U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Transition Period from: ______________
Commission File Number: 001-13217
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Florida 91-1796903
------------------------------ -------------------------------------
(State or Other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
741 Front Street, Suite 140
Celebration, Florida 34747
--------------------------------------
(Address of Principal Executive Offices)
Issuer's Telephone Number: (407) 566-2493
Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the Registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
----- -----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court. Yes No
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity as of the latest practicable date: As of August 11, 2000 5,192,999 shares
of the Registrant's no par value Class A Common Stock and 1,000 shares of no par
value Class B Common Stock were outstanding.
Transitional Small Business Disclosure format: Yes[ ] No [X]
<PAGE>
ORLANDO PREDATORS ENTERTAINMENT, INC.
FORM 10-QSB
INDEX
Part I Financial Information Page
------ --------------------- ----
Item 1. Financial Statements:
Balance Sheets as of June 30, 2000 and December 31, 1999 1
Statements of Operations for the Three Months and
Six Months Ended June 30, 2000 and 1999 3
Statements of Cash Flows for the
Six Months Ended June 30, 2000 and 1999 4
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Part II Other Information and Signatures 12
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
BALANCE SHEETS
ASSETS
June 30, December 31,
2000 1999
---------- ------------
(Unaudited)
CURRENT ASSETS:
Cash $ 74,648 $ 368,490
Accounts receivable 37,968 --
Accounts receivable, sponsorships 204,802 42,409
Accounts receivable, related party 54,417 54,417
AFL receivable, current portion 78,770 84,886
Accrued interest receivable, AFL 244,821 597,056
Inventory 29,671 29,807
Receivable from employees 15,000 26,431
Deferred acquisition costs -- 179,303
Deposits 6,751 60,000
Prepaid expenses 399,900 315,423
----------- -----------
Total Current Assets 1,146,748 1,758,222
----------- -----------
PROPERTY AND EQUIPMENT, at cost, net 507,531 445,342
EQUITY INVESTMENT IN AFL 4,032,650 4,032,650
AFL RECEIVABLE, net of current portion 1,856,246 1,881,085
MEMBERSHIP COST, net 1,819,892 1,844,765
OTHER INTANGIBLES, net 3,447 13,789
RESTRICTED INVESTMENT 100,000 100,000
OTHER ASSETS -- 900
----------- -----------
TOTAL ASSETS $ 9,466,514 $10,076,753
=========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
1
<PAGE>
<TABLE>
<CAPTION>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
BALANCE SHEETS (CONTINUED)
LIABILITIES AND STOCKHOLDER'S EQUITY
June 30, December 31,
2000 1999
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 529,560 $ 474,947
Accrued interest, related party 9,788 10,336
Deferred revenue 322,893 722,638
Convertible debt - related party 125,000 125,000
Due to AFL -- 61,000
------------ ------------
Total Current Liabilities 987,241 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; 5,192,999 and 5,187,999 issued and
outstanding, respectively 10,136,399 10,126,400
Class B Common Stock, 1,000 shares authorized;
1,000 issued and outstanding 5,000 5,000
Additional paid-in capital 2,920,653 2,914,403
Accumulated (deficit) (4,582,779) (4,362,971)
------------ ------------
Total Stockholders' Equity 8,479,273 8,682,832
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 9,466,514 $ 10,076,753
============ ============
SEE ACCOMPANYING NOTES TO FINANCIAL STATMENTS
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS
For the Three For the Three For the Six For the Six
Months Ended Months Ended Months Ended Months Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Ticket $ 1,397,017 $ 955,466 $ 1,397,017 $ 955,466
Concession 101,394 72,863 101,394 72,863
Advertising and promotion 923,691 889,384 926,634 892,555
Advertising and promotion, related party -- 34,250 -- 34,250
League 60,435 547,858 60,435 547,858
Telemarketing 19,130 7,486 28,057 54,476
Telemarketing, related party -- 6,400 -- 6,400
Other 25,676 11,159 25,676 11,159
