WOW ENTERTAINMENT, INC. AND SUBSIDIARY
(FORMERLY AMERICAN GAMING & ENTERTAINMENT, LTD.
AND SUBSIDIARIES)
CONSOLIDATED FINANCIAL STATEMENTS
AND
INDEPENDENT AUDITORS' REPORT
August 31, 2000 and December 31, 1999
<PAGE>
WOW ENTERTAINMENT, INC. AND SUBSIDIARY
(FORMERLY AMERICAN GAMING & ENTERTAINMENT, LTD.
AND SUBSIDIARIES)
CONTENTS
Page
Independent Auditors' Report F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Operations F-3
Consolidated Statements of Stockholders' Equity F-4
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-6 - F-21
<PAGE>
Independent Auditors' Report
Board of Directors and Stockholders
WOW Entertainment, Inc. and Subsidiary
We have audited the accompanying consolidated balance sheet of WOW
Entertainment, Inc. and Subsidiary (formerly American Gaming & Entertainment,
Ltd. and Subsidiaries) as of August 31, 2000, and the related consolidated
statements of operations, stockholders' equity and cash flows for the
eight-month period then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit. The
consolidated financial statements of WOW Entertainment, Inc. and Subsidiary
(formerly American Gaming & Entertainment, Ltd. and Subsidiaries) as of December
31, 1999, were audited by other auditors whose report dated March 17, 2000, on
those statements included an explanatory paragraph that described certain
conditions that raised substantial doubt about the Company's ability to continue
as a going concern.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated 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 audit provides a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements for the eight-month period
ended August 31, 2000 referred to above present fairly, in all material
respects, the financial position of WOW Entertainment, Inc. and Subsidiary at
August 31, 2000, and the results of their operations and their cash flows for
the eight-month period then ended in conformity with generally accepted
accounting principles.
As discussed in Note 13 to the consolidated financial statements, effective July
21, 2000, the Company implemented a quasi-reorganization which eliminated its
accumulated deficit of $60,099,000.
KATZ, SAPPER & MILLER, LLP
Certified Public Accountants
Indianapolis, Indiana
October 26, 2000
F-1
<PAGE>
WOW ENTERTAINMENT, INC. AND SUBSIDIARY
(FORMERLY AMERICAN GAMING & ENTERTAINMENT, LTD. AND SUBSIDIARIES)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
August 31, December 31,
2000 1999
<S> <C> <C>
CURRENT ASSETS
Cash $ 294,000 $ 127,000
Restricted cash-Note 3 80,000 -
Prepaid insurance 135,000 -
Prepaid distribution fee 970,000 -
Other current assets 9,000 65,000
Due from stockholder-Note 4 - 376,000
------------ ------------
Total Current Assets 1,488,000 568,000
PRODUCTION COSTS 60,000 -
OFFICE EQUIPMENT 27,000 5,000
WEB-SITE DEVELOPMENT COSTS 98,000 -
------------ ------------
TOTAL ASSETS $ 1,673,000 $ 573,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 164,000 $ 47,000
Due to escrow agent-Note 3 80,000 -
Accrued payroll and related expenses 118,000 3,000
Accrued expenses 40,000 52,000
------------ ------------
Total Current Liabilities 402,000 102,000
------------ ------------
STOCKHOLDERS' EQUITY-Notes 3,6 and 7
Preferred stock 1,300,000 17,137,000
Preferred stock subscribed (7,000 shares) 700,000 -
Common stock 624,000 21,000
Additional paid-in capital and warrants outstanding 158,000 42,812,000
Accumulated deficit, since July 21, 2000 when (811,000) (59,474,000)
------------ ------------
a deficit of $60,099,000 was eliminated - Note 13 1,971,000 496,000
Less: Preferred stock subscribed (7,000 shares) (700,000) -
Cost of common shares held in treasury
(4,006 shares) - (25,000)
------------ ------------
Total Stockholders' Equity 1,271,000 471,000
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,673,000 $ 573,000
============ ============
</TABLE>
See Accompanying Summary of Accounting Policies and Notes to Consolidated
Financial Statements.
F-2
<PAGE>
WOW ENTERTAINMENT, INC. AND SUBSIDIARY
(FORMERLY AMERICAN GAMING & ENTERTAINMENT, LTD. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Eight Months Year Ended
Ended August 31, December 31,
2000 1999
<S> <C> <C>
OPERATING REVENUE
Equity interests in gaming projects-Note 9 $ - $ 11,743,000
------------ ------------
OPERATING COSTS AND EXPENSES
Operating costs 664,000 -
Selling, general and administrative expenses 770,000 1,436,000
Reversal of bad debt expense related to lease
expenses-Note 10 - (2,792,000)
Reversal of net liabilities for subsidiaries in
bankruptcy-Note 10 - (75,000)
------------ ------------
Total Operating Costs and Expenses 1,434,000 (1,431,000)
------------ ------------
Operating Income (Loss) (1,434,000) 13,174,000
------------ ------------
OTHER INCOME (EXPENSE)
Interest income 8,000 66,000
Interest expense - (4,476,000)
Net gain on sale of assets - 4,186,000
------------ ------------
Total Other Income (Expense) 8,000 (224,000)
------------ ------------
Net Income (Loss) before Extraordinary Credit
and Income Taxes (1,426,000) 12,950,000
EXTRAORDINARY CREDIT-EXTINGUISHMENT OF DEBT-
NET OF INCOME TAXES-Note 9 - 47,181,000
------------ ------------
Net Income (Loss) before Provisions for Income
Taxes (1,426,000) 60,131,000
PROVISION FOR INCOME TAXES-Note 8 - -
------------ ------------
NET INCOME (LOSS) $ (1,426,000) $ 60,131,000
============ ============
BASIC INCOME PER SHARE - Note 12
Before extraordinary credit $ 1.28 $ 6.84
Extraordinary credit - 22.56
------------ ------------
Total Basic Income Per Share $ 1.28 $ 29.40
============ ============
DILUTED INCOME PER SHARE - Note 12
Before extraordinary credit 0.06 0.06
Extraordinary credit - 0.12
------------ ------------
Total Diluted Income Per Share $ 0.06 $ 0.18
============ ============
</TABLE>
See Accompanying Summary of Accounting Policies and Notes to Consolidated
Financial Statements.
