ORLANDO PREDATORS ENTERTAINMENT INC, 10KSB, 2000-04-14

ORLANDO PREDATORS ENTERTAINMENT INC
10KSB, 2000-04-14
MEMBERSHIP SPORTS & RECREATION CLUBS

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

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

(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act of
1934 for the fiscal year ended December 31, 1999 or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

741 Front Street, Suite 140
Celebration, Florida 34747
- ----------------------------------------------------- ---------
(Address of principal executive offices) (Zip Code)

Issuer's telephone number: (407) 566-2493

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

Securities to be registered under 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 during the past 12 months (or
for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.

Yes X No
-----

Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this report, and no disclosure will 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

As of April 10, 2000, 5,192,999 shares of the Registrant's no par value
Class A Common Stock were outstanding. As of April 10, 2000, the market value of
the Registrant's no par value Class A Common Stock, excluding shares held by
affiliates, was $ based upon a closing bid price of $2.0625 per share of Class A
Common Stock on the Nasdaq SmallCap Market.

The Registrant's revenues for its most recent fiscal year were $5,105,969.

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

<PAGE>
PART I

ITEM 1. DESCRIPTION OF BUSINESS
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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 this 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
this 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 8.3% 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 at the League level 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 is evidenced by the February 1999 announcement by the
National Football League ("NFL") that it had obtained an option to purchase up
to 49.9% of the League and by the addition of five new AFL teams (Los Angeles,
Carolina, Detroit, New Orleans and Chicago) which are expected to begin play in
the 2000 and 2001 seasons.

In a broader sense, the Company's strategy is to acquire and consolidate
the operations of minor league professional sports teams in order to realize the
significant economies of scale available through the operations of these sports
franchises. Consistent with this strategy, the Company expects to have a Merger
Agreement completed by late April 2000 to acquire United Sports Ventures, Inc.
and United Sports Holding, Inc. (collectively "USV"). USV owns and operates

<PAGE>

three minor league hockey teams and holds a controlling interest in a minor
league baseball team. The acquisition is contingent upon approval by the
Company's stockholders, financing matters and other conditions.

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
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.orlandopredators.com. The
Company also employs five to ten part-time telemarketing personnel prior to
commencement of the AFL season to assist in ticket sales.

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 ninth AFL season in 1999, have played in the Arena Bowl for the AFL
championship on five occasions and won the Arena Bowl XII championship in 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 limited liability company 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 2000, the League grew from four teams to 17 teams with
teams in New Orleans, Chicago and Detroit expected to begin play in 2001. The
membership fees for the next team joining the AFL have increased from $125,000
in 1995 to $5.5 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 2000 season, the Arena Football League has
reached an agreement on a non-exclusive, multi-year television contract with CBS
Cable's TNN, ESPN and ESPN2, and ABC Sports. The contract will feature 14
broadcasts in prime time on CBS Cable's TNN and 10 playoff games split between

<PAGE>

TNN, ESPN and ESPN2. Arena Bowl XIV, the league's championship game, will be
broadcast on ABC Sports on Sunday, Aug. 20. The length of contract covers three
years for TNN and one year each on ESPN, ESPN2, and ABC. TNN's contract includes
two, one-year options. The agreements with the other broadcast entities include
a one-year option. From 11 million television households in 1994, the AFL is
expected to reach approximately 80 million households in 2000.

The Company has derived its revenue and operating funds from the arena
football operations of the Predators and its 8.3% 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. To date, the owners of five NFL teams
have purchased or applied to purchase AFL teams.

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 is expected to 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. 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 August
1998 the AFL purchased all patent and other rights to the Arena Football Game
System from Gridiron for $4,000,000. In August 1998 the AFL became a limited
liability company.

5
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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, Buffalo commenced play, and in 2000 and 2001
expansion teams in Los Angeles and Carolina followed by Detroit, Chicago 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.

Game attendance has risen consistently over the AFL's 13 seasons of play
with over 1.1 million in total fan attendance announced for the 1999 season. Per
game announced attendance averaged approximately 10,000 during the 1999 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. In terms of education, 47% have college or graduate
degrees, 28% have some college attendance and 87% hold at least high school
diplomas.

The membership fee for new teams joining the AFL has grown from $125,000
for the 1990 season to $7 million for the 2001 season. In 1999 there were
approximately 27.5 million households with AFL teams in their metropolitan
areas, up from 11 million households in 1994. During the 2000 season, TNN, ESPN,
ESPN 2 and ABC will broadcast a total of 25 games including ten playoff games
and the Arena Bowl.

AFL team salaries for the 1999 season ranged from $350,000 to $750,000.
Players' salaries range from $11,600 to $105,000 per season. In February 2000,
the League entered into an interim collective bargaining agreement with the
Arena Football League's Player Organizing Committee. This interim agreement
substantially increased benefits to the League's players. Minimum salaries are
$11,600 for a first year player, $14,500 for a second year player and $17,400
for a player with a minimum of three years of service. The agreement also calls
for year round health insurance for the players and their families, full pay for
inactive players, short and long term disability insurance, a 401k pension plan
and unrestricted free agency after eight years of service in the League. A
long-term collective bargaining agreement is expected to be completed later this
year. There are no player drafts, although expansion teams are allowed to draw
from a pool of players designated by existing AFL teams.

The Predators provide a $250,000 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.

<PAGE>

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 end
zone 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 end zone 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
active 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.

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.

<PAGE>

AFL Teams

For the 2000 season, the AFL will consist of the following 17 teams,
aligned into two conferences, with two divisions in each conference:

American Conference

Western Division Central Division
---------------- ----------------
Arizona Rattlers Iowa Barnstormers
Oklahoma City Wranglers Milwaukee Mustangs
San Jose SaberCats Houston ThunderBears
Los Angeles Avengers 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
Carolina Cobras

Regular Season and Playoffs

Following two pre-season games, the regular AFL season extends from April
to July, 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
the end of the regular season, the four division champions along with the eight
teams with the best winning records, qualify for the AFL playoffs to determine
the AFL's Arena Bowl champion for that season. Seeds 1-4 receive first round
byes with seed 1 playing the lowest seed remaining after first round play and so
on. Each playoff 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 each playoff game and $50,000 for the Arena Bowl.