----------- ----------- ----------- -----------
Total Revenue 2,527,343 2,524,866 2,539,213 2,575,027
----------- ----------- ----------- -----------
COSTS AND EXPENSES:
Operations 1,336,822 1,166,895 1,336,822 1,169,339
Operations, related party 1,894 5,654 1,894 5,654
Selling and promotional 716,604 701,374 718,573 701,374
League assessments 96,750 87,312 96,750 87,312
General and administrative 193,639 204,517 488,740 361,784
Telemarketing 9,764 7,481 15,136 54,228
Telemarketing, related party -- 6,255 -- 6,255
Amortization 17,608 17,607 35,216 35,215
Depreciation 86,260 29,958 100,694 34,208
Failed Acquisition Costs 180,367 -- 180,367 --
Loss on disposal of equipment -- 9,601 -- 9,601
----------- ----------- ----------- -----------
Total Costs and Expenses 2,639,708 2,236,654 2,974,192 2,464,970
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) (112,365) 288,212 (434,979) 110,057
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSES):
Interest expense, related party (3,117) (1,342) (6,233) (1,342)
Interest income 835 2,638 3,725 4,156
Interest income, AFL 107,287 111,901 217,679 224,251
Other income 6,863 7,012 -- 7,012
----------- ----------- ----------- -----------
Net Other Income (Expense) 111,868 120,209 215,171 234,077
----------- ----------- ----------- -----------
NET (LOSS) $ (497) $ 408,421 $ (219,808) $ 344,134
=========== =========== =========== ===========
NET (LOSS) PER SHARE-BASIC AND
DILUTED $ (0.00) $ 0.08 $ (0.04) $ 0.07
=========== =========== =========== ===========
Weighted Average Number of Common
Shares Outstanding 5,192,999 5,131,166 5,191,784 5,113,442
=========== =========== =========== ===========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
3
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
For the Six For the Six
Months Ended Months Ended
June 30, 2000 June 30, 1999
------------- -------------
(Unaudited) (Unaudited)
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net Income (loss) $(219,808) $ 344,134
Adjustments to reconcile net (loss) to net cash from operating
activities:
Depreciation and amortization 135,910 69,423
Loss on disposal of equipment -- 9,601
Issuance of Class A common stock purchase warrants 6,250 --
Changes in assets and liabilities:
Accounts receivable (200,361) (253,922)
AFL, Interest income receivable 352,235 (224,251)
Employee receivable 11,431 11,362
Inventory 136 (26,472)
Prepaid expenses (84,477) (151,203)
Accounts receivable, related party -- 52,317
Other assets 54,148 (70,800)
Accounts payable and accrued expenses (6,387) 139,537
Accounts payable and accrued expenses, related party (548) (24,318)
Deferred revenue (399,745) 298,870
--------- ---------
Net Cash (Used) by Operating Activities (351,216) 174,278
--------- ---------
CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Purchase of equipment (162,883) (138,953)
Sale of equipment -- --
Payments received-AFL note receivable 30,955 --
Payment of acquisition costs (1,064) (12,153)
Acquisition costs written off 180,367 --
--------- ---------
Net Cash (Used) by Investing Activities 47,375 (151,106)
--------- ---------
CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from issuance of Class A common stock 9,999 175,333
Note payable - related party -- 350,000
Payment of offering costs -- (21,750)
--------- ---------
Net Cash Provided by Financing Activities 9,999 503,583
--------- ---------
INCREASE (DECREASE) IN CASH (293,842) 526,755
Cash and Cash Equivalents at Beginning of Period 368,490 117,188
--------- ---------
Cash and Cash Equivalents at End of Period $ 74,648 $ 643,943
========= =========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for:
Interest $ -- $ --
========= =========
Taxes $ -- $ --
========= =========
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
4
</TABLE>
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited financial statements include the accounts of The
Orlando Predators Entertainment, Inc. (the "Company"). The financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and in accordance with the instructions for
Form 10-QSB. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles.