F-3
<PAGE>
WOW ENTERTAINMENT, INC. AND SUBSIDIARY
(FORMERLY AMERICAN GAMING & ENTERTAINMENT, LTD. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Eight Months Ended August 31, 2000 and
Year Ended December 31, 1999
<TABLE>
<CAPTION>
Preferred Stock
---------------------------------
Additional
Women of Paid-in Capital Cost of
Series Series Wrestling, Common and Warrants Treasury Accumulated
A C, D & E Inc. Stock Outstanding Stock Deficit
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1999 $ 1,000 $ 15,869,000 $ - $ 126,000 $ 41,421,000 $ (25,000) $(119,605,000)
Effect of 6-for-1 stock split - - - (105,000) 105,000 - -
Accretion of preferred stock - 1,267,000 - - (1,267,000) - -
Dividends accrued on preferred
stock - - - - (600,000) - -
Reversal of dividends previously
accrued on preferred stock - - - - 3,153,000 - -
Net income - - - - - - 60,131,000
-------- ------------ ---------- ----------- ------------ --------- --------------
BALANCE AT DECEMBER 31, 1999 1,000 17,136,000 - 21,000 42,812,000 (25,000) (59,474,000)
Effect of 6-for-1 reverse stock split - - - (3,016,000) 3,016,000 - -
Fair value of stock warrants issued for
distribution services - Note 13 - - - - 935,000 - -
Exercise of stock option (5,000 shares) - - - - 2,000 - -
Accretion of preferred stock - 950,000 - - (950,000) - -
Cancellation of treasury stock - - - - (25,000) 25,000 -
Conversion of preferred stock into
60,331,321 shares of common stock
-Note 6 (1,000) (18,086,000) - 3,619,000 14,467,000 - -
Quasi-reorganization - Note 13 - - - - (60,099,000) - 60,099,000
Issuance of 20,000 shares of preferred
stock - - 2,000,000 - - - -
Preferred stock subscribed
(7,000 shares) - - (700,000) - - - -
Dividends paid to preferred stockholders - - - - - - (10,000)
Net loss - - - - - - (1,426,000)
-------- ------------ ---------- ----------- ------------ --------- -------------
BALANCE AT AUGUST 31, 2000
$ - $ - $1,300,000 $ 624,000 $ 158,000 $ - $ (811,000)
======== ============ ========== =========== ============ ========= =============
</TABLE>
See Accompanying Summary of Accounting Policies and Notes to Consolidated
Financial Statements.
F-4
<PAGE>
WOW ENTERTAINMENT, INC. AND SUBSIDIARY
(FORMERLY AMERICAN GAMING & ENTERTAINMENT, LTD. AND SUBSIDIARIES)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Eight Months Year Ended
Ended August 31, December 31,
2000 1999
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) $ (1,426,000) $ 60,131,000
Adjustments to reconcile net income (loss) to
net cash (used) by operating activities:
Equity interests in gaming projects - (11,743,000)
Depreciation 1,000 526,000
Reversal of bad debt expense related to lease
expenses - (2,792,000)
Reversal of net liabilities for subsidiaries in
bankruptcy - (75,000)
Interest income from restricted cash - (53,000)
Accrued interest expense - 4,476,000
Stock options granted for services 125,000 -
Net gain on sale of assets - (4,186,000)
Extraordinary credit-extinguishment of debt-Note 9 - (47,181,000)
Increase (decrease) in certain operating assets
and liabilities:
Restricted proceeds from sale of barge - (1,562,000)
Restricted cash - 376,000
Production costs (60,000) -
Other current assets (159,000) 60,000
Accounts payable, accrued expenses and other
current liabilities 140,000 125,000
------------ ------------
Net Cash (Used) by Operating Activities (1,379,000) (1,898,000)
------------ ------------
INVESTING ACTIVITIES
Due from stockholder 376,000 (376,000)
Purchase of office equipment (24,000) -
Web-site development costs incurred (98,000) -
Proceeds from sale of barge - 723,000
Proceeds from disposition of building - 416,000
------------ ------------
Net Cash Provided by Investing Activities 254,000 763,000
------------ ------------
FINANCING ACTIVITIES
Dividends paid to preferred stockholders (10,000) -
Proceeds from issuance of preferred stock 1,300,000 -
Proceeds from exercise of stock options 2,000 -
Proceeds from notes receivable - 1,139,000
------------ ------------
Net Cash Provided by Financing
Activities 1,292,000 1,139,000
------------ ------------
NET INCREASE IN CASH 167,000 4,000
CASH
Beginning of Year 127,000 123,000
------------ ------------
End of Year $ 294,000 $ 127,000
============ ============
</TABLE>
See Accompanying Summary of Accounting Policies and Notes to Consolidated
Financial Statements.
F-5
<PAGE>
WOW ENTERTAINMENT, INC. AND SUBSIDIARY
(FORMERLY AMERICAN GAMING & ENTERTAINMENT, LTD AND SUBSIDIARIES).
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF ACCOUNTING POLICIES
Nature of Business: Prior to 2000, WOW Entertainment, Inc. and Subsidiary
(the "Company"), formerly known as American Gaming & Entertainment, Ltd.,
operated various gaming operations through wholly-owned subsidiaries. On
September 1, 2000, the Company purchased, for nominal consideration, all
of the common stock of Women of Wrestling, Inc. ("WOW"), a company owned
by the Control Group (Note 3). Based in Indianapolis, Indiana, WOW
develops and produces sports entertainment programming. WOW's first run
syndicated television series, WOW-Women of Wrestling, premiered in the
fall of 2000. The acquisition was accounted for in a manner similar to a
pooling of interest.
Reverse Stock Split: The Board of Directors authorized a one-for-six
reverse split of the Company's common stock for shareholders of record as
of October 13, 2000. The par value of the Company's common stock remained
$.01 per share, and additional paid-in capital was increased. All
references to share data for all periods presented have been adjusted to
give effect to this reverse stock split.
Principles of Consolidation: The accompanying consolidated financial
statements include the accounts of the Company and its wholly-owned
subsidiaries. All significant intercompany accounts and transactions have
been eliminated. The accompanying financial statements have been prepared
including the impact of the change in control (Note 3) which occurred on
September 1, 2000.
Change in Fiscal Year: In 2000, the Company changed its fiscal reporting
year end from December 31, to August 31. Accordingly, the 2000
consolidated financial statements include only eight months of operations.
Estimates: Management uses estimates and assumptions in preparing
financial statements in accordance with generally accepted accounting
principles. Those estimates and assumptions affect the reported amounts of
assets and liabilities, the disclosure of contingent assets and
liabilities and the reported revenues and expenses. Actual results could
vary from the estimates that were used.
Revenues: The Company recognizes revenue from the direct distribution,
exploitation, and licensing of film and television programs before
deduction for any of the Company's direct costs of distribution. For
markets and territories in which the Company's fully or jointly-owned
films and television programs are distributed by third parties, revenue is
the net amounts payable to the Company by third party distributors.
Revenue is reduced by appropriate allowances, estimated returns, price
concessions, and similar adjustments, as applicable.
In 1999, revenue was derived primarily from the charter of the Gold Coast
Barge (Note 10).
Cash: The Company maintains its cash in bank deposit accounts, which at
times may exceed federally insured limits. The Company has never
experienced any losses in such accounts.
