Company sells sponsorships for cash and services. In exchange, the sponsor
receives advertising and various benefits to Predator games. The value of the
services has been estimated in the accompanying financial statements. Management
believes these estimates reasonably disclose the value of services received.

Investment in AFL
- -----------------
The Company accounts for its two non-voting equity interests in the AFL using
the equity method.

F-9

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes
- ------------
The Company accounts for income taxes under the asset and liability method.
Under this method, deferred income taxes are recorded to reflect the tax
consequences in future years of temporary differences between the tax basis of
assets and liabilities and their financial statement amounts at the end of each
reporting period. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense
represents the tax payable for the current period and the change during the
period in deferred tax assets and liabilities. Deferred tax assets and
liabilities have been netted to reflect the tax impact of temporary differences.

Deferred tax assets arise primarily from the net operating loss and amortization
of the membership cost which is not deductible for tax purposes until the
membership is sold. Deferred tax liabilities result when depreciation for tax
purposes exceeds depreciation for book purposes. The net deferred tax asset at
December 31, 1998 was not significant. A valuation allowance equal to the net
deferred tax asset has been recorded since it is more likely than not that the
tax asset will not be realized. (See Note 9).

Concentrations of Risk
- ----------------------
Concentrations of credit risk associated with accounts receivable is limited due
to accounts receivable transactions arising from sponsorship contracts which
have a history of performance. The supply of talented players is limited due to
the competitive nature with other professional football leagues.

The Company maintains all cash in deposit accounts, which at times may exceed
federally insured limits. The Company has not experienced a loss in such
accounts.

Fair Value of Financial Instruments
- -----------------------------------
The carrying value of accounts receivable, AFL receivable, accounts payable and
accrued expenses approximate fair value because of the short maturity of these
items.

Earnings Per Common Share
- -------------------------
The Company computes earnings per common share in accordance with Statement of
Financial Accounting Standards No. 128, Earnings Per Share (SFAS No. 128). This
Statement simplifies the standards for computing earnings per share (EPS)
previously found in Accounting Principles Board Opinion No. 15, Earnings Per
Share, and makes them more comparable to international EPS standards. SFAS No.
128 replaces the presentation of primary EPS with a presentation of basic EPS.
In addition, the Statement requires dual presentation of basic and diluted EPS
on the face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
computation. Diluted EPS is not presented since the computation is antidilutive.

F-10

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-Based Compensation
- ------------------------
The Company accounts for stock based compensation in accordance with the
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based Compensation" (SFAS No.123). Under the
provisions of SFAS No. 123, companies can either measure the compensation cost
of equity instruments issued under employee compensation plans using a fair
value based method, or can continue to recognize compensation cost using the
intrinsic value method under the provisions of APB No. 25. However, if the
provisions of APB No. 25 are continued, proforma disclosures of net income or
loss and earnings or loss per share must be presented in the financial
statements as if the fair value method had been applied. The Company recognizes
compensation costs under the provisions of APB No. 25 and will provide the
expanded disclosure required by SFAS No. 123.

Recently Issued Accounting Pronouncements
- -----------------------------------------
In 1997, the FASB issued Statements No. 130, "Reporting Comprehensive Income",
and No. 131, "Disclosures about Segments of an Enterprise and Related
Information" and No. 132, "Employers Disclosure about Pensions and Other
Postretirement Benefits", effective for fiscal years beginning after December
15, 1997. The Company has disclosed its operating segments in Note 11. The
adoption by the Company of Statements No. 130 and 132 did not impact the
Company's financial statements.

Year 2000 Issues
- ----------------
Many computer systems and other equipment with embedded chips or microprocessors
may not be able to appropriately interpret dates after December 31, 1999 because
such systems use only two digits to indicate a year in the date field rather
than four digits. If not corrected, many computers and computer applications
could fail or create miscalculations, causing disruptions to the Company's
operations. In addition, the failure of customer and supplier computer systems
could result in interruption of sales and deliveries of key supplies or
utilities. Because of the complexity of the issues and the number of parties
involved, the Company cannot reasonably predict with certainty the nature or
likelihood of such impacts.

Using internal staff and outside consultants, the Company is actively addressing
this situation and anticipates that it will not experience a material adverse
impact to its operations, liquidity or financial condition related to systems
under its control. The Company is addressing the Year 2000 issue in four
overlapping phases: (i) identification and assessment of all critical software
systems and equipment requiring modification or replacement prior to 2000; (ii)
assessment of critical business relationships requiring modification prior to
2000; (iii) corrective action and testing of critical systems; (iv) development
of contingency and business continuation plans to mitigate any disruption to the
Company's operations arising from the Year 2000 issue.

F-11

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company is in the process of implementing a plan to obtain information from
its external service providers, significant suppliers and customers, and
financial institutions to confirm their plans and readiness to become Year 2000
compliant, in order to better understand and evaluate how their Year 2000 issues
may affect the Company's operations. The Company currently is not in a position
to assess this aspect of the Year 2000 issue; however, the Company plans to take
the necessary steps to provide itself with reasonable assurance that its service
providers, suppliers, customers and financial institutions are Year 2000
compliant. This phase is 50% complete to date.

The Company is developing contingency plans to identify and mitigate potential
problems and disruptions to the Company's operations arising from the year 2000
issue. This phase is expected to be completed by May, 1999. The total cost to
achieve Year 2000 compliance is currently estimated at $39,000. Approximately
$34,000 has been spent to date on a new networked computer system.

While the Company believes that its own internal assessment and planning efforts
with respect to its external service providers, suppliers, customers and
financial institutions are and will be adequate to address its Year 2000
concerns, there can be no assurance that these efforts will be successful or
will not have a material adverse effect on the Company's operations.

NOTE 2 - ACQUISITION OF PREDATORS

The Predators were purchased by Monolith Limited Partnership (Monolith) as an
agent for the Company on February 13, 1997 from the Orlando Predators, Ltd.
During March 1997 Monolith organized the Company and transferred ownership of
the Predators to the Company in exchange for 1,276,500 shares of the Company's
common stock.

Monolith acquired substantially all of the assets and the business of the
Orlando Predators, a Division of Orlando Predators, Ltd. (Predators). The assets
consist primarily of the Orlando Arena Football League (AFL) membership, game
and office equipment. The purchase price for the team was $2,325,000 comprised
of $1,875,000 in cash, $180,000 note which was paid in May 1997, assumption of
$45,000 in commissions payable, and $225,000 of Monolith Limited Partnership
interests (agent for the Company).