In the opinion of management, the unaudited interim financial statements for the
three and six months ended June 30, 2000 are presented on a basis consistent
with the audited financial statements and reflect all adjustments, consisting
only of normal recurring accruals, necessary for fair presentation of the
results of such period.
The results for the six months ended June 30, 2000 are not necessarily
indicative of the results of operations for the full year. These financial
statements and related footnotes should be read in conjunction with the
financial statements and footnotes thereto included in the Company's Form 10-KSB
filed with the Securities and Exchange Commission for the period ended December
31, 1999.
Certain amounts in the prior period's financial statements have been
reclassified for comparative purposes to conform to the current year.
NOTE 2 - CONTINGENCIES
The AFL is party to a number of lawsuits arising in the normal course of
business. The Company is contingently liable for its share of the outcomes.
NOTE 3 - 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 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. Segment information for the
six months ended June 30, 2000 was as follows:
<TABLE>
<CAPTION>
Net Operating Identifiable Capital
Revenues Income (Loss) Assets Expenditures
-------- ------------- ------ ------------
<S> <C> <C> <C> <C>
Football operations $2,511,156 $ (447,900) $9,412,097 $ 162,883
Telemarketing services 28,057 12,921 54,417 --
---------- ---------- ---------- ----------
Totals $2,539,213 $ (434,979) $9,466,514 $ 162,883
========== ========== ========== ==========
5
<PAGE>
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
Segment information for the six months ended June 30, 1999 was as follows:
Net Operating Identifiable Capital
Revenues Income Assets Expenditures
-------- ------ ------ ------------
Football operations $ 2,514,151 $ 109,664 $10,379,227 $ 138,953
Telemarketing services 60,876 393 54,417 --
----------- ----------- ----------- -----------
Totals $ 2,575,027 $ 110,057 $10,433,644 $ 138,953
=========== =========== =========== ===========
</TABLE>
NOTE 4 -NTH AGREEMENT
In April 2000, the Company settled a dispute with the League regarding the
payment terms of the Nth Agreement, as a result, the Company will receive a
guaranteed amount of $480,000 per year and all additional monies received from
the League will go to the repayment of the remaining $1,965,971 owed to the
Company. Subsequently, the Company will continue to receive their pro rata share
of League revenues.
NOTE 5-SUBSEQUENT EVENTS
In July 2000, the Company entered into a $250,000 promissory note payable to a
related party. The note accrues interest at 12% per year and is due in January
2001. In August 2000, the Company repaid $100,000.
In July 2000, the Company entered into an agreement with an investment bank firm
for financing and investment banking consulting services expiring in October
2001. Fees for the services are $10,000 at the signing of the agreement and
$2,174 per month thereafter. The Company also has granted warrants to purchase
350,000 shares of the Company's Class A Common Stock at prices ranging from
$2.50 to $4.50 per share, which vest quarterly over the life of the contract.
The warrants have been valued at $113,100, which will be expensed ratably over
the life of the contract.
In July 2000, the Company modified its management agreement with United Sports
Ventures, Inc. (USV) to reduce the monthly fee from $10,000 to $3,000. The
agreement expires in July 2001. The Company granted options to purchase 150,000
shares of the Company's Class A Common Stock at $2.50 per share, which vest
quarterly over a period of one year. The options have been valued at $63,300,
which will be expensed ratably over the life of the contract.
6
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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 8.4% 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 evidenced
by the announcement by the National Football League's ("NFL") purchase of an
option to acquire up to 49.9% of the League, and the sale of league memberships
during 1999.
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 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 late March through
August of each year. The team begins to receive deposits in late August for
season tickets during the upcoming season. From August through late March, the
team sells season tickets and collects revenue from all such sales. Selling,
advertising and promotions also take place from August through late March,
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.