F-6
<PAGE>
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(CONTINUED)
Inventory and Production Costs: The Company has implemented AICPA
Statement of Position (SOP) 00-2, which requires special accounting for
production costs relating to episodic television series. Specifically, SOP
00-2 requires that a company must demonstrate through its experience and
industry norms that the number of episodes already produced, plus those
for which a firm commitment exists and the entity expects to deliver, can
be licensed in the secondary market before an episodic television series
can implement the individual-film-forecast-computation method to amortize
production costs. SOP 00-2 further stipulates that until an entity can
establish estimates of secondary market revenue, capitalized costs for
each episode produced should not exceed an amount equal to the amount of
revenue contracted for that episode, the entity should expense as incurred
production costs in excess of this limitation on an episode-by-episode
basis, and the entity should expense all capitalized costs for each
episode as it recognizes the related revenue for each episode. The Company
did not film its first episode of WOW Women of Wrestling until September
17, 2000, and its first episode was not broadcast until the week of
October 2, 2000, both subsequent to the Company's fiscal year end of
August 31, 2000. As such, the Company's capitalized production costs as of
August 31, 2000, were considered to be in development and pre-production
and will be expensed in the upcoming operating cycle as the related
episodic revenue is recognized. As of August 31, 2000, the Company had
capitalized $60,000 of production costs. Production costs expensed for the
eight months ended August 31, 2000, were $428,000.
Office Equipment is recorded at cost. Depreciation is provided for by the
straight-line method over the estimated useful lives (3 to 10 years) of
the respective assets.
August 31, December 31,
2000 1999
Office Equipment $ 31,000 $ 88,000
Less: Accumulated Depreciation (4,000) (83,000)
-------- --------
Office Equipment, Net $ 27,000 $ 5,000
======== ========
Web Design Costs incurred subsequent to the preliminary project stage are
capitalized until the website is operational. A total of $98,000 was
capitalized in 2000. Capitalized web design costs are amortized on a
straight-line basis over a period of 24 months. The Company began
amortizing these costs in September 2000. Costs of maintaining and
operating the website are expensed as incurred.
Long-lived Assets including the Company's office equipment, production
costs, website development costs and intangible assets, are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability is
measured by comparison of the carrying amount to future net undiscounted
cash flows expected to be generated by the related asset. If such assets
are considered to be impaired, the impairment to be recognized is measured
by the amount by which the carrying amount exceeds the fair market value
of the assets. To date, no adjustments to the carrying amount of
long-lived assets have been required.
Leases: The Company's facilities are leased pursuant to month-to-month
agreements.
Advertising and Exploitation Costs including marketing, advertising,
publicity, promotion and other distribution costs are expensed as incurred
and totaled $236,000 for the eight months ended August 31, 2000. No
advertising and exploitation costs were incurred during the year ended
December 31, 1999.
F-7
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Fair Value of Financial Instruments is estimated using relevant market
information and other assumptions. Fair value estimates involve
uncertainties and matters of significant judgement regarding interest
rates, prepayments, and other factors. Changes in assumptions or market
conditions could significantly affect these estimates. The amounts
reported in the consolidated balance sheets for cash, receivables and
payables approximate fair value.
Income Taxes: The Company accounts for income taxes under the provisions
of Statement of Financial Accounting Standards ("SFAS") No. 109,
"Accounting for Income Taxes." Accordingly, deferred tax assets and
liabilities are determined based on differences between financial
reporting and tax basis of assets and liabilities and are measured using
the enacted tax rates.
Stock-based Compensation: The Company accounts for all stock based
compensation under the provision of SFAS No. 123, "Accounting for
Stock-Based Compensation", which uses the term compensation in its
broadest sense to refer to consideration paid for goods and services,
regardless of whether the supplier is an employee or not. In connection
with a certain distribution agreement, the Company's distributor was
granted a warrant to purchase 1% of the common stock owned by the Control
Group at an aggregate exercise price of $1,000,000. The warrant is
exercisable immediately and expires in 2005. The Company values stock
options and warrants issued based upon an option-pricing model and
recognized this value as an expense over the period in which the option
vests.
Income Per Common Share: Income per share has been computed in accordance
with SFAS No. 128, "Earnings Per Share." Under SFAS No. 128, basic income
per share is computed based on income applicable to common stock divided
by the weighted average number of common shares outstanding for the
period. Diluted income per share is computed based on income applicable
to common stock divided by the weighted average number of shares of
common stock outstanding during the period after giving effect to
securities considered to be dilutive common stock equivalents. For the
eight months ended August 31, 2000 and for the year ended December 31,
1999, the Company's Series A Preferred Stock, Series C Cumulative
Preferred Stock ("Series C Preferred Stock"), Series D Cumulative
Preferred Stock ("Series D Preferred Stock") and Series E Preferred Stock
are considered to be dilutive common stock equivalents. For the eight
months ended August 31, 2000, certain common stock options considered to
be potential shares of common stock are considered to be dilutive common
stock equivalents. For the year ended December 31, 1999, common stock
options and warrants considered to be potential shares of common stock
are excluded from the calculation of diluted income for common
stockholders per common share because they have an antidilutive effect.
NOTE 2 - COMPARATIVE FINANCIAL INFORMATION
Eight Months Eight Months
Ended Ended
August 31, August 31,
2000 1999
Selected Financial Data (Audited) (Unaudited)
Operating revenue $ - $11,743,000
Net income (loss) before provision for
income taxes (1,426,000) 13,152,000
Net income (loss) (1,426,000) 10,177,000
F-8
<PAGE>
NOTE 3 - CHANGE IN CONTROL
On September 1, 2000, Messrs. David B. McLane, John F. Fisbeck and Carter
M. Fortune (collectively, the "Control Group") and their assigns
collectively purchased 61,318,563 shares of the Company's common stock
pursuant to two stock purchase agreements dated July 28, 2000. One
agreement was with Richard C. Breeden, who is the bankruptcy trustee (the
"Trustee") for Bennett Funding Group, Inc. et al. (the "Estate") in a
bankruptcy proceeding pending in the United States Bankruptcy Court for
the Northern District of New York (the "Bankruptcy Court"). This agreement
provided for the purchase of 60,348,060 shares (the "Estate Stock") of
common stock from the Estate for $98,200 in cash. The Estate Stock
included 60,098,060 shares of Common Stock that were converted from the
Company's Series C Cumulative Preferred Stock, Series D Cumulative
Preferred Stock and Series E Preferred Stock owned by the Estate pursuant
to a notice of conversion delivered to the Company dated July 21, 2000
(Note 11). The other agreement was with Shamrock Holdings Group, Inc.