F-12

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 2 - ACQUISITION OF PREDATORS (Continued)

The purchase price for the Predators has been allocated as follows:

AFL Membership $ 1,989,860
Game equipment and system 225,721
Office equipment 41,948
Prepaid expenses 67,471
------------

Total Purchase Price 2,325,000

Monolith units (225,000)
Note payable (180,000)
Commissions payable (45,000)
------------

Cash paid at closing $ 1,875,000
============

NOTE 3 - ARENA FOOTBALL LEAGUE

The AFL is a non-profit corporation, which governs the rules and conduct of each
member team. Each member owns an equal percentage of the AFL and appoints one
board member. A budget for AFL expenses is approved annually by the board and
expenses are shared equally. Revenues from expansion membership fees are divided
equally between all members, the Company's two additional, non-voting equity
interests (see Note 10) and the two equity interests owned by the inventor
(Gridiron) of the Arena Football Game. Revenues and assessments are recognized
when billed by the league. Special assessments for membership repurchases are
recognized in the same periods as membership expansion fees that replace them.
The Arena Football League's strategic development plan calls for the formation
of an AFL minor league system ("AF2") beginning in the year 2000. The Company's
share of the 1999 season budget is as follows:

Revenue:
"AFL" Expansion membership fees $ -
"AF2" Expansion membership fees 11,053
------------
11,053
Assessments:
Operating assessment (120,000)
Other assessments (9,000)
------------
Net Assessment $ (117,947)
============

The Company continues to be contingently liable for its share of AFL expenses
which may exceed AFL revenues.

F-13

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 3 - ARENA FOOTBALL LEAGUE (Continued)

A $1,500,000 judgement has been entered against the AFL. The AFL has filed a
motion to appeal and set aside the judgement. No date has been set for the
motion to set aside and legal counsel is unable to estimate the future outcome.
The AFL is also a defendant to a claim for alleged damages for approximately
$800,000. The AFL is vigorously defending this action. The AFL is also a party
to a number of other lawsuits arising in the course of business. In the opinion
of the Company's management, the resolution of those matters will not have a
material adverse effect on the AFL's results of operations, cash flows or
financial position.

Outcomes and expenses of litigation will be divided equally between all members.
Management believes its share of the outcomes will not have a material adverse
effect on the Company's results of operations, cash flows or financial position.

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

December 31,
1998
------------

Office equipment $ 52,285
Game equipment and system 243,207
------------
295,492
Less accumulated depreciation (65,278)
------------
$ 230,214
============

NOTE 5 - COMMITMENTS AND CONTINGENCIES

A.) Local Media Contracts
- -------------------------
In March 1998, the Company entered into a three-year television contract for the
1998, 1999 and 2000 seasons, which requires the Company to provide certain
services, goods and game tickets in exchange for approximately $80,000 of
commercial time, promotional events and the right to broadcast the games. The
Company also entered into a one-year radio contract with under similar terms.
The Company is currently negotiating a new radio contract.

B.) Employment Agreements
- ------------------------
The Company has employment agreements with players, the head coach and
executives of the Predators. Certain of these contracts provide for guaranteed
payments which, must be paid even if the employee is injured or terminated. The
player contracts are for a term of one year with a one year renewal option. If
the team does not re-sign the player at the end of the contract, he is waived
and free to sign with another team. However, the team has the option of signing
the player first. If the player refuses to re-sign, he must "sit out" for one
year before playing for another team.

F-14

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)

The former President had a 42 month agreement with annual compensation ranging
from $60,000 to $80,000, commission on sponsorship revenue ranging from 10% to
7%, tickets to home games and options to purchase 34,500 shares of the Company's
Class A Common Stock with an exercise price of $2.00 through July 2007. During
December 1998, the former President was dismissed.

The Director of Player Personnel and Assistant Coach has a 3 year employment
agreement with annual compensation ranging from $40,000 to $44,000, a $6,000
signing bonus, playoff participation incentives and options to purchase 10,000
shares of the Company's Class A Common Stock with an exercise price of $2.00 per
share.

The Headcoach had a 3 year employment agreement with annual compensation ranging
from $70,000 to $80,000, playoff participation incentives and options to
purchase 15,000 shares of the Company's Class A Common Stock with an exercise
price of $2.00 per share. The Company has an option to renew the contract for an
additional 3 years. The agreement was amended effective January 1, 1999,
providing for an increase in salary ranging from $90,000 to $115,000 and an
extension of the term of the agreement for an additional 2 years at the
Company's option. He was also granted options to purchase 30,000 shares of the
Company's Class A Common Stock with an exercise price of $3.19 for 15,000
shares, and $3.25 for 15,000 shares.

The Vice-President of Sales and Marketing had a 3 year employment agreement with
annual compensation of $45,000, 10% commissions on increases in sponsorship
revenues over the prior year sponsorship revenues, 1% of renewal season ticket
sales and 20% of new season ticket sales, less commissions paid to direct sales
staff. The agreement was subsequently cancelled when the employee resigned and
accepted the position of Vice-President of Business Development. The new
agreement is for one year and calls for annual compensation of $45,000, 20%
commission on all new season ticket sales by the employee, 30% of gross revenues
from Company sanctioned seminars and 6 season tickets.

The Chief Financial Officer of the Company has a 1 year employment agreement
with annual compensation of $50,000 and options to purchase 50,000 shares of the
Company's Class A Common Stock with an exercise price of $3.19 per share.

C.) Lease Obligations
- ---------------------
In March 1998, the Company signed a five-year lease (with an additional
five-year option) with the Orlando Centroplex arena commencing in the 1998
season. The agreement provides the Company with an approximately 20% share of
revenue generated from food and beverage concessions in exchange for the Company
reducing ticket prices by approximately 10% to 20%, depending upon seat
location. The Company will also receive a credit to be applied to the game
rental of $3 per person (up to $10,000) for games in which attendance exceeds
9,000 persons.

F-15

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)

During September 1998, the Company entered into an 8 month lease agreement with
the City of Orlando for office space for the telemarketing division at a rate of
$2,828 per month. As of December 31, 1998, minimum future rent payments under
the lease were $11,312.

Corporate office space was received as trade for a sponsorship from a financial
institution. The total value of the office space was $50,000 and the lease was
renewed annually.

The Company was given notice in January 1999, that the corporate office space
received as trade for a sponsorship from a financial institution would no longer
be available as of March 31, 1999. The Company has entered into a two year lease
agreement at a rate of $900 per month.

