<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
x QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
__ TRANSITION REPORT UNDER SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____ to ____
Commission file number 0-22042
MILLENNIUM SPORTS MANAGEMENT, INC.
(Exact name of small business issuer as specified in its charter)
New Jersey 22-3127024
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Ross' Corner
U.S. Highway 206 and County Route 565
Augusta, New Jersey 07822
(Address of Principal Executive Offices) (Zip Code)
(973) 383-7644
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
---- ----
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes No
---- ----
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date 7,188,085 shares of common stock
outstanding as of November 11, 1998.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (check one):
Yes No X
---- ----
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
(Unaudited) (Note 1)
<S> <C> <C>
ASSETS
PROPERTY AND EQUIPMENT, AT COST,
LESS ACCUMULATED DEPRECIATION $ 12,541,125 $ 12,799,986
CASH 392,218 115,295
INVENTORIES 50,832 85,170
INVESTMENT IN LIMITED PARTNERSHIP, AT EQUITY 486,561 485,555
OTHER ASSETS 110,461 108,680
------------ -------------
$ 13,581,197 $ 13,594,686
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Amounts payable settled pursuant to
Chapter 11 proceedings $ 90,865 $ 339,609
Accounts payable and accrued expenses 187,340 250,110
Accrued interest 63,542 209,297
Accrued compensation - officers and directors 170,775 170,775
------------ -------------
Total Liabilities 512,522 969,791
STOCKHOLDERS' EQUITY:
Preferred stock, no par value; 500,000 shares
authorized, none issued -- --
Common stock, no par value, stated value $0.10
per share; 20,000,000 shares authorized
7,188,085 and 4,353,607 shares issued in 1998
and 1997, respectively 718,808 435,362
Additional paid-in capital 18,767,384 17,182,134
Accumulated deficit (6,417,517) (4,992,601)
------------ -------------
Total Stockholders' Equity 13,068,675 12,624,895
------------ -------------
$ 13,581,197 $ 13,594,686
============ ============
</TABLE>
2
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended Three months ended
---------------------------------------------------------------------
September 30, September 30,
---------------------------------------------------------------------
1998 1997 1998 1997
<S> <C> <C> <C> <C>
REVENUES: Stadium and facility rentals and
admissions $ 327,411 $ 300,817 $ 213,052 $ 168,765
Retail and concession sales 207,689 228,533 122,036 133,653
Other 8,645 13,492 1,159 992
----------- ----------- ----------- -----------
Totals 543,745 542,842 336,247 303,410
----------- ----------- ----------- -----------
COSTS OF SALES AND SERVICES:
Costs of stadium operations 196,979 159,984 93,847 64,237
Costs of retail and concession sales 111,950 136,743 73,897 68,362
Selling, general and administrative 583,266 613,929 214,652 214,158
Stock compensation to officers and
directors 734,375 -- -- --
Depreciation 273,825 276,108 91,275 92,436
----------- ----------- ----------- -----------
1,900,395 1,186,764 473,671 439,193
----------- ----------- ----------- -----------
LOSS FROM OPERATIONS (1,356,650) (643,922) (137,424) (135,783)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Equity income of limited partnership 100,000 100,000 100,000 100,000
Write down of investment joint venture (175,000) -- (175,000) --
Interest (net) 6,734 (59,247) 2,766 (9,464)
----------- ----------- ----------- -----------
(68,266) 40,753 (72,234) 90,536
----------- ----------- ----------- -----------
NET LOSS $(1,424,916) $ (603,169) $ (209,658) $ (45,247)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 6,434,515 1,644,391 7,177,194 2,256,604
=========== =========== =========== ===========
NET LOSS PER COMMON SHARE $ (0.22) $ (0.37) $ (0.03) $ (0.02)
=========== =========== =========== ===========
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
Common Stock
----------------------- Additional
Number Paid-in Accumulated
of Shares Amount Capital Deficit Total
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1997 4,353,623 $ 435,362 $ 17,182,134 $ (4,992,601) $ 12,624,895
Issuance of common stock upon exercise of:
Underwriter warrants 1,500,000 150,000 -- -- 150,000
Class A warrants 115,844 11,584 104,260 -- 115,844
Class D warrants 925,000 92,500 370,000 -- 462,500
Issuance of common stock upon conversion of
debt 138,390 13,839 261,405 -- 275,244