("Shamrock"), collectively with the Estate, the ("Sellers") and provided
for the purchase of 970,503 shares of common stock, of which 233,261
shares were converted from the Company's Series A Preferred Stock owned by
Shamrock pursuant to a notice of conversion delivered to the Company dated
July 21, 2000, (Note 11) for $1,800 in cash. The source of funds for both
purchases was from personal funds. Collectively, the stock purchased from
the Estate and Shamrock represents 98.1% of the outstanding common stock
of the Company.
Pursuant to the stock purchase agreements, the Control Group and the
Sellers required that the amount of cash on hand in the Company as of
September 1, 2000, less certain specified liabilities, be deposited with
an escrow agent, and subject to certain offsets, be distributed to the
Sellers on September 30, 2000. Accordingly, the Company transferred cash
in the amount of $80,000 to the escrow agent on September 1, 2000.
NOTE 4 - DUE FROM STOCKHOLDER
Pursuant to a letter agreement (Note 9), the Company was to retain cash of
$464,000 as of January 1, 2000, less legal retainers plus accounts payable
incurred in the ordinary course of business to bona fide third parties and
others mutually agreed upon by the Company and Shamrock. As of December
31, 1999, approximately $376,000 was due from Shamrock in connection with
excess cash distributions. The Company received repayment in April 2000.
NOTE 5 - CREDIT FACILITIES
In accordance with a letter agreement (Note 9), the Company agreed to
transfer certain assets ("Transferred Assets") to Shamrock. The amount of
the Transferred Assets reduced the Company's indebtedness to Shamrock.
Additionally, pursuant to the letter agreement, Shamrock released the
Company from all debts and liabilities in excess of the amount of the
Transferred Assets and waived all accrued dividends, whether declared or
undeclared, on the Series C Preferred Stock and the Series D Preferred
Stock.
At August 31, 2000, the Company had a $3 million operating line of credit
with a stockholder. The line of credit is secured by the assets of WOW,
the Company's operating subsidiary, and interest is payable monthly at a
rate of LIBOR plus 1%. There were no outstanding borrowings at August 31,
2000. In November 2000, the stockholder agreed to loan to the Company up
to an additional $1,000,000 under substantially the same terms as the
original loan from the stockholder for additional consideration that is
being negotiated as of the date of this report.
F-9
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY
The following are the details of the preferred and common stock (after
giving effect to the one-for-six reverse stock split) as of August 31,
2000 and December 31, 1999:
<TABLE>
<CAPTION>
Number of Shares
Authorized Issued Outstanding Amount
<S> <C> <C> <C> <C>
August 31, 2000
---------------
Common stock, $0.01 par
Value (1) 500,000,000 62,424,946 62,424,946 $ 624,000
-----------
Preferred stock
Series A Preferred stock
of subsidiary, $100 par
value 5,000,000 13,000 13,000 $ 1,300,000
-----------
December 31, 1999
-----------------
Common stock, $0.01 par value 8,333,333 2,092,690 2,088,684 $ 21,000
-----------
Preferred Stock
Series A preferred stock,
$0.01 par value 55,983 55,983 55,983 $ 1,000
Series C cumulative preferred
stock, $0.01 par value 4,000 4,000 4,000 5,995,000
Series D cumulative preferred
stock, $0.01 par value 4,000 4,000 4,000 5,779,000
Series E preferred stock, $0.01
par value 4,000 4,000 4,000 5,362,000
-----------
$17,137,000
-----------
</TABLE>
(1) The principal stockholder of the distributor of the Company's
television program owns approximately 1,875,000 shares of the
Company's common stock. The distributor was also granted a warrant
(Note 7) to purchase 1% of the common stock owned by the Control
Group.
All the shares of the Company's Series A Preferred Stock were converted
into 233,261 shares of common stock as of July 21, 2000. The shares of
Series A Preferred Stock, all the outstanding shares of which were held by
Shamrock, were convertible at the holder's option into 25 shares of common
stock per share of Series A Preferred Stock. The shares of Series A
Preferred Stock did not accrue or pay dividends.
All the shares of Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock were converted into 60,098,060 shares of Common
Stock as of July 21, 2000. Each of the Series C Preferred Stock, Series D
Preferred Stock and Series E Preferred Stock was convertible by the holder
thereof into the number of shares of common stock equal to the
then-applicable redemption price for each such series divided by an amount
equal to 75% of the average market price of Common Stock for the ten
consecutive business days prior to the conversion date.
As a result of the conversion of all the shares of Series C Preferred
Stock, Series D Preferred Stock and Series E Preferred Stock, the Company
reversed accrued accretion on those series of preferred stock totaling
approximately $18,086,000 as of July 21, 2000. Additionally, as a result
of the conversion of all the shares of preferred stock, the Company
recorded common stock of approximately $3,620,000 and additional paid-in
capital of approximately $14,467,000 as of such date.
F-10
<PAGE>
NOTE 6 - STOCKHOLDERS' EQUITY (CONTINUED)
Pursuant to the letter agreement (Note 9), Shamrock waived all accrued
dividends, whether declared or undeclared, on the Series C Preferred Stock
and the Series D Preferred Stock. The Series E Preferred Stock had no
stated dividend rate. Accordingly, the Company reversed accrued dividends
on the Series C Preferred Stock and Series D Preferred Stock totaling
approximately $1,627,000 and approximately $1,527,000, respectively, as of
December 16, 1999.
On May 5, 2000 the Company's subsidiary, WOW, authorized 5,000,000 shares
of cumulative voting Series A Preferred Stock. Dividends are payable
quarterly at the rate of Libor plus 1%. Preferred stockholders have
preference over common stockholders in dividends and liquidation rights.
The Preferred Stock has voting rights similar to those of the common
stockholders. At the Company's option, the Series A Preferred Stock may
be redeemed at a purchase price of $100 per share plus any unpaid
dividends. The outstanding and subscribed preferred stock was purchased
by a member of the Control Group.
NOTE 7 - STOCK OPTIONS, WARRANTS AND OTHER COMPENSATION
The Company sponsored a stock option plan for employees that provided for
the issuance of both incentive and nonqualified stock options to purchase
shares of the Company's common stock at exercise prices not less than the
fair market value of the common stock on the date of grant. The stock
option plan terminated as a result of the purchase of substantially all of
the common stock by the Control Group on September 1, 2000 (Note 3), and
all options granted under the Plan that were not exercised prior to such
purchase were terminated. Transactions related to the stock option plan
were as follows:
<TABLE>
<CAPTION>
Eight Months Weighted Average Year Ended Weighted Average
Ended August 31, Exercise Price December 31, Exercise Price
2000 Per Share 1999 Per Share
<S> <C> <C> <C> <C>
Options outstanding
at beginning of period 238,482 $16.44 250,901 $18.72
Options exercised (5,000) $ 0.36 - -
Options canceled (150,148)(1) $25.92 (12,419) $62.46
--------- --------
Options outstanding
at end of period 83,334 (1) $ 0.42 238,482 $16.44
========= ========
</TABLE>
(1) The Company's former President and CEO was the only option holder
to advise the Company that he would exercise certain of his
options, granted in 1996, prior to the purchase of substantially
all of the Common Stock by the Control Group. Such options, at an
exercise range of $0.375 to $0.48, were exercised on September 1,
2000, immediately prior to such purchase.
