U.S. 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 for the transition period ended August 31, 2000
WOW Entertainment, Inc.
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(Name of small business issuer in its charter)
0-19049
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Commission file number
Delaware 74-2504501
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Bank One Tower
111 Monument Circle, Suite 4600
Indianapolis, Indiana 46204
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(Address of principal executive offices) (Zip Code)
(317) 974-1969
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(Issuer's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act:
Common Stock ($0.01 par value per share) ("Common Stock")
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(Title of Class)
Check whether the Company (1) has 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
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Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure will be contained, to
the best of the Company's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB. [X]
The Company's revenues for the transition period ended August 31, 2000 were nil.
On October 31, 2000 the aggregate market value of the voting stock of the
Company held by non-affiliates of the Company was approximately $1,837,227.
On October 31, 2000 there were 62,509,164 shares of the Company's Common Stock
outstanding (after giving effect to a one for six reverse stock split).
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Additional Information
For the purpose of calculating the aggregate market value of the Company's
Common Stock held by non-affiliates, it has been assumed that only the
outstanding Common Stock legally or beneficially held by the directors and
executive officers of the Company and the stockholders indicated in "Security
Ownership" with the largest holdings of the Company's Common Stock are held by
affiliates of the Company. However, this should not be deemed to constitute an
admission that all of such persons are, in fact, affiliates or that there are no
other persons who may be deemed to be affiliates of the Company.
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WOW ENTERTAINMENT, INC.
2000 FORM 10-KSB ANNUAL REPORT
TABLE OF CONTENTS
PART 1
Item 1. Description of Business.......................................... 3
Item 2. Description of Property.......................................... 15
Item 3. Legal Proceedings................................................ 16
Item 4. Submission of Matters to a Vote of Security Holders............. 16
PART II
Item 5. Market for Common Equity and Related Stockholder Matters......... 16
Item 6. Management's Discussion and Analysis or Plan of Operation........ 17
Item 7. Financial Statements............................................. 22
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure............................................. 22
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Section 16(a) Beneficial Ownership Report Compliance............. 23
Item 10. Executive Compensation........................................... 24
Item 11. Security Ownership of Certain Beneficial Owners and
Management....................................................... 26
Item 12. Certain Relationships and Related Transactions................... 28
Item 13. Exhibits and Reports on Form 8-K................................. 29
SIGNATURES................................................................. 32
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PART I
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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This report contains statements that constitute "forward-looking statements"
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended, and Section 27A of the Securities Act of 1933, as amended. The words
"expect," "estimate," "anticipate," "predict," "believe" and similar expressions
and variations thereof are intended to identify forward-looking statements.
These statements appear in a number of places in this report and include
statements regarding the intent, belief or current expectations of the Company,
its directors or its officers with respect to, among other things, trends
affecting the Company's financial condition or results of operations. The
readers of this report are cautioned that any such forward-looking statements
are not guarantees of future performance and involve risks and uncertainties.
Those risks and uncertainties are discussed under the heading "Management's
Discussion And Analysis Or Plan Of Operation," as well as the information set
forth below. The Company does not ordinarily make projections of its future
operating results and undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Readers should carefully review the risk factors referred
to above and the other documents filed by the Company with the Securities and
Exchange Commission.
ITEM 1. DESCRIPTION OF BUSINESS
WOW Entertainment, Inc. (formerly known as American Gaming & Entertainment,
Ltd.), is a Delaware corporation incorporated in 1988. The Company has conducted
its business directly and through wholly-owned subsidiaries. The term "Company"
as used herein refers to WOW Entertainment, Inc. and such subsidiaries unless
the context otherwise requires. Prior to 2000, the Company owned equity
interests in various properties that were utilized in casino gaming projects.
The Company is focusing its efforts on other areas of the entertainment business
and is no longer actively seeking to develop gaming projects.
The Company's primary focus is to produce a series of live events featuring
women's professional wrestling that are taped for worldwide television
broadcast, pay-per-view, and live action Internet distribution, which are
designed to generate revenues from the sale of commercial advertising time,
e-commerce, pay television programming, merchandisable products and live event
presentations. These productions feature professional women wrestlers in comedy
vignettes and soap opera stories leading week-to-week to enhance the performer's
personalities and engage consumer interest.
The Company hopes to achieve a dominant position in the marketplace by
incorporating the prominent features of the most successful men's wrestling
shows and by offering a variety of new, creative elements. The Company's
programs feature beautiful, athletic women. The programs will produce characters
with defined personalities that reflect "good" versus "evil" with a particular
emphasis on the development of lead characters as positive role models.
The Company began in September, 2000, producing a weekly one-hour program on
which stories unfold week-to-week. Through this format, the Company hopes to
build interest in its Internet site and pay-per-view
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telecasts. The Company's first run syndicated program premiered the week of
October 2, 2000 in 100 markets nationwide. The Company plans to air its first
pay-per-view broadcast in February, 2001. The Company promotes its brand and
performers on its Internet site, www.wowe.com. The Company is also planning to
use its Internet site to enhance its story lines, allow for interaction with
consumers, market and distribute consumer goods and broadcast original content
through "Internet Access Only" programming.
In the upcoming year, the Company intends to aggressively promote and market its
brand, programming, live events and merchandise and other products by:
o Presenting live events at one of the most famous sports venues, The Great
Western Forum in Inglewood, California;
o Producing and distributing up to 52 one-hour original programs for domestic
and international television;
o Producing and distributing three to four three-hour original programs for
domestic and international pay-per-view television;
o Marketing and selling the Company's branded merchandise directly to
consumers and to retailers worldwide;
o Licensing the Company's brand to manufacturing companies that produce and
distribute retail products worldwide;
o Distributing news and information about the weekly drama, performers and
programming through the Company's Internet site;
o Producing exclusive programming for Internet broadcasting of live and
prerecorded content; and
o Creating and marketing a fully integrated publicity campaign that drives
consumers to the Company's broadcasts, Internet-related business and its
branded merchandise.
The operations of the Company are organized around three primary segments:
o The creation, marketing and distribution of the Company's live and
televised entertainment events through over-the-air television and Internet
broadcasting, including the sale of integrated sponsorship and commercial
advertising time within the Company's events and programs;
o The marketing, promotion and licensing of the Company's branded
merchandise; and
o The creation of a new media platform designed to fully exploit the other
two segments and generate revenues from the sales of advertising,
memberships and merchandise on the Company's Internet site.
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The Company believes that it will generate revenues from Internet programming,
home video, sponsorship and advertising sales, merchandising, licensing, ticket
sales, fan club memberships, international broadcast sales and pay-per-view
television as its television performers and their characters and story lines
become established through television broadcasts.