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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, 1999, the Company's share of net
revenues from licensing was negligible. The Company's share of net revenue from
the League (the "Team Share") was equal to 1/24 of the AFL's net revenue for the
1999 season and will be 1/25 for the 2000 season. The Company's Team Share is
equal to the AFL's net revenue divided by the total number of League teams (17
in 2000), two Gridiron Team Shares, two Team Shares owned by the Company and
four expansion teams. 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 in 1999 the
Company's Team Share was 1/24 together with an additional 2/24 for its two
non-voting equity interests.

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. 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.

arenafootball2 League

In August 1999 the AFL established the arenafootball2 League to be
comprised of smaller market "farm" teams. To date, 15 teams have joined the new
league, which commences play in April 2000 with an 18-week, 120-game schedule.
The 15 teams include Augusta, GA; Birmingham, AL; Charleston, SC; Greensboro,
NC; Greenville, SC; Huntsville, AL; Jacksonville, FL; Little Rock, AR; Norfolk,
VA; Pensacola, FL; Quad Cities, IA; Richmond, VA; Roanoke, VA; Tallahassee, FL;
and Tulsa, OK. Franchises in Shreveport-Bossier, LA and Ft. Myers, FL are
expected to join the league in 2001.

The creation of arenafootball2 is a significant step for the Company and
the AFL. The addition of this league practically doubles the number of cities
that will have either an AFL or arenafootball2 franchise. This expansion will
greatly increase the visibility of the game throughout the United States, which
will result in greater credibility for the sport. And since arenafootball2 is 51
percent owned by the Arena Football League, it will have a positive impact on
the Company's operations.

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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
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.

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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 aggregate 12% 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 two additional Team Shares in the League (which
then represented 2/19 of the League's revenue) for $6,000,000. Under the terms
of the agreement, the Company will receive $480,000 per year and its two
additional Team Shares of the League's gross revenue with all monies going
towards the principle balance, until the Company receives an aggregate of
$6,000,000. The League currently owes the Company $4,609,338.

Ticket Sales. The Predators played seven home games and seven away games
during the 1999 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. Ticket prices for regular season home games
during the 1999 season at the Orlando Arena ranged from $10 to $100 per game.
The following table sets forth certain information relating to the Predators'
regular season revenue generated by the sale of tickets for the 1998 and 1999
seasons:

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

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

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

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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 end zone 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 $25,000 per season. The Company also entered into a one-year radio
contract with Clear Channel, Inc. providing for the Company to receive
approximately $35,000 in 2000. 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. For the 2000 season, the AFL granted TNN, ESPN, ESPN 2
and ABC broadcast rights to televise 25 AFL games, including ten playoff games
and ABC's telecast of the Arena Bowl. All games will be televised live in 2000
(no tape delays as in previous years).

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 $79,000 for the 1999 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.

Performance

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

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

1997 10-4 1st Lost in second
playoff game
1998 9-5 2nd Won the Arena
Bowl Championship
1999 7-7 3rd Lost the Arena
Bowl Championship

<PAGE>

Coaches

Jay Gruden, age 33, 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, two wins
over the Predators 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
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.

<PAGE>

Coach Gruden's staff includes four assistant coaches including an assistant
head coach, a special teams coach and a director of player personnel.

Players

The rules of the AFL permit each team to maintain an active roster of 20
players during the regular season with an additional 4 players on the inactive
list.

AFL team salaries for the 1999 season ranged from $350,000 to $750,000. For
the 2000 season, players' salaries will range from $11,600 to $105,000 per
season. In February 2000, the League entered into an interim collective
bargaining agreement with the Arena Football League's Player Organizing
Committee. This interim agreement substantially increased benefits to the
League's players. Minimum salaries are $11,600 for a first year player, $14,500
for a second year player and $17,400 for a player with a minimum of three years
of service. The agreement also calls for year round health insurance for the
players and their families, full pay for inactive players, short and long term
disability insurance, a 401k pension plan and unrestricted free agency after
eight years of service in the League. A long-term collective bargaining
agreement is expected to be completed later this year. There are no player
drafts, although expansion teams are allowed to draw from a pool of players
designated by existing AFL teams.

Orlando Arena

The Predators have played in the Orlando Arena, which has a seating
capacity of 15,595, 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.

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)

<PAGE>

the NFL, the Canadian Football League and NFL Europe. Additionally, in early
2000, the World Wrestling Federation announced the formation of an eleven-man
outdoor league called the XFL. Preliminary indications are that it will play
from January thru April and field eight teams, of which one is schedule to be
placed in Orlando, FL.

Employees

In addition to its active football players, the Company employs six
football personnel and 16 non-football personnel. During the AFL season, the
Company also uses volunteer part-time employees from time to time.

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

The Company leases team offices at 400 West Church Street in Orlando,
Florida, pursuant to a two-year lease covering 4,800 square feet for $900 per
month. The Company paid approximately $40,000 for leasehold improvements in the
space. The Company leases corporate offices at 741 Front Street, Celebration,
Florida, under a two-year lease terminating January 2002 at a monthly rental of
$3,200.

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 releases. The
Company settled with Mr. Youngblood in March 2000 for an amount of $300,000. Mr.
Youngblood also retained his 34,500 stock options at an exercise price of $2.00
per share. The Company believes it will be reimbursed at a minimum of 50% of the
settlement by its D/O Insurance carrier plus 50% of its legal fees in excess of
the deductible.

In July 1999, the Arena Football League ("AFL") and all of its member teams
were joined as defendants in a civil action brought by Charlotte Arena Football
League, Inc., a former AFL team operator (the case is captioned Charlotte Arena
football, Ltd. et. al. vs. Arena Football League, Inc., et. al., United States

<PAGE>

District Court for the Middle District of Florida) in which the Plaintiffs seek
damages for alleged violations of the Sherman Antitrust Act, for certain
tortious conduct, for breach of fiduciary duties and for civil conspiracy. The
complaint seeks damages against the defendants in amounts exceeding $100
million. Costs of defense and payment of any damages by the defendants will be
advanced by the AFL to be shared equally by all of the AFL teams. The Company
has been advised that the AFL believes the civil action is without merit and
intends to vigorously defend against it.