The Company determined that it would account for employee stock-based
transactions under Accounting Principles Board Opinion No. 25.
Accordingly, no compensation cost has been recognized for options issued
with an exercise price equal to the market value of the common stock at
the date of grant. The Company has adopted the disclosure-only provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation," which defines
a fair value method of accounting for stock options and other equity
instruments. Under the fair value method, compensation cost is measured at
the grant date based on the fair value of the award and is recognized over
the service period, which is usually the vesting period. Management
believes that had compensation cost been determined based on the fair
value at the grant dates consistent with the provisions of SFAS No. 123,
there would have been no material effect on the Company's net income
(loss) and earnings per common share for the eight months ended August 31,
2000 or the year ended December 31, 1999. No options were granted during
the eight months ended August 31, 2000 or the year ended December 31,
1999.
F-11
<PAGE>
NOTE 7 - STOCK OPTIONS, WARRANTS AND OTHER COMPENSATION (CONTINUED)
The Company periodically issues warrants on a one-for-one basis, for the
purchase of shares of its common stock. The exercise prices of the
warrants are no less than the fair market value of the common stock on the
dates of grant. The estimated fair market value of the warrants are
measured on the date of grant (measurement date), and accounted for as
part of the related transaction. At the beginning of 1999, warrants for
the purchase of 29,792 shares of common stock at exercise prices ranging
from $18.00 to $97.50 were outstanding. All such warrants expired in 1999.
No warrants were exercised during the year ended December 31, 1999. In
connection with the change in control discussed in Note 3, the Company
has agreed to grant 50,000 new warrants to the Company's former CEO on
June 30, 2002. Each new warrant is convertible into one share of common
stock at an exercise price of $1.00 per share exercisable June 30, 2002
through June 30, 2008.
In connection with a certain distribution agreement, the Company's
distributor was granted a warrant to purchase 1% of the common stock owned
by the Control Group at an aggregate exercise price of $1,000,000. The
warrant is exercisable immediately and expires in 2005 (Note 1).
NOTE 8 - INCOME TAXES
The partial repayment of debt to Shamrock pursuant to the letter agreement
(Note 4), which for tax purposes is effective for the eight months ended
August 31, 2000, was accomplished by the transfer of the Transferred
Assets. The release by Shamrock of the remaining debt owed by the Company
to Shamrock, effective for tax purposes for the eight months ended August
31, 2000, did not result in any taxable gain. However, the Company's net
operating loss carryforwards and other tax attributes were reduced by the
amount of the forgiveness.
Reconciliation of income taxes computed at the statutory rate to the
Company's effective rate is as follows:
<TABLE>
<CAPTION>
Eight Months
Ended Year Ended
August 31, December 31,
2000 1999
<S> <C> <C>
Federal income tax (benefit) at statutory rate $(500,000) $ 21,046,000
Valuation allowance 500,000 21,046,000
--------- -------------
Provision for Income Taxes $ - $ -
========= =============
</TABLE>
The significant components of the Company's deferred tax asset are as
follows:
<TABLE>
<CAPTION>
<S> <C> <C>
Deferred Tax Assets:
Net operating loss carryforwards $ 445,000 $ 11,957,000
Stock warrants 55,000 -
Valuation allowance (500,000) (11,957,000)
--------- ------------
Net Deferred Tax Assets $ - $ -
========= ============
</TABLE>
At August 31, 2000, the Company's tax operating loss carryforwards were
approximately $1,301,000 and expire in 2020.
F-12
<PAGE>
NOTE 9 - 1999 RESTRUCTURING
In accordance with an Agreement dated November 23, 1999 between the
Company and Shamrock (the "Letter Agreement"), the Company agreed to
transfer to Shamrock (a) substantially all of the Company's right, title
and interest under the First Amended Joint Plan of Liquidation (the
"Mississippi Plan") for Amgam Associates, Inc. ("AMGAM") and American
Gaming and Resorts of Mississippi, Inc. ("AGRM") and (b) all payments,
distributions, dividends and proceeds of any type to which the Company is
entitled pursuant to or in connection with an Irrevocable Proxy and
Consent Agreement (the "Proxy Agreement") relating to a 4.9% interest in a
riverboat gaming and entertainment complex in Rising Sun, Indiana (the
"RSR Interest") (collectively, the "Transferred Assets"). On December 16,
1999, the Letter Agreement was approved by the Bankruptcy Court, in which
Shamrock was a debtor in bankruptcy from June 1998 through February 2000.
The Transferred Assets constituted substantially all of the assets of the
Company as of December 16, 1999. The amount of the Transferred Assets
reduced the Company's indebtedness to Shamrock. The Company was to retain
cash of $464,000 as of January 1, 2000, less legal retainers plus accounts
payable incurred in the ordinary course of business to bona fide third
parties and others mutually agreed upon by the Company and Shamrock (Note
4).
In accordance with the Letter Agreement, the Company executed a security
agreement in favor of Shamrock relating to the RSR Interest in exchange
for Shamrock agreeing to forebear from the exercise of any rights or
remedies in respect of all obligations owing by the Company to Shamrock.
Prior to December 16, 1999, the Company was indebted to Shamrock in the
amount of approximately $64,315,000.
Pursuant to the Letter Agreement, Shamrock released the Company from all
debts and liabilities in excess of the amount of the Transferred Assets,
and dismissed with prejudice of the adversary proceeding captioned
Richard C. Breeden, Trustee of the Bennett Funding Group, Inc. et al v.
Gamma International, (Formerly American Gaming & Entertainment, Ltd. and
John Does 1 to 100 (AP 98-70465 A) (United States Bankruptcy Court for
the Northern District of New York).
Shamrock waived all accrued dividends, whether declared or undeclared, on
the Series C Preferred Stock and the Series D Preferred Stock (Note 9).
In accordance with the Letter Agreement, the Company released Shamrock
from all debts and liabilities and withdrew all claims in the bankruptcy
cases of Shamrock and Bennett Funding Group, Inc. et al.
As a result of the transactions agreed to in the Letter Agreement, the
Company recorded a decrease in assets of approximately $9,915,000 and a
decrease in liabilities of approximately $64,347,000 as of December 16,
1999. Additionally, net income increased by approximately $51,279,000 and
net income for common stockholders increased by approximately $54,432,000
for the year ended December 31, 1999.