The minimum future lease payments under the lease agreements are as follows:

Corporate Orlando
Office Centroplex
------------- -------------
1999 $ 8,100 $ 60,000
2000 10,800 60,000
2001 2,700 60,000
2002 - 60,000
------------- -------------

$ 21,600 $ 240,000
============= =============

Rent expense for the periods ended December 31, 1998 and December 31, 1997 was
$163,752 and $170,941, respectively.

D.) Self Insurance
- ------------------
The Company is insured for medical and disability coverage for the players.
Under the terms of the policy, the Company is required to pay the first $35,000
of medical costs for each player. An insurance policy provides reimbursement up
to $465,000 for each player or $1,000,000 in aggregate.

E.) Letter of Credit
- --------------------
The Company has entered into an agreement with a financial institution for an
irrevocable stand by letter of credit in the amount of $100,000. The letter of
credit is required by the AFL and is available to draw upon, if necessary, by
the AFL after the AFL Board of Directors has given approval. The letter of
credit is secured by a $100,000 certificate of deposit.

F-16

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)

F.) Litigation
- --------------
On December 9, 1998, the Company's former President filed a lawsuit against the
Company for breach of employment and defamation in connection with a press
release. The Company has accrued $53,849 in sales commissions per the former
president's employment contract.

The Company believes that these claims are without merit and intends to
vigorously defend the action.

G.) Put Options
- ---------------
In August, 1998, Monolith Limited Partnership ("Monolith"), a major stockholder
of the Company, entered into an agreement with a third party (who is also a
partner in Monolith), who purchased 1,000,000 shares of the Company's Class A
common stock for $2,000,000. The agreement requires Monolith to purchase 600,000
shares of the Company's Class A common stock from the third party for $4,000,000
at the third party's option. The agreement was amended in May 1999, to extend
the period of exercise through March 2001. Generally accepted accounting
principles require that the Company record a capital contribution from Monolith
of $2,802,000 on the date of the transaction, with a corresponding charge to
accumulated deficit. This amount is also reflected as an addition to net loss in
computing loss attributable to common stockholders, in the earnings per share
computation. On July 13, 1999, the option agreement for 275,000 shares out of
the 600,000 shares was exercised. In consideration for $550,000 paid by Monolith
to the third party, as a cancellation fee, the third party agreed to terminate
its put right for the remaining shares.

NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION

For the Period Ended December 31, 1997
- --------------------------------------
In connection with the acquisition of the Predators, the Company executed notes
payable to Monolith for $1,295,000, issued 1,380,000 shares of common stock
valued at $487,796 and assumed liabilities of $1,431,285 in exchange for the
following assets:

Accounts receivable $ 688,956
Stock subscriptions receivable 49,709
Employee receivables 5,461
Inventory 19,985
Prepaid expenses 92,441
Property and equipment 267,669
Membership cost 1,989,860
-------------

$ 3,114,081
=============

F-17

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION (Continued)

In addition to the above noncash transactions, during the period ended December
31, 1997, the Company exchanged notes payable to stockholders of $212,828 and
the receivable for the stock subscription agreement of $49,709, for the payment
of the note payable and accrued interest to the former owners of the team of
$92,537 and the Company reduced a note payable to stockholders by $170,000. The
Company issued 1,000 shares of Class B common stock in exchange for $5,000 in
accrued interest payable to stockholders. The notes payable were subsequently
paid from the proceeds of the Company's initial public offering of Class A
common stock.

For the Year Ended December 31, 1998
- ------------------------------------
On August 31, 1998 the Company converted notes of $755,000 and accrued interest
of $5,573 to 304,229 shares of the Company's Class A Common Stock.

NOTE 7 - COMMON STOCK

Stock Option Plan
- -----------------
Effective April 1, 1997, the Company's board of directors adopted the Stock
Option Plan under which 150,000 shares of the Company's Class A Common Stock
were reserved for issuance at prices not less than fair market value on the date
of grant. During 1998, the Plan was amended to provide for 350,000 additional
option shares. The board may grant options to key management employees,
officers, directors and consultants.

Outstanding Options
Option -----------------------------
Shares Price Per
Available Shares Share
--------- --------- ------------

Initial reserved shares 150,000 - $ -
Granted 138,000 138,000 2.00
-------- -------- ------------

Balance, December 31, 1997 12,000 138,000 2.00

Additional reserved shares 350,000 - -
Granted 295,000 295,000 3.19-4.75
Cancelled 23,667 (23,667) 2.00
-------- -------- ------------

Balance, December 31, 1998 90,667 409,333 $ 2.00-4.75
======== ======== ============

Stock-Based Compensation
- ------------------------
The Company accounts for stock-based compensation under Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No.
123). The standard requires the Company to adopt the fair value method with
respect to stock-based compensation of consultants and other non-employees.

F-18

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 7 - COMMON STOCK (Continued)

The Company did not change its method of accounting with respect to employee
stock options; the Company continues to account for these under the intrinsic
value method. Had the Company adopted the fair value method with respect to
options issued to employees as well, an additional charge to income of $134,000
would have been required in 1997; proforma net loss would have been ($1,025,985)
and loss per share would have been ($.70). An additional charge to income of
$340,990 would have been required in 1998; proforma net loss would have been
($1,312,204) and loss per share would have been ($.39).

The Company granted stock options to two consultants and recognized $77,940 of
stock based compensation, during the year ended December 31, 1998.

In 1998, the Company granted stock options to purchase 250,000 shares at $2.50
per share expiring October 26, 2002 to the Vice President of Business
Development. These options were not granted under the Stock Option Plan.

Issuance of Common Stock
- ------------------------
In November 1997, the Company issued 1,380,000 shares of Class A Common Stock
and 1,000 shares of Class B Common Stock in exchange for the 1,380,000 shares of
outstanding common stock and $5,000 in accrued interest.

The Class A Common Stock and Class B Common Stock are identical in all respects
except that each share of Class A Common Stock is entitled to one vote and each
share of Class B Common Stock is entitled to 10,000 votes. The Class B Common
Stock was issued to satisfy certain control requirements of the AFL.

In December 1997 the Company issued 1,100,000 shares of Class A Common Stock in
conjunction with the completion of its initial public offering of Class A Common
Stock for $4,373,911, net of offering costs of $1,126,089.

There are outstanding (i) warrants to purchase 550,000 shares of Class A Common
Stock at exercise price of $7.50 per share at any time until their expiration on
December 10, 2002 (the "Unit Warrants"), (ii) warrants to purchase 110,000
shares of Class A Common Stock and 55,000 Unit Warrants (the "1997 Underwriters'
Unit Warrants') at an exercise price of $12.00 per 1997 Underwriters' Unit
Warrants and (iii) warrants to purchase 160,000 shares of Class A Common Stock
at $4.50 per share at any time until December 31, 2002 (the "1998 Warrants").