In February 2000, the Arena Football League ("AFL") and all of its member
teams, including the Company, were joined as defendants in a civil action
brought by several AFL players (the case is captioned James Guidry, et. al. vs.
Arena Football League L.L.C. et. al., United States District Court, District of
New Jersey, Case Number 00-533-HAA) in which plaintiffs seek damages for
violation of federal antitrust law, specifically Sections 1 and 2 of the Sherman
Antitrust Act. The complaint seeks damages against the defendants in an amount
to be determined and trebled, plaintiffs' cost of litigation and further relief,
as the court deems proper and equitable. Should the plaintiffs prevail, the
Company's operating expenses, results of operations and financial condition
could be materially and adversely affected.

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

Not applicable.

16
<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

The Company has approximately 886 holders of record of its Common Stock.
The Company's Common Stock has been traded on the Nasdaq SmallCap Market
("Nasdaq") under the symbol "PRED" since December 1997. On April 10, 2000, the
closing price of the Company's Common Stock was $ 2.0625 per share.

The following table sets forth, for the quarters indicated the range of
high and low sales prices of the Company's Common Stock on the Nasdaq SmallCap
Market.

Common Stock
By Quarter Ended: High Low
---- ---
Calendar 2000
-------------
March 31, 2000 $3.12 $1.75

Calendar 1999
-------------
December 31, 1999 $3.75 $2.75
September 30, 1999 $4.50 $3.00
June 30, 1999 $5.00 $4.12
March 31, 1999 $7.25 $3.25

Calendar 1998
-------------
December 31, 1998 $3.38 $3.25
September 30, 1998 $3.88 $3.38
June 30, 1998 $5.26 $3.63
March 31, 1998 $4.25 $2.94

The above quotations were reported by the Nasdaq SmallCap Market and
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not necessarily represent actual transactions. As of March 3, 2000, the
Company had approximately 886 record and beneficial stockholders.

<PAGE>

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 5,192,999 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. 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 therefore, and, in the event of the 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.

18
<PAGE>

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 under the symbol
"PREDW."

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., 3200 Cherry Creek
Drive, Suite 430, Denver, Colorado 80209, as its transfer agent and warrant
agent.

19
<PAGE>

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.

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

General
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 8% 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.

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 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.

<PAGE>

The Company currently derives substantially all of its revenue from the arena
football operations of the Predators. This revenue is primarily generated from
(i) the sale of tickets to the Predators' home games, (ii) the sale of
advertising and promotions to Predator sponsors, (iii) the sale of local and
regional broadcast rights to Predators' games, (iv) the Predators' share of
League contracts with national broadcast organizations and expansion team fees
paid through the AFL, (v) the sale of merchandise carrying the Predators' logos
and (vi) concession sales at Predators' home games. A large portion of the
Company's annual revenue is determinable at the commencement of each football
season based on season ticket sales and contracts with broadcast organizations
and team sponsors.

The operations of the team are year-round; however, the majority of revenues and
expenses are recognized during the AFL playing season, from April through August
of each year. The team begins to receive deposits in late August for season
tickets during the upcoming season. From August through April, the team sells
season tickets and collects revenue from all such sales. Selling, advertising
and promotions also take place from August 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 and expenses are recognized in August from
playoff games, if any.

In May 1999, the Company entered into a non-binding letter of intent to acquire
United Sports Ventures, Inc. ("USV"). USV wholly or partially owns and operates
the Quad City Mallards, the Rockford Ice Hogs and the Missouri River Otters of
the United Hockey League and the Mobile Bay Bears (AA) professional baseball
club. The Company expects to complete the acquisition in 2000.

21
<PAGE>

Except for the historical information contained herein, certain matters set
forth in this report are forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially. These risks are detailed
from time to time in the Company's periodic reports filed with the Securities
and Exchange Commission. These forward-looking statements speak only as of the
date hereof. The Company disclaims any intent or obligation to update these
forward-looking statements.

Results of Operations
Year Ended December 31, 1999 Compared To The Year Ended December 31, 1998

Revenues
The Company recognizes game revenues and expenses over the course of the season
(April through August).

Revenues for the year ended December 31, 1999 were $5,105,969, which represented
an increase of $1,386,640 or 37% as compared to revenues for the period, ended
December 31, 1998 of $3,719,329. The increase for the year ended December 31,
1999 was directly attributable to an increase in corporate sponsorship revenue
of $499,053 and an increase of League revenue of $1,008,246 due to the Raleigh
Durham, NC and Chicago, IL expansion franchises that will begin play in 2000 and
2001, respectively. The team played the same number of home games in the period
as last year. Ticket sales are recognized when the games are played. The lease
agreement with the Orlando Arena generated $118,521 in concession income for the
eight home games played in this period.

The telemarketing division also generated revenue of $90,798 for the year ended
December 31, 1999 compared to $130,600 for the year ended December 31, 1998. The
division produced revenue from selling season tickets for the Tampa Bay Storm of
the AFL and the Missouri River Otters of the UHL. The Company has entered into
an agreement to sell year 2000 season tickets for the San Jose Sabercats of the
AFL. The Company anticipates the expansion of this division in the future to
other teams in the AFL, arenafootball2 (the AFL's minor league system is
expected to begin play in the 2000 season) and other minor league hockey and
baseball teams.

22
<PAGE>

Operating Expenses
- ------------------
Operating expenses of $1,973,414 decreased of $6,420 or (0.32 %) for the year
ended December 31, 1999 as compared to $1,979,834 for the year ended December
31, 1998.

Selling and Promotional Expenses
- --------------------------------
Selling and promotional expenses of $989,810 increased $324,763 or 49% for the
year ended December 31, 1999 compared to $665,047 for the year ended December
31, 1998. This was due to telemarketing department expenses of $188,000, which
is the Company's primary source of increasing and maintaining the team's season
ticket base. Coinciding with the large increase in sponsorship revenue,
corporate sponsorship commissions increased to $226,000 compared to
approximately $70,000 in the same period in 1998.

League Assessments
- ------------------
League assessments of $583,809 increased $463,809 or 386% for the year ended
December 31, 1999 as compared to $120,000 for the year ended December 31, 1998.
The League is comprised of numerous teams who share in all league revenue and
expenses. 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 $1,161,532 decreased $77,640 or (6%) for
the year ended December 31, 1999 compared to $1,239,172 for the year ended
December 31, 1998. This decrease can be primarily attributed to a restructured
senior management.