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.
7
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Six Months Ended June 30, 2000 Compared To The Six Months Ended June 30, 1999
Revenues
--------
The Company recognizes game revenues and expenses over the course of the season
(April through August). The team plays eight home games per season. The Arena
Football League was involved with a labor dispute with its players just prior to
the start of the 2000 season. This labor dispute resulted with a temporary
cancellation of the League's season in February. The dispute was resolved
approximately in early March. An interim Collective Bargaining Agreement was
agreed upon by the players and the owners for the 2000 season.
The football division generated ticket revenues for the six months ended June
30, 2000 were $1,397,017, which represented an increase of $441,551 or 46% as
compared to ticket revenues for the six months ended June 30, 1999 of $955,466.
The primary reason for the increase was the team played two additional home
games during the period. However, the team also increased their average ticket
revenue per game by 4%.
Advertising and promotion revenue was $923,691 for the six months ended June 30,
2000 as compared to revenues for the six months ended June 30, 1999 of $926,805.
The team played two additional home games during the period. Actual advertising
and promotion revenue decreased approximately 36%. This decrease was due
strictly to the labor dispute just prior to the beginning of the season. The
uncertainty of the League at that time caused some sponsors to move their
sponsorship monies elsewhere until the labor dispute was resolved.
League revenues for the six months ended June 30, 2000 were $60,435, which
represented a decrease of $487,423 or 89% as compared to revenues for the six
months ended June 30, 1999 of $547,858. The primary reason for the decrease was
due to the Company's modification of the Nth Agreement signed during second
quarter of this year. This agreement requires all payments in association with
the Nth Agreement to be for accrued interest and principal until the entire note
from the Company is repaid by the League (approximately $1.9 million remaining).
Prior to the modification, the Company recognized expansion revenues for all
payments except for the annual $480,000 payable each August.
The telemarketing division also generated revenue of $28,057 for the six months
ended June 30, 2000 compared to $60,876 for the six months ended June 30, 1999.
The division produced revenue from selling season tickets for the San Jose
SaberCats of the AFL, the Missouri River Otters of the UHL and the Mobile
BayBears, the AA affiliate of the San Diego Padres. The Company anticipates the
expansion of this division in the future to other teams in the AFL,
arenafootball2 (the AFL's minor league system which began play in April 2000)
and other minor league hockey and baseball teams.
Football Operations Expense
---------------------------
Football operational expenses of $1,338,716 increased $163,723 or 14% for the
six months ended June 30, 2000 compared to $1,174,993 for the six months ended
June 30, 1999. The primary reason for the increase was due to the additional
expenses related to the interim Collective Bargaining Agreement for the 2000
season. The main increase in expenses for the players were year round health
care, League minimum salaries and different disability coverages.
Selling and Promotional Expenses
--------------------------------
Selling and promotional expenses of $718,573 increased $17,199 or 2.5% for the
six months ended June 30, 2000 compared to $701,374 for the six months ended
June 30, 1999. This increase in expenses was due to the additional games played
in the period.
8
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
League Assessments
------------------
League assessments of $96,750 increased $9,438 or 11% for the six months ended
June 30, 2000 compared to $87,312 for the six months ended June 30, 1999.
General and Administrative Expenses
-----------------------------------
General and administrative expenses of $488,740 increased $126,956 or 35% for
the six months ended June 30, 2000 compared to $361,784 for the six months ended
June 30, 1999. This increase can be primarily attributed to the opening of a new
corporate office and legal fees associated with the Youngblood settlement.
Telemarketing Expenses
----------------------
Telemarketing expenses of $15,136 decreased $45,347 or 74% for the six months
ended June 30, 2000 compared to $60,483 for the six months ended June 30, 1999.
The decrease in telemarketing expenses was due directly to a decrease in
telemarketing sales for the period.