LIVE AND TELEVISED ENTERTAINMENT
Live Events
Until the Company's brand becomes more established, the Company plans to present
its live events from an established location to provide a positive vehicle for
exposure and promotion. The Company's events are highly theatrical productions,
complete with special effects, lighting, pyrotechnics, musical entrances,
audience participation and a variety of props and has selected The Great Western
Forum, one of the most famous sports and entertainment venues in the world, as
its initial home. The first three-hour live event, WOW-Women of Wrestling, was
held on Saturday, September 16, 2000.
The live events typically feature 14 to 16 matches per event. The event matches,
when combined with interviews and character vignettes, provide enough footage to
produce at least three weeks of programming. This ability to transform footage
from one live event into numerous television shows allows the Company to
generate high quality programming at a relatively low cost.
Television Programming
WOW-Women of Wrestling, the television series produced by the Company, premiered
nationally in its first run syndication during the broadcast week of October 2,
2000. The Company has contracted with MG Perin, Inc., a leading independent
television distributor to represent the Company's domestic television
distribution and sales. The Company is currently committed to produce up to 52
weeks of original programming for "barter" distribution domestically by a
combination of independent and affiliated television stations with markets
comprising approximately 75% of the U.S. households.
In exchange for providing the WOW-Women of Wrestling program to the stations,
the Company is granted a portion of the available advertising time within each
WOW program to sell to national advertisers and sponsors. The Company retains
seven minutes (14 :30 second units) of the fourteen and one half minutes of
available commercial time within each WOW-Women of Wrestling program. The
Company anticipates that the sale of corporate advertising and sponsorships will
be one of its primary sources of revenues. The Company's television
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distributor, MG Perin, Inc., has engaged Pearson Television, Inc. to represent
and sell the available commercial advertising time within the WOW-Women of
Wrestling program.
The Company believes that its brand of entertainment will appeal to a wide
demographic audience based upon the television ratings data supplied to the
Company by MG Perin. In particular, the Company believes that the principal
audience will be 18 to 34 years of age, with the highest viewership among
advertisers' highly coveted audience of males 18 to 34 and teenagers aged 12 to
17.
International Television Rights
The Company expects to sell its programs to international broadcasters. The
Company is investigating the international markets of Argentina, Australia,
Austria, Bahamas, Belgium, Bolivia, Brazil, Bulgaria, Canada, Denmark, Ecuador,
El Salvador, Finland, France, Germany, Sri Lanka, Italy, Japan, United Kingdom,
Netherlands, Panama, Peru, Philippines, Portugal, Romania, Sweden, Turkey,
Russia and the Middle East for the sale of portions or all of the WOW programs.
The Company's distributor, MG Perin, Inc., has engaged The Fremantle Corporation
to represent the international television distribution and sales of the
Company's programs. The Fremantle Corporation has offices in New York, Toronto,
London, Madrid and Sydney and is a leading international distribution company of
television programs.
Pay-Per-View Programming
The Company plans to create story lines and soap-opera drama scenarios with
"cliff hanger" endings that will come to closure at its pay-per-view televised
events. The Company anticipates that its pay-per-view events will be televised
live in a two hour broadcast, which will be promoted through the WOW-Women of
Wrestling television shows, Internet site and other promotional campaigns. The
Company's first pay-per-view program is scheduled for Sunday, February 4, 2000.
The Company has plans for three pay-per-view telecasts over the next year,
including the February 4, 2000 program; however, the Company may produce more or
fewer programs.
BRANDED MERCHANDISE
The Company is developing a branded merchandise program that contemplates
selling the WOW brand of products and merchandise through such avenues as direct
marketing, traditional retailers, and event sales. The Company plans to
capitalize on the unique status of its content through a variety of ancillary
channels, including merchandise sales, licensing, home video, music, publishing
and the Internet.
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Licensing
The Company plans to develop a domestic and international licensing program
placing the WOW mark and logo, copyrighted works and characters on numerous
retail products. The Company anticipates that the products may include photos
and posters, branded apparel, magazines and calendars, video games, lunch boxes,
toys, trading cards, t-shirts and caps. The Company's merchandise operations may
include the sale of branded merchandise with the WOW logo and performers at the
Company's events, on its television shows and on its Internet site.
Home Video
The Company plans to collect a video library containing all the footage of its
events, television shows and pay-per-view broadcast. The Company plans to
explore the licensing of this footage for the development and sale of home
videos or maintain the ownership of such footage and produce, distribute and
sell its own home videos. The Company can produce home videos at a low cost
because much of the video footage is derived from the television and
pay-per-view programming. From its first season, the Company plans to release
video tapes from its pay-per-view broadcasts as well as a documentary entitled
"The Making of WOW".
Music
Music is an integral part of the Company's entertainment presentations. The
Company has and will continue to compose and record theme songs for each of its
primary characters. The music rights to these recordings are owned by the
Company. The Company may license the rights to a third party for the purpose of
manufacturing and distributing CD's featuring the Company's performer theme
songs to retailers worldwide.
Publishing
The Company plans to license the rights to an official WOW magazine for retail
distribution, which will focus on augmenting the story lines created on the
television programs and the Internet site. The Company also hopes to insert a
direct marketing catalog of branded merchandise into several issues to promote
product sales. The Company plans to reserve certain advertising categories
exclusively for its sponsors. The Company plans to sell the magazine to the
public through newsstand and subscription circulation.
NEW MEDIA
The Company is promoting its brand and performers on its Internet site,
www.wowe.com. The Company is also planning to use its Internet site to enhance
its story lines, allow for interaction with consumers, market and distribute
consumer goods and broadcast original content through "Internet Access Only"
programming. The Company plans to tap the Internet's potential through
advertising sales, memberships, individual performer sites, vanity email,
bulletin boards, auctions of WOW memorabilia and a WOW merchandise page. The
Company anticipates that Internet ad sales will be integrated into television
sales or sold separately.
By using the WOW television programs and other media sources available to it,
the Company
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hopes to build and leverage its brand recognition in this new medium with
minimal promotional cost. The Company plans to link its Internet advertising to
its television and venue advertising to maximize sales and accomplish an
integrated advertising platform. The Company believes that this effort should
build continuity of theme and create loyalty with advertising customers.
Unlike other companies that are required to spend millions of dollars to market
their products or services on the Internet in order to build brand recognition,
the Company's website will be able to use traditional media programs at little
to no incremental cost to drive its Internet traffic. In short, the Company
believes that its Internet business model should be highly scalable and allow it
to expand advertising and e-commerce revenues with minimal increases in
operating expenses.