Playoffs
- --------
The Orlando Predators played three road playoff games in 1999 and played one
home and two road playoff games in 1998. Playoff revenues for the year ended
December 31, 1999 were $176,970 as compared to $225,762 for the year ended
December 31, 1998. Home teams retain all revenues for playoff games. Road teams
receive $45,000 for rounds one and two, and $50,000 for the Arena Bowl.

Playoff expenses for the year ended December 31, 1999 were $259,485 as compared
to $357,121 for the year ended December 31, 1998.

Other Income/Expense
- --------------------
Interest income during year ended December 31, 1999 was $458,774 as compared to
$207,640 for the year ended December 31, 1998. The interest income related to
the Arena Football League is due to the Nth Purchase Agreement.

Interest expense during the year ended December 31, 1999 was $12,075 as compared
to $63,418 for the prior period.

In March 2000, the Company settled its lawsuit with its former President Jack
Youngblood. The Company believes it is responsible for one-half of the $300,000
settlement due to insurance coverage.

23
<PAGE>

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 $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) was 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.

On November 5, 1998, the Company received a payment from the League in the
amount of $672,791. This payment represented expansion revenue related to the
Los Angeles expansion team that will begin play in 2000.

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.

On September 26, 1999, the Company received a payment from the League in the
amount of $547,858. This represented expansion revenue related to the Chicago
expansion team that will begin play in 2001.

In June 1999, the Monolith Limited Partnership, ("Monolith"), a major
stockholder of the Company, loaned the Company $350,000, due in September 2002
with interest at 8% annually. The note was repaid in July 1999.

<PAGE>

In July 1999, the Company issued a convertible note payable to a stockholder of
the Company for $250,000, convertible at $4.50 per share, due in September 2001
with interest at 10% annually. The Company granted warrants to purchase 25,000
shares of the Company's Class A common stock at $4.50 per share, which expire in
July 2004 in conjunction with the issuance of the note payable. In October 1999,
the company repaid $125,000 of the convertible note and 12,500 of the warrants
were canceled.

In October and November 1999, the Company received payments from the League in
the amount of $682,488. This represented expansion revenue related to the
Carolina membership that will begin play in 2000.

In November 1999, the Company completed another private placement offering. It
consisted of one investor totaling $100,000 ($2.00 per share), with commissions
of 10% or $10,000 paid for 50,000 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 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.

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.

The Company has experienced no material Year 2000 problems in the period since
January 1, 2000.

25
<PAGE>

ITEM 7. FINANCIAL STATEMENTS
- ----------------------------

26
<PAGE>

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

None.

27
<PAGE>

PART III

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

Information concerning each of the Company's executive officers and
directors is set forth below:
<TABLE>
<CAPTION>

Officer/Director
Name Age Position Since
- ---- --- -------- ----------------

<S> <C> <C> <C>
J. Richard Corley(1)(2) 62 Chairman of the Board 1999
of Directors

Eric A. Margenau (1) 58 Chief Executive Officer, President 2000
and Director

Jeffrey L. Bouchy (2) 34 Secretary, Treasurer, 1998
Chief Financial Officer and
Director

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

John W. Frasco (1)(2) 60 Director 1999
</TABLE>

- ----------

(1) Member of Compensation Committee.
(2) Member of Audit 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. Mr. Gagleard
resigned in 1998 and Messrs. Bouchy (Brett L.), Meris, Armstrong and Whelan
resigned in 1999.

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.

<PAGE>

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

J. Richard Corley was elected Chairman of the Board of Orlando Predators
Entertainment, Inc. in February 2000.

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

Eric A. Margenau was appointed Chief Executive Officer and President of
Orlando Predators Entertainment, Inc. in January 2000. Dr. Margenau is also the
President of United Sports Ventures Inc.

Dr. Margenau has been involved in the ownership and operation of Minor
League Sports teams since 1986. In that time he has owned, operated and/or
managed seven Minor League Baseball franchises and four Minor League Hockey
franchises. Dr. Margenau has been a practicing psychologist for over twenty
years. From 1983 to 1988 he was the executive director of the Center for Sports
Psychology and in his capacity as a sports psychologist, he has acted as a
consultant to several Major League Baseball teams. Dr. Margenau is a graduate of
Dickinson College and received his Doctorate from New York University.

Jeffrey L. Bouchy has served as the Chief Financial Officer and Director of
Orlando Predators Entertainment, Inc. since late 1998. He also serves as the
General Manager of the Orlando Predators.

From 1995 to 1998 he was Chief Financial Officer of Gum Tech International,
Inc., a Nasdaq National Market company. From 1994 to 1995 he was employed by Fun
Tees, Inc., a t-shirt manufacturer. From 1992 to 1993 he was involved in arena
management with 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.
Mr. Bouchy earned a B.S. degree in Accounting from Arizona State University and
a M.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. Mr. Bouchy received his Series 7 and
Series 63 stockbroker licenses in the fall of 1998.

Thomas F. Winters, Jr., M.D. received his medical degree in 1980 from the
University of Connecticut. Dr. Winters is a designated consultant for Major
League Baseball, Inc.; Orthopedic Consultant for the Kansas City Royals Baseball

<PAGE>

Organization, Orlando International Aquatic Center and Brown's Gymnasium. 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. In 1996
Dr. Winters founded the Tom Winters Orthopedics and Sports Medicine Center.

John W. Frasco is 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 until 1998. Sports Management Network, Inc. is involved
in sports sponsorships, endorsement and player contracts. From 1980 to 1988, Mr.
Frasco founded and was Chairman of Championship Auto Racing Teams, Inc. (now
known as Indy Car), which is the controlling body of Indy Car racing. Mr. Frasco
has owned and operated racing events in Atlanta, New York, Miami, Las Vegas and
Vancouver. Mr. Frasco received his B.A. degree from Loras College in Dubuque,
Iowa and his Juris Doctorate from Detroit College Law.

ITEM 10. EXECUTIVE COMPENSATION
- -------------------------------

None of the Company's executive officers received compensation in excess of
$100,000 for the years ended December 31, 1998 or 1999. The following table
indicates all compensation received the by Company's Chief Executive Officer in
1998 and 1999.
<TABLE>
<CAPTION>

Summary Compensation Table

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

<S> <C> <C> <C> <C> <C>
Brett L. Bouchy,
Chief Executive Officer 1999 50,000 0 817,068 0

Jack Youngblood,
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.

<PAGE>

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 3,000,000 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.

