<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
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Millennium Sports Management, Inc.
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<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
Ross' Corner
U.S. HIGHWAY 206 AND COUNTY ROUTE 565
AUGUSTA, NEW JERSEY 07822
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 25, 1998
To the Shareholders of
MILLENNIUM SPORTS MANAGEMENT, INC.:
NOTICE IS HEREBY GIVEN that the 1998 Annual Meeting (the "Annual Meeting")
of Shareholders of Millennium Sports Management, Inc. (the "Company") will be
held at Skylands Park, Ross' Corner, U.S. Highway 206 and County Route 565,
Augusta, New Jersey 07822, on Wednesday, November 25, 1998, at 10:00 a.m. local
time, for the following purposes:
1. To elect four Directors to hold office until the 1999 Annual
Meeting;
2. To ratify the appointment of Wiss & Company, LLP as auditors of the
Company for the fiscal year ending December 31, 1998;
3. To transact such other business as may properly come before the
Annual Meeting or any adjournment or adjournments thereof.
The Board of Directors has fixed October 23, 1998 as the record date for
the determination of shareholders entitled to notice of and to vote at the
Annual Meeting or any adjournment(s) thereof. The stock transfer books of the
Company will not be closed, but only shareholders of record at the close of
business on October 23, 1998 will be entitled to vote at the Annual Meeting or
any adjournment(s) thereof.
By Order of the Board of Directors
Robert H. Stoffel, Jr., Secretary
WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR
- ------------------------------------------------------------------------------
PROXY FORM PROMPTLY IN THE ENCLOSED ENVELOPE PROVIDED FOR YOUR USE.
- ------------------------------------------------------------------
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
ROSS' CORNER
U.S. Highway 206 and County Route 565
AUGUSTA, NEW JERSEY 07822
___________________________________
PROXY STATEMENT
___________________________________
GENERAL INFORMATION CONCERNING SOLICITATION
This proxy statement is furnished in connection with the solicitation of
proxies by and on behalf of the Board of Directors of Millennium Sports
Management, Inc. (the "Company"), for its 1998 Annual Meeting of Shareholders
(the "Annual Meeting") to be held at Skylands Park, Ross' Corner, U.S. Highway
206 and County Route 565, Augusta, New Jersey 07822, at 10:00 a.m. local time
on Wednesday, November 25, 1998, or any adjournment(s) thereof. Shares cannot
be voted at the Annual Meeting unless their owner is present in person or
represented by proxy. Copies of this Proxy Statement (which includes the annual
report and financial statements required by applicable proxy rules) and the
accompanying form of proxy are being mailed to the shareholders of the Company
(as same were constituted on the October 23, 1998 record date) on or about
October 28, 1998. The principal executive offices of the Company are located at
the address indicated above.
If a proxy is properly executed and returned, the shares represented thereby
will be voted in accordance with the specifications made, or if no specification
is made, the shares will be voted to approve each proposition and to elect each
nominee for director identified on the proxy. Any shareholder giving a proxy
has the power to revoke it at any time before it is voted by filing with the
Secretary of the Company a notice in writing revoking it. A proxy may also be
revoked by any shareholder present at the Annual Meeting who expresses a desire
in writing to revoke a previously delivered proxy and to vote his or her shares
in person. The mere presence at the Annual Meeting of the person appointing a
proxy does not revoke the appointment. In order to revoke a properly executed
and returned proxy, the Company must receive a duly executed written revocation
of that proxy before it is voted. A proxy received after a vote is taken at the
Annual Meeting will not revoke a proxy received prior to the Annual Meeting; and
a subsequently dated proxy received prior to the vote will revoke a previously
dated proxy.
All expenses in connection with the solicitation of proxies, including the
cost of preparing, handling, printing and mailing the Notice of Annual Meeting,
Proxies and Proxy Statements will be borne by the Company. Directors, officers
and regular employees of the Company, who will receive no additional
compensation therefor, may solicit proxies by telephone or personal call, the
cost of which will be nominal and will be borne by the Company. In addition,
the Company will reimburse brokerage houses and other institutions and
fiduciaries for their expenses in forwarding proxies and proxy soliciting
material to their principals.
As of October 23, 1998 (the "Record Date"), the following shareholders,
holding an aggregate of 131,340 shares of common stock of the Company
(constituting approximately 1.8% of the total votes entitled to vote at the
Annual Meeting), have indicated their intention to vote in favor of all nominees
for director and all other matters to be submitted for consideration at the
Annual Meeting: Barry M. Levine (15,200 shares), Robert H. Stoffel, Jr. (6,500
shares), Barry J. Gordon (42,970 shares) and Marc H. Klee (66,670 shares).
<PAGE>
DESCRIPTION OF BUSINESS
From June 1, 1994 to April 13, 1995, the Company operated as a debtor-in-
possession under Chapter 11 of the United States Bankruptcy Code, as more fully
described below.
The Company was incorporated in the State of New Jersey in August 1991. The
Company has developed a regional sports entertainment and recreation center in
Sussex County, New Jersey, known as the Skylands Park Sports and Recreation
Center (the "Complex"). Sussex County is located in the heart of New Jersey's
"Skylands" region (comprised of the counties of Sussex, Warren, Passaic, Morris
and Hunterdon), approximately 50 miles northwest of New York City. The Complex
has been designed with a view to addressing both the entertainment interests and
the sports and other recreational needs of the region's diverse population
(including interest in spectator sports, and the need for equipment and practice
facilities for participatory sports and activities), including tourists who
visit the region. The Company also seeks to take advantage of the related
market for sporting goods, sports apparel and sports collectibles.
The centerpiece of the Complex is Skylands Park, which is a 4,300 seat
professional baseball stadium ("Skylands Park"), and is, among other things, the
home of the New Jersey Cardinals (the "Team"), a Class "A" minor league
affiliate of the St. Louis Cardinals major league baseball franchise of the
National League. The Company has a minority ownership interest in Minor League
Heroes, L.P. ("Heroes"), the limited partnership that owns the Team. The Team
is a member of the New York-Penn League. Skylands Park was placed in operation
in April 1994, and the Team has played all of its home games at Skylands Park
during the 1994 through 1998 minor league baseball seasons.
During the 1998 calendar year, in addition to the Team's 38 regular season
games, a total of 28 other baseball game dates were held at Skylands Park,
including 8 home games of the New Jersey Diamonds, a team owned and operated by
the Ladies Professional Baseball ("LPB") league. However, in July 1998, LPB
announced that it was canceling all further league games for the balance of
1998, including the remaining 20 New Jersey Diamonds home games, and it is
uncertain whether or when LPB will resume operations or fulfill the balance of
its lease obligations through the year 2000. In addition to baseball games, a
total of five other events have been held at Skylands Park during the 1998
calendar year (through October 23, 1998), consisting of two professional
wrestling events and three paid photo shoots.
The remainder of the Complex follows a courtyard village design theme, and
includes a recreation facility containing batting cages, a soft-play area, a
sports video parlor, mini-gym and children's party room; a wholesale and retail
sporting goods outlet; and an exhibit hall. The Company has terminated its
effort to utilize the exhibit hall as a sports lounge, and is currently
considering other potential uses of the exhibit hall (although the Company has
not entered into any commitments or agreements regarding any such alternate
uses).
In 1994 through 1996, the Company published six issues of BarnStorming: New
-----------------
Jersey's Baseball Magazine, a baseball magazine edited by Phil Pepe, a
- --------------------------
nationally syndicated sports columnist and author. The Company did not realize
a profit from the magazine, and the Company has discontinued publication of
BarnStorming.
- ------------
The Company currently operates, in the Complex, a 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 and
apparel.
In 1998, the Company entered into agreements with affiliates of Golf Stadiums,
Inc., William F. Rasmussen and Glenn J. Rasmussen, in implementation of such
parties' October 1997 letter of intent, with respect to the development, through
a joint venture corporation known as Stadium Capital, Inc. ("Stadium Capital"),
of a "Stadium Golf" resort destination (including two 18-hole professional golf
courses and a related "Stadium" facility containing luxury boxes and/or
condominium units, grandstand seating, telecast facilities, professional golf
facilities and dining and locker room amenities) in Naples, Florida. The
Company currently holds 50% of the outstanding capital stock of Stadium Capital.