F-19

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 7 - COMMON STOCK (Continued)

The Company completed the following private placements during 1998:
<TABLE>
<CAPTION>

Gross Offering Net
Shares Proceeds Costs Proceeds
------ -------- ----- --------

<S> <C> <C> <C> <C>
August 11 1,250,000 $ 2,500,000 $ - $ 2,500,000
August 31 1,200,000 3,000,000 749,557 2,250,443
October 13 100,000 250,000 37,500 212,500
December 11 20,000 50,000 7,500 42,500
----------- ------------ ------------ ------------

2,570,000 $ 5,800,000 $ 794,557 $ 5,005,443
========= ============ ============ ============
</TABLE>

NOTE 8 - NOTES PAYABLE - BRIDGE LOANS

During April 1998, the Company completed an offering of 40 units, with each unit
consisting of one $50,000 promissory note 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 were due on the earlier of December 31, 2001 or the closing
date of a public offering in excess of $5,000,000. A commission of $95,000 was
paid in connection with the transaction. Of the $2,000,000 (40 units) promissory
notes, $1,050,000 (21 units) were sold to current stockholders or directors,
including $850,000 (17 units) to Monolith. Notes of $755,000 (of which $5,000
was from a related party) and accrued interest of $5,573 were converted to
304,229 shares of the Company's Class A Common Stock in the August 31, 1998
private placement. The remaining notes payable and accrued interest totaling
$1,295,774 were paid on September 1, 1998.

F-20

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 9 - INCOME TAXES

The components of deferred tax assets and (liabilities) were as follows:

Total deferred tax assets $ 665,352
Less valuation allowance (665,352)
-------------

Net deferred tax asset $ -
=============

The tax effects of temporary differences that give rise to deferred tax assets
and (liabilities) were as follows:

Temporary differences;
Property and equipment $ (10,872)
Membership cost 35,851
Accrued interest-stockholders 2,508
Net operating loss carryforward 637,865
Less valuation allowance (665,352)
-----------

$ -
===========

The components of deferred income tax expense (benefit) were as follows:

1998 1997
------------- -------------
Temporary differences:
Depreciation expense $ 8,099 $ 2,773
Amortization expense (18,705) (17,146)
Interest-stockholders 34,747 (37,255)
Net operating loss carryforward (354,107) (283,759)
Less valuation allowance 329,966 335,387
------------- -------------

$ - $ -
============= =============

The following is a reconciliation of the amount of income tax expense (benefit)
that would result from applying the statutory income tax rates to pre-tax loss
and the reported amount of income tax expense (benefit):

1998 1997
-------------- -------------
Benefit at statutory rates $ (297,549) $ (303,275)
Other (19,527) (20,693)
State tax effect (12,890) (11,419)
Increase in valuation allowance 329,966 335,387
------------- -------------

$ - $ -
============== =============

F-21

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 9 - INCOME TAXES (Continued)

No provision for income taxes has been recorded for the periods ended December
31, 1998 and December 31, 1997, as the Company has incurred losses during these
periods. Net operating loss carryovers of approximately $941,773 as of December
31, 1998 and $754,677 as of December 31, 1997 expire in 2016 and 2012,
respectively. The Company is providing a full valuation allowance in connection
with the deferred tax assets because there is no assurance of future taxable
income.

NOTE 10 - PURCHASE OF EQUITY INTERESTS IN THE AFL

In August 1998 the Company acquired two, non-voting, equity interests in the
Arena Football League, Inc. (AFL) for $6,000,000 plus acquisition costs. Each
similar equity interest entitles the Company to share equally with each other
member in AFL revenues. The AFL guarantees 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 purchase, 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 was paid as follows: $3,500,000 was paid with the executed
contract and $2,500,000 was paid on August 14, 1998.

The purchase of the rights for the two, non-voting, equity interests in the
League has been recorded as an investment accounted for under the equity method
of accounting at $4,071,437, and an unsecured, receivable recorded for
$1,965,971 from the League, with imputed interest of 23% and principal due
annually on August 14 of each year. The minimum payment is $480,000 annually.

During the year ended December 31, 1998 the Company's recorded a loss from its
equity interest in the AFL of $38,786 based upon its equity share of the AFL of
approximately 10.5%.

NOTE 11 - OPERATING SEGMENTS

The Company organizes its business units into two reportable segments: football
operations and telemarketing services. The football operations segment operates
the AFL team and the telemarketing services segment provides telemarketing
services to a related party and other sports franchises.

The segment's accounting policies are the same as those described in the summary
of significant accounting policies included in Note 1.

F-22

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
-----------------------------

NOTE 11 - OPERATING SEGMENTS (Continued)

The Company's reportable business segments are strategic business units that
offer different products and services. The segments are managed together because
they utilize similar resources within the Company. There were no reportable
segments during the period ended December 31, 1997. All assets of the Company
relate to the football operations segment.

Net Operating Identifiable Capital
Revenues Loss Depreciation Assets Expenditures
-------- --------- ------------ ------ ------------
<S> <C> <C> <C> <C> <C>
December 31, 1998:
Football operations $ 3,428,729 $ (1,060,270) $ 43,610 $ 8,868,204 $ 25,758
Telemarketing services 130,600 (89,507) - 138,547 -
------------ ------------- ------------ ------------ ------------

$ 3,559,329 $ (1,149,777) $ 43,610 $ 9,006,751 $ 25,758
============= ============= ============ ============ ============
</TABLE>

NOTE 12 - SUBSEQUENT EVENTS

Sale of Common Stock
- --------------------
In February 1999, the Company completed private placements of 65,000 Class A
common shares for $145,000, with commissions of 15%.

Employment Agreements
- ---------------------
On January 26, 1999, the Company entered into a 35 month employment agreement
with its new President and Chief Executive Officer. The agreement among other
things, provides for an annual salary of $50,000 and options to purchase 950,000
shares of the Company's Class A common stock at $4.4375 per share. The new
President and Chief Executive Office was previously employed by the Company as a
business strategist, under an employment agreement which granted options to
purchase 115,000 shares of the Company' Class A common stock at $4.75 per share.
Upon the execution of the new employment agreement 47,920 of the options issued
under the previous agreement were cancelled.

On February 26, 1999, the Company entered into a 18 month employment agreement
with its now Vice-President of Sales and Marketing. The agreement calls for
annual salary of $50,000 and commissions of 7% of sponsorship income from $1 to
$750,000 and commissions of 10% of all sponsorship income greater than $750,000.