CHANGE OF CONTROL
On September 1, 2000, David B. McLane, John F. Fisbeck and Carter M. Fortune
(collectively, the "Control Group") and their assigns collectively purchased
367,911,380 shares of Common Stock (which was prior to a one for six reverse
stock split). Of the 367,911,380 shares purchased, 343,561,540 shares were
purchased by the Control Group. The right to purchase the remainder of the
shares was assigned to family members of the Control Group and employees and
consultants of WOW Entertainment, Inc., a company owned by the Control Group
(which company became a wholly-owned subsidiary of the Company and changed its
name to Women of Wrestling, Inc.). In particular, the Company's distributor of
its television program, M/G Perin, Inc. through its principal shareholder,
Richard Perin, purchased 3% of the 367,911,380 shares Common Stock pursuant to
the Distribution Agreement with the Company. (MG Perin, Inc. is also entitled to
receive a warrant to purchase 1% of the Common Stock owned by the Control
Group). The source of funds for all purchases was from personal funds.
Collectively, the stock purchased represents 98.1% of the outstanding common
stock of the Company (which was prior to a one for six reverse stock split).
The stock was purchased 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 the 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 362,088,361 shares (the "Estate Stock") of Common Stock from
the Estate for $98,200 in cash. The Estate Stock included 360,588,361 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 as of July 21, 2000.
The other agreement was with Shamrock Holdings Group, Inc. ("Shamrock",
collectively with the Estate, the "Sellers") and provided for the purchase of
5,823,019 shares of Common Stock (of which 1,399,565 shares was converted from
the Company's Series A Preferred Stock owned by Shamrock pursuant to a notice of
conversion delivered to the Company dated as of July 21, 2000) for $1,800 in
cash.
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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 specified liabilities, be deposited with an escrow agent, and, subject to
certain offsets, be distributed to the Sellers on September 30, 2000. According,
the Company transferred cash in the amount of $80,000 to the escrow agent on
September 1, 2000.
On September 1, 2000 J. Douglas Wellington resigned as President and Chief
Executive Officer ("CEO") and David McLane was elected President and Douglas E.
May was elected Chief Financial Officer. Mr. McLane was also appointed to the
Board of Directors as of such date. As of such date, the Company entered in a
Severance and Consulting Agreement with Mr. Wellington (see "Executive
Compensation - Employment Contracts and Termination of Employment").
The Board of Directors also authorized changing the Company's fiscal year from a
December 31 year end to an August 31 year end to coincide with the Company's
television season.
In October, 2000, certain actions, which had been approved by written consent of
the Control Group, became effective, including:
1) The election of Frank Fisbeck and Douglas E. May as directors of the Company.
Mr. Wellington resigned as a director and all other positions with the Company
(including Secretary) as of such date;
2) A 1 for 6 reverse stock split resulting in each share of Common Stock being
reclassified into 0.1667 of a share of new common stock, $0.01 par value. Except
as otherwise noted, the outstanding shares of Common Stock presented in this
Form 10-KSB have been adjusted for this reverse stock split; and
3) The amendment and restatement of the Company's Certificate Incorporation,
which included amendments to reflect the reverse stock split and to change the
name of the Company from "American Gaming & Entertainment, Ltd." to "WOW
Entertainment, Inc."
Also in October, 2000, the Company elected Mr. May as Secretary and Vice
President of Finance; Kevin Foster as Chief Information Officer and Vice
President of New Media; Selina Majors as Vice President of Talent and Steven
Blance as Vice President of Creative Affairs.
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. WOW was incorporated as an Indiana corporation in May, 2000, and
had no operating history. This transaction was accounted for in a manner similar
to a pooling of interest. WOW's significant assets included employment, venue
and other production contracts (entered into in the ordinary course of
business); certain intellectual property, including trademark rights in the "WOW
Women of Wrestling" name, logos and character names of performers; rights in
characters portrayed by performers; publicity rights of performers with respect
to their performances; and
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copyrights in recorded performances, events, programs, advertisements and
promotional materials and capitalized production costs relating to its
syndicated television program.
1999 RESTRUCTURING
In accordance with a Letter 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 ("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,
the 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 retained 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 mutually agreed upon
by the Company and Shamrock.
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, 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
Company's Series C Cumulative Preferred Stock and Series D Cumulative Preferred
Stock.
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 The 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
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$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.
DISCONTINUED VENTURES
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.
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 " -
1999 Restructuring").
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.
Mississippi. Prior to 1998, an involuntary petition for liquidation under
Chapter 7 of the U.S. Bankruptcy Code (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. AMGAM was a general partnership in which Gamma of
Mississippi, Inc., a wholly owned subsidiary of the Company, owned a 10%
interest and American Gaming and Resorts of Mississippi, Inc.("AGRM"), another
wholly owned subsidiary of the Company, owned through its subsidiary, American
Gaming of Biloxi, Inc. the remaining 90%. The case was subsequently converted
into a reorganization under Chapter 11 of the Code. Additionally prior to 1998,
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.
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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 the Escrow Account and delivered a promissory note in the amount of
$5,827,500 to an escrow agent, who will 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 canceled as of the effective date of the
Mississippi Plan.
In accordance with the Letter Agreement, the Company transferred to Shamrock
substantially all of the Company's right, title and interest under the
Mississippi Plan (See " - 1999 Restructuring").
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 as of 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
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been asserted related to, adverse environmental conditions at 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
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.
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 the 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.
Mobile, Alabama. Prior to 1998, the Company acquired the GM&O Building for
$1,006,000 in cash and subsequently recognized writedowns in the value of such
investment to reflect its fair market value. On March 1, 1999, the Company sold
the GM&O Building in Mobile, Alabama 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
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<PAGE>
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 aggregating 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.
COMPETITION
The Company competes for entertainment and advertising dollars with other
entertainment and leisure activities. The Company's live events, which as of the
date of this report are only being held in California, face competition from a
variety of other activities, including professional and college baseball,
basketball, hockey and football. The Company also competes for attendance,
broadcast audiences and advertising revenue with a wide range of alternative
entertainment and leisure activities.
The Company competes in the sports entertainment business as it relates to
wrestling on a national basis primarily with World Wrestling Federation ("WWF")
and World Championship Wrestling ("WCW"). The Company competes with WWF and WCW
in all aspects of its business, including viewership, the sale and licensing of
branded merchandise and distribution channels for its televised programs. The
Company also directly competes to find, hire and retain talented performers.
Both WWF and WCW have substantially greater financial resources than the Company
does.
In addition, WWF began a strategic alliance with Viacom/CBS in April, 2000,
which will provide it access to a variety of television networks and other
operations from which it can promote its programs and merchandise. Further, WCW
is affiliated with television cable networks on which WCW's programs are aired.
Notwithstanding, the Company believes that its programs and related products are
distinctive and easily differentiated from those of its competitors. In
particular, the Company's emphasis on women as the main characters in all of its
story lines distinguishes its programs from those of its competitors. Other
sources of competition in the Company's sports entertainment market are regional
promoters of wrestling events.
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GOVERNMENT REGULATION
Various states in the United States require compliance with regulations of state
athletic commissions and other applicable regulatory agencies in order to
promote and conduct live entertainment. As of the date of this report, the
Company is only conducting live events in California which requires the payment
of certain fees in connection with live boxing and wrestling events. The Company
has paid all fees required for its events in California.