Stadium Capital is in the start-up phase, and the implementation of its business
2
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plan is dependent upon raising substantial financing. Stadium Capital has
previously terminated a proposed private placement in which it sought to raise a
small portion of the total financing contemplated by its business plan, and
there can be no assurance that Stadium Capital will be able to obtain any or all
of this required financing.
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 Robert
H. Stoffel, Jr.'s three years of experience as Vice President and Chief
Controller of the New York Yankees, Barry H. Levine's five years of experience
as an executive officer of a publicly traded sports memorabilia and collectibles
company, and Barry J. Gordon's and Marc H. Klee's eight years of experience as
managing owners and operators of minor league baseball teams. However, the
Company has not yet entered into any definitive consulting arrangements.
The Company anticipates receiving approximately $40,000 per year in rent from
the Team, and parking revenues from the Team's home games, 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, rentals, parking
fees and other revenues from other baseball games, 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 Heroes. In the 1998 calendar year, the Company received an
aggregate of $55,000 from the rental of six skyboxes (of which the Team is
entitled to retain $19,152). 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 1997 was approximately $76,000, and the
Company expects to receive a comparable amount for its 20% share of advertising
sign rentals for the 1998 season.
The Company filed a voluntary petition for reorganization with the United
States Bankruptcy Court for the District of New Jersey (the "Court") on June 1,
1994. The Company made such filing with a view to fostering a more orderly
payment and resolution of the Company's obligations. On April 13, 1995, with
the requisite approval of the Company's creditors, the Court approved and
confirmed the Company's proposed plan of reorganization (the "Plan"). A summary
of the provisions of the Plan is set forth below. Other than ongoing
obligations under the Plan, the Company is not party to any material legal
proceedings.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
At the back of this Proxy Statement are the Company's audited financial
statements for the years ended December 31, 1997 and 1996, and the Company's
unaudited financial statements as of June 30, 1998 and for the six months then
ended. Although the six-month financial statements are unaudited, they include,
in the opinion of management, all adjustments (consisting only of normal
recurring adjustments) necessary for a fair presentation of the information set
forth therein; the operating results for the six months ended June 30, 1998 will
not, however, be indicative of the operating results to be expected for the full
year.
The following discussion and analysis should be read in conjunction with the
information set forth in the financial statements and the notes thereto.
RESULTS OF OPERATIONS
The following table sets forth operating data of the Company for the Company's
1997 and 1996 fiscal years, and for the first six months of 1998 and 1997. Six-
month data is unaudited and not indicative of the operating results to be
expected for the full year.
3
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, Six Months Ended June 30,
----------------------- ------------------------
1997 1996 1998 1997
--------------- -------------------- ---------------------- ----------------
<S> <C> <C> <C> <C>
Total Revenues $ 656,554 $ 770,733 $ 207,501 $ 239,432
Cost of sales and services (1) (1,517,619) (1,637,328) (1,426,727) (747,797)
----------- ----------- ----------- ----------
Loss from operations (861,065) (866,595) (1,219,226) (508,365)
----------- ----------- ----------- ----------
Other Income (Expense):
Equity in income of limited partnership 93,985 111,009 -- --
Interest income (expense) (58,140) (111,794) 3,968 (49,558)
----------- ----------- ----------- ----------
35,845 (785) 3,968 (49,558)
----------- ----------- ----------- ----------
Net Loss $ (825,220) $ (867,380) $(1,215,258) $ (557,923)
=========== =========== =========== ==========
Weighted average common shares
outstanding 2,203,043 1,212,202 6,054,907 1,333,611
=========== =========== =========== ==========
Basic and diluted loss per share $(0.37) $(0.72) $(0.20) $(0.42)
=========== =========== =========== ==========
</TABLE>
___________________________________
(1) Costs during the six months ended June 30, 1998 include a non-cash pre-tax
charge of $734,375, representing compensation expense attributable to the
issuance of stock options to directors of the Company at an exercise price
below the fair market value of the underlying common stock.
Sources and Uses of Resources and Comparative Annual Results for the Years
Ended December 31, 1997 and 1996
During the year ended December 31, 1997, the Company's revenues were
approximately $657,000, consisting of approximately $301,000 of stadium rentals,
admissions and parking fees, approximately $97,000 of retail sales,
approximately $149,000 of concession sales, and approximately $110,000 of
advertising and subscription revenues. Revenues in 1996 were approximately
$771,000, with the reduction in revenues from 1996 and 1997 being primarily
attributable to a reduction in retail sales due to reduced institutional sales
resulting from limited cash flows.
From 1996 to 1997, total operating expenses were reduced from approximately
$1,637,000 in 1996 to approximately $1,518,000 in 1997; this change is
attributable to a substantial reduction in the cost of retail sales
(corresponding to the reduction in revenues from retail sales). All other
categories of operating expenses remained substantially constant from 1996 to
1997.
The Company incurred a loss of approximately $825,000 in 1997, as compared
to a loss of approximately $867,000 in 1996. The decreased loss is attributable
primarily to a $53,000 reduction in interest expense, as the Company paid down
its interest-bearing pre-petition liabilities during 1997. Due primarily to an
82% increase in the number of weighted average common shares outstanding, loss
per share went from $.72 per share in 1996 to $.37 per share in 1997.
The Company will need to obtain substantial additional financing to sustain
operations beyond 1998. The Company currently has outstanding an aggregate of
923,555 Class A Warrants (each of which entitles the holder to purchase 2.8
shares of common stock of the Company for an aggregate price of $2.80) and
1,012,000 Class D Warrants (each of which entitles the holder to purchase one
share of common stock of the Company at a total price of $.60). There can be no
assurance as to whether or when any of such Warrants may be exercised.
4
<PAGE>
Due to the Company's consistent history of operating losses, the likelihood of
continuing losses in the future, and the Company's need for additional financing
to cover such potential losses and pay its liabilities when due, the opinion of
the Company's independent auditors, included in the audited financial statements
appearing elsewhere in this Prospectus, includes a "going concern"
qualification, indicating that the foregoing factors raise substantial doubt
about the Company's ability to continue as a going concern.
Sources and Uses of Resources and Comparative Quarterly Results for the Six
Months Ended June 30, 1998 and 1997
The Company's stadium and facility rentals and admissions during the six
months ended June 30, 1998 was approximately $127,000, as compared to
approximately $132,000 in the six months ended June 30, 1997. The 4% decrease
is principally attributable to a reduction in the number of high school and
college baseball games played at Skylands Park. Retail sales decreased
approximately 23% from $95,000 to $73,000 during the six months ended June 30,
1998 as compared to the comparable prior year period, which decrease is
primarily attributable to a reduction in traffic at Skylands Park, and reduced
merchandise selection.
Cost of stadium operations increased by approximately 5% to approximately
$101,000 for the six months ended June 30, 1998, as compared to approximately
$96,000 for the same period in 1997. The increase reflects a more proactive
approach in maintaining the Complex. Cost of retail sales decreased
approximately $33,000 to approximately $35,000 for the six months ended June 30,
1998 from approximately $68,000 for the six months ended June 30, 1997. The
cost of retail sales as a percentage of retail sales decreased to approximately
48% for the six months ended June 30, 1998 as compared to approximately 72% for
the same period in 1997. This decrease is principally attributable to a change
in product mix, allowing for higher profit margins.
Selling, general and administrative expenses decreased by approximately
$27,000 (7%) to approximately $373,000 for the six months ended June 30, 1998,
as compared to approximately $400,000 for the same period in 1997. This
decrease is due principally to management's emphasis on effecting an overall
reduction of excess costs.
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 common 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 October 5, 1998, rights to purchase 155,228 of such
shares had been exercised, and rights to purchase 94,772 shares remained
outstanding.
Depreciation and amortization remained relatively stable at approximately
$183,000 for the six months ended June 30, 1998 and 1997.
Net loss in the six months ended June 30, 1998 was approximately $1,215,000,
as compared to approximately $558,000 in the six months ended June 30, 1997.
The increased net loss was attributable to the non-cash charge to earnings of
$734,375 relating to stock compensation to directors and the decrease in
revenues, offset by a decrease in interest expense of $54,000 during the six
months ended June 30, 1998.
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, other than the Company's investment in the start-up Stadium Capital,
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.
5
<PAGE>
PLAN OF REORGANIZATION
Pursuant to the Plan, the Company's various pre-petition liabilities, and the
administrative expenses relating to the reorganization, are divided into several
classifications, which are treated in substantially the following manner.