Letter of Intent to Purchase Hockey Teams
- -----------------------------------------
On March 2, 1999, the Company executed a non-binding letter of intent to
purchase all outstanding capital stock of Holdings C.A.T., a Virginia
corporation, and the majority equity interest in the professional minor league
ice hockey teams known as the "Seawolves" and the "Bombers: of the East Coast
Hockey League (ECHL).

Telemarketing Agreement
- -----------------------
On March 5, 1999, the Company entered into a telemarketing agreement with the
Tampa Bay Storm ("Storm"), an Arena Football team, to sell season tickets and
Storm merchandise.

F-23

<PAGE>

ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
- ------------------------------------------------------------------------

None.

<PAGE>

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
- ---------------------------------------------------------------------

The name, age and position of each of the Company's executive officers and
directors are set forth below:
<TABLE>
<CAPTION>
Officer/Director
Name Age Position Since
---- --- -------- -----
<S> <C> <C> <C>
William G. Meris ................... 32 Chairman of the Board of Director 1997

Brett L. Bouchy .................... 30 Chief Executive Officer, President 1999
and Director

Jeffrey L. Bouchy(1) ............... 33 Secretary, Treasurer, Chief 1999
Financial Officer and Director

Mark M. Novell ..................... 41 Vice President-Sales and 1998
Marketing

Scott L. Armstrong ................. 37 Director 1998

Thomas F. Winters, Jr., M.D. ...... 46 Director 1997

John W. Frasco (1)(2) .............. 59 Vice President of Business 1999
Development and Director

J. Richard Corley (1)(2) ........... 61 Director 1999

Richard C. Whelan (2) .............. 34 Director 1999
</TABLE>

- ----------
(1) Member of Audit Committee.

(2) Member of Compensation Committee.

Directors are elected at the Company's annual meeting of shareholders and
serve a term of one year or until their successors are elected and qualified.
Officers are appointed by the Board of Directors and serve at the discretion of
the Board of Directors, subject to the bylaws of the Company.

<PAGE>

Brett L. Bouchy and Jeffrey L. Bouchy are brothers. In 1998 and 1999,
Messrs. Youngblood and Gagleard resigned as Directors and Messrs. Narushka and
Flynn resigned as executive officers. Mr. Youngblood was terminated as an
executive officer in December, 1998.

The Audit Committee reviews the engagement and independence of the
Company's independent accountants, the audit and non-audit fees of the
independent accountants and the adequacy of the Company's internal accounting
controls. The Compensation Committee considers the compensation and incentive
arrangements of the Company's executive officers.

The Company agreed with its IPO Underwriters that, until December 10, 1999,
the Company would allow an observer designated by the Underwriters and
acceptable to the Company to attend all meetings of the Board of Directors. The
observer has no voting rights, is reimbursed for out-of-pocket expense incurred
in attending meetings and is indemnified against any claims arising out of
participation at the meetings, including claims based on liabilities arising
under the securities laws.

The principal occupation of each director and executive officer of the
Company, for at least the past five years, is as follows:

William G. Meris was appointed the Company's Chairman in March 1997. Mr.
Meris has served as Chairman of the Board of Directors of Interhealth
Nutritionals, Inc., a privately-held nutrition supplement manufacturer since
April 1996 and has been a director of SunWest P.E.O. Inc. since January 1998. He
was also a director of Gum Tech International, Inc., a publicly-held specialty
chewing gum manufacturer from 1997 until February 1998. Since June 1995, Mr.
Meris has been President of WGM Corporation, which acts as the General Partner
of the Monolith Limited Partnership, a limited partnership which is a principal
stockholder of the Company. From January 1995 to June 1995, he was also a
co-manager of Meris Financial, Inc., a private investment and consulting
company. From October 1994 until March 1995, Mr. Meris was a co-owner of
Cyberia, Inc., a virtual reality entertainment firm. Mr. Meris was employed by
Prudential Securities, Inc., as a retail stockbroker from 1989 to April 1994.
Subsequently, he worked in the same capacity at Franklin-Lord, Inc. between May
and August of 1994. Mr. Meris earned a Bachelor of Science degree in Business
Administration from Arizona State University. Mr. Meris devotes such time as is
necessary to the affairs of the Company.

Brett L. Bouchy was appointed the Chief Executive Officer and President in
January, 1999 and was employed by Meris Financial, Inc., an affiliate of The
Monolith Limited Partnership from 1996 to December, 1998. From 1992 to 1995 he
was a registered representative and Chairman of the Board of Directors of
Franklin-Lord Inc., a Phoenix, Arizona-based stock brokerage firm. Mr. Bouchy
was fined, censored and suspended for five days from selling securities by the
NASD and his securities license was canceled by the Arizona Corporation
Commission. Mr. Bouchy intends to apply for reinstatement of his license in the
near future.

<PAGE>

Jeffrey L. Bouchy earned a Bachelor of Science degree in Accounting from
Arizona State University and a Master's degree in Sports Management from West
Virginia University. While completing his graduate studies at WVU, he worked for
the Assistant Athletic Director of Finance and Administration. From 1992 to 1993
he was involved in arena management as an employee of the Charlotte Coliseum,
home of the NBA's Charlotte Hornets. From 1990 to 1991 Mr. Bouchy was employed
by the Phoenix Roadrunners of the International Hockey League, assisting in
public relations and game operations. From 1994 to 1995 he was employed by Fun
Tees, Inc., a t-shirt manufacturer. From 1995 to 1998 he was Chief Financial
Officer of Gum Tech International, Inc., a Nasdaq National Market company.

Mark M. Novell was employed by the Company from 1992 to 1994 as an
assistant coach. From 1994 to 1998 he was a vacation resort agent for Fairfield
Communities and Vistana Inc. In 1997 he rejoined the Company, first as an
assistant coach and then in December 1998 as Vice President of Sales and
Marketing.

Scott L. Armstrong has been the national sales manager of Medco
Laboratories, a marketer of inhalation products and services, since March 1993.
From 1991 to February 1993, he was a surgical sales representative for the IOLAB
division of Johnson & Johnson, and from 1985 to 1991, he was a sales
representative for Healthdyne. He is a director of Sunwest PEO, Inc., an
affiliated company. He graduated from Arizona State University in 1984 with a
Bachelor of Science degree in Business Marketing.