The production and distribution of television programming by independent
producers is not directly regulated by the federal or state governments, but the
marketplace for television programming in the United States is substantially
affected by regulations of the Federal Communications Commission applicable to
television stations, television networks and cable television systems and
channels.
EMPLOYEES
As of October, 2000, the Company had 48 full-time employees of which 44 were
primarily engaged in organizing and producing live performances and television
and pay-per-view shows and four were primarily engaged in management and
administration. The Company's in-house production staff is supplemented with
contract personnel on an as needed basis. The Company believes that its
relationships with its employees are generally satisfactory. None of its
employees is represented by a union.
INTELLECTUAL PROPERTY
The Company owns, controls or claims ownership of key intellectual properties
associated with its business, including trademark rights in the "WOW Women of
Wrestling" name (which is the subject of a U.S. service mark registration) and
in the Company's logos and character names of performers (for which a number of
applications for federal registration have been filed); rights in characters
portrayed by performers; publicity rights of performers with respect to their
performances; and copyrights in recorded performances, events, programs,
advertisements and promotional materials. The Company also claims a proprietary
interest in all confidential or trade secret information relating to its
business. The Company does not have any patents or patent rights.
ITEM 2. DESCRIPTION OF PROPERTY
Headquarters. The Company's headquarters is located in downtown Indianapolis,
Indiana. The Company is leasing office space by oral agreement from Lowe Gray
Steele & Darko, LLP, the Company's law firm. The Company is leasing this space
for $100 per month on a month-to-month basis, which is less than the prevalent
market rental rates for comparable office space in downtown Indianapolis. The
property is sufficient for the Company's current administrative and known
operating needs. The Company intends to evaluate its space needs in December,
2000. Long-range future growth can be accommodated by leasing new or additional
space if necessary.
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<PAGE>
Los Angeles. The Company's subsidiary, Women of Wrestling, Inc., leases office
and warehouse space at The Great Western Forum located 3900 W. Manchester Blvd.,
Los Angeles, California pursuant to a lease dated June 7, 2000, as amended on
June 28, 2000. The Company is leasing approximately 10,000 square feet of office
and warehouse space from L.A. Forum Holdings, LLC (who is not affiliated with
the Company) for $6,750 per month on a month-to-month basis. The Company
believes that this space will provide adequate office and working space to
support its production and administrative needs. Long-range future growth can be
accommodated by leasing additional space in the same facility if necessary.
ITEM 3. LEGAL PROCEEDINGS
The Company is not involved in any legal proceedings or claims that management
believes that will have a material adverse effect on the Company's business or
financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable. The last annual meeting of stockholders of the Company was held
on October 12, 1995. No meeting of stockholders has been held since such date
and the Company has no present intention of holding a meeting of stockholders in
2000.
PART II
-------
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information. From 1998 through October 4, 1999 and from June 21, 2000
through October 16, 2000, the Common Stock traded under the symbol "AGEL" on the
OTC Bulletin Board (from October 4, 1999 through June 21, 2000 the Common Stock
traded under the symbol "AGELE" on the OTC Bulletin Board). Effective October
16, 2000, the Common Stock has traded under the symbol "WOWI" on the OTC
Bulletin Board.
The following table sets forth, for the calendar periods indicated, the high and
low bid prices (which prices are interdealer prices without retail markup,
markdown or commissions, and may not necessarily represent actual transactions).
16
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Bid Price Per Share (1)
-----------------------
Calendar Periods High Low
---------------- ---- ---
1998
First Quarter ......................... $ 0.1878 $ 0.0936
Second Quarter ........................ 0.0936 0.0936
Third Quarter ......................... 0.0936 0.0936
Fourth Quarter ........................ 0.0936 0.0936
1999
First Quarter ......................... $ 0.6564 $ 0.0936
Second Quarter ........................ 0.1878 0.0936
Third Quarter ......................... 0.3600 0.1200
Fourth Quarter ........................ 0.1200 0.0300
2000
First Quarter ......................... $ 2.40 $ 0.0540
Second Quarter ........................ 4.50 0.4800
Third Quarter (through August 31) ..... 5.10 0.3000
(1) The prices per share have been restated to reflect the 1 for 6 reverse stock
split which became effective on October 13, 2000.
(b) Holders. At October 31, 2000, there were approximately 297 holders of record
of the Common Stock.
(c) Dividends. The Company has never declared or paid any dividends on its
Common Stock. The Board of Directors presently intends to retain any and all
earnings for use in the Company's business and therefore does not anticipate
paying any cash dividends on the Common Stock in the foreseeable future.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
The following analysis of the results of operations and financial condition of
the Company should be read in conjunction with the Company's financial
statements, including the notes thereto, contained elsewhere in this report.
As noted above in Item 1, Description of Business, on September 1, 2000, the
Company purchased, for nominal consideration, all of the common stock of WOW, a
company owned by the Control Group. WOW was incorporated as an Indiana
corporation in May, 2000, and had no operating history. This transaction was
accounted for in a manner similar to a pooling of interest. WOW's significant
assets included employment, venue and other production contracts (entered into
in the ordinary course of business); certain intellectual property, including
trademark rights in the "WOW Women of Wrestling" name, logos and character names
of performers; rights in characters portrayed by performers; publicity rights of
performers with respect to their performances; and copyrights in recorded
performances, events, programs, advertisements and promotional materials and
capitalized production costs relating to its syndicated television program. Also
noted in Item 1, the Company has discontinued for the foreseeable future its
gaming operations.
The Company anticipates that it will derive future revenues from the creation,
marketing and
17
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distribution of the Company's live and televised entertainment events through
over-the-air television and Internet broadcasting, including the sale of
integrated sponsorship and commercial advertising time within the Company's
events and programs; the marketing, promotion and licensing of the Company's
branded merchandise; and the creation of a new media platform designed to fully
exploit the other two segments and generate revenues from the sale of
advertising, memberships and merchandise on the Company's website.
The Company anticipates that it will receive license fees for the production of
television programming through its distribution agreement with MG Perin, Inc.
and other future direct and third party agreements. Revenue will be recognized
by the Company from its direct distribution, exploitation, or licensing of its
films 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 entity by third party distributors.
Revenue is reduced by appropriate allowances, estimated returns, price
concessions, and similar adjustments, as applicable.
The Company has implemented SOP 00-2, which requires special accounting for
production costs relating to episodic television series. Specifically, SOP 00-2
requires a company to 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 all considered in development and pre-production and will be expensed in
the upcoming operating cycle as episodic revenue is recognized.
Advertising and exploitation costs, which include marketing, advertising,
publicity, promotion, and other distribution expenses incurred in connection
with the distribution of a film or television program, are expensed as incurred.