Indiana
Pursuant to the Proxy Agreement, RSR, LLC ("RSR"), a limited
liability company formed by the Company and a group of non-affiliated
individuals, was obligated to purchase the RSR Interest from NBD
Bank, N.A., as trustee ("NBD"), for the benefit of the Company, at an
average appraised fair market value.
On September 9, 1999, RSR alleged that the Company and its principal
stockholders fraudulently induced RSR and the other members of RSR to
enter into the operating agreement for RSR and the Proxy Agreement.
RSR offered to release the Company from such alleged claims in
exchange for the RSR Interest and all distributions received by the
Company with respect to the RSR Interest. The Company rejected RSR's
offer and filed suit against RSR for damages arising from RSR's
failure to comply with the provisions of the Proxy Agreement and
purchase the RSR Interest.
F-13
<PAGE>
NOTE 9 - 1999 RESTRUCTURING (CONTINUED)
In accordance with the Letter Agreement, the Company agreed to
transfer to Shamrock all payments, distributions, dividends and
proceeds of any type to which the Company is entitled pursuant to, or
in connection with, the RSR Interest and the Company, and Shamrock
executed a security interest in the RSR Interest in exchange for
Shamrock agreeing to forebear from the exercise of any rights or
remedies in respect of all obligations owing by the Company to
Shamrock (see Note 5).
On August 25, 2000, the Company entered an Agreement and Release with
RSR, pursuant to which RSR agreed to purchase the RSR Interest, and
the Company agreed to dismiss with prejudice its suit against RSR.
All sales proceeds under such agreement will be paid directly to
Shamrock in accordance with the Letter Agreement.
The Company did not receive any financial statement information or
payments relating to the RSR Interest for the year ended December 31,
1999 and therefore did not record any revenues attributable to the
RSR Interest for such period.
Mississippi
Prior to 1999, an involuntary petition for liquidation under Chapter
7 of the Code was filed with the United States Bankruptcy Court,
Southern District of Mississippi (the "Mississippi Bankruptcy Court")
against AMGAM, which operated the Gold Shore Casino in Biloxi,
Mississippi. The case was subsequently converted into a
reorganization under Chapter 11 of the Code. Additionally, prior to
1999, AGRM, which owned and leased certain property in Vicksburg,
Mississippi, filed a voluntary petition for reorganization under
Chapter 11 of the Code with the Mississippi Bankruptcy Court.
Prior to 1998 and the bankruptcy proceedings of AGRM and AMGAM, the
Gold Coast Barge, on which AMGAM had previously operated the Gold
Shore Casino, had been transferred to the Company from AGRM in
exchange for the cancellation of AGRM's guaranty to the Company of
certain unpaid lease obligations of AMGAM to the Company.
Pursuant to a Charter Agreement (the "Charter Agreement") entered
into prior to 1998 between the Company and President Mississippi
Charter Corporation ("PMCC"), PMCC leased the Gold Coast Barge from
the Company. Effective October 30, 1998, PMCC and the Company entered
into an amendment to the Charter Agreement (the "Charter Amendment").
Pursuant to the Charter Amendment, among other things, (i) PMCC paid
$4,105,000 (the "Amendment Payments") into an escrow account (the
"Escrow Account") for the benefit of the creditors of AMGAM and AGRM,
(ii) PMCC agreed to pay into the Escrow Account a monthly charter
payment of $215,000 for the period from December 1, 1998 through
April 15, 2000 (and made all such payments through July 31, 1999). On
August 10, 1999, the Company sold the Gold Coast Casino barge to The
President Riverboat Casino-Mississippi, Inc. (the "Purchaser"), an
affiliate of PMCC, for $6,827,500, calculated as $5,000,000 plus all
remaining charter payments. Upon closing the Purchaser paid
$1,000,000 into an Escrow Account and delivered a promissory note in
the amount of $5,827,500 to an escrow agent, to disburse all amounts
paid by the Purchaser pursuant to the Mississippi Plan.
On July 23, 1999, the Mississippi Bankruptcy Court confirmed the
Mississippi Plan. Pursuant to the Mississippi Plan, the Company's and
Shamrock's claims will be paid from (a) 70% of all escrowed charter
payments, including the Amendment Payments, (b) 72% of the first
$3,000,000 of net proceeds from the sale of the Gold Coast Barge, and
(c) 75% of the net proceeds in excess of $3,000,000 from the sale of
the Gold Coast Barge. Additionally, all equity interests of the
Company in AMGAM and AGRM were cancelled as of the effective date of
the Mississippi Plan.
F-14
<PAGE>
NOTE 10 - DISCONTINUED VENTURES
As a result of the confirmation of the Mississippi Plan, as of July
23, 1999, the Company set off "Short Term Portion of Estimated Net
Liabilities for Subsidiaries in Bankruptcy", totaling approximately
$3,635,000, against the "Restricted Cash Mississippi" and "Note
Receivable" amounts (totaling approximately $2,024,000 and
$1,611,000, respectively) to be received by creditors of AMGAM and
AGRM other than the Company. Additionally, as a result of the
confirmation of the Mississippi Plan and the dismissal of an
adversary complaint filed by the Official Committee of Unsecured
Creditors of AMGAM Associates challenging the transfer of the Gold
Coast Barge from AGRM to the Company, the Company recognized
"Deferred Charter Revenue" of approximately $11,743,000 as revenue
for the year ended December 31, 1999.
In accordance with the Letter Agreement, the Company transferred to
Shamrock substantially all of the Company's rights, title and
interest under the Mississippi Plan (Note 5).
Nevada
Prior to 1998, pursuant to an agreement between Shamrock and the
Company under which Shamrock provided the necessary funds to the
Company to close the purchase of the Harolds Club casino in Reno,
Nevada, the Company transferred to Shamrock title to the land and the
building related to the Harolds Club. Shamrock assumed responsibility
for all carrying costs of the Harolds Club property including, but
not limited to, lease payments under certain land leases held by the
Company related to the Harolds Club, taxes, insurance and utilities.
Such land leases were assigned by the Company to Shamrock on
September 29, 1998.
On June 25, 1999, Shamrock sold the Harolds Club in Reno, Nevada. All
five land- leases held by Shamrock related to the Harolds Club
terminated at closing. The Company was released from all obligations
under such leases, except that the Company agreed to indemnify the
five lessors of the Harolds Club property against any environmental
liabilities resulting from intentional or negligent conduct on the
part of the Company. The Company is unaware of, and no claim has been
asserted related to, adverse environmental conditions at the Harolds
Club resulting from intentional or negligent conduct on the part of
the Company. Additionally, lawsuits filed against the Company by the
five lessors of the Harolds Club property and cross-claims filed
against the Company by co-defendants were dismissed upon closing, and
any judgments which were entered have been withdrawn and set aside as
if not entered.