First, all previously unpaid administrative claims relating to the
reorganization proceedings, and all priority claims (other than tax claims,
which are payable over six years or as may otherwise be agreed by the Company
and the subject tax authorities), were paid at the time of or shortly after the
confirmation of the Plan. The total of such claims was approximately $400,000.
In April 1995, the Company repaid in full a $200,000 loan which was secured by
substantially all of the Company's assets (other than its equity interest in the
Team). Total payments in respect of this loan, including all unpaid accrued
interest, were approximately $233,000.
Also in April 1995, the Company paid to Strescon, a mechanic's lienholder in
respect of pre-petition liabilities, the sum of approximately $115,000. (The
balance of Strescon's claim has been categorized as a general unsecured claim,
and is to be paid on a ratable basis with the other unsecured pre-petition
liabilities.)
Also 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
$2,608,153, which is payable pursuant to the terms of a secured promissory note
(the "Creditors' Note"). Through June 30, 1998, the Company had made payments
on the Creditors' Note out of net equity proceeds received by the Company,
leaving a balance of approximately $63,542 under the Creditors' Note as of June
30, 1998, which amount has been set aside by the Company pending confirmation of
certain adjustments made with respect to a small number of creditors' claims.
Until such payment is completed, the Creditors' Note is secured by substantially
all of the assets of the Company, as same are constituted from time to time, and
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), in the aggregate amount of approximately $339,265, 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. As of
October 5, 1998, an aggregate of $244,994 of such claims had been paid through
the issuance of common stock of the Company, and there remained a balance of
$91,115 of such claims yet to be paid.
Equity interests, including interests of stockholders and warrantholders, were
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 DESCRIPTION OF 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 THE PLAN IS INCLUDED AS AN EXHIBIT TO THE COMPANY'S
ANNUAL REPORT ON FORM 10-KSB FOR THE FISCAL 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
6
<PAGE>
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; net proceeds of approximately $6,830,000 from the exercise of Class A
Warrants and Class B Warrants, which were received and used 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 to make
a partial prepayment of the Creditors' Note); and net proceeds of approximately
$2,691,000 from the issuance and exercise of Class A Warrants, Class D Warrants,
underwriter's warrants and stock options in 1997 and first and second quarters
of 1998.
Substantially all of such capital resources have been utilized for the
planning, construction and development of the Complex, for working capital for
the Company's operations (including funding shortfalls in the Company's cash
flow from operations), for the payment of administrative expenses relating to
the Company's reorganization proceeding, and for a $150,000 capital contribution
to Stadium Capital. As of June 30, 1998, the Company had capitalized costs of
approximately $14,000,000 (before depreciation) for the purchase of land and the
development and construction of Skylands Park and the Complex. The Company has
also implemented the Plan, and in connection therewith, paid out approximately
$2,350,000 in April and May 1995 (consisting of approximately $1,950,000 paid to
pre-petition lenders and other creditors, and approximately $400,000 paid to
professionals and other persons providing services in the reorganization).
After giving effect to such payments, substantially all of the Company's
remaining liabilities (other than the additional construction costs to be
incurred) were of a long-term nature.
Although the Company derived significant revenues from operations in 1994
through 1997 (including operation of limited facilities in 1994, and the entire
Complex in 1995 through 1997), those revenues were not sufficient to cover
operating expenses or produce a positive cash flow. As a result, the Company
incurred significant net losses during such years, and has incurred additional
losses in 1998. Revenues from the rental of Skylands Park to its primary tenant
have not been and will not be significant. Instead, management expects that the
Company will generate revenues from skybox rentals, advertising signs and
parking fees for Team games, from the rental of Skylands Park for other sports
and entertainment events, and from ancillary activities and the operation of
related facilities in the Complex; management is also focused on identifying
other sources of revenues (particularly in the winter months or on a year-round
basis). However, with the exception of Stadium Capital (which has not yet and
may not in the future become operational), the Company has not identified or
entered into any commitments for any such additional businesses; furthermore,
certain of such other 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. If the Company is unable to generate
additional revenues from its existing facilities or develop or acquire
additional businesses for operations in the winter months, additional losses (in
addition to those incurred in the first half of 1998) may also be expected in
the remainder of 1998 and thereafter.
As of June 30, 1998, the Company had cash totalling approximately $465,000
(exclusive of $63,542 set aside for the final payment under the Creditors'
Note). Management believes that the Company is in need of additional liquid
resources to enable the Company to sustain operations beyond 1998, whether
through the exercise of its remaining outstanding Warrants, through the issuance
of other equity securities, and/or from other sources. The Company has
outstanding 923,555 Class A Warrants and 1,012,000 Class D Warrants; however,
there can be no assurance as to whether or to what extent any of such Warrants
may be exercised. In addition to such potential equity financing, management of
the Company is exploring possibilities for bank financing or other debt
financing, although the Company has no commitments for any such financing.
The Company's history of operating losses, the likelihood of ongoing operating
losses, and the need to raise additional financing to sustain ongoing operations
and pay the Company's liabilities as they mature, has caused the Company's
independent auditors to include a "going concern" qualification in their opinion
on the Company's financial statements as of December 31, 1997 and for the year
then ended. If the Company is unable to raise additional financing, the Company
may be required to sell certain assets (such as its interest in the Team) to
raise required cash, or may be required to again seek the protection of the
Bankruptcy Court. Although management
7
<PAGE>
continues to explore various financing alternatives, the Company does not have
any commitments with respect to any additional financing.
PURCHASE OF INTEREST IN HEROES
In 1994, the Company purchased limited partnership interests in Heroes, the
limited partnership that owns the Team.
As of June 30, 1998, the Company owned a 16.82% limited partnership interest
in Heroes. The cost of the Company's limited partnership interests was $284,375
paid in cash, including cash payments totalling $14,875 paid to persons who were
then directors and executive officers of the Company.
The Company is using the equity method to account for its investment in
Heroes. The operations of Heroes are highly seasonal because the Team does not
play any games during the first and last quarters of the year.
Historically, the Company's share of the net income of Heroes has been $90,000
or more in each year, and the Company has received cash distributions from
Heroes in amounts ranging from $35,000 to $100,000 in each year. The Company
received a total of $98,994 as its full cash distributions from Heroes with
respect to the 1997 year.
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 businesses 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
supplies may, however, be so dependent, although the Company has not yet
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 information 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 costs of this investigation to be material.
CHANGE IN THE COMPANY'S CERTIFYING ACCOUNTANT
On August 2, 1995, in accordance with the recommendation and approval of the
Board of Directors of the Company, the Company dismissed its independent
accountants, J.H. Cohn LLP ("Cohn"), who had theretofore been engaged as the
principal accountants to audit the Company's financial statements.
Cohn's report on the Company's financial statements for the fiscal year ended
December 31, 1993 included a "going concern" emphasis paragraph, indicating that
there were substantial doubts about the Company's ability to continue as a going
concern, due to (a) the Company's historical lack of significant revenues or
cash from operating
8
<PAGE>
activities, (b) the Company's need to obtain substantial additional financing to
complete the construction of certain facilities and commence certain of its
planned operating activities, and (c) the Company's Chapter 11 reorganization
proceedings (commenced on June 1, 1994 and continuing through the confirmation
of the Plan on April 13, 1995).
During the Company's fiscal years ended December 31, 1994 and 1995, and the
interim period from January 1, 1995 through August 2, 1995 (the date of the
dismissal of Cohn as the Company's independent accountants), there were no
disagreements between the Company and Cohn on any matter of accounting
principles or practices, financial statement disclosure, or auditing scope or
procedure.
Effective on August 2, 1995, the Company engaged the firm of Wiss & Company,
LLP, 354 Eisenhower Parkway, Livingston, New Jersey 07039, as the principal
accountants to audit the Company's financial statements. Such accounting firm
had not previously rendered any services to the Company or been consulted by the
Company (or any person acting on its behalf) for any purpose.
SECURITY OWNERSHIP OF MANAGEMENT
AND PRINCIPAL SHAREHOLDERS
At the close of business on the Record Date, there were outstanding 7,188,085
shares of common stock of the Company (the "Common Stock"), which constituted
all of the voting securities of the Company. Each shareholder is entitled to
cast one vote for each share of Common Stock held by him or her as of the Record
Date, which is present at the Annual Meeting either in person or by proxy. Only
holders of record of the outstanding shares of the Common Stock at the close of
business on the Record Date will be entitled to vote at the Annual Meeting.