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, 1,867,247 stock options have been granted
under the Plan, exercisable at prices ranging from $2.00 to $2.88 per share.

31
<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. Unless otherwise indicated, 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.
Shareholdings include shares issuable under stock options exercisable within 60
days from the date of this Report.

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

J. Richard Corley (6) 110,000 2.1%
Eric A. Margenau (1)(7) 0 0%
Jeffrey L. Bouchy (2) 100,000 1.9%
Thomas F. Winters (3) 37,500 .72%
John W. Frasco (4) 300,000 4.59%
Riverlux Trust REG 725,000 13.96%
The Monolith Limited Partnership (5) 1,546,500 29.78%
Brett L. Bouchy (1) 383,746 6.88%
All directors and officers
as a group (5 persons) 547,500 9.71%

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

(1) Includes stock options to purchase 817,080 shares at $2.50 per share. Mr.
Bouchy is under contract to purchase 462.50 Class B shares from the
Monolith Limited Partnership. Any Class B shares or Class A shares
purchased by Mr. Bouchy under the options will be subject to a voting trust
in favor of Mr. Margenau until January 28, 2010.

(2) Includes stock options to purchase 50,000 shares at an average exercise
price of $2.50 per share.

(3) Includes stock options to purchase 5,000 shares at an exercise price of
$2.00 per share and 65,000 shares at an exercise price of $2.50 per share.

(4) Includes stock options to purchase 450,000 shares of the Company's Class A
Common Stock at $2.50 per share.

<PAGE>

(5) The Monolith Limited Partnership ("Monolith") is a privately held, Delaware
limited partnership, which owns 1,546,500 shares of the Company's Common
Stock. The General Partner of Monolith is WGM Corporation, a Delaware
Corporation ("WGM"), of which William G. Meris, a former Director of the
Company, is the President and sole principal stockholder. Monolith is under
contract to sell 925 shares of Class B stock to Messers. B. Bouchy and
Margenau (462.5 shares each).

(6) Includes stock options to purchase 270,000 shares at $2.50.

(7) Mr. Margenau is under contract to purchase 462.50 Class B shares from the
Monolith Limited Partnership.

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.

33
<PAGE>

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
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 August 1998, in connection with the sale of 1,000,000 shares of the
Company's Class A Common Stock to Riverlux Trust REG at $2.00 per share,
Monolith agreed at Riverlux's request to purchase from Riverlux 600,000 of the
1,000,000 shares acquired by Riverlux from the Company for $6.67 per share on or
before May 9, 1999. In turn, Riverlux granted Monolith an option to purchase up
to 400,000 shares of Class A Common Stock of the Company held by Riverlux
commencing September 1999 at prices from $7.00 to $13.00 per share. On July
13,1999 Monolith purchased 275,000 shares from Riverlux at $7.00 per share. In
consideration for $550,000 paid by Monolith to the stockholder as a cancellation
fee, the stockholder 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.

In January 1999, the Company issued to Brett L. Bouchy, its then Chief
Executive Officer, non-plan 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

<PAGE>

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. Mr. Bouchy terminated his employment agreement
with the Company in January 2000. Mr. Bouchy canceled his 950,000 non-plan
options in consideration of which he received 817,068 plan options at $2.50 per
share, which will be placed in a trust under the governance of current
CEO/President, Eric Margenau.

In January 1999 the Company borrowed $350,000 from Monolith at 8% per annum
interest. The loan was repaid in July 1999.

In January 2000, Monolith agreed to sell its 925 shares of Class B Common
Stock to Brett L. Bouchy (462.5 shares) and Eric Margenau (462.5 shares).
Additionally, in January 2000, Mr. Bouchy granted Mr. Margenau the right to vote
the shares until January 2010.

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. 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.

35
<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)
10.15 Employment Agreement with Brett L. Bouchy (3)
10.16 Employment Agreement with Jeffrey L. Bouchy (3)
10.17 Employment Agreement with John W. Frasco (3)
10.18 Voting Trust Agreement between Messrs. Bouchy and Margenau
10.19 Merger Agreement between the Registrant and USV (3)
10.20 Civil Complaint: Guidry, et.al. vs. Arena Football
League LLC et.al.(3)
10.21 Management Agreement (USV)(3)
Amended Employment Agreement with Brett L. Bouchy (3)

(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) Incorporated by reference to the Registrant's previous filings on Forms
10K-SB, 10Q-SB and 8-K.

b. Reports on Form 8-K: None.

36
<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 April 13, 2000.

THE ORLANDO PREDATORS
ENTERTAINMENT, INC.

By: /s/Eric Margenau
----------------------------
Eric A. Margenau, 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/J.Richard Corley Chairman of the Board April 13, 2000
- -------------------- of Directors
J. Richard Corley

/s/ Eric A. Margenau Chief Executive Officer, April 13, 2000
- -------------------- President and Director
Eric A. Margenau

/s/ Jeffrey L. Bouchy Secretary, Treasurer, April 13, 2000
- --------------------- Chief Financial Officer
Jeffrey L. Bouchy and Director

Director April 13, 2000
- -------------------
Thomas F. Winters, Jr.

/s/ John W. Frasco Director April 13, 2000
- ------------------
John W. Frasco

<PAGE>

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, 1999, and the related statements of
operations, changes in stockholders' equity and cash flows for each of the years
in the two year period then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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, 1999 and the results of its operations
and its cash flows for each of the years in the two year period then ended, in
conformity with generally accepted accounting principles.