Stock compensation to officers and directors -- -- 734,375 -- 734,375
Common stock issued to officers and directors 155,228 15,523 23,196 -- 38,719
Issuance of Class D Warrants -- -- 80,464 -- 80,464
Issuance of Class A Warrants -- -- 11,550 -- 11,550
NET LOSS -- -- -- (1,424,916) (1,424,916)
--------- ------------ ------------ ------------ ------------
BALANCES, SEPTEMBER 30, 1997 7,188,085 $ 718,808 $ 18,767,384 $ (6,417,517) $ 13,068,675
--------- ------------ ------------ ------------ ------------
</TABLE>
4
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended September 30,
-----------------------------------
1998 1997
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,424,916) $ (603,169)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 273,825 276,108
Stock compensation awarded to officers and directors 734,375
Equity in income of limited partnership (100,000) (100,000)
Write down of investment in joint venture 175,000 --
Common stock issued for services rendered -- 375
Changes in operating assets and liabilities:
Inventory 34,338 40,133
Other assets (12,781) (125,147)
Accounts payable and accrued expenses (208,525) (28,541)
------------ ------------
Net cash flows from operating activities (528,684) (540,241)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and improvements (14,964) (33,705)
Investment in joint venture (134,000)
Distribution from limited partnership 98,994 30,469
------------ ------------
Net cash flows from investing activities (49,970) (3,236)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES -
Proceeds from notes payable -- 75,000
Repayments of creditors' notes payable and amounts due insiders (3,500) (398,808)
Proceeds from issuance of common stock upon exercise
of warrants, net of costs 767,063 839,298
Proceeds from issuance of warrants 92,014 142,279
Payments of offering costs -- (46,324)
------------ ------------
Net cash flows from by financing activities 855,577 611,445
------------ ------------
NET CHANGE IN CASH 276,923 67,968
CASH, BEGINNING OF PERIOD 115,295 8,600
------------ ------------
CASH, END OF PERIOD $ 392,218 $ 76,568
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ -- $ 38,480
============ ============
Income taxes paid $ -- $ --
============ ============
Issuance of common stock upon conversion of
outstanding debt $ 275,244 $ --
============ ============
</TABLE>
5
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 - Basis of Presentation: The balance sheet at the end of the
preceding fiscal year has been derived from the audited balance
sheet contained in Millennium Sports Management, Inc.'s (the
"Company's") Annual Report on Form 10-KSB for the year ended
December 31, 1997 (the "10-KSB") and is presented for comparative
purposes. All other financial statements are unaudited. In the
opinion of management, all adjustments, which include only normal
recurring adjustments necessary to present fairly the financial
position, results of operations and cash flows for all periods
presented, have been made. The results of operations for interim
periods are not necessarily indicative of the operating results for
the full year.
Footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been omitted in accordance with the published rules
and regulations of the Securities and Exchange Commission. These
financial statements should be read in conjunction with the
financial statements and notes thereto included in the 10-KSB.
Net Income (Loss) Per Common Share - In February 1997, the
Financial Accounting Standards Board issued Statement of Financial
Accounting Standards 128, Earnings Per Share ("SFAS 128") which is
effective for financial statements for both interim and annual
periods ending after December 31, 1997. The Company adopted SFAS
128 in the fourth quarter of 1997. SFAS 128 replaces the
presentation of primary and fully diluted earnings per share with
basic and diluted earnings per share. Basic earnings per share is
calculated based on the weighted average number of common shares
outstanding during the period and excludes all dilution. Diluted
earnings per share is calculated by using the weighted average
number of common shares outstanding, while also giving effect to
all dilutive potential common shares that were outstanding during
the period. Such dilutive potential common shares have been
excluded since the effect would be anti-dilutive, due to net losses
for all periods presented. SFAS 128 had no impact on the loss per
share for the three and nine months ended September 30, 1997.