Shareholders of the Company do not have cumulative voting rights in the election
of directors, and those nominees receiving a plurality of the votes cast at the
Annual Meeting (assuming a quorum is duly constituted) will be elected to the
four directorships which are up for election at the Annual Meeting. Pursuant to
the Company's by-laws, the holders of a majority of the outstanding Common
Stock, if present in person or by proxy, are sufficient to constitute a quorum
for the transaction of the business scheduled for the Annual Meeting.
The following table sets forth certain information as of the Record Date with
respect to the beneficial ownership of the Common Stock by each person known to
the Company to be the beneficial owner of more than 5% of the outstanding shares
of the Common Stock, each director and nominee for director, and all executive
officers and directors of the Company as a group. Unless otherwise indicated,
the owners have sole voting and investment power with respect to their
respective shares.
<TABLE>
<CAPTION>
Name and Address Shares Beneficially Percentage
of Beneficial Owner (1) Position Owned (2) Owned
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Barry M. Levine Director, Nominee for Director, 46,393 (3) 0.7%
President, Chief Executive Officer
Robert H. Stoffel, Jr. Director, Nominee for Director, Vice 17,693 (4) 0.2%
President, Chief Financial Officer,
Chief Accounting Officer
Barry J. Gordon Director, Nominee for Director 69,163 (5) 1.0%
Marc H. Klee Director, Nominee for Director 92,863 (5) 1.3%
William F. Rasmussen None 500,000 (6) 6.5%
Glenn J. Rasmussen None 500,000 (7) 6.5%
All directors and executive 226,652 (3)(4) 3.1%
officers as a group (four persons) (5)
- ------------------------------------
</TABLE>
9
<PAGE>
(1) The address for all persons is c/o Millennium Sports Management, Inc.,
Ross' Corner, U.S. Highway 206 and County Route 565, Augusta, New Jersey
07822-0117.
(2) All shares are directly held unless otherwise stated.
(3) Includes 31,193 shares which are subject to currently exercisable stock
options.
(4) Includes 11,193 shares which are subject to currently exercisable stock
options.
(5) Includes 26,193 shares which are subject to currently exercisable stock
options.
(6) Consists of 500,000 shares which are subject to currently exercisable
warrants issuable to William F. Rasmussen's affiliate, TGT of Naples, Inc.
(7) Consists of 500,000 shares which are subject to currently exercisable
warrants issuable to Glenn J. Rasmussen's affiliate, GTG of Naples, Inc.
DIRECTORS, NOMINEES FOR DIRECTOR,
AND EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth information with respect to directors, nominees
for director, executive officers and key employees of the Company as of the
Record Date. There are no pending legal proceedings in which any director,
nominee for director or executive officer of the Company is a party adverse to
the Company.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Barry M. Levine 54 Director, Nominee for Director, President, Chief Executive Officer
Robert H. Stoffel, Jr. 58 Director, Nominee for Director, Vice President,
Chief Financial Officer, Chief Accounting Officer
Barry J. Gordon 53 Director, Nominee for Director
Marc H. Klee 43 Director, Nominee for Director
</TABLE>
All directors are elected at the annual meeting of shareholders and hold
office until the next annual meeting and until their successors have been
elected and qualified. Officers are elected by and hold office at the
discretion of the Board of Directors.
The following sets forth summary biographical information as to the business
experience of each executive officer and director of the Company.
BARRY M. LEVINE was elected a Director and the President and Chief Executive
Officer of the Company in October 1996. From March to October 1996, Mr. Levine
was unemployed. From December 1991 through March 1996, Mr. Levine held various
offices (including, at varying times, President, Chief Executive Officer,
Executive Vice President, Chief Financial and Administrative Officer, Vice
President-Finance and Administration, and Treasurer) in, and from April 1994
through March 1996 was a Director of, Sports Heroes, Inc. ("SHI"), a publicly
traded company engaged primarily in the business of acquiring and marketing
sports memorabilia and related collectible items. Mr. Levine resigned from SHI
in March 1996, and subsequently, in May 1996, SHI filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code; and in
October 1996, such case was converted to a proceeding under Chapter 7 of the
United States Bankruptcy Code. Prior to his employment with SHI, Mr. Levine was
Chief Financial Officer of Pharmos Corporation (a New York-based pharmaceutical
company), and from 1984 to 1991 he was Chief Financial Officer of Cardio Fitness
Corporation. Mr. Levine is also a certified public accountant, and spent
sixteen years with a certified public accounting firm, where he was a partner.
ROBERT H. STOFFEL, JR. has been Vice President, Chief Financial Officer and
Chief Accounting Officer of the Company since January 1993, and, except for a
temporary resignation pending completion of a background
10
<PAGE>
check by the New Jersey alcohol licensing authorities from June 1995 to February
1996, he has been a Director of the Company since May 1995. Mr. Stoffel has been
an independent financial consultant from 1990 to the present, serving several
contract research organizations in the pharmaceutical field. Specifically, Mr.
Stoffel has been working in the areas of acquisitions and accounting systems.
From 1987 to 1990, he was Vice President and Chief Controller for the New York
Yankees, reporting directly to its Managing General Partner and Principal Owner
George Steinbrenner. Mr. Stoffel has over 30 years of professional experience in
the area of finance.
BARRY J. GORDON has been a Director of the Company since October 1996. Since
1980, Mr. Gordon has been President and a Director of American Fund Advisors,
Inc., a money management firm, and has served as Chairman of the Board of that
company since 1987. In addition, Mr. Gordon is a Director of Winfield Capital
Corp., a publicly traded small business investment company, a Director of Hain
Food Corp., a publicly traded specialty foods product company, a Director of
Robocom Systems, Inc., a computer software company, and President of the John
Hancock Global Technology Fund, a mutual fund specializing in telecommunications
and technology securities. From April 1989 to March 1996, Mr. Gordon was also a
Director of SHI. Mr. Gordon is also the Chairman and Chief Executive Officer of
the general partner of Heroes, which is the limited partnership that owns the
Team. Mr. Gordon is also Chairman and Chief Executive Officer of the general
partner of the limited partnership that owns the Norwich Navigators, a Class
"AA" minor league affiliate of the New York Yankees.
MARC H. KLEE has been a Director of the Company since October 1996. Since May
1984, Mr. Klee has been Senior Vice President and a Director of American Fund
Advisors, Inc., and since May 1987, Mr. Klee has also been Senior Vice President
of John Hancock Technology Series, Inc., a mutual fund specializing in aviation
and technology securities. Mr. Klee is also the Treasurer and Secretary of the
general partner of Heroes, and the Vice President, Treasurer and Secretary of
the general partner of the limited partnership that owns the Norwich Navigators.
EXECUTIVE COMPENSATION
The Company did not pay any cash compensation to its executive officers in
1991 or 1992. Although compensation for services was paid to certain executive
officers in 1992 through the issuance of certain shares of common stock, and
cash compensation was paid in 1993 and thereafter, no executive officer or other
employee received total compensation in excess of $100,000 in any of 1991, 1992,
1993, 1994, 1995 or 1996.
The following table shows all compensation of all types paid or accrued in the
Company's three most recent full fiscal years for services rendered in all
capacities by the Company's Chief Executive Officer.
<TABLE>
<CAPTION>
Name and Total Compensation
Principal Position Year Salary Options/SAR's (#) Paid or Accrued
- ------------------ ---- ------ ----------------- ---------------
<S> <C> <C> <C> <C>
Robert A. Hilliard 1995 $77,175 (2) 0 $77,175 (1)(2)
Chairman of the Board of Directors and
Chief Executive Officer 1996 $81,000 (3) 5,000 (4) $81,000 (1)(3)
Barry M. Levine 1996 $31,250 (5) 15,000 $31,250 (1)(5)
President and Chief Executive Officer 1997 $125,000 0 $125,000 (1)
</TABLE>
(1) Does not include benefits or perquisites in an aggregate amount which is
less than 10% of the total compensation for the subject year.
(2) Consists of $30,000 paid in cash, and an additional $47,175 accrued.
(3) Consists of $7,500 paid in cash, and an additional $73,500 accrued. Mr.