The Company accounts for all stock based compensation under the provision of
Statement of Financial Accounting Standards ("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 recognizes this value as an expense over the period in
which the option vests.
RESULTS OF OPERATIONS: TRANSITION PERIOD ENDED AUGUST 31, 2000 AND YEAR ENDED
DECEMBER 31, 1999
Revenues
The Company did not record revenues for the eight months ended August 31, 2000
compared to $11,743,000 for the twelve months ended December 31,1999, a decrease
of $11,743,000. The
18
<PAGE>
decrease was 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, for which the Company recognized "Deferred Charter
Revenue" of approximately $11,743,000 as revenue for the year ended December 31,
1999.
Costs and Expenses
While the Company did not record any revenues for the eight months ended August
31, 2000, it did begin additional operations, primarily the production of its
one-hour weekly television program WOW Women of Wrestling. Operating costs were
$664,000 for the eight months ended August 31, 2000 compared to zero for the
twelve months ended December 31,1999, an increase of $664,000. This increase was
due to an increase of $428,000 in production costs and an increase of $236,000
in exploitation costs. Both increases were the result of the Company's
commencement in production of its one-hour weekly television program WOW Women
of Wrestling in which the first live event, where the first three shows were
taped, was September 16, 2000 and the first episode from that taping premiered
the week of October 2, 2000.
Selling, general and administrative expenses were $770,000 for the eight months
ended August 31, 2000, compared to $1,436,000 for the year ended December 31,
1999, a decrease of $666,000. The change was primarily due to a decrease in
depreciation and amortization costs of approximately $525,000, primarily
related to the Gold Coast Barge, which was sold in August 1999.
For the year ended December 31, 1999, the Company recorded a reversal of bad
debt expense related to lease expenses of approximately $2,785,000 based on the
sale of the Harolds Club and approximately $7,000 based on a settlement for
management services rendered prior to 1998. The Company also recorded a reversal
of net liabilities for subsidiaries in bankruptcy of approximately $75,000 based
upon the sale of the Gold Coast Barge and the anticipated distributions under
the Mississippi Plan.
Interest income for the eight months ended August 31, 2000 was approximately
$8,000, primarily related to funds deposited in a money market account. Interest
income for the year ended December 31, 1999 was approximately $66,000, primarily
related to funds held in escrow in connection with the RSR Interest.
Interest expense for the year ended December 31, 1999 was approximately
$4,476,000 on debt owed to Shamrock. In November 1999, Shamrock agreed to
release the Company from all debts and liabilities. Accordingly, no interest
expense was recorded for the eight months ended August 31, 2000.
For the year ended December 31, 1999, the Company recorded a net gain of
approximately $4,098,000 resulting from the cancellation of indebtedness to
Shamrock in exchange for all payments, distributions, dividends and proceeds of
any type to which the Company is entitled
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<PAGE>
pursuant to or in connection with the Proxy Agreement relating to the RSR
Interest, in accordance with the terms of the Letter Agreement. The Company
valued the RSR Interest, exclusive of distributions being escrowed for the
benefit of the Company, as the average of the appraisal of the value of the RSR
Interest obtained by the Company and the value the Company understands an
appraiser for RSR placed on the RSR Interest. The Company also recorded a net
gain of approximately $48,000 for the year ended December 31, 1999 related to
the sale of the GM&O Building in Mobile, Alabama. Additionally, for the year
ended December 31, 1999, the Company recorded a net gain of approximately
$40,000 as the result of the settlement of a lawsuit brought by the Company
against the purchaser of one of the Company's keno systems. The associated
account receivable had been written off in 1996.
Pursuant to the Letter Agreement, Shamrock released the Company from all debts
and liabilities in excess of the amount of the Transferred Assets. Accordingly,
the Company recorded an extraordinary item of approximately $47,181,000
resulting from the extinguishment of indebtedness to Shamrock.
LIQUIDITY AND CAPITAL RESOURCES
The Company's management believes that its capital resources are adequate to
meet its current working capital requirements. The Company had cash of
approximately $294,000 as of August 31, 2000. As of August 31, 2000, the Company
has no outstanding bank borrowings. The Company's subsidiary, Women of
Wrestling, Inc. ("WOW"), had outstanding 13,000 shares of Series A Preferred
Stock that were sold to Carter M. Fortune, a member of the Control Group for
$1,300,000. The dividend rate of the Series A Preferred Stock is equal to the
London Interbank Offered Rate ("LIBOR") plus one percent (1%) (subject to change
effective on the same date as each change of LIBOR) per annum payable quarterly
on the 15th day of January, April, July and October in each year. The redemption
price for the Preferred Stock is $100 per share; the Preferred Stock is not
convertible into common stock; in the event of a liquidation, the Preferred
Stock is entitled to receive a liquidating distribution of $100 per share (plus
any accrued but unpaid dividends) and the Preferred Stock has the same voting
rights as WOW's common stock of one vote per share.
As of October 31, 2000, the Company had cash of approximately $456,000. As of
October 31, 2000, the Company's subsidiary, WOW, issued an additional 7,000
shares of Series A Preferred Stock to Mr. Fortune for an additional $700,000.
In addition, Mr. Fortune has agreed to loan to WOW up to $3,000,000 pursuant to
a Line of Credit Promissory Note dated May 5, 2000, at an interest rate equal to
LIBOR plus one percent (1%) (subject to change effective on the same date as
each change of LIBOR) per annum. Interest on said note is due monthly with the
entire outstanding principal and any accrued interest due on November 1, 2001.
The note is secured by a security interest in WOW's assets. As of October 31,
2000, the outstanding balance of the loan from Mr. Fortune was approximately
$1,500,000. Mr. Fortune also agreed in November, 2000, to loan the Company up
20
<PAGE>
to an additional $1,000,000 under substantially the same terms as the original
loan from Mr. Fortune for additional consideration that is being negotiated as
of the date of this report.
The Company recently began airing its programs in the United States and
marketing its programs internationally. It anticipates that its future cash
requirements over the next 12 month will be partially fulfilled by sales of its
television programs internationally, advertising revenues from its television
programs, pay-per-view buys, Internet advertising and memberships and sales of
branded merchandise.
The Company believes that its loan commitments from Mr. Fortune along with
revenues from its programs and merchandise sales will be adequate to satisfy its
cash requirements over the next 12 months without the necessity of raising
additional capital. However, the Company is also engaging in discussions with
several third parties to participate in an "accredited investor" only Regulation
D offering under the Securities Act of 1933. If the Company receives additional
funding under such an offering, it will be in a better position to expand its
present marketing and operating efforts.
The Company's short and long term capital requirements will depend upon many
factors, including the rate of market acceptance of the Company's television and
pay-per-view broadcasts and its new media broadcasts, advertising, Internet
memberships and sales of branded merchandise as well as the level of resources
required to expand the Company's marketing and sales operations. Many of these
and other factors are beyond the Company's control.
Over the next 12 months, the Company has no plans as of the date of this report
to hire a significant number of additional employees.
RISK FACTORS
There are certain forwarding-looking statements contained in this report. These
statements relate to the Company's future plans, objectives, expectations and
intentions and are based on assumptions that the Company believes are
reasonable, but are subject to a wide range of risks and uncertainties, and a
number of factors could cause the Company's actual results to differ materially
from those expressed in the forward-looking statements. These factors include:
o the Company may fail to attract an audience and advertisers for its
programs and markets for its products,
o the Company may not be able to compete with competitors with greater
financial resources or marketplace presence,
o the loss of the creative services of David McLane could impair the
Company's ability to create popular characters and story lines,
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o the failure to continue to develop creative and entertaining programs
and events would likely lead to a decline in the popularity of the
Company's brand of entertainment,
o the Company may not be able to protect its intellectual property
rights which could have impair its ability to compete in the sports
entertainment market,
o the Company could fail to retain or recruit key performers which could
lead to a decline in the appeal of the story lines and the popularity
of the Company's programs and branded merchandise,
o the Company could be unable to maintain or renew key agreements which
could adversely affect the its ability to distribute its television
and pay-per-view programming,
o a decline in the popularity of the Company's programs or merchandise
could have an adverse impact its business,
o the Company's insurance could be insufficient to cover liabilities
resulting from accidents or injuries,
o the Control Group, which owns a substantial majority of the Company's
common stock, could through the exercise of its voting rights affect
decisions which could conflict with the interests of the public
shareholders.
This list of factors that may affect future performance and the accuracy of
forward-looking statements is illustrative, but by no means exhaustive.
Accordingly, all forward-looking statements should be evaluated with the
understanding of their inherent uncertainty.
ITEM 7. FINANCIAL STATEMENTS
See pages F-1 through F-21 following Item 13 below.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Effective as of September 14, 2000, the Company appointed Katz Sapper & Miller,
LLP as the Company's independent public accountants and such firm accepted such
appointment. Katz Sapper & Miller, LLP had not been previously engaged by the
Company. The Company also notified Mintz Rosenfeld & Company LLC that the
Company was changing accountants as of such date. The change of accountants was
approved by the Board of Directors of the Company.
The report of Mintz Rosenfeld & Company LLC on the Company's financial
statements for the fiscal year ended December 31, 1999 contained an unqualified
opinion with a going-concern
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explanation. For the fiscal year ended December 31, 1999 and the subsequent
interim periods, there were no disagreements with Mintz Rosenfeld & Company LLC
on any matter of accounting principles or practices, financial statement
disclosure or auditing scope or procedure, which, if not resolved to the
satisfaction of Mintz Rosenfeld & Company LLC, would have caused Mintz Rosenfeld
& Company LLC to make reference to the matter in its audit report.
Mintz Rosenfeld & Company LLC has furnished a letter to the Company addressed to
the Securities and Exchange Commission stating that it agrees with the foregoing
statements.
PART III
--------
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; SECTION
16(A) BENEFICIAL OWNERSHIP COMPLIANCE REPORT.
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
(a) Executive Officers and Directors
The executive officers and directors of the Company are as follows:
----------------------------------------------------------------------------
DIRECTOR
NAME AGE SINCE POSITION
David B. McLane 40 2000 President, Director
Douglas E. May 33 2000 Chief Financial Officer, Vice
President of Finance and
Secretary, Director
Frank Fisbeck 70 2000 Director
----------------------------------------------------------------------------
The Company's current directors serve until the next annual meeting of
stockholders and until their respective successors are duly elected and
qualified.
David B. McLane was appointed to the Board of Directors and became President of
the Company as of September 1, 2000. Mr. McLane and the other members of the
Control Group formed Women of Wrestling, Inc. in May, 2000. Women of Wrestling,
Inc. become a subsidiary of the Company in September, 2000 (See "Description of
Business - Investments") Mr. McLane has been involved in various facets of
wrestling for more than 20 years. In the 1980s, Mr. McLane was employed by Dick
the Bruiser's Championship Wrestling, Inc., an Indianapolis-based wrestling
promotion company. In 1985, Mr. McLane became the president and principal
shareholder of David McLane Enterprises, Inc., a production and promotion
company. Mr. McLane created, produced and promoted the nationally syndicated
women's wrestling program, GLOW (Gorgeous Ladies of Wrestling) in the 1980s. Mr.
McLane also develops and produces the Pro Beach Hockey television series which
is in its third season on ESPN.
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Douglas E. May was elected to the Board of Directors and became Vice President
of Finance and Secretary on October 2, 2000. He was previously elected the CFO
of the Company in September, 2000. Mr. May, who is a certified public accountant
and certified financial planner, was a financial consultant with Merrill Lynch
from August, 1995 until August, 2000. Prior to joining Merrill Lynch, Mr. May
was with Price Waterhouse, LLP from 1990 to 1995.
Frank Fisbeck was elected to the Board of Directors on October 2, 2000. Mr.
Fisbeck is the father of John F. Fisbeck, a member of the Control Group. Mr.
Fisbeck has been retired since 1988. Prior to his retirement, Mr. Fisbeck was
president of Mineweld Company, a wholesale distributor of industrial gases and
welding supplies with 17 offices in three states.
(b) Significant Employees. None
(c) Family Relationships. None.
(d) Involvement in Certain Legal Proceedings. None.
SECTION 16(A) BENEFICIAL OWNERSHIP COMPLIANCE REPORT
Section 16(a) of the Exchange Act requires the Company's officers and directors,
and persons who own more than 10% of a registered class of the Company's equity
securities, to file an initial report of ownership of such securities on Form 3
and changes in ownership of such securities on Form 4 or 5 with the Commission.
Such officers, directors and 10% stockholders are required to furnish the
Company with copies of all Section 16(a) forms they file with the Commission.
Based solely on its review of the copies of such forms received by it, or
written representations from certain such reporting persons that no Form 5's
were required for such persons, the Company believes that, for the transition
period ended August 31, 2000, its officers, directors and 10% stockholders
complied with all applicable Section 16(a) filing requirements.
ITEM 10. EXECUTIVE COMPENSATION
The following tables set forth certain information respecting the compensation
awarded to, earned by, or paid to the sole individual serving as the Company's
CEO during the transition period ended August 31, 2000. No other individual had
a total annual compensation exceeding $100,000 for the transition period ended
August 31, 2000.
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SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------
Long Term
Annual Compensation Compensation Awards
Securities
Other Annual Underlying All Other
Name and Principal Year Salary ($) Bonus ($) Compensation ($) Options (#) Compensation ($)
Position
<S> <C> <C> <C> <C> <C> <C>
J. Douglas Wellington, 2000 (1) 83,654 -- -- -- 9,608 (2)
CEO 1999 125,000 -- -- -- 18,422 (3)
1998 125,000 -- -- -- 23,432 (4)
---------------------------------------------------------------------------------------------------------
</TABLE>
(1) For the transition period ended August 31, 2000.
(2) Consists of $4,808 for accrued vacation and sick time, $4,000 for car
allowance and $800 for home office expenses.
(3) Consists of $12,022 for accrued vacation and sick time, $6,000 for car
allowance and $400 for home office expenses.
(4) Consists of $17,432 for accrued vacation and sick time and $6,000 for car
allowance.
AGGREGATED OPTION EXERCISES IN THE TRANSITION PERIOD ENDED
AUGUST 31, 2000 AND TRANSITION PERIOD-END OPTION VALUES
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------
Value of
Number of Unexercised Unexercised
Options in-the-money
At TP-End (#) Options at TP-End ($)
Shares Acquired on Value Realized Exercisable / Exercisable /
Name Exercise (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
J. Douglas Wellington 0 $0 518,750/0 (1) $350,000/$0
-----------------------------------------------------------------------------------------------------------
</TABLE>
(1) The number of options has not been adjusted to reflect a one for six reverse
stock split.
COMPENSATION OF DIRECTORS
Directors who are employed by the Company receive no compensation. Every
director is reimbursed for out-of-pocket expenses incurred in connection with
attendance at meetings of the Board of Directors and other Company business.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT
The Company and Mr. Wellington executed an employment agreement dated as of
December 31, 1999 (the "Employment Agreement") in connection with the execution
of the Letter Agreement. The Employment Agreement had a term of thirteen months,
and provided for compensation payable to Mr. Wellington of $135,417. The
Employment Agreement also provided for a severance payment of $125,000 to be
paid to Mr. Wellington from a reserve account set aside and controlled by
Shamrock in the event (a) there was no intervening voluntary bankruptcy by the
Company prior to January 31, 2001 without Shamrock's consent and the terms and
conditions of the Employment Agreement and the Letter Agreement were satisfied,
(b) Mr. Wellington was
25
<PAGE>
terminated "without cause", (c) a "substantial breach" occurred or (d) Mr.
Wellington resigned after a "change of control" (as such terms are defined in
the Employment Agreement).
As a result of change in control resulting from the purchase by the Control
Group of substantially all of the Common Stock, Mr. Wellington became entitled
to the severance payment provided for in the Employment Agreement. On September
1, 2000, the Company, WOW, the Control Group and Mr. Wellington entered into a
Severance and Consulting Agreement. Pursuant to such agreement, (a) Mr.
Wellington will receive his severance payment on January 31, 2001 (pursuant to
the Letter Agreement, one-half of such amount will be paid by Shamrock, see
"Description of Business - Change in Control and - 1999 Restructuring"), (b) the
Company paid Mr. Wellington his base salary under the Employment Agreement
through September 30, 2000, (c) the Company paid Mr. Wellington the remainder of
his base salary under the Employment Agreement, and (d) the Company paid Mr.
Wellington $1,500 for car and rent allowances through January 31, 2001. The
Company has engaged Mr. Wellington as a consultant through January 31, 2002 and
has agreed to grant Mr. Wellington warrants to purchase 50,000 shares of Common
Stock at $1.00 per share on June 30, 2002, exercisable immediately after grant,
for a period of six years. The Company also gave Mr. Wellington two computers
owned by the Company (with an aggregate net book value of approximately $4,000).
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of October 31, 2000 with respect
to the only persons or groups known to the Company who may be deemed to own
beneficially more than 5% of the Company's voting securities (i.e. Common
Stock). Unless otherwise noted, each holder has sole voting and investment power
with respect to the shares of the listed securities.
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
Title of Class Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Ownership (1)
<S> <C> <C> <C>
Common Stock David B. McLane 57,260,257 (2) 91.7%
Bank One Tower
111 Monument Circle
Suite 4600
Indianapolis, IN 46204
Common Stock John F. Fisbeck 57,260,257 (2) 91.7%
Bank One Tower
111 Monument Circle
Suite 4600
Indianapolis, IN 46204
Common Stock Carter M. Fortune 57,260,257 (2) 91.7%
Bank One Tower
111 Monument Circle
Suite 4600
Indianapolis, IN 46204
-----------------------------------------------------------------------------------------------------------------
</TABLE>
26
<PAGE>
(1) The number of shares has been adjusted to reflect a one for six reverse
stock split. Based on information supplied by persons listed or as reported
on the most recent Schedule 13D, as amended, filed by any such persons. As
used in this table, "beneficial ownership" of securities means the sole or
shared power to vote, or to direct the voting of, such securities, or the
sole or shared investment power with respect to such securities, including
the power to dispose of, or to direct the disposition of, such securities.
In addition, for purposes of this table, a person is deemed to have
"beneficial ownership" of any security that such person had the right to
acquire within 60 days after October 31, 2000.
(2) As the Control Group, Messrs. McLane, John F. Fisbeck and Fortune
beneficially own 57,260,257 shares of Common Stock. Individually, each
person has sole dispositive and voting power over the following shares of
Common Stock: McLane, 18,907,586, John F. Fisbeck, 19,009,669 and Fortune,
19,343,002. Members of the Control Group assigned the right to purchase
certain additional shares of the Company pursuant to the Stock Purchase
Agreements to family members of the Control Group and employees and
consultants of WOW Entertainment, Inc., a company owned by the Control
Group (which company became a wholly-owned subsidiary of the Company;
however, the members of the Control Group did not retain sole or shared
voting or dispositive power over such shares.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of October 31, 2000 with respect
to (i) each director, (ii) all individuals serving as the Company's CEO during
the transition period ended August 31, 2000, and (iii) all directors and all
such executive officers as a group. Unless otherwise noted, each holder has sole
voting and investment power with respect to the shares of the listed securities.
An asterisk (*) indicates beneficial ownership of less than 1%.
COMMON STOCK
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------
Name and Address of Amount and Nature of Percent of Class
Beneficial Owner Beneficial Ownership (1)
<S> <C> <C>
J. Douglas Wellington 83,333 *
c/o American Gaming &
Entertainment, Ltd.,
51 Beech Road,
Glen Rock, New Jersey, 07452
David B. McLane 57,260,257 (2) 91.7%
Bank One Tower
111 Monument Circle
Suite 4600
Indianapolis, IN 46204
Executive Officers and 57,343,590 91.8%
Directors as a group (2 people)
-------------------------------------------------------------------------------------------
</TABLE>
27
<PAGE>
(1) The number of shares have been adjusted to reflect a one for six reverse
stock split. As used in this table, "beneficial ownership" of securities
means the sole or shared power to vote, or to direct the voting of, such
securities, and/or the sole or shared investment power with respect to such
securities (i.e., the power to dispose of, or to direct the disposition of,
such securities). In addition, for purposes of this table, a person is
deemed to have "beneficial ownership" of any security which such person had
the right to acquire within 60 days after October 31, 2000.