Reclassification - Certain amounts previously reported have been
reclassified to conform to current year presentation.
6
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 2 - Organization, Proceedings Under Chapter 11 And Subsequent Operation
Organization and development - The Company operates a regional
sports entertainment and recreation center in Sussex County, New
Jersey, known as the Skylands Park Sports and Recreation Center
(the "Complex"). The Complex includes a professional baseball
stadium ("Skylands Park") used for sports and other entertainment
events, and other adjacent recreational and commercial facilities
(the "Related Facilities") that include, among other things, a
sports apparel and collectibles store, a wholesale and retail
sporting goods outlet, batting cages, and a video parlor.
During the nine months ended September 30, 1998, the years ended
December 31, 1997 and 1996 and since inception, the Company has
generated only limited amounts of revenues from the events held at
Skylands Park and the operation of the Related Facilities and, as a
result, the Company incurred significant net losses during such
periods. Management expects that revenues from the rental of
Skylands Park to its primary tenant will not be significant.
Instead, management expects that the Company will generate revenues
primarily from the rental of skyboxes and advertising signs in
Skylands Park, the rental of Skylands Park for certain other sports
and entertainment events, concession sales, and the operation of
the Related Facilities in the Complex. Accordingly, the Company's
ability to generate significant additional revenues will be
dependent upon, among other things, its ability to generate future
attendance at events and the success of its other commercial
operations.
Management believes that the Company may need to obtain additional
liquid resources to enable it to sustain operations beyond 1998.
Therefore, management expects that to sustain future operations,
the Company will need to obtain additional financing through the
exercise of its remaining outstanding warrants or the issuance of
other equity securities. Although management continues to explore
various financing alternatives, the Company does not have any
commitments with respect to any additional financing.
Chapter 11 Filing and Confirmation of Plan of Reorganization -The
Company's Plan of Reorganization (the "Plan") was confirmed by the
Company's creditors and the United States Bankruptcy Court on April
13, 1995 (the "Confirmation Date"). Since the Confirmation Date,
the Company has paid the unsecured pre-petition liabilities
pursuant to the terms of a secured promissory note (the "Creditors'
Note"). The Creditors' Note bore interest on the unpaid principal
balance at the prime rate plus 3%. The difference between the
interest paid and the interest accrued became due
7
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
on April 26, 1998. The Company has set aside sufficient funds to
make such final payment under the Creditors' Note, and intends to
make such payment upon final reconciliation of the amount due.
Claims of "insiders" (generally, former directors and executive
officers of the Company and certain of their affiliates) of
approximately $339,609 as of the Confirmation Date (including
accrued salaries and loans and advances made to the Company) has
been reduced, through the issuance of common stock, to
approximately $91,000 as of September 30, 1998, and may be paid
from time to time after payment in full of the Creditors' Note, as
the cash flow of the Company may permit; however, each insider has
the option to elect to be paid in shares of common stock of the
Company valued at the then current market price of such common
stock as reported on "NASDAQ," and approximately $248,000 of such
claims has been paid in such manner through September 30, 1998.
Equity interests, including interests of stockholders and warrant
holders, were not altered or impaired under the terms of the Plan.
However, the terms of the Plan prohibit the Company from paying
dividends until all payments required under the Plan have been
made.
Pursuant to SOP 90-7, the Company was not required to adopt
"fresh-start" reporting (and, as a result, revalue all of its
assets and liabilities) since the holders of the Company's existing
voting stock immediately prior to confirmation held the same
relative voting interests after confirmation. In addition, since
the Company will be paying all of its pre-petition liabilities at
their original principal amounts, the Company did not recognize any
material gain or loss as a result of the confirmation of the Plan.
Note 3 - Stockholders' Equity:
In December 1997, the Company again extended the expiration date of
the outstanding Class A common stock warrants to June 30, 1998 from
the original expiration date of September 23, 1995, at which time
the exercise price was reduced from $4.00 to $2.80 per warrant,
with each warrant continuing to entitle the exercising holder to
receive the increased amount of 2.8 shares of the Company's common
stock. In April 1998, such expiration date was further extended to
September 30, 1998, and was subsequently further extended to
December 31, 1998. A total of 923,775 Class A Warrants remain
unexercised at September 30, 1998. The Class A Warrants are subject
to redemption at $.10 per Class A Warrant on 30 days' prior written
notice if the closing bid price of the Company's common stock
equals or exceeds $32.70 per share for any 20 trading days within a
period
8
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
of 30 consecutive trading days ending on the fifth day prior to the
date of the notice of redemption.