Hilliard resigned as an officer of the Company in October 1996, and as a
director of the Company in April 1997.
11
<PAGE>
(4) Consists of 5,000 stock options which were repriced in 1996, and have since
lapsed without exercise.
(5) Represents accrued compensation for the months of October through December
1996.
EMPLOYMENT AND INCENTIVE COMPENSATION
AGREEMENTS
EMPLOYMENT AGREEMENTS
The Company entered into an employment agreement with Mr. Levine in October
1996, pursuant to which Mr. Levine is to serve as President and Chief Executive
Officer of the Company through December 31, 1999 at an annual salary of
$125,000. Mr. Levine agreed to accrue and defer receipt of his salary and other
cash compensation through June 30, 1997, to the extent required by the Company's
lack of cash resources.
The Company has also entered into an amended employment agreement with Mr.
Stoffel, pursuant to which Mr. Stoffel is to serve as Vice President and Chief
Financial Officer of the Company through December 31, 1999 at an annual salary
of $78,000.
Under the terms of their respective agreements, each of Messrs. Levine and
Stoffel is required to devote the majority of his business time to the affairs
of the Company, and is prohibited, for the duration of his employment agreement,
from engaging in any activities which are competitive with the businesses of the
Company.
DIRECTOR COMPENSATION
The Company has adopted a policy whereby the Company will pay each non-
employee director $500 per year for serving in such capacity, in addition to
reimbursement of out-of-pocket expenses in connection with attending directors'
meetings. To the Record Date, although there have been numerous directors'
meetings, no such directors' fees or expenses have been paid or accrued, and all
of such fees in respect of prior meetings have been waived. All current non-
employee directors have agreed to waive such fees for their current term of
office.
STOCK OPTION PLAN
The Company's 1993 Stock Option Plan (the "Stock Option Plan") was adopted
by the Company's Board of Directors on April 14, 1993, was approved by a
majority of the Company's shareholders on July 23, 1993, and became effective on
August 9, 1993. The Stock Option Plan provides for the granting of options to
key employees (including officers), non-employee directors and consultants to
purchase up to 53,571 shares of Common Stock which are intended to qualify
either as incentive stock options ("Incentive Stock Options") within the meaning
of Section 422 of the Internal Revenue Code, as amended, or as options which are
not intended to meet the requirements of such section.
The Stock Option Plan provides for its administration by an administrative
committee of two directors (the "Committee") which has discretionary authority,
subject to certain restrictions, to determine the number and type of options to
be granted and the individuals to whom, the times at which and the exercise
price for which options will be granted.
The exercise price of all options granted under the Stock Option Plan must
be at least equal to the fair market value of the underlying shares of Common
Stock on the date of the grant, or, in the case of Incentive Stock Options
granted to an individual owning more than 10% of the Company's outstanding
voting shares, at least 110% of the fair market value of such shares on the date
of the grant. The maximum exercise period for which options may be granted is
ten years from the date of grant (five years in the case of an Incentive Stock
Option granted to an individual owning more than 10% of the Company's
outstanding voting shares). The aggregate fair market value (determined at the
date of the option grant) of shares of Common Stock with respect to which
Incentive Stock Options are exercisable for the first time by the holder of the
option during any calendar year may not exceed $100,000.
12
<PAGE>
As of the Record Date, an aggregate of 42,500 options granted under the
Stock Option Plan had been exercised (40,000 by executive officers and
directors, all in 1997), and 5,000 options had lapsed without exercise. As of
the Record Date, 2,000 options remained outstanding under the Stock Option Plan,
and 9,071 options remained available for future issuance under the Stock Option
Plan.
The following table sets forth all stock option exercises by executive
officers and directors of the Company during the fiscal year ended December 31,
1997, the "value" (i.e., the amount by which the fair market value of the
underlying common stock exceeded the option exercise price on the date of
exercise) realized upon such exercise, and the number of remaining options held
by executive officers and directors of the Company as of December 31, 1997.
<TABLE>
<CAPTION>
Number of Value of
Shares Acquired Unexercised Options Unexercised
Name on Exercise Value Realized at Year End Options
---- ----------- -------------- ----------- -------
<S> <C> <C> <C> <C>
Barry M. Levine 15,000 $22,500 0 --
Robert H. Stoffel, Jr. 5,000 $18,100 0 --
Barry J. Gordon 10,000 $14,688 0 --
Marc H. Klee 10,000 $14,688 0 --
</TABLE>
STOCK AWARD PLAN
In December 1996, the Board of Directors adopted the Stock Award Plan,
pursuant to which, subject to the achievement of certain targets, the Board of
Directors is given the authority to grant, to such members of the Board,
executive officers, key employees and consultants to the Company as may be
determined by the Board, the right to purchase up to an aggregate of 1,000,000
shares of common stock of the Company at a nominal price for a limited period of
time. Up to 250,000 shares of common stock may be awarded from time to time if
and after the Company receives gross proceeds of $2,000,000 on or before
December 31, 1997 from issuances of equity securities of the Company, and up to
an additional 250,000 shares of common stock may be awarded from time to time if
and after the Company receives additional gross proceeds (over and above the
first $2,000,000) of $2,200,000 or more, on or before December 31, 1998, from
issuances of equity securities of the Company. Up to an additional 250,000
shares of common stock may be awarded from time to time if and after the Company
achieves a positive cash flow from operations for any two consecutive fiscal
quarters, and up to an additional 250,000 shares of common stock may be awarded
time to time if and after the Company achieves an operating profit for any two
consecutive fiscal quarters. In the event and to the extent that any person to
whom any such award may be granted shall fail to timely purchase the subject
shares of common stock, then such shares will again become available for award
under this plan.
The first threshold for awards under the Stock Award Plan (i.e., the
Company's receipt of gross equity proceeds of $2,000,000 on or before December
31, 1997) was satisfied, and by reason thereof, in April 1998, the Board granted
to Messrs. Levine, Stoffel, Gordon and Klee the right to purchase 70,000,
50,000, 65,000 and 65,000 shares, respectively, of common stock at $.25 per
share at any time and from time to time through October 31, 1998. Through
October 5, 1998, these individuals exercised their rights under the Stock Award
Plan and purchased 155,228 shares of common stock. The Company recognized
compensation expense in the second quarter of 1998 based on the excess of the
fair market value price per share of common stock at the time of the grant over
the $.25 exercise price under all of the options granted. This resulted in a
compensation expense recorded in the second quarter of 1998 of $734,375.
13
<PAGE>
CERTAIN TRANSACTIONS
In October 1993, the Company and Robert H. Stoffel, Jr. entered into an
agreement whereby, in lieu of Mr. Stoffel's receiving certain shares of common
stock (which were originally to be transferred to Mr. Stoffel as an inducement
for entering into employment with the Company), the Company agreed to pay to Mr.
Stoffel a total of $35,000. Of such $35,000, a total of $25,000 has been paid
in cash, and the remaining $10,000 was paid in 1996 by the issuance to Mr.
Stoffel of an aggregate of 3,230 shares of common stock.
In March 1994, the Company borrowed $100,000 and $6,000, respectively, from
Robert A. Hilliard and John C. Ertmann, which loans bear simple interest at 15%
per annum and matured in November 1994. Of such amounts, through October 5,
1998, $73,285 had been paid through the issuance of shares of common stock to
one of such individuals, and the remaining portion of such obligations is now
payable in cash or, at the option of the subject creditor, in shares of common
stock valued at the market price thereof at the time of such payment election.
At the time such loans were borrowed, the Company was not able to obtain
financing from any other persons at a lower interest rate.
In April 1994, Barry J. Gordon and Marc H. Klee each loaned the Company the
principal amount of $125,000. Such loans were included in the Company's pre-
petition obligations to unsecured creditors, and have since been paid or set
aside pursuant to the Company's payments under the Creditors' Note.
Also in April 1994, the Company received an advance from Heroes, the
limited partnership that owns the Team, in the aggregate amount of $180,000.
This advance consists of unsecured loans in the aggregate amount of $125,000
(which were non-interest-bearing until their due date on October 31, 1994, and
thereafter have accrued interest at the rate of 2% per month on the first
$60,000 of principal and 1.25% per month on the remaining $65,000 of principal,
until fully paid), and the sum of $55,000 which was designated as a prepayment
of rentals and advertising fees. Pursuant to the agreements under which the
advance was made, Heroes agreed to reimburse the Company for certain additional
construction costs to be undertaken by the Company, and reserved the right to
satisfy such reimbursement obligations by offset against up to $65,000 of loan
principal and reduction of the $55,000 of rent and advertising prepayments.