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

Denver, Colorado
February 4, 2000, except for
Note 4(G) which is dated
March 31, 2000

F-2
<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
BALANCE SHEET
DECEMBER 31, 1999
-----------------

ASSETS

CURRENT ASSETS:
Cash $ 368,490
Accounts receivable, sponsorships 42,409
Accounts receivable, related party 54,417
AFL receivable, current portion 84,886
Accrued interest receivable, AFL 597,056
Inventory 29,807
Receivable from employees 26,431
Prepaid expenses 315,423
Deferred acquisition costs 179,303
Deposits 60,000
-----------

Total Current Assets 1,758,222

PROPERTY AND EQUIPMENT, at cost, net 445,342

EQUITY INVESTMENT IN AFL 4,032,650

AFL RECEIVABLE, net of current portion 1,881,085

MEMBERSHIP COST, net 1,844,765

OTHER INTANGIBLES, net 13,789

RESTRICTED INVESTMENT 100,000

OTHER ASSETS 900
-----------

$10,076,753
===========

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-3

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
BALANCE SHEET (Continued)
DECEMBER 31, 1999
-----------------

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 474,947
Accrued interest, related party 10,336
Due to AFL 61,000
Deferred revenue 722,638
Convertible debt - related party 125,000
------------

Total Current Liabilities 1,393,921
------------

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;
5,187,999 issued and outstanding 10,126,400
Class B Common Stock, 1,000 shares authorized,
1,000 issued and outstanding 5,000
Additional paid-in capital 2,914,403
Accumulated (deficit) (4,362,971)
------------

Total Stockholders' Equity 8,682,832
------------

$ 10,076,753
============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-4
<PAGE>
<TABLE>
<CAPTION>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998

1999 1998
----------- ----------
<S> <C> <C>
REVENUES:
Ticket $ 1,553,872 $ 1,534,440
Concession 118,521 122,866
Play-off 176,970 225,762
Advertising and promotions 1,345,072 846,019
League 1,808,162 799,916
Telemarketing 90,798 130,600
Other 12,574 59,726
----------- -----------

Total Revenues 5,105,969 3,719,329
----------- -----------
COSTS AND EXPENSES:
Operations 1,973,414 1,979,834
Playoff expenses 259,485 357,121
Selling and promotional expenses 989,810 665,047
League assessments 583,809 120,000
General and administrative 1,161,532 1,239,172
Telemarketing expenses 109,635 220,107
Amortization 70,432 70,432
Depreciation 73,595 43,610
Loss from disposal of equipment 9,601 13,783
----------- -----------

Total Costs and Expenses 5,231,313 4,709,106
----------- -----------

OPERATING (LOSS) (125,344) (989,777)
----------- -----------

OTHER INCOME (EXPENSE):
Interest expense (12,075) (63,418)
Interest income 12,172 57,186
Interest income, AFL 446,602 150,454
Loss on settlement of litigation (106,000) --
Loss from equity investment in AFL -- (38,786)
----------- -----------

Net Other Income (Expense) 340,699 105,436
----------- -----------

INCOME (LOSS) BEFORE PROVISION (BENEFIT) FOR INCOME TAXES 215,355 (884,341)

PROVISION (BENEFIT) FOR INCOME TAXES -- --
----------- -----------

NET INCOME (LOSS) 215,355 (884,341)

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

INCOME (LOSS) ATTRIBUTABLE TO COMMON STOCKHOLDERS $ 215,355 $(3,686,341)
=========== ===========

NET INCOME (LOSS) PER SHARE, Basic $ .04 $ (1.09)
=========== ===========

Weighted Average Number of Common Shares Outstanding, Basic 5,132,535 3,374,836
=========== ===========

NET INCOME PER SHARE, Diluted $ .04
===========

Weighted Average Number of Common Shares Outstanding, Diluted 5,254,117
===========

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-5
</TABLE>

ORLANDO PREDATORS ENTERTAINMENT, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------

Class A Common Stock Class B Common Stock Additional
----------------------- ------------------- Paid-In Accumulated
Shares Amount Shares Amount Capital (Deficit) Total
--------- ----------- -------- ---------- ----------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances,
December 31, 1997 2,480,000 $ 4,861,707 1,000 $ 5,000 $ -- $ (891,985) $ 3,974,722

Class A Common Stock issued in
private placements, 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,
December 31, 1998 5,050,000 9,867,150 1,000 5,000 2,879,940 (4,578,326) 8,173,764

Class A Common Stock issued in
private placements, net of
offering costs of $31,750 115,000 213,250 -- -- -- -- 213,250

Class A Common Stock issued for
exercise of stock options 22,999 46,000 -- -- -- -- 46,000

Warrants issued with convertible
debt -- -- -- -- 34,463 -- 34,463

Net income -- -- -- -- -- 215,355 215,355
----------- ----------- --------- ---------- ----------- ----------- -----------

Balances, 5,187,999 $10,126,400 1,000 $ 5,000 $ 2,914,403 $(4,362,971) $8,682,832
December 31, 1999 =========== =========== ========= ========== =========== =========== ==========

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-6

<PAGE>

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
----------------------------------------------

1999 1998
----------- ----------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net income (loss) $ 215,355 $ (884,341)
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Loss from disposal of equipment 9,601 13,783
Depreciation and amortization 144,027 114,042
Loss from equity interest in AFL -- 38,787
Stock options issued to consultants -- 77,940
Warrants issued for loan fees 34,463 --
Changes in assets and liabilities:
Accounts receivable, sponsorships 172,407 (214,816)
Accrued interest receivable (446,602) (150,454)
Employee receivables 18,704 6,582
Inventory (9,222) (5,926)
Prepaid expenses (58,862) (162,427)
Accounts receivable, related party 52,317 (106,734)
Other assets (58,356) (1,636)
Accounts payable 134,821 (29,062)
Accrued expenses 18,056 183,777
Accounts payable, related party (25,661) (54,447)
Accrued expenses, related party 3,665 (86,839)
Due to AFL 61,000 --
Deferred revenue 78,966 186,029
----------- -----------

Net Cash Provided (Used) by Operating Activities 344,679 (1,075,742)
----------- -----------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Purchase of equipment (298,324) (25,758)
Sale of equipment -- 548
Investment in AFL -- (4,071,437)
Issuance of AFL receivable -- (1,965,971)
Payment of deferred acquisition costs (179,303) --
----------- -----------

Net Cash (Used) by Investing Activities (477,627) (6,062,618)
----------- -----------

CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from loans from stockholders 350,000 316,000
Proceeds from issuance of notes payable to related parties -- 1,050,000
Proceeds from issuance of convertible debt 250,000 --
Repayments of loans from stockholders (350,000) (316,000)
Repayment of notes payable -- (200,000)
Repayment of convertible debt (125,000) --
Proceeds from issuance of notes payable -- 950,000
Proceeds from issuance of Class A Common Stock 291,000 5,039,426
Repayment of notes payable to related parties -- (1,045,000)
Payment of offering costs (31,750) (794,556)
----------- -----------

Net Cash Provided by Financing Activities 384,250 4,999,870
----------- -----------

INCREASE (DECREASE) IN CASH 251,302 (2,138,490)

CASH, beginning of period 117,188 2,255,678
----------- -----------

CASH, end of period $ 368,490 $ 117,188
=========== ===========

CASH PAID FOR INTEREST $ 8,411 $ 149,857
=========== ===========
Supplementary information:
See Note 5

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 professional Arena
Football team and a member of the Arena Football League (AFL or League).