Note 4 - Stock Award Plan:
On April 29, 1998, pursuant to the Company's stock award plan
adopted in December 1996 (the "Stock Award Plan"), the Company
granted the right to purchase a total of 250,000 shares of stock at
$.25 per share to members of the Company's Board of Directors. In
accordance with generally accepted accounting principles, a
non-cash charge to earnings of $734,375 was recorded as
compensation expense, representing the difference between the
exercise price and the fair market value per share on the date of
grant for the full award of 250,000 shares. As of September 30,
1998, rights to purchase 155,228 of such shares have been
exercised, and rights to purchase 94,772 shares remain outstanding.
Note 5 - Lease Cancellation:
In July 1998, the Ladies Professional Baseball league ("LPB"), a
secondary tenant of Skylands Park, canceled all further league
games for the balance of 1998, including the remaining 20 home
games for 1998 of the LPB's New Jersey franchise, which were to be
played at Skylands Park. The Company is uncertain if LPB will
satisfy the remaining lease payments, consisting of the second half
of payments for 1998 and all of 1999 and 2000.
9
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
information set forth in the unaudited financial statements and notes thereto
included elsewhere herein and the audited financial statements and the notes
thereto included in the 10-KSB.
Overview
Skylands Park is a 4,300-seat professional baseball stadium which, among other
things, has been and will be leased for sports and other entertainment events.
The Complex follows a courtyard village design theme, and includes, among other
things, a sports apparel and collectibles store, a wholesale and retail sporting
goods outlet, batting cages, and a video parlor.
The New Jersey Cardinals ("the Team"), which is a member of the Class "A" level
New York-Penn League, plays its regularly-scheduled home games and playoff home
games at Skylands Park. The Company has a minority ownership interest in Minor
League Heroes, L.P. ("Heroes"), which is the limited partnership that owns the
Team.
In February 1998, the Company entered into a three-year lease agreement,
commencing in 1998, with Ladies Professional Baseball ("LPB"), a women's
professional baseball league. Pursuant to the agreement, the New Jersey Diamonds
(the "Diamonds"), a league-owned team, was to play its regular season home
games, approximately 28 per year, at the Skylands Park during the months of July
through September. In July 1998, LPB canceled all further league games for the
balance of 1998, including the remaining 20 Diamonds' home games. The Company is
uncertain if LPB will satisfy the remaining lease payments, consisting of the
second half of payments for 1998 and all of 1999 and 2000.
The Company currently operates, in the Complex, the Skylands Sporting Goods
store, which sells, year-round both at retail and at wholesale, a broad range of
sporting goods relating to baseball and other sports, and Team paraphernalia.
The Company also operates, in the Complex, a year-round recreational facility
known as the "Barn", which contains batting cages, a sports video parlor,
mini-gym and children's party room, and a subleased space in which an
unaffiliated third party sells sports collectibles.
The Company also intends to utilize the professional skills and collective
sports-related backgrounds of its management team to provide strategic,
financial and operational consulting services to small to mid-sized professional
franchise owners and sports facility operators. Such backgrounds include Mr.
Stoffel's three years of experience as Vice President and Chief Controller of
the New York Yankees, Mr. Levine's five years of experience as an executive
officer of a publicly traded sports memorabilia and collectibles company, and
Mr. Gordon's and Mr. Klee's eight years of experience as managing owners and
operators of minor league baseball teams. However, the Company has not entered
into any definitive consulting agreements.