Due to certain lease guarantees, the Company had recorded unpaid
Harolds Club lease payments and property taxes from April 1996
through March 1999, collectively totaling approximately $2,307,000
(the "Unpaid Harolds Club Obligations"), as current liabilities. The
Company had recorded the amount of the Unpaid Harolds Club
Obligations as a receivable due from Shamrock, but, as a result of
the Company's determination that there was a substantial likelihood
that such amounts would be uncollectible, the Company fully reserved
for such amounts at the same time such amounts were recorded as a
receivable. As a result of the sale of the Harolds Club, and the
consequent release of the Company from all obligations under such
leases and the dismissal of all related lawsuits and cross-claims
against the Company, the Company reversed the Unpaid Harolds
Obligations as of June 30, 1999.
F-15
<PAGE>
NOTE 10 - DISCONTINUED VENTURES (CONTINUED)
Prior to 1998, Shamrock and the Company entered into an agreement
pursuant to which Shamrock agreed, upon the sale of the Harolds Club,
to reimburse the Company for (i) all costs and expenses, in an amount
not to exceed $15,000, incurred by the Company in connection with
such sale, (ii) all reasonable attorneys' fees incurred by the
Company in connection with litigation commenced against, among
others, the Company by the five lessors of the Harolds Club property,
and (iii) all reasonable costs and expenses incurred by the Company
in connection with the operation and maintenance of the Harolds Club.
The Company had recorded the amount of such costs and expenses as a
receivable due from Shamrock, but, as a result of the Company's
determination that there was a likelihood that Harolds Club would not
be sold, the Company fully reserved for such amounts at the same time
such amounts were recorded as a receivable. As a result of the sale
of the Harolds Club, the Company set off such amounts, collectively
totaling approximately $524,000 as of June 30, 1999, against the
Company's indebtedness due to Shamrock.
Alabama
Prior to 1998, the Company acquired the GM&O Building in Mobile,
Alabama for approximately $1,006,000 in cash and subsequently
recognized write downs in the value of such investment to reflect its
fair market value.
On March 1, 1999, the Company sold the GM&O Building to the City of
Mobile for approximately $423,000. The Company used the net sales
proceeds of approximately $415,000 for working capital purposes.
Nebraska
Prior to 1998, the Company entered into an assignment and transfer
agreement with American Heartland Corporation ("AHC"), and Big Red
Keno, Ltd., a licensed keno operator in Omaha, Nebraska ("BRK"),
pursuant to which: (i) the Company assigned, and AHC assumed, all of
the Company's rights and obligations under a certain financing
agreement with BRK to provide equipment, services and financing for
the operation of a multiple parlor keno game in the City of Omaha in
exchange for a revenue participation equal to 50% of cash net income
of BRK after deduction of certain cash payments by BRK: (ii) the
Company transferred and assigned to AHC all of the Company's right,
title and interest to all of the assets utilized by the Company in
the conduct of its keno gaming activities, including, without
limitation, the Company's computerized keno system and all
maintenance and servicing agreements with the licensed operators for
stations and locations at which the Company's computerized keno
system is utilized; (iii) the Company agreed not to compete, directly
or indirectly, with AHC or BRK as a distributor, manufacturer or
maintainer of keno equipment or software, other than in the normal
course of any casino operations of the Company for a period of five
years; (iv) AHC paid the Company $500,000 on March 29, 1996; and (v)
AHC issued and delivered its promissory note to the Company in the
principal amount of approximately $1,112,000 (the "Keno Note"). On
September 22, 1998, AHC asserted set offs against the Keno Note
aggregated approximately $198,000. The Company received principal and
interest payments on the Keno Note totaling $850,000 through December
31, 1998. On January 8, 1999, the Company agreed to the payment of
$300,000 from AHC in full satisfaction of the Keno Note and
accordingly recorded a writedown in the value of the Keno Note in the
amount of $165,000.
F-16
<PAGE>
NOTE 11 - NONCASH INVESTING AND FINANCING ACTIVITIES
Noncash investing and financing activities occurred as follows:
<TABLE>
<CAPTION>
Eight Months
Ended Year Ended
August 31, December 31,
2000 1999
<S> <C> <C>
Write-off of fully-depreciated equipment $ 80,000 $ -
Accretion on Series C and D Preferred Stock 950,000 1,267,000
Dividends on Series C, D and E Preferred Stock - 600,000
Reversal of Previously Accrued Accretion:
Preferred Stock (see Note 6) 18,086,000 -
Reversal on Previously Accrued Dividend:
Preferred Stock (see Note 6) - 3,153,000
Transfer of assets to stockholder and reduction
of related indebtedness - 14,013,000
Quasi-reorganization 60,099,000 -
</TABLE>
The Company's Series C Preferred Stock, Series D Preferred Stock and
Series E Preferred Stock were all converted into Common Stock as of July
21, 2000. Accordingly, the Company reversed the accretion previously
accrued with respect to such preferred stock for the eight months ended
August 31, 2000. Pursuant to the Agreement (Note 6), Shamrock waived all
accrued dividends, whether declared or undeclared, on the Series C
Preferred Stock and the Series D Preferred Stock. Accordingly, the
Company reversed such accrued dividends for the year ended December 31,
1999.
The Company paid no interest or income taxes for the eight months ended
August 31, 2000 or for the year ended December 31, 1999.
NOTE 12 - PER SHARE DATA
The following presents the computation of basic earnings per share and
diluted earnings per share.
<TABLE>
<CAPTION>
Eight Months
Ended Year Ended
August 31, December 31,
2000 1999
<S> <C> <C>
Net Income (Loss) $ (1,426,000) $ 60,131,000
------------ ------------
Dividends and Accretion on Preferred Stock
Accretion (950,000) (1,267,000)
Dividends (10,000) (600,000)
Reversal of previously accrued accretion upon
conversion 18,086,000 -
Reversal of previously accrued dividends - 3,153,000
------------ ------------
Total Dividends and Accretion on Preferred
Stock 17,126,000 1,286,000
------------ ------------
Net Income Available for Common Stockholders $ 15,700,000 $ 61,417,000
============ ============
Basic Income Per Share
Before extraordinary credit $ 1.28 $ 6.84
Extraordinary credit - 22.56
------------ ------------
Total Basic Income per Share $ 1.28 $ 29.40
============ ============
</TABLE>
F-17
<PAGE>
NOTE 12 - PER SHARE DATA (CONTINUED)
<TABLE>
<CAPTION>
Eight Months
Ended Year Ended
August 31, December 31,
2000 1999
<S> <C> <C>
Diluted Income Per Share
Before extraordinary credit $ 0.06 $ 0.06
Extraordinary credit - 0.12
------------ ------------
Total Diluted Income per Share $ 0.06 $ 0.18
============ ============
Shares Outstanding
Basic weighted average number of common shares
Outstanding 12,229,537 2,088,684
Dilutive effect of conversion of options 168,259 -
Dilutive effect of conversion of preferred stock
Series A, C, D & E 256,805,556 302,751,375
------------ ------------
Total Shares Outstanding 269,203,352 304,840,059
============ ============
</TABLE>
NOTE 13 - QUASI-REORGANIZATION
Effective July 21, 2000, the Company's Board of Directors approved a
quasi-reorganization. The effect of the quasi-reorganization was to
eliminate the accumulated deficit of $60,099,000 by application of the
Company's paid-in capital. The quasi-reorganization had no impact on the
Company's cash flows, total stockholders' equity or the tax basis of its
assets, but resulted in a consolidated balance sheet that better reflects
the Company's current financial position.