Thomas F. Winters, Jr., M.D. A graduate of Brown University, Dr. Winters
received his medical degree in 1980 from the University of Connecticut. He
completed an internship in internal medicine at the Medical College of Virginia
in Richmond, Virginia, a year of general surgery at St. Francis Hospital and
Medical Center in Hartford, Connecticut and an orthopedic residency was at the
University of Connecticut Health Center in Farmington, Connecticut. Dr. Winters
completed an A.O. Fellowship in Trauma in Hanover, West Germany, followed by
Fellowships in Sports Medicine and Adult Reconstructive Surgery at the Brigham
and Women's Hospital of Harvard Medical School. At the Harvard Medical School he
served as Assistant Team Physician for the Department of Athletics of Harvard
University. He has been involved with teaching at both Harvard and now at
Orlando Regional Medical Center. Dr. Winters currently serves as Team Physician
for the Orlando Predators; a designated consultant for Major League Baseball,
Inc.; Orthopedic Consultant for the Kansas City Royals Baseball Organization,
Orlando International Aquatic Center and Brown's Gymnasium. He also works
closely with area college and high school athletes. Dr. Winters has concentrated
on adult orthopedics, specifically, Sports Medicine and Adult Reconstruction,
which includes Total Joint Replacement, since 1986. He has received patents for
the design of rotational components for total knee replacements, and for
meniscal cartilage repair following knee injuries.

John W. Frasco has been the managing partner of Frasco & Caponigro, P.C., a
Bloomfield Hill, Michigan-based law firm. He founded Sports Management Network,
Inc. in 1988 and was a principal stockholder of that firm from 1988 to 1998.
Sports Management Network, Inc. is involved in sports sponsorships, endorsement
and player contracts. Mr. Frasco is the founder and was from 1980 to 1989

<PAGE>

Chairman of Championship Auto Racing Teams, Inc. (now known as IndyCar), which
is the controlling body of IndyCar racing. Mr. Frasco has owned and operated
racing events in Atlanta, New York, Miami, Las Vegas and Vancouver, British
Columbia.

J. Richard Corley has been the Chief Executive Officer and owner of Bowl
New England, an operator of 18 bowling centers in six northeastern states since
1968. A graduate of St. Michaels College, Mr. Corley served as a pilot and
navigator in the United States Air Force from 1959-1973. He served as a
commissioner for Burlington International Airport from 1982-1998, spending the
last eight years as that group's Chairman. Mr. Corley is currently on the Board
of Directors of Howard Bank and is a Trustee Emeritus for Champlain College.

Richard C. Whelan has been an employee since June 1995 of The Monolith
Limited Partnership, an investment firm and a principal stockholder of the
Company, where he is responsible for investor relations, assistance in capital
formation and assistance in evaluation of acquisitions. From 1992 to June 1995
he was employed by Franklin-Lord, Inc., a Phoenix-Arizona-based stock brokerage
firm as a registered representative and Chief Executive Officer. Mr. Whelan was
fined, censured and suspended for five days from selling securities by the NASD
and was fined, censored and his securities license was canceled by the Arizona
Corporation Commission. He graduated from Arizona State University with a
Bachelor of Science degree.

<PAGE>

ITEM 10. EXECUTIVE COMPENSATION
- --------------------------------
<TABLE>
<CAPTION>
Summary Compensation Table

Annual Compensation (1)
-----------------------
(a) (e) (f)
Name and Principal (b) (c) (d) Stock Other Annual
Position Year Salary($) Bonus($) Options Compensation($)
-------- ---- --------- -------- ------- ---------------

<S> <C> <C> <C> <C> <C>
William G. Meris, 1997 0 0 5,000 $40,000
Chairman 1998 28,460 0 15,000 0
Jack Youngblood, 1997 60,000 45,000 34,500 0
President 1998 63,250 0 0 0
</TABLE>

- -----------

The Company's directors do not receive compensation for attending Board
meetings but are reimbursed for out-of-pocket expenses incurred in connection
therewith. The Company has entered into employment agreements with Brett L.
Bouchy and Jeffrey L. Bouchy providing for annual salaries of $50,000 each
through January 2002 for Brett L. Bouchy and December 1999 for Jeffrey L.
Bouchy. As a part of their employment agreements, Brett L. Bouchy was granted
options to purchase 950,000 shares of the Company's Class A Common Stock at
$4.44 per share, and Jeffrey L. Bouchy was granted options to purchase 50,000
shares at $3.19 per share. The Company granted certain stock options to Mr.
Frasco as a part of his employment. See "Item 12."

1997 Employee Stock Option Plan

In April 1997, the Company's stockholders adopted the Company's 1997
Employee Stock Option Plan (the "Plan"), which provides for the grant of stock
options intended to qualify as "incentive stock options" and "nonqualified stock
options" (collectively "stock options") within the meaning of Section 422 of the
United States Internal Revenue Code of 1986 (the "Code"). Stock options are
issuable to any officer, director, key employee or consultant of the Company.

The Company's Board of Directors has reserved 500,000 shares of Class A
Common Stock for issuance under the Plan. The Plan is administered by the full
Board of Directors, which determines which individuals shall receive stock
options, the time period during which the stock options may be exercised, the
number of shares of Class A Common Stock that may be purchased under each stock
option and the stock option price.

The per share exercise price of incentive stock options may not be less
than the fair market value of the Class A Common Stock on the date the option is
granted. The aggregate fair market value (determined as of the date the stock
option is granted) of the Class A Common Stock that any person may purchase
under an incentive stock option in any calendar year pursuant to the exercise of
incentive stock options may not exceed $100,000. No person who owns, directly or
indirectly, at the time of the granting of an incentive stock option, more than
10% of the total combined voting power of all classes of stock of the Company is
eligible to receive incentive stock options under the Plan unless the stock
option price is at least 110% of the fair market value of the Class A Common
Stock subject to the stock option on the date of grant.

<PAGE>

No incentive stock options may be transferred by an optionee other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee, the stock option may only be exercisable by the optionee. Stock
options may be exercised only if the stock option holder remains continuously
associated with the Company from the date of grant to the date of exercise. The
exercise date of a stock option granted under the Plan cannot be later than ten
years from the date of grant. Any stock options that expire unexercised or that
terminate upon an optionee's ceasing to be employed by the Company become
available once again for issuance. Shares issued upon exercise of a stock option
will rank equally with other shares then outstanding.

As of the date of this Report, 495,080 stock options have been granted
under the Plan, exercisable at prices ranging from $2.00 to $4.75 per share.

<PAGE>

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
- ------------------------------------------------------------------------

The following table sets forth certain information with respect to the
ownership of the Company's Class A and Class B Common Stock as of the date of
this Report, by (i) each person who is known by the Company to own of record or
beneficially more than 5% of the Company's Class A and Class B Common Stock,
(ii) each of the Company's directors and (iii) all directors and officers of the
Company as a group. The stockholders listed in the table have sole voting and
investment powers with respect to the shares of Class A and Class B Common Stock
and their addresses are in care of the Company.