10
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
The Company anticipates receiving approximately $42,000 per year in rent from
the Team, which management does not believe will constitute a significant
portion of the Company's revenues. The Company expects to generate additional
revenues from, among other things, the rental of skyboxes and advertising signs
in Skylands Park, the rental of Skylands Park for other sports and entertainment
events, the operation of the related facilities in the Complex, and the
Company's direct and indirect ownership interest in the limited partnership that
owns the Team. For the 1998 baseball season, the Company rented and received
payment for six skyboxes for the 1998 Team season for an aggregate annual rental
of $56,640. In addition, the Company is entitled to 20% of all revenues from
advertising sign rental commitments at Skylands Park. The Company's 20% share of
such revenues in 1998 is approximately $75,000.
In March 1998, the Company, entered into a start-up joint venture (known as
Stadium Capital, Inc.) as a 50% owner with third parties to develop a golf
facility in Florida, and the Company has invested $150,000 in cash for capital,
$25,000 in expense reimbursements, and 1,000,000 Class D Warrants of the Company
in respect of the joint venture. In September 1998, the Company determined that
the possibility of development of a golf facility was remote and therefore has
determined to write down its investment in such joint venture.
Plan of Reorganization
In April 1995, the Company paid $1,600,000 in respect of its pre-petition
unsecured liabilities (including payment in full of de minimis claims, and
subject to the Company's reservation of rights to contest a limited number of
unsecured claims), leaving a balance due in respect of such claims of
approximately $2,608,000, which was payable pursuant to the terms of the
Creditors' Note. The Company has fully paid the principal on the Creditors'
Note, primarily out of net equity proceeds from the sale of common stock by the
Company, leaving a balance of accrued interest of approximately $64,000 (for
which the Company has set aside funds sufficient to pay such amount in full).
The Creditors' Note is secured by substantially all of the assets of the Company
as same are constituted from time to time. Until the Creditors' Note and related
accrued interest have been paid in full, the Company continues to report to and
operate under the review of the independent accountants retained by the official
committee of the unsecured creditors of the Company.
Claims held by insiders (consisting of past and present directors and executive
officers of the Company and certain of their affiliates) in respect of
pre-petition obligations (including but not limited to pre-petition loans made
to the Company), originally in the aggregate amount of approximately $339,609,
may be paid from time to time after payment in full of the Creditors' Note, as
the cash flow of the Company may permit; or, at the option of each insider, may
be paid at any time or from time to time in shares of common stock of the
Company valued at the then-current market price of such common stock as reported
on NASDAQ. During the nine months ended September 30, 1998, approximately
$248,000 was repaid upon conversion of such insider claims into 78,390 shares of
common stock, leaving an unpaid balance of approximately $91,000 at September
30, 1998.
11
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
Equity interests, including interests of stockholders and warrantholders, are
not altered or impaired under the terms of the Plan. However, pursuant to the
Plan, the Company is not permitted to pay any dividends on its common stock
until all required payments under the Plan have been made.
The foregoing information regarding the Plan is merely a summary of certain
material provisions thereof, and is qualified in its entirety by the specific
provisions of the Plan, a copy of which was previously filed as an exhibit to
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1994.
Liquidity and Capital Resources
The Company's primary sources of liquidity since its inception have been the
sale of shares of common stock to and short-term borrowings from certain
shareholders, which were used during the period from inception through March
1993; the net proceeds of approximately $739,000 from a private placement of
common stock and warrants, which were used during the period from March 1993
through September 1993; the net proceeds of approximately $5,815,000 from an
initial public offering of common stock and Class A Warrants, which were used
during the last quarter of 1993 and the first quarter of 1994; short-term
borrowings from certain officers, former shareholders and other related and
unrelated parties during March, April and May 1994, which were used during the
first and the beginning of the second quarter of 1994; proceeds from the
exercise of Class A Warrants and Class B Warrants, which were received during
the fourth quarter of 1994, and in 1995; net proceeds of $1,500,000 from a
private placement of common stock in August 1995 (all of which net proceeds were
utilized for partial prepayment of the Creditors' Note); and net proceeds of
$2,965,228 from the issuance of and exercise of Class A Warrants and Class D
Warrants and underwriter's warrants in 1997 and the first nine months of 1998.
As of September 30, 1998, the Company had cash totaling approximately $392,000.