However, as a result of the Company's reorganization proceedings, there are
substantial uncertainties relating to Heroes' right to offset its obligations
for current rents, fees and reimbursement obligations against its pre-petition
advances, and thus, in the Company's financial statements, the Company has
continued to reflect the entire $180,000 advance as a loan payable, and includes
rents and advertising fees payable by Heroes (totalling $49,000 for the period
from June 16, 1994, when the Team played its first game at Skylands Park,
through December 31, 1994) in income as and when earned, without regard to
either the pre-petition designation of the $55,000 as being "prepayments," or
any rights of offset described above.
Also in April 1994, the Company also borrowed $20,000 from Richard A.
Hunsicker (then a director of the Company), and in May 1994, the Company
borrowed an additional $15,000 from Mr. Hilliard. These loans bear simple
interest at 15% per annum and matured in November 1994. Of such amounts,
through October 5, 1998, $20,000 had been paid through the issuance of shares of
common stock to Mr. Hunsicker, and the $15,000 owed to Mr. Hilliard is now
payable in cash or, at Mr. Hilliard's option, in shares of common stock valued
at the market price thereof at the time of such payment election. At the time
such loans were borrowed, the Company was not able to obtain financing from any
other persons at a lower interest rate.
The proceeds of the foregoing 1994 loans were used for the construction of
the Complex and for working capital. Other than the loans from Messrs. Gordon
and Klee and the advance from Heroes (which have been classified and paid or set
aside with the Company's other pre-petition liabilities), all of the foregoing
loans have been classified separately from the Company's other unsecured pre-
petition liabilities within the framework of the Plan, and the remaining $47,365
balance thereof as of October 5, 1998 may be repaid in cash or in shares of
common stock valued at their market price as of the time election is made to
receive payment in such form.
As of December 31, 1997, in addition to the aforedescribed $180,000 loan,
the Company was indebted to Heroes in respect of other pre-petition liabilities
subject to compromise (consisting primarily of the unremitted
14
<PAGE>
portion of proceeds from season ticket subscriptions collected by the Company on
behalf of Heroes) of $81,606. This amount has been repaid or set aside ratably
with the Company's other pre-petition liabilities.
In April 1997, the Company borrowed an additional $40,000 from Heroes. In
December, 1997, Heroes applied $10,000 of the principal of this loan to exercise
20,000 Class D Warrants, and in March 1998, Heroes applied the remaining $30,000
principal balance of this loan to exercise 60,000 Class D Warrants.
CONFLICTS OF INTEREST
Two directors of the Company, Barry J. Gordon and Marc H. Klee, are also
executive officers and equity owners in Heroes, the limited partnership that
owns and operates the Team. In light of the potential conflicts of interest,
the Company has adopted policies whereby all matters relating to the
relationship between the Company and the Team will be determined by directors
other than Messrs. Gordon and Klee.
MARKET PRICE AND DIVIDENDS
The following represents the range of reported high ask and low bid
quotations for the Company's common stock on a quarterly basis since January 1,
1996, as reported on the SmallCap Market of the National Association of
Securities Dealers Automated Quotation System (NASDAQ). None of such quotations
have been adjusted to reflect the 1-for-10 reverse stock split in respect of the
Common Stock, which became effective on November 7, 1996.
Period High Low
------ ---- ---
1st Quarter 1996 $ 1.125 $ 0.40
2nd Quarter 1996 $ 0.53 $ 0.21
3rd Quarter 1996 $ 0.437 $ 0.125
4th Quarter 1996 $ 0.75 $ 0.25
1st Quarter 1997 $ 1.72 $ 0.25
2nd Quarter 1997 $ 2.125 $ 0.75
3rd Quarter 1997 $ 2.44 $ 1.50
4th Quarter 1997 $ 5.125 $ 2.03
1st Quarter 1998 $ 5.56 $ 2.69
2nd Quarter 1998 $ 4.09 $ 1.375
3rd Quarter 1998 $ 1.93 $ 0.375
4th Quarter 1998 $ 0.75 $ 0.19
(through October 23, 1998)
On the Record Date, the closing bid price for the Company's common stock was
$0.3125, and the Company had 647 shareholders of record as of that date. The
Company believes that there are in excess of 2,000 beneficial owners of common
stock of the Company.
The Company has not paid cash dividends to its shareholders since its
inception and has no intention of paying any dividends to its shareholders in
the foreseeable future. The Company intends to reinvest earnings, if any, in
the operation and development of its business.
15
<PAGE>
ACTION TO BE TAKEN UNDER THE PROXY
Unless otherwise directed by the grantor of the proxy, the persons acting
under the accompanying proxy will vote the shares represented thereby: (a) for
the election of the persons named in the table below as nominees for directors
of the Company; (b) for the proposal to ratify the appointment of Wiss &
Company, LLP as the Company's auditors for the fiscal year ending December 31,
1998; and (c) in connection with the transaction of such other business that may
be brought before the Annual Meeting, in accordance with the judgment of the
person or persons voting the proxy.
I. ELECTION OF DIRECTORS
Nominees
At the Annual Meeting, four Directors are to be elected, each to hold
office until the 1999 Annual Meeting of Shareholders or until his successor
shall be elected and shall qualify. The names of the nominees for election as
such Directors, all of whom are now serving as Directors of the Company, and
certain information furnished to the Company by such nominees with respect to
them, as of the Record Date, are set forth below. Unless authority to vote for
one or more nominees is withheld, it is intended that shares represented by
proxies in the accompanying form will be voted for the election of the following
nominees. With respect to any such nominee(s) who may become unable or unwilling
to accept nomination or election, it is intended that the proxies will be voted
for the election in his stead of such person(s) as the Board of Directors may
recommend, but the Board does not know of any reason why any nominee will be
unable or unwilling to serve if elected.
DIRECTOR PRINCIPAL OCCUPATION
NAME AGE SINCE DURING LAST FIVE YEARS
- ---- --- ----- ----------------------
Barry M. Levine 54 * *
Robert H. Stoffel, Jr. 58 * *
Barry J. Gordon 53 * *
Marc H. Klee 43 * *
- --------------------------
* See "Directors, Nominees for Director, and Executive Officers of the Company"
on pages 10 and 11 above.
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT SHAREHOLDERS VOTE IN
FAVOR OF ALL OF THE NOMINEES FOR DIRECTOR.
Committees and Meetings of the Board
During the Company's fiscal year ended December 31, 1997, the Board of
Directors met a total of six times, including actions taken by unanimous written
consent. All of the nominated directors then serving on the Board of Directors
attended all of the meetings of the Board held during periods of their tenure
during such fiscal year. See "Director Compensation" at page 12 above for
information concerning fees payable to non-employee directors.
There are presently no committees of the Company's Board of Directors,
although the Company's By-Laws permit the creation of one or more committees
from time to time at the discretion of the Board.
II. RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS FOR THE
FISCAL YEAR ENDING DECEMBER 31, 1998
At the Annual Meeting, a vote will be taken on a proposal to ratify the
appointment by the Board of Directors of Wiss & Company, LLP, independent
certified public accountants, as the independent auditors of the Company for the
fiscal year ending December 31, 1998. Such firm has no interest in or
relationship with the Company except as its auditors.
16
<PAGE>
MANAGEMENT BELIEVES THE APPOINTMENT TO BE IN THE BEST INTEREST OF THE COMPANY
AND RECOMMENDS THAT IT BE RATIFIED.
A representative of Wiss & Company, LLP will be present at the Annual Meeting
and will be given an opportunity to make a statement to the shareholders if he
so desires. The representative will be available to respond to questions from
shareholders.
III. OTHER BUSINESS
While management of the Company does not know of any matters which may be
brought before the Annual Meeting other than as set forth in the Notice of
Annual Meeting, the proxy confers discretionary authority with respect to the
transaction of any other business. It is expected that the proxies will be
voted in support of management on any question which may properly be submitted
to the Annual Meeting.