Reclassification
- ----------------
Certain amounts reported in the Company's financial statements for the year
ended December 31, 1998 have been reclassified to conform to the current year
presentation.

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 years ended December 31,
1999 and December 31, 1998 was $73,595 and $43,610, 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.

Membership Cost
- ---------------
The AFL membership is recorded at a cost of $1,989,860 and is being amortized on
a straight-line basis over 40 years. Amortization expense for the years ended
December 31, 1999 and December 31, 1998 was $49,747 and $49,747, respectively.

Acquisition Costs
- -----------------
The Company has acquisition costs of $179,303 at December 31, 1999, relating to
the planned acquisition of United Sports Ventures, Inc. Acquisition costs are
allocated to the net assets acquired if the acquisition is successful, or are
charged to operations if not successful.

F-8
<PAGE>

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

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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 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 original contract with the Company, 3 years.
Amortization expense for the years ended December 31, 1999 and December 31, 1998
was $20,685 and $20,685, 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 under
the terms of the agreement which records revenues as received but do not
currently share in expenses.

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 carryforward 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. A valuation allowance equal to the net deferred
tax asset has been recorded at December 31, 1999 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.

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 1999 the FASB issued Statement No. 133, Accounting for Derivative Instruments
and Hedging Activities. The adoption by the Company of Statement 133 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.

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 Companies' operations. Costs in
connection with compliance were not significant.

To date, the Company has not experienced any interruptions with respect to the
Year 2000 issue, but cannot reasonably predict with certainty that they will not
experience any interruptions.

F-11
<PAGE>

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

NOTE 2 - ARENA FOOTBALL LEAGUE

The AFL is a Limited Liability Company, 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 are recognized when
received from the league. Special assessments for litigation and other costs are
recognized in the same periods as incurred. 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 2000 season
budget is as follows:

Revenue:
"AFL" Expansion membership fees $ -
"AF2" Expansion membership fees -
-------------
-
Assessments:
Operating assessment 120,000
Other assessments -
-------------

Net Assessment $ (120,000)
=============

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

A $1,500,000 judgement had been entered against the AFL, which the AFL settled
in 1999 for $1,100,000. The Company has recorded a liability to the AFL for its
share of the settlement. The AFL is also a defendant to a claim for alleged
damages for approximately $300,000,000. 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.

F-12
<PAGE>

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

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

December 31,
1999
-----------------

Office equipment $ 273,386
Leasehold improvements 53,555
Game equipment and system 253,072
-----------------
580,013
Less accumulated depreciation (134,671)
-----------------

$ 445,342
=================

NOTE 4 - 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 $70,000 of
commercial time, promotional events and the right to broadcast the games. The
Company also entered into a one-year radio contract under similar terms.

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.
Through the end of the 1999 season, player contracts were for a term of one year
with a one year renewal option. If the team did not re-sign the player at the
end of the contract, he was waived and free to sign with another team. However,
the team had the option of signing the player first. If the player refused to
re-sign, he was required to "sit out" for one year before playing for another
team.

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.

F-13
<PAGE>

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

NOTE 4 - COMMITMENTS AND CONTINGENCIES (Continued)

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.

In October 1999, the agreement was amended to increase the salaries to range
from $120,000 to $147,500 and to extend the agreement through 2003.

On January 28, 2000, the Company's then President/Chief Executive Officer
resigned his position and resigned from the board of directors. He will now be
the Company's Arena Football League Liaison for a term of three years, with an
annual base salary of $50,000 per year.

C.) Collective Bargaining Agreement
- ------------------------------------
In February 2000, the League entered into an interim collective bargaining
agreement with the Arena Football League's Player Organizing Committee. This
interim agreement substantially increased benefits to the League's players.
Minimum salaries are $11,600 for a first year player, $14,500 for a second year
player and $17,400 for a player with a minimum of three years of service. The
agreement also calls for year round health insurance for the players and their
families, full pay for inactive players, short and long term disability
insurance, a 401k pension plan and unrestricted free agency after eight years of
service in the League.

D.) 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% (during 1998), 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.

Until April 1999, corporate office space was received as trade for a sponsorship
from a financial institution. The total value of the office space was $50,000.
The Company has entered into a new two year lease agreement at a rate of $900
per month.

The Company also leases offices under a two-year lease terminating January 2002
at a monthly rental of $3,200.

F-14
<PAGE>

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

NOTE 4 - COMMITMENTS AND CONTINGENCIES (Continued)

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

Orlando
Offices Centroplex
------- ----------

2000 $ 49,200 $ 60,000
2001 41,100 60,000
2002 3,200 60,000
-------- --------

$ 93,500 $180,000
======== ========

Rent expense for the periods ended December 31, 1999 and December 31, 1998 was
$124,753 and $163,752, respectively.

E.) Self Insurance
- -------------------
The Predators provide a $250,000 occupational health, accidental death and
disability insurance policy to each player. 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.

F.) Letter of Credit
- ---------------------
The Company had 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 was required by the AFL and was 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. Subsequent to December
31, 1999 the letter of credit was no longer required.

G.) 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.

In March 2000, the Company reached a settlement agreement with its former
President. The Company has agreed to pay the former President $300,000. The
Company had previously accrued approximately $54,000 for amounts it believed
would be payable to the former President. In December 1999, the Company recorded
an additional $106,000 in settlement costs, net of anticipated insurance
reimbursements of $140,000.

F-15
<PAGE>

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

NOTE 4 - COMMITMENTS AND CONTINGENCIES (Continued)

H.) Put Options
- ----------------
In August, 1998, Monolith Limited Partnership ("Monolith"), a major stockholder
of the Company, entered into an agreement with a stockholder (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 stockholder for $4,000,000
at the stockholder'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 stockholder, as a cancellation fee, the stockholder agreed to terminate
its put right for the remaining shares.

I.) Telemarketing Agreements
- -----------------------------
The Company has telemarketing agreements with other professional sports teams to
sell season tickets.

NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION

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 6 - 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. During 1999, the Plan was amended to provide for 2,500,000
additional option shares. The board may grant options to key management
employees, officers, directors and consultants.