Number of Shares Percentage
Name Beneficially Owned of Class
---- ------------------ --------

William G. Meris (1) 33,800 .65%
Brett L. Bouchy (2) 67,080 1.29%
Jeffrey L. Bouchy (3) 62,500 1.2%
Scott L. Armstrong (4) 87,765 1.68%
Thomas F. Winters (5) 6,000 .05%
John W. Frasco (6) 300,000 5.52%
J. Richard Corley 0 0%
Richard C. Whelan(7) 11,500 .22%
Riverlux Trust REG(8) 1,000,000 16.31%
The Monolith Limited 1,373,500 21.12%
Partnership(1)(8)(9)
All directors and officers 2,938,645 48.04%
as a group (9 persons)

- -----------

(1) The Monolith Limited Partnership ("Monolith") is a privately held, Delaware
limited partnership which owns 1,276,500 shares of the Company's Common
Stock. The General Partner of Monolith is WGM Corporation, a Delaware
Corporation ("WGM"), of which William G. Meris is the President and sole
principal stockholder. The amount of securities shown held by Mr. Meris
represents stock options.

(2) Includes stock options to purchase 67,080 shares at $4.75 per share and
950,000 shares at $4.44 per share.

(3) Includes stock options to purchase 12,500 shares at an average exercise
price of $3.47 per share.

<PAGE>

(4) Includes stock options to purchase 87,765 at an average exercise price of
$3.41 per share.

(5) Includes stock options to purchase 6,000 shares at an average exercise
price of $2.89 per share.

(6) Includes stock options to purchase 150,000 shares of the Company's Class A
Common Stock at $2.50 per share.

(7) Includes stock options to purchase 7,500 shares.

(8) Excludes Monolith's option to purchase 400,000 shares of the Company's
Class A Common Stock from Riverlux Trust REG and Riverlux's right to put
600,000 shares to Monolith. See "Item 12."

(9) In addition to the Class A Common Stock set forth above, the Company has
issued and outstanding 1,000 shares of Class B Common Stock owned 925
shares by Monolith (92.5%) and 75 shares by Gagleard (7.5%). See
"Description of Securities."

<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------

In February 1997, The Monolith Limited Partnership ("Monolith") purchased 92.5%
and Alan N. Gagleard ("Gagleard") purchased 7.5% of the Predators from Orlando
Predators, Ltd. ("OPL"), a non-affiliated Florida limited partnership for a
purchase price of $2,325,000 including $1,875,000 in cash, $180,000 in the form
of a promissory note payable to OPL and the issuance of $225,000 of Monolith
limited partnership interests to OPL. In March 1997, Monolith organized the
Company and transferred its 92.5% ownership of the Predators to the Company in
exchange for the issuance by the Company of 1,276,500 shares of its common stock
to Monolith (valued at $.34 per share), the issuance of a promissory note
bearing interest at 8% per annum payable to Monolith in the amount of $1,295,000
due the earlier of December 31, 1998 or the closing of the IPO and the
assumption by the Company of the $180,000 promissory note obligation to OPL. At
the same time, Gagleard transferred his 7.5% ownership of the Predators to the
Company in exchange for 103,500 shares of its common stock (valued at $.48 per
share) and the issuance of a promissory note payable to Gagleard in the amount
of $105,000 carrying the same terms as the Monolith promissory note. Also in
March 1997, Mr. Meris, the President of WGM Corporation, the corporate general
partner of Monolith, became the Chairman of the Company and Gagleard became a
director.

In June 1997, the Company paid the $180,000 promissory note due OPL and Monolith
repurchased the $225,000 of Monolith limited partnership interests from OPL for
$225,000 in cash. At the same time, Monolith borrowed $112,500 from Gagleard,
evidenced by a non-interest bearing promissory note due the earlier of December
31, 1998 or the closing of the IPO. As additional consideration for the loan,
Monolith granted Gagleard an option to purchase 13,800 shares of the Company's
common stock owned by Monolith for $2.00 per share. The loan was paid in full in
December 1997.

Between March and November 1997 Monolith and Gagleard loaned the Company
$862,537 and $120,291, respectively for working capital evidenced by promissory
notes bearing interest at 8% per annum due the earlier of December 31, 1998 or
the closing of the IPO. The loans were repaid in full in December 1997.

In November 1997 the Company (i) issued 1,276,500 shares of its Class A Common
Stock and 925 shares of its Class B Common Stock to Monolith in exchange for
1,276,500 shares of its then-voting common stock and $4,625 in accrued interest
payable and (ii) issued 103,500 shares of its Class A Common Stock and 75 shares
of its Class B Common Stock to Gagleard in exchange for 103,500 shares of its
then-voting common stock and $375 in accrued interest payable. The Class B
Common Stock was issued to Monolith and Gagleard at $5.00 per share, the same
price as the IPO offering price per share. Prior to the exchange, Monolith and
Gagleard owned all of the then-voting common stock and continued to do so
following the exchange. The Class B Common Stock was issued to satisfy the
control requirements of the AFL. The AFL Bylaws require League approval before

<PAGE>

an AFL team may become publicly held. In the case of the Company, League
approval was conditioned upon the League's requirement that voting control of
the Company would remain in the hands of its two existing stockholders (Monolith
and Gagleard). The League requirement was satisfied by the Company through
creation of the Class B Common Stock each share of which votes the equivalent of
10,000 shares of Class A Common Stock. See "Arena Football-Restrictions on
Ownership."

In July 1997 Monolith granted options to purchase 90,365 shares of the Company's
Common Stock owned by Monolith and exercisable at $2.00 per share to four
persons, including Gagleard (13,800 options) and Meris Financial, Inc. (13,800
options).

In January, 1999, the Company issued to Brett L. Bouchy, its Chief Executive
Officer, options to purchase 950,000 shares of its Class A Common Stock at $4.44
per share until December 2001. The options were issued in connection with a
three year employment agreement executed by the Company and Mr. Bouchy and
provide that 1/3 of the options vest yearly on the anniversary date of the
employment agreement.