INCLUSION OF SHAREHOLDER PROPOSALS IN THE COMPANY'S PROXY STATEMENT
If any shareholder desires to put forth a proposal to be voted on at the 1999
Annual Meeting of Shareholders and wishes that proposal to be included in the
Company's Proxy Statement to be delivered to shareholders in connection with
such meeting, that shareholder must cause such proposal to be received by the
Company at its principal executive office no later than April 30, 1999. Any
request for such a proposal should be accompanied by a written representation
that the person making the request is a record or beneficial owner of the lesser
of at least 1% of the outstanding shares of Common Stock or $1,000 in market
value of the Company's common shares and has held such shares for a least one
year as required by the proxy rules of the Securities and Exchange Commission.
AVAILABILITY OF FORM 10-K OR FORM 10-KSB
The Company will provide, without charge, to any shareholder, upon written
request of such shareholder, a copy of the Company's annual report on Form 10-
KSB for the fiscal year ended December 31, 1997.
Any request for such annual report should include a representation that the
person making the request was the beneficial owner, as of the Record Date, of
securities entitled to vote at the Annual Meeting. Such request should be
addressed to: Millennium Sports Management, Inc., P.O. Box 117, Augusta, New
Jersey 07822-0117; Attention: Shareholder Relations.
17
<PAGE>
INDEX TO FINANCIAL STATEMENTS
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997, AND FOR THE YEARS ENDED
DECEMBER 31, 1997 AND DECEMBER 31, 1996
Report of Independent Public Accountants F-2
Balance Sheet, December 31, 1997........................................ F-3
Statements of Operations for the years ended
December 31, 1997 and December 31, 1996............................ F-4
Statements of Changes in Shareholders' Equity for the years ended
December 31, 1997 and December 31, 1996............................ F-5
Statements of Cash Flows for the years ended
December 31, 1997 and December 31, 1996............................ F-6
Notes to Financial Statements........................................... F-7
UNAUDITED FINANCIAL STATEMENTS AS OF JUNE 30, 1998, AND FOR THE
SIX MONTHS ENDED JUNE 30, 1998 AND JUNE 30, 1997
Unaudited Balance Sheet, June 30, 1998.................................. F-17
Unaudited Statements of Operations for the six months
ended June 30, 1998 and June 30, 1997.............................. F-18
Unaudited Statement of Changes in Shareholders' Equity for the
six months ended June 30, 1998..................................... F-19
Unaudited Statements of Cash Flows for the six months
ended June 31, 1998 and June 30, 1997.............................. F-20
Notes to Unaudited Financial Statements................................. F-21
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Millennium Sports Management, Inc.
(formerly Skylands Park Management, Inc.)
We have audited the balance sheet of Millennium Sports Management, Inc.
(formerly Skylands Park Management, Inc.) as of December 31, 1997 and the
related statements of operations, changes in stockholders' equity and cash flows
for each of the two years in the period then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Millennium Sports Management,
Inc. (formerly Skylands Park Management, Inc.) at December 31, 1997, and the
results of its operations and its cash flows for each of the two years in the
period ended December 31, 1997 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
WISS & COMPANY, LLP
Woodbridge, New Jersey
February 25, 1998, except as to Note 12 for
which the date is March 11, 1998
F-2
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
(Formerly Skylands Park Management, Inc.)
Balance Sheet
December 31, 1997
ASSETS
<TABLE>
<S> <C> <C>
PROPERTY AND EQUIPMENT, AT COST, $ 12,799,986
LESS ACCUMULATED DEPRECIATION
CASH 115,295
INVENTORIES 85,170
INVESTMENT IN LIMITED PARTNERSHIP, AT EQUITY 485,555
OTHER ASSETS 108,680
------------
$13,594,686
===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Amounts due insiders, pursuant to Chapter 11 proceedings $ 339,609
Accounts payable 250,110
Accrued interest 209,297
Accrued compensation - officers and directors 170,775
------------
Total Liabilities $ 969,791
STOCKHOLDERS' EQUITY:
Preferred stock, no par value; 500,000 shares authorized,
none issued --
Common stock, no par value, stated value $.10 per share;
20,000,000 shares authorized and 4,353,607 shares issued 435,361
Additional paid-in capital 17,182,135
Accumulated deficit (4,992,601)
Total Stockholders' Equity ------------- 12,624,895
-----------
$13,594,686
===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
(Formerly Skylands Park Management, Inc.)
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
REVENUES:
Stadium rentals and admissions $ 301,293 $ 304,865
Retail sales 96,514 222,499
Concession sales 149,130 147,396
Advertising and subscription revenues 109,617 95,973
----------- -----------
Totals 656,554 770,733
----------- -----------
COST OF SALES AND SERVICES:
Costs of stadium operations $ 285,287 $ 272,141
Costs of retail sales 79,580 206,506
Selling, general and administrative expenses 783,923 780,936
Depreciation 368,829 377,745
----------- -----------
1,517,619 1,637,328
----------- -----------
LOSS FROM OPERATIONS (861,065) (866,595)
----------- -----------
OTHER INCOME (EXPENSE):
Equity in income of limited partnership 93,985 111,009
Interest (net) (58,140) (111,794)
----------- -----------
35,845 (785)
----------- -----------
NET LOSS $ (825,220) $ (867,380)
=========== ===========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 2,203,043 1,212,202
=========== ===========
BASIC AND DILUTED LOSS PER COMMON SHARE $ (0.37) $ (0.72)
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
(Formerly Skylands Park Management, Inc.)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock
--------------------- Additional
Number Paid-in Accumulated
of Shares Amount Capital Deficit Total
--------- ------ ------- ------- -----
<S> <C> <C> <C> <C> <C>
BALANCES, JANUARY 1, 1996 1,207,727 $120,773 $15,544,911 $(3,300,001) $12,365,683
YEAR ENDED DECEMBER 31, 1996:
Issuance of common stock:
For services rendered by an
officer and an employee, at fair value 3,920 392 11,858 -- 12,250
Upon conversation of debt 3,230 323 9,771 -- 10,094
Upon exercise of warrants 10 1 95 -- 96
Net loss -- -- -- (867,380) (867,380)
--------- -------- ----------- ----------- ------------
BALANCES, DECEMBER 31, 1996 1,214,887 121,489 15,566,635 (4,167,381) 11,520,743
YEAR ENDED DECEMBER 31, 1997:
Issuance of common stock upon exercise of warrants:
Class A warrants, net of costs 279,720 27,972 210,413 238,385
Class D warrants, net of costs 2,725,000 272,500 1,058,921 1,331,421
Issuance of common stock for services
rendered by an officer 1,500 150 225 375
Issuance of common stock upon
conversion of debt 90,000 9,000 36,000 45,000
Issuance of Class D Warrants, net of costs 300,922 300,922
Exercise of options under Stock Option
Plan 42,500 4,250 9,019 13,269
Net Loss -- -- -- (825,220) (825,220)
--------- -------- ----------- ----------- ------------
BALANCES, DECEMBER 31, 1997 4,353,607 $435,361 $17,182,135 $(4,992,601) $12,624,895
========= ======== =========== =========== ============
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
(Formerly Skylands Park Management, Inc.)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1997 1996
----------- ---------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (825,220) $(867,380)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 368,829 377,745
Equity in income of limited partnership (93,985) (104,109)
Common stock issued for services rendered 375 12,250
Changes in operating assets and liabilities:
Inventory 39,007 1,688
Other assets (40,945) (10,766)
Accounts payable and accrued expenses (299,089) 365,864
----------- ---------
Net cash flows from operating activities (851,028) (224,708)
----------- ---------
INVESTING ACTIVITIES:
Net disbursements of restricted cash -- 24,125
Purchases of property and improvements (41,616) (45,306)
Distribution from limited partnership 30,469 156,406
----------- ---------
Net cash flows from investing activities (11,147) 135,225
----------- ---------
FINANCING ACTIVITIES:
Repayments of creditors' notes payable (940,627) (45,029)
Deferred offering costs -- (25,500)
Proceeds from issuance of common stock
and warrants, net of costs 1,909,497 96
----------- ---------
Net cash flows from financing activities 968,870 (70,433)
----------- ---------
NET CHANGE IN CASH 106,695 (159,916)
CASH, BEGINNING OF YEAR 8,600 168,516
----------- ---------
CASH, END OF YEAR $ 115,295 $ 8,600
=========== =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 151,002 $ 17,741
=========== =========
Income taxes paid $ -- $ --
=========== =========
NON-CASH FINANCING ACTIVITIES:
Issuance of common stock and warrants upon conversion
of outstanding debt $ 45,000 $ 10,094
=========== =========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
(Formerly Skylands Park Management, Inc.)