F-16
<PAGE>

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

NOTE 6 - COMMON STOCK (Continued)
Outstanding Options
Option ------------------------------
Shares Price Per
Available Shares Share
--------- ------ -----

<S> <C> <C> <C>
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

Additional reserved shares 2,500,000 -- --
Granted (1,789,580) 1,789,580 2.50
Cancelled 290,000 (290,000) 3.19-4.75
Expired 120,667 (120,667) 2.00-3.19
Exercised -- (22,999) 2.00
---------- ---------- ----------

Balance, December 31, 1999 1,211,754 1,765,247 $ 2.00-2.50
========== ========== ===========
</TABLE>

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.

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 $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). An additional charge to income of
$202,503 would have been required in 1999; proforma net income would have been
$12,852 and income per share would have been less than $.01 per share on the
basic and diluted basis.

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.

F-17
<PAGE>

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

NOTE 6 - COMMON STOCK (Continued)

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 connection with the Company's public offering of stock 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. There are
also 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").

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 7 - CONVERTIBLE DEBT

The Company sold a $250,000 convertible debt in July 1999. The debt accrues
interest at 10% per annum and interest and principal are due in January 2001.
The debt is convertible at a rate of one share of the Company's Class A common
stock for $4.375 each. In October 1999, the Company repaid $125,000.

F-18
<PAGE>
<TABLE>
<CAPTION>

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

NOTE 8 - EARNINGS PER SHARE

For the Year Ended December 31, 1999
----------------------------------------------------
Per
Income Shares Share
(Numerator) (Denominator) Amount
----------- ------------- -------
<S> <C> <C> <C>
Basic EPS
Income available to common stockholders $ 215,355 5,132,535 $ .04

Effect of Dilutive Securities
Options and warrants -- 121,582 (.00)
--------- --------- -------

Diluted EPS
Income available to common stockholders $ 215,355 5,254,117 $ .04
including assumed conversions ========= ========= =======

For the Year Ended December 31, 1998
------------------------------------------------------
Per
Income Shares Share
(Numerator) (Denominator) Amount
----------- ------------- ------
Basic EPS
(Loss) available to common stockholders $(3,686,341) 3,374,836 $ (1.09)

Effect of Dilutive Securities
Options and warrants -- -- --
----------- ----------- --------

Diluted EPS
Income available to common stockholders $(3,686,341) 3,374,836 $ (1.09)
including assumed conversions =========== =========== ========

F-19
</TABLE>

<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 $ 1,317,000
Less valuation allowance (1,317,000)
-----------

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 $ (13,000)
Membership cost 55,000
Accrued interest-stockholders 4,000
Net operating loss carryforward 1,271,000
Less valuation allowance (1,317,000)
-----------

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

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

1999 1998
--------- ---------
Temporary differences:
Depreciation expense $ 2,000 $ 8,000
Amortization expense (19,000) (19,000)
Interest-stockholders (1,000) 35,000
Net operating loss carryforward (633,000) (354,000)
Less valuation allowance 651,000 330,000
--------- ---------

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

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):

1999 1998
--------- ---------
Tax expense (benefit) at statutory rates $ 73,000 $(298,000)
Other 21,000 (32,000)
AFL (667,000) --
Increase in valuation allowance 573,000 330,000
--------- ---------

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

F-20

<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, 1999 and December 31, 1998, as the Company has incurred losses during these
periods. Net operating loss carryovers of approximately $3,400,000 as of
December 31, 1999 expire beginning in 2016. 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. 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 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.

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

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. All assets of the Company
relate to the football operations segment.

F-21
<PAGE>
<TABLE>
<CAPTION>

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

NOTE 11 - OPERATING SEGMENTS (Continued)

Net Operating Identifiable Capital
Revenues Loss Depreciation Assets Expenditures
-------- ---- ------------ ------ ------------

December 31, 1998:
<S> <C> <C> <C> <C> <C>
Football operations $ 3,428,729 $ (900,270) $ 43,610 $ 8,868,204 $ 25,758
Telemarketing services 130,600 (89,507) -- 138,547 --
------------ ------------ ------------ ------------ ------------

$ 3,559,329 $ (989,777) $ 43,610 $ 9,006,751 $ 25,758
============ ============ ============ ============ ============

December 31, 1999:
Football operations $ 5,015,171 $ (106,507) $ 73,595 $ 10,022,336 $ 298,324
Telemarketing services 90,798 (18,837) -- 54,417 --
------------ ------------ ------------ ------------ ------------

$ 5,105,969 $ (125,344) $ 73,595 $ 10,076,753 $ 298,324
============ ============ ============ ============ ============
</TABLE>

NOTE 12 - SUBSEQUENT EVENTS

Management Agreement with USV
- -----------------------------
On January 28, 2000, the Company entered into an agreement with United Sports
Ventures, Inc. (USV) for management services in connection with the Company's
Orlando Predators sports team and for general management services in the
operation of the Company. The agreement is for a term of one year and
automatically renews each year. Fees for the management services are $10,000
per month.

In conjunction with the management agreement with USV, certain members of USV's
management have taken Vice-President positions with the Company and USV's
President has been appointed the Chief Executive Officer of the Company.

Warrants
- --------
In January 2000, the Company sold a warrant for $6,250 to purchase 50,000 shares
of the Company's Class A common stock for $5.00 per share. The warrant expires
in January 2005.

F-22

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<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 368,490
<SECURITIES> 0
<RECEIVABLES> 208,143
<ALLOWANCES> 0
<INVENTORY> 29,807
<CURRENT-ASSETS> 1,758,222
<PP&E> 518,937
<DEPRECIATION> 73,595
<TOTAL-ASSETS> 10,076,753
<CURRENT-LIABILITIES> 1,393,921
<BONDS> 0
0
0
<COMMON> 10,131,400
<OTHER-SE> 2,914,403
<TOTAL-LIABILITY-AND-EQUITY> 10,076,753
<SALES> 5,105,969
<TOTAL-REVENUES> 5,105,969
<CGS> 0
<TOTAL-COSTS> 5,231,313
<OTHER-EXPENSES> (340,699)
<LOSS-PROVISION> 106,000
<INTEREST-EXPENSE> 12,075
<INCOME-PRETAX> 215,355
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215,355
<EPS-BASIC> .04
<EPS-DILUTED> 0

</TABLE>