In August, 1998, Monolith Limited Partnership ("Monolith"), a major stockholder
of the Company, entered into an agreement with a third party (who is also a
partner in Monolith), who purchased 1,000,000 shares of the Company's class A
common stock for $2,000,000. The agreement requires Monolith to purchase 600,000
shares of the Company's Class A common stock from the third party for $4,000,000
at the third party's option. The agreement was amended in May 1999, to extend
the period of exercise through March 2001. Generally accepted accounting
principles require that the Company record a capital contribution from Monolith
of $2,802,000 on the date of the transaction, with a corresponding charge to
retained earnings. This amount is also reflected as an addition to net loss in
computing net loss attributable to common stockholders, in the earnings per
share computation. On July 13, 1999, the option agreement for 275,000 of the
600,000 shares was exercised. In consideration for $550,000 paid by Monolith to
the third party, as a cancellation fee, the third party agreed to terminate its
put right for the remaining shares.

In October 1998 the Company retained John W. Frasco, a director, to act as its
Vice President for Business Development for which the Company granted Mr. Frasco
options to purchase 250,000 shares of the Company's Class A Common Stock at
$2.50 per share and agreed to sell to Mr. Frasco 50,000 shares of Class A Common
Stock at $2.00 per share.

The Company believes the terms of the above transactions were fair, reasonable
and consistent with terms that could be obtained from nonaffiliated third
parties. All future transactions with affiliates of the Company will be approved
by the disinterested members of the Company's Board of Directors. Moreover, the
Company's securities (other than stock options under the Company's 1997 Employee
Stock Option Plan) may not be issued to management, promoters or their
respective associates or affiliates without obtaining (i) a fairness opinion
from a qualified brokerage firm or appraiser confirming the fairness of the
consideration to be received by the Company for the issuance of any such
securities and (ii) written approval of the securities issuance by a majority of
the Company's disinterested directors.

<PAGE>

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
- ------------------------------------------

a. Exhibits:

Exhibit No. Title
- ----------- -----

3.01 Articles of Incorporation of the Registrant(1)

3.02 Bylaws of the Registrant(1)

10.01 1997 Employee Stock Option Plan(1)

10.02 Lease Agreement(1)

10.03 Arena Football League Licensing Program Update-November 4, 1996 (1)

10.04 Bylaws of the Arena Football League(1)

10.05 Membership Agreement with the Arena Football League(1)

10.06 Form of Standard Player Contract(1)

10.08 Purchase Agreement for Orlando Predators(1)

10.09 Exchange Agreement for Orlando Predators' Assets(1)

10.10 Employment Agreement with Mr. Youngblood (1)

10.11 Employment Agreement with Brett L. Bouchy (3)

10.12 Agreement between Arena Football League and the Registrant to acquire
the Equity Interests (2)

10.13 Form of April 1998 Promissory Note (2)

10.14 Employment Agreement with Mr. Gruden (2)

10.17 Employment Agreement with John W. Frasco

<PAGE>

(1) Incorporated by reference to the Registrant's Registration Statement on
Form SB-2, File Number 333-31671, declared effective on December 10,
1997.

(2) Incorporated by reference to the Registrant's Registration Statement on
Form SB-2, File No. 333-53217 , filed on May 21, 1998.

(3) Previously filed.

<PAGE>

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized, in Orlando, Florida, on August 17, 1999.

THE ORLANDO PREDATORS
ENTERTAINMENT, INC.

By /s/ Brett L. Bouchy
--------------------------------
Brett L. Bouchy,
President

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on the dates
indicated.

Signature Title Date
--------- ----- ----

/s/ William G. Meris Chairman of the Board of August 17, 1999
- ------------------------- Directors
William G. Meris

/s/ Brett L. Bouchy Chief Executive Officer, August 17, 1999
- ------------------------- President and Director
Brett L. Bouchy

/s/ Jeffrey L. Bouchy Secretary, Treasurer, Chief August 17, 1999
- ------------------------- Financial Officer and
Jeffrey L. Bouchy Director

/s/ Mark M. Novell Vice-President - Sales and August 17, 1999
- ------------------------- Marketing
Mark M. Novell

/s/ Scott L. Armstrong Director August 17, 1999
- -------------------------
Scott L. Armstrong

/s/ Thomas F. Winters, Jr. Director August 17, 1999
- -------------------------
Thomas F. Winters, Jr., M.D.

/s/ John W. Fracso Vice President of Business August 17, 1999
- ------------------------- Development and Director
John W. Frasco

/s/ J. Richard Corley Director August 17, 1999
- -------------------------
J. Richard Corley

/s/ Richard C. Whelan Director August 17, 1999
- -------------------------
Richard C. Whelan

October 26, 1998

Mr. Jack Frasco
1668 Telegraph Road
Suite 200
Bloomfield Hills, MI 48302

Dear Jack,

This letter serves to confirm in writing the Agreement entered into between
The Orlando Predators Entertainment, Inc. ("Predators") and yourself pursuant to
which you have agreed to act as the Company's Executive Vice President for
business development. In such capacity, we anticipate that you may (i) represent
the Predators at the Arena Football League ("League") level including,
reviewing, on behalf of the Company, League proposals and, ultimately, using
your judgment to vote the Predators interst on League matters for which a vote
is required (ii) advise the Company's Chairman and its senior management on a
host of other League related matters, including such economic considerations as
sponsorship sales, ticket sales, media contracts and the like.

We assume that these and relatd matters will require a significant amount
of your time at your discretion. In that regard, we invite you to join the
Predator's 1997 Employee Stock Option Plan pursuant to which we have agreed to
grant you options to purchase 250,000 shares of Common Stock at $2.50 per share.
150,000 of such options will vest after one year of service to the Company, an
additional 50,000 will vest after two years of service to the Company and the
remaining 50,000 will vest after three years of service to the Company. Any
options not vested at the time you terminate your service to the Company will
not be exercisable. The Company will, however, register the shares underlying
your options so that they will be freely tradable upon exercise.

We have also agreed to sell to you an aggregate of 50,000 shares of
Predators' Preferred Stock at $2.00 per share until November 6, 1998. Each share
of Preferred Stock is directly convertible into one share of Predators' Common
Stock, which share of Common Stock will not be transferable to a third party nor
carry voting rights for a period of one year from the date of issuance.

Finally, we have invited you to join the Predators' Board of Directors and
you have indicatd your willingness to serve on the Board. We, in turn, have
agreed to provide you with Director and Officer liability insurance covering
your acivities as a director.

If the above and foregoing correctly recite our understanding, kindly so
indicate on the line provided below.

Very truly yours,

THE ORLANDO PREDATORS
ENTERTAINMENT, INC.

By:/s/ William G. Meris
---------------------------------
William G. Meris, Chairman

Tthe above and foregoing correctly recite our understanding and is accepted
this ...... day of October, 1998.

/s/ Jack Frasco
---------------------------------
Jack Frasco

<ARTICLE> 5

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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
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</TABLE>