Interest Income/Expense
-----------------------
Interest income during the six months ended June 30, 2000 was $221,404 as
compared to $228,407 for the six months ended June 30, 1999. The Company will
now record the majority of the monies received from the League as a reduction of
principal until approximately $1.9 million is received. Afterwards, 100% of
League revenue related to the Nth Purchase Agreement will recognized as revenue.
Related party interest expense during the six months ended June 30, 2000 was
$6,233 as compared to $0 for the six months ended June 30, 1999. The interest
expense during this period was related to a loan from a stockholder of $125,000,
which was used for operating capital.
Net Income (Loss)
-----------------
The net loss during the six months ended June 30, 2000 was ($219,808) as
compared to net income of $344,134 for the six months ended June 30, 1999. The
primary reasons for the decrease in net income were due to the increases in
football operating expenses related to the interim Collective Bargaining
Agreement and increased general and administrative, depreciation and failed
acquisition expenses as well as reduced League revenues.
Results of Operations
Three Months Ended June 30, 2000 Compared To The Three Months Ended
June 30, 1999
Net Income (Loss)
----------------
The net (loss) during the three months ended June 30, 2000 was ($497) as
compared to net income of $408,421 for the three months ended June 30, 1999.
Even though the Company recorded revenues for two additional games during the
period, league revenues decreased by $487,423. Additional increases in expenses
were due to the following: 1) The interim Collective Bargaining Agreement with
the players caused football operation expenses to increase by $167,483; 2) The
League required the Company to purchase a new game system for the 2000 season
which increased depreciation expense by $66,486; and 3) The Company terminated
its agreement to acquire United Sports Ventures, Inc., thereby causing the
Company to expense $180,367 of acquisition costs.
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
9
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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 (40units) 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.
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 July 2000, the company repaid $110,000 of the convertible note
and the stockholder forgave the remaining balance, all unpaid interest and his
remaining 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.
10
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
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.
In July 2000, the Company issued a promissory note to a related party of the
Company for $250,000, due in January 2001 with interest at 12% annually,
collateralized by the Nth Agreement. In August 2000, the Company repaid
$100,000.
In August 2000, the League made their second payment of $480,000 to the Company
related to the minimum guaranteed payment as stated in the Nth Agreement.
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 its 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.
11
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PART II. OTHER INFORMATION AND SIGNATURES
ITEM 1. LEGAL PROCEEDINGS
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
District Court for the Middle District of Florida) in which the Plaintiffs seek
damages for alleged violations of the Sherman Antitrust Act, for certain
tortuous conduct, for breach of fiduciary duties and for civil conspiracy. The
complaint seeks damages against the defendants in amounts exceeding $300
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 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
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PART II. OTHER INFORMATION AND SIGNATURES
------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Form 8-K
Orlando Predators Entertainment, Inc. ("OPE") has terminated its letter of
intent to acquire United Sports Ventures, Inc ("USV"). The letter of intent was
signed in May 1999. OPE was to acquire the Quad City Mallards, Missouri River
Otters and the Rockford Ice Hogs of the United Hockey League and the Mobile
BayBears, a AA affiliate of the San Diego Padres as part of the USV acquisition.
Dr. Eric A. Margenau will remain CEO and President of OPE. The current Operating
Agreement between OPE and USV will remain in effect.
Orlando Predators Entertainment, Inc. ("OPE") has amended its Operating
Agreement with United Sports Ventures, Inc ("USV"). The agreement reduces the
monthly management fee from $10,000 to $3,000 per month.
Exhibits on Form 8-K
10.12 Second Amendment to Management Agreement
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PARTII. OTHER INFORMATION AND SIGNATURES
-----------------------------------------
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereto duly authorized.
THE ORLANDO PREDATORS ENTERTAINMENT, INC.
Registrant
/s/ Jeffrey L. Bouchy
------------------------------------------
Jeffrey L. Bouchy, Chief Financial Officer
Date: August 14, 2000
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