The Company may need to obtain additional liquid resources to enable the Company
to sustain future operations beyond 1998, whether through the exercise of its
remaining outstanding warrants, through the issuance of other equity securities
and/or from other sources. Although management continues to explore various
financing alternatives, the Company does not have any commitments with respect
to any additional financing.
Comparative Quarterly Results
The Company's stadium and facility rentals and admissions during the three and
nine months ended September 30, 1998 was approximately $213,000 and $327,000, as
compared to approximately $169,000 and $301,000 in the three and nine months
ended September 30, 1997. The 26% and 9% increases are principally attributable
to additional skybox rentals and greater use of the other facilities (i.e.,
batting cages). Retail and concession sales decreased approximately $12,000 and
$21,000 to approximately $122,000 and $208,000 for the three and nine months
ended September 30, 1998, from approximately $134,000 and $229,000 for the three
and nine months
12
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
ended September 30, 1997. The decrease is principally attributable the reduction
in traffic in the stadium and reduced merchandise selection.
Cost of stadium operations increased by approximately 46% to approximately
$94,000 for the three months ended September 30, 1998, as compared to
approximately $64,000 for the same period in 1997; and increased by
approximately 23% to approximately $197,000 for the nine months ended September
30, 1998 as compared to approximately $160,000 for the same period in 1997. The
overall increase for the three and nine months reflects an increase in employees
for special events and repairs to a water treatment facility. Cost of retail and
concession sales as a percent of retail and concession sales increased to 61%
for the three months ended September 30, 1998 and 1997 as compared to 51% in the
comparable prior year period. Cost of retail sales as a percent of retail sales
decreased to approximately 54% for the nine months ended September 30, 1998 as
compared to 60% in the comparable prior year period. The decrease for the nine
months ended September 30, 1998, is due primarily to a continued change in the
product mix allowing for higher profit margins. Selling, general and
administrative expenses decreased by approximately $31,000 to approximately
$583,000 for the nine months ended September 30, 1998, as compared to
approximately $614,000 for the same period in 1997. The reduction is due
principally to reduced costs for the electric service to the Complex. Selling,
general and administrative expenses for the three months ended September 30,
1998 and 1997 remained relatively constant at approximately $214,000.
On April 29, 1998, pursuant to the Company's stock award plan adopted in
December 1996 (the "Stock Award Plan"), the Company granted the right to
purchase a total of 250,000 shares of stock at $.25 per share to members of the
Company's Board of Directors. In accordance with generally accepted accounting
principles, a non-cash charge to earnings of $734,375 was recorded as
compensation expense, representing the difference between the exercise price and
the fair market value per share on the date of grant for the full award of
250,000 shares. As of September 30, 1998, rights to purchase 155,228 of such
shares have been exercised, and rights to purchase 94,772 shares remain
outstanding. Depreciation and amortization remained relatively stable at
approximately $92,000 and $274,000 for the three and nine months ended September
30, 1998 as compared to $92,000 and $276,000 for the three and nine months ended
September 30, 1997.
The charge for $175,000 as a write down of investment in a joint venture is a
result of the Company's determination that the probability of the Stadium
Capital golf stadium facility coming to fruition was remote.
Net loss in the three and nine months ended September 30, 1998, was
approximately $210,000 and $1,425,000 as compared to approximately $45,000 and
$603,000 in the three and nine months ended September 30, 1997. The increase is
primarily attributable to the charges relating to stock compensation to
directors and the write-off of investment in joint venture, offset by a decrease
in interest expense of approximately $9,000 and $59,000 for the three and nine
months.
13
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
In 1998, management of the Company has undertaken a close analysis of the
Company's expenses, with a view to eliminating unnecessary and/or duplicative
expenses, while maintaining the Complex in good condition. Management believes
that it has implemented all expense reductions that are prudent and reasonably
possible, and that efforts to improve the Company's business are now best
focused on increasing gross revenues through the development of additional
sources of revenues, preferably during the winter months or on a year-round
basis. Although management is actively exploring possible additional business
activities, the Company has not entered into any agreements or commitments with
respect to any such matters. Certain of such proposed business activities could
require the Company to obtain additional financing, and there can be no
assurance that the Company would be able to obtain any such financing.
Seasonality
The Company's cash flow from operations is significantly greater in each spring,
summer and fall than in the winter months, when Skylands Park is not rented for
outdoor events, and the Company relies upon income generated by its other
businesses. In the event that the Company is unable to generate sufficient cash
flow from operations during the seasons of full operations, or the Company is
unable to develop or acquire additional business which will generate cash flow
in the off season, the Company may be required to utilize other cash reserves
(if any) or seek additional financing to meet operating expenses, and there can
be no assurance that there will be any other cash reserves or that additional
financing will be available or, if available, on reasonable terms.
Year 2000 Compliance
The Company is not itself dependent to any significant extent on computer or
other embedded information systems, nor, to the Company's knowledge, are any of
its customers dependent on computer or other embedded information systems in
such customers' dealings with the Company. Certain of the Company's vendors and
suppliers may, however, be so dependent, although the Company has not undertaken
any investigation to determine the nature or extent of any Year 2000 issues that
may be posed by vendor unpreparedness. Thus, while the Company will not be
required to incur any material costs or expenses in order to adapt, modify or
upgrade its systems to be Year 2000 compliant, the Company still needs to
determine the degree of its vendors' preparedness and whether alternate
suppliers will be needed or available in the event of any disruption in supply
of goods or services to the Company. The Company expects to discuss with its key
vendors the status of their Year 2000 readiness in the fourth quarter of 1998,
and to promptly thereafter identify possible alternative suppliers to the extent
that such action may be called for based on any relative lack of Year 2000
readiness by existing suppliers. The Company does not expect the cost of this
investigation to be material.
14
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
None
Item 6 - Exhibits and Reports on Form 8-K.
(a) Exhibit 11 - Weighted Average Shares
(b) Exhibit 27 - Financial Data Schedule
(c) On September 21, 1998, the Company filed a current
report on Form 8-K, in respect of the extension of the
exercise period for its outstanding Class A Warrants.
15
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MILLENNIUM SPORTS MANAGEMENT, INC.
- ----------------------------------
(Registrant)
Signature Title Date
/s/ Robert H. Stoffel, Jr. Chief Financial Officer November 12, 1998
- --------------------------
Robert H. Stoffel, Jr.
16
<PAGE>
1997
Month Shares Weighted Weighted
Issued 9 3
Opening 1,214,887 1,214,887 1,214,887
January -- -- --
February -- -- --
March 86,800 67,029 86,800
April -- -- --
May 125,000 68,750 125,000
June 332,280 147,751 332,380
July 215,000 62,637 187,624
August 420,000 75,693 227,080
September 400,000 27,644 82,933
October 1,066,668 -- --
November 201,852 -- --
December 291,120 -- --
4,353,607 1,664,391 2,256,604
<PAGE>
1998
Month Shares Weighted Weighted
Issued 9 3
Opening 4,353,623 4,353,623 7,166,185
January 223,504 216,302 --
February 17,360 14,872 --
March 2,096,406 1,563,036 --
April 309,424 196,312 --
May 160,268 83,874 --
June 5,600 2,308 --
July 10,000 3,011 8,333
August 2,000 380 1,000
September 9,900 781 1,660
October -- -- --
November -- -- --
December -- -- --
7,188,085 6,434,499 7,177,179
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FORM 10-QSB FOR 9/30/98 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 392,218
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 50,832
<CURRENT-ASSETS> 443,050
<PP&E> 14,076,317
<DEPRECIATION> 1,535,192
<TOTAL-ASSETS> 13,581,197
<CURRENT-LIABILITIES> 512,222
<BONDS> 63,542
0
0
<COMMON> 718,808
<OTHER-SE> 12,349,867
<TOTAL-LIABILITY-AND-EQUITY> 13,581,197
<SALES> 207,689
<TOTAL-REVENUES> 543,745
<CGS> 111,950
<TOTAL-COSTS> 582,754
<OTHER-EXPENSES> 1,317,641
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (6,734)
<INCOME-PRETAX> (1,424,916)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,424,916)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,424,916)
<EPS-PRIMARY> (0.22)
<EPS-DILUTED> (0.22)
</TABLE>