NOTES TO FINANCIAL STATEMENTS
Note 1 - Basis of Presentation and Management's Plans to Overcome Operating and
Liquidity Difficulties:
The accompanying financial statements of Millennium Sports Management,
Inc. (formerly Skylands Park Management, Inc.) (the "Company") have
been presented on the basis that it is a going concern, which
contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company reported net
losses of approximately $825,000 and $867,000 for the years ended
December 31, 1997 and 1996, respectively. In addition, the Company had
an accumulated deficit of approximately $4,992,000 at December 31,
1997. Revenues from operations in 1997 and 1996 were not sufficient to
cover operating expenses or produce a positive cash flow from
operations. Additional losses are expected in 1998. The Company will
require additional working capital to cover anticipated losses and
sustain operations in 1998, and will also be required to pay the
remaining accrued interest balance of the pre-petition liabilities in
1998 (See Note 2). Accordingly, the Company will need to obtain
additional financing through the exercise of outstanding warrants,
through the issuance of other equity securities, by bank financing
and/or through other sources. Although management continues to explore
various financing alternatives, the Company does not have any
commitments with respect to any additional financing. In February
1997, the Company's registration statement on Form SB-2 was declared
effective. The maximum proceeds sought from this secondary offering
approximated $10,000,000. The net proceeds from the offering amounted
to approximately $1,689,000 through December 31, 1997, and an
additional $648,000 was raised from the sale of equity securities in
the first quarter of 1998.
During 1997, management continued to attempt to develop plans to
further curtail its general and administrative expenses, with a view
to eliminating unnecessary and/or duplicate expenses, while
maintaining the Complex in good condition. Management currently
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, other
than the Company's investment in the start-up joint venture (see Note
12), the Company has not yet entered into any agreements or
commitments with respect to any such matters. As discussed above, the
Company believes that the additional $648,000 of equity financing
received in the first quarter of 1998 through the exercise of warrants
will provide the Company with sufficient funds to cover its 1998
anticipated negative cash flow from operations.
Reference should be made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere
herein for additional information.
Note 2 - Organization, Proceedings Under Chapter 11 And Subsequent Operations:
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
F-7
<PAGE>
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.
The Company did not have sufficient financing to pay its contractors
and other vendors and, as a result, filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code
in the United States Bankruptcy Court (the "Court") for the District
of New Jersey on June 1, 1994 (the "Petition Date"). The Company
operated as a debtor-in-possession subject to the jurisdiction of the
Court from the Petition Date through April 13, 1995, the date its plan
of reorganization (the "Plan") was confirmed.
During the years ended December 31, 1997 and 1996, the Company
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 years.
Revenues from the rental of Skylands Park to its primary tenant have
not and 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.
Confirmation of Plan of Reorganization - The Company's Plan was
confirmed by its creditors and the Court on April 13, 1995 (the
"Confirmation Date"). Since the Confirmation Date, the Company has
paid the unsecured pre-petition liabilities that were 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 unpaid accrued interest is due and payable on
or before April 26, 1998. The Creditors' Note was secured by
substantially all of the assets of the Company.
Claims of "insiders" (generally, the directors and executive officers
of the Company and certain of their affiliates) of approximately
$339,000 as of the Confirmation Date (including accrued salaries and
loans and advances made to the Company) 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."
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.
F-8
<PAGE>
Pursuant to Statement of Position 90-7, the Company did not 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 - Summary of Significant Accounting Policies:
Estimates and Uncertainties - The preparation of financial statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the period. Actual
results could differ from those estimates.
Revenue Recognition - The Company recognizes revenues from facility
rentals and stadium admissions upon official completion of such
events, advertising on a pro-rata basis over the minor league baseball
season, and retail sales at the time the customer takes possession of
the merchandise.
Financial Instruments - Financial instruments include cash, other
assets, accounts payable, accrued interest and amounts due to
insiders. The following methods were used in determining the fair
value of the financial instruments:
Cash, other assets, accounts payable and accrued interest - Due
to the short-term maturity of these instruments, carrying value
approximates fair value.
Due to insiders - Although it is impractical to determine the
current fair value of this liability or its current interest rate
because of the lack of an identifiable market for financial
instruments with similar characteristics, management considers
this liability to approximate its fair value due to the
short-term nature of the obligation.
Property and Equipment - Property and equipment are recorded at cost
and are depreciated using straight line and accelerated methods over
the estimated useful lives of the assets. The estimated useful lives
used in computing depreciation are: buildings and improvements - 40
years, and equipment - 5 to 10 years.
The Company adopted Statement of Financial Accounting Standards 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed of ("SFAS 121") in 1996. SFAS 121 requires that
long-lived assets and certain identifiable intangibles to be held and
used by the Company be reviewed for impairment whenever there is an
indication that the carrying amount of the asset may not be
recoverable. Recoverability of these assets is reviewed annually by
management. Impairment loss is measured by determining the amount by
which the carrying value of the asset exceeds the fair value of the
asset by using quoted market prices, selling prices of similar assets
or the present value of the estimated expected cash flows of the
operations to which the assets relate. The adoption of SFAS 121 has
not had a significant effect on the consolidated financial position or
results of operations.
Inventories - Inventories principally consist of merchandise for
resale which is stated at the lower of cost (first-in, first-out
method) or market.
Investment in Limited Partnership - The Company accounts for its
direct 16.82% interest in Minor League Heroes, L.P. ("Heroes"), the
limited partnership that leases Skyland Park, pursuant to the equity
method. Under this method, the proportionate interest in the net
income or loss of the limited partnership is reflected in the
F-9
<PAGE>
Company's results of operations. The Company's investment is reduced
by any distributions from the limited partnership.
Income Taxes - Deferred tax assets and liabilities are computed
annually for temporary differences between the financial statement and
tax bases of assets and liabilities that will result in taxable or
deductible amounts in the future based on enacted tax laws and rates
applicable to the periods in which the temporary differences are
expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount
expected to be realized.
Concentration of Credit Risk - The Company maintains cash in bank
accounts. Such bank accounts are insured by the Federal Deposit
Insurance Corporation up to $100,000 per institution. Uninsured
balances, including outstanding checks, totaled approximately $73,000
at December 31, 1997.
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. Weighted average shares outstanding
was calculated based on the number of days that the respective shares
were outstanding during the year. SFAS 128 had no impact on the loss
per share for the year ended December 31, 1996.
Stock-Based Compensation - The Company has elected to follow
Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees (APB 25) and related interpretations in accounting
for its employee stock options. Under APB 25, because the exercise
price of employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is
recorded. The Company has adopted the disclosure-only provisions of
Statement of Financial Accounting Standards ("SFAS") No. 123,
Accounting for Stock-Based Compensation ("SFAS 123"). Common stock
issued for services rendered is recorded at the fair value of such
common stock on the date of issuance, as determined using quoted
market prices.
Reclassification - Certain amounts previously reported have been
reclassified to conform to current year presentation.
F-10
<PAGE>
Note 4 - Property and Equipment:
Property and equipment at December 31, 1997 consists of the following:
<TABLE>
<S> <C>
Land $ 1,202,342
Buildings and improvements 12,377,983
Equipment 493,496
------------
14,073,821
Less: Accumulated depreciation 1,273,835
------------
$ 12,799,986
============
</TABLE>
Note 5 - Investment in Limited Partnership:
The Company's statement of operations includes income of $93,985
(1997) and $111,009 (1996) attributable to the Company's equity in
Heroes' net income. The carrying value of the investment was reduced
by distributions received by the Company of $30,469 in 1997 and
$156,406 in 1996.
Summary balance sheet and operating data for Heroes as of December 31,
1997 and 1996 and for the years then ended follows:
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Balance sheet data:
Current assets $1,450,000 $1,402,000
Noncurrent assets 805,000 927,000
---------- ----------
$2,255,000 $2,329,000
========== ==========
Current liabilities $ 474,000 $ 495,000
Partners' capital 1,781,000 1,834,000
---------- ----------
$2,255,000 $2,329,000
========== ==========
Operating data:