NOTE 14 - SEGMENT INFORMATION
Prior to 2000, the Company operated various gaming operations through
wholly-owned subsidiaries. The Company is focusing its efforts on other
areas of the entertainment business and is currently not actively seeking
to develop gaming projects. Future operations of the Company will be
organized around three primary segments:
o Live and Televised Entertainment: The creation, marketing and
distribution of the Company's live and televised entertainment
events through over-the-air television and Internet broadcasting,
includes the sale of the integrated sponsorship and commercial
advertising time within the Company's events and programs;
o Branded Merchandise: The marketing, promotion and licensing of
the Company's branded merchandise; and
o New Media: The creation of a new media platform designed to fully
capitalize on the live and televised entertainment and branded
merchandise segments and generate revenue from the sale of
advertising, memberships and merchandise on the Company's
Internet site.
F-18
<PAGE>
NOTE 14 - SEGMENT INFORMATION - (CONTINUED)
<TABLE>
<CAPTION>
Live and
Televised Branded Gaming Segment
Entertainment Merchandise New Media Entertainment Other Totals
<S> <C> <C> <C> <C> <C> <C>
Eight months ended August 31, 2000
Operating costs $ (664,000) $ - $ - $ - $ - $ (664,000)
Selling, general and administrative
expenses - - - (470,000) (300,000) (770,000)
------------ ---------- -------- ------------ ------------ ------------
Segment (Loss) $ (664,000) $ - $ - $ (470,000) $ (300,000) $ (1,434,000)
============ ========== ======== ============ ============ ============
As of August 31, 2000
Cash $ - $ - $ - $ 61,000 $ 233,000 $ 294,000
Restricted cash - - - 80,000 - 80,000
Prepaid expenses 970,000 - - 60,000 75,000 1,105,000
Other current assets - - - 1,000 8,000 9,000
Production costs 60,000 - - - - 60,000
Net property and equipment - - - 4,000 23,000 27,000
Other assets - - 98,000 - - 98,000
------------ ---------- -------- ------------ ------------ ------------
Total Segment Assets $ 1,030,000 $ - $ 98,000 $ 206,000 $ 339,000 $ 1,673,000
============ ========== ======== ============ ============ ============
Year ended December 31, 1999
Revenues $ - $ - $ - $ 11,743,000 $ - $ 11,743,000
Selling, general and administrative
expenses (1,436,000) - (1,436,000)
Other income - - - 2,867,000 - 2,867,000
------------ ---------- -------- ------------ ------------ ------------
Segment Profit $ - $ - $ - $ 13,174,000 $ - $ 13,174,000
============ ========== ======== ============ ============ ============
As of December 31, 1999
Cash $ - $ - $ - $ 127,000 $ - $ 127,000
Prepaid expenses - - - 58,000 - 58,000
Due from stockholder - - - 376,000 - 376,000
Other current assets - - - 7,000 - 7,000
Net Property and equipment - - - 5,000 - 5,000
------------ ---------- -------- ------------ ------------ ------------
Total Segment Assets $ - $ - $ - $ 573,000 $ - $ 573,000
============ ========== ======== ============ ============ ============
</TABLE>
F-19
<PAGE>
NOTE 15 - CONSOLIDATING INFORMATION
<TABLE>
<CAPTION>
Eight Months Ended August 31, 2000
-------------------------------------------------
Women of WOW
Wrestling, Inc. Entertainment,Inc. Consolidated
<S> <C> <C> <C>
OPERATING REVENUE
Equity interests in gaming projects $ - $ - $ -
----------- ----------- -----------
OPERATING COSTS AND EXPENSES
Operating costs 664,000 - 664,000
Selling, general and administrative expenses 300,000 470,000 770,000
----------- ----------- -----------
Total Operating Costs and Expenses 964,000 470,000 1,434,000
----------- ----------- -----------
Operating (Loss) (964,000) (470,000) (1,434,000)
----------- ----------- -----------
INTEREST INCOME 2,000 6,000 8,000
----------- ----------- -----------
Net (Loss) before Provision for Income Taxes (962,000) (464,000) (1,426,000)
PROVISION FOR INCOME TAXES - - -
----------- ----------- -----------
NET (LOSS) $ (962,000) $ (464,000) $(1,426,000)
=========== =========== ===========
</TABLE>
F-20
<PAGE>
NOTE 15 - CONSOLIDATING INFORMATION (CONTINUED)
<TABLE>
<CAPTION>
Eight Months Ended August 31, 2000
-------------------------------------------------
Women of WOW
Wrestling, Inc. Entertainment,Inc. Consolidated
<S> <C> <C> <C>
CURRENT ASSETS
Cash $ 233,000 $ 61,000 $ 294,000
Restricted cash - 80,000 80,000
Prepaid insurance 75,000 60,000 135,000
Prepaid distribution fee 970,000 - 970,000
Other current assets 8,000 1,000 9,000
----------- ----------- -----------
Total Current Assets 1,286,000 202,000 1,488,000
PRODUCTION COSTS 60,000 - 60,000
PROPERTY AND EQUIPMENT 23,000 4,000 27,000
WEB-SITE DEVELOPMENT COSTS 98,000 - 98,000
----------- ----------- -----------
TOTAL ASSETS $ 1,467,000 $ 206,000 $ 1,673,000
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 162,000 $ 2,000 $ 164,000
Due to escrow agent - 80,000 80,000
Accrued payroll and related expenses 2,000 116,000 118,000
Accrued expenses 40,000 - 40,000
----------- ----------- -----------
Total Current Liabilities 204,000 198,000 402,000
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock 1,300,000 - 1,300,000
Preferred stock subscribed (7,000 shares) 700,000 - 700,000
Common stock - 624,000 624,000
Additional paid in capital and warrants
outstanding 158,000 - 158,000
Accumulated deficit (195,000) (616,000) (811,000)
----------- ----------- -----------
1,963,000 # 8,000 1,971,000
Less: Preferred stock subscribed (7,000 shares) (700,000) - (700,000)
----------- ----------- -----------
Total Stockholders' Equity 1,263,000 # 8,000 1,271,000
----------- ----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 1,467,000 $ 206,000 $ 1,673,000
=========== =========== ===========
</TABLE>
F-21