(2) As the Control Group, Mr. McLane beneficially owns 57,260,257 shares of
Common Stock. Individually, he has sole dispositive and voting power over
18,907,586, shares of Common Stock.
CHANGES IN CONTROL
The Company knows of no arrangements the operation of which may at a subsequent
date result in a change of control.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Security Ownership of Certain Beneficial Owners and Management" for those
persons or groups known to the Company who may be deemed to own beneficially
more than 5% of the Company's voting securities (i.e. Common Stock).
See "Description of Business - Change of Control" for certain relationships
regarding the Company's subsidiary, Women of Wrestling, Inc.
28
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION LOCATION
------- ----------- --------
<S> <C> <C>
3.1 Restated Certificate of Incorporation (1)
3.2 Bylaws (2) Exh. 3.3
3.3 Amendment to Bylaws (1)
4.1 Specimen Common Stock Certificate (1)
4.2 Subscription and Shareholders' Agreement dated as of May 5, 2000 (4) Exh. 4.1
between Women of Wrestling, Inc. (f/k/a WOW Entertainment, Inc.),
John F. Fisbeck, David B. McLane and Carter M. Fortune
4.3 Security Agreement dated May 5, 2000, made by Women of (4) Exh. 4.2
Entertainment, Inc. (f/k/a WOW Entertainment, Inc.) in favor of
Carter M. Fortune
10.1 Stock Purchase Agreement dated as of July 28, 2000 between John F. (3) Exh. 10.11
Fisbeck, David B. McLane and Carter M. Fortune, and Richard C. Breeden
Trustee of The Bennett Funding Group, Inc. et. al. and the Company
10.2 Stock Purchase Agreement dated as of July 28, 2000 between John F. (3) Exh. 10.12
Fisbeck, David B. McLane and Carter M. Fortune, and Shamrock Holdings
Group, Inc. and the Company
10.3 Stock Purchase Agreement dated as of September 1, 2000 between John (4) Exh. 10.1
F. Fisbeck, David B. McLane and Carter M. Fortune, and American
Gaming & Entertainment, Ltd.
10.4 Distribution Agreement executed as of July 17, 2000 between (4) Exh. 10.2
Women of Wrestling, Inc.(f/k/a WOW Entertainment, Inc.) and M/G
Perin, Inc.
10.5 Standard Office Lease dated as June 7, 2000, as amended, between the (1)
Company and L.A. Forum Holdings, LLC
10.6 Employment Agreement dated December 31, 1999 between the Company and (2)(8) Exh. 10.2
J. Douglas Wellington
10.7 Agreement dated September 1, 1999 between the Company and J. Douglas (2)(8) Exh. 10.3
Wellington
10.8 Severance and Consulting Agreement dated September 1, 2000 between the (4) Exh. 10.3
Company, Women of Wrestling, Inc. (f/k/a WOW Entertainment, Inc.),
John F. Fisbeck, David B. McLane and Carter M. Fortune and
J. Douglas Wellington
29
<PAGE>
10.9 Service Agreement dated May 5, 2000 between Women of Wrestling, (4) Exh. 10.4
Inc. (f/k/a WOW Entertainment, Inc.) and David McLane Enterprises,
Inc.
10.10 Employment Agreement dated May 5, 2000 between Women of Wrestling, (4) Exh. 10.5
Inc. (f/k/a WOW Entertainment, Inc.) and David B. McLane
10.11 Sale Agreement dated as of July 2, 1999 between The President Riverboat (5) Exh. 10.27
Casino-Mississippi, Inc., President Casinos, Inc., President
Mississippi Charter Corporation, the Company, AMGAM Associates,
American Gaming & Resorts of Mississippi, Inc., the Committee for the
Unsecured Creditors of AMGAM, the Committee for the Unsecured Creditors
of AGRM, International Game Technology, Inc., and Shamrock Holdings
Group, Inc.
10.12 Letter agreement dated October 21, 1998 by and between Shamrock (6) Exh. 10.26
Holdings Group, Inc., Bennett Management and Development Co., AMGAM
Associates, American Gaming and Resorts of Mississippi, Inc., and the
Company
10.13 Letter Agreement dated November 23, 1999, by and between Shamrock (7) Exh. 10.28
Holdings Group, Inc., Bennett Funding Group, Inc., American Gaming &
Entertainment, Ltd., Emerald Gaming, Inc., AMGAM Associates and
American Gaming and Resorts of Mississippi, Inc.
10.14 Security Agreement dated as of December 16, 1999 made by the Company (2) Exh. 10.10
in favor of Shamrock Holdings Group, Inc.
23.1 Consent of Mintz Rosenfeld & Company LLC (1)
27 Financial Data Schedule (1)
</TABLE>
(1) Enclosed herewith.
(2) Each of these exhibits is incorporated by reference to the Company's Annual
Report on Form 10-KSB for the year ended December 31, 1999.
(3) This exhibit is incorporated by reference to the Company's Current Report
on Form 8-K dated July 28, 2000.
(4) This exhibit is incorporated by reference to the Company's Current Report
on Form 8-K dated September 18, 2000, as amended on November 17, 2000.
(5) This exhibit is incorporated by reference to the Company's Quarterly Report
on Form 10-QSB for the period ended June 30, 1999.
(6) This exhibit is incorporated by reference to the Quarterly Report on Form
10-QSB for the period ended September 30, 1998.
(7) This exhibit is incorporated by reference to the Company's Current Report
on Form 8-K dated November 23, 1999.
(8) Each of these exhibits is a management contract or compensatory plan or
arrangement required to be filed as an exhibit to this Form 10-KSB.
30
<PAGE>
(b) Reports on Form 8-K.
The Company filed the following reports during the two month period ended August
31, 2000:
Form 8-K dated July 28, 2000 with respect to the anticipated change in control
resulting from the proposed purchase by the Control Group of substantially all
of the Common Stock.
Form 8-K dated September 18, 2000, as amended on November 17, 2000, with respect
to the change in control resulting from the purchase by the Control Group of
substantially all of the Common Stock, the acquisition Women of Wrestling, Inc.
as a subsidiary, the change in certifying accountant and the change in the
fiscal year of the Company.
31
<PAGE>
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
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Company caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
WOW ENTERTAINMENT, INC.
Date: 11/17/00 By: /s/ David B. McLane
-------------------------------
David B. McLane, President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Company and in the capacities and on the
dates indicated.
Date: 11/17/00
/s/ David B. McLane
---------------------------------------
David B. McLane, President and Director
/s/ Douglas E. May
---------------------------------------
Douglas E. May, Chief Financial Officer,
Vice President of Finance, Secretary and Director
/s/ Frank F. Fisbeck
---------------------------------------
Frank F. Fisbeck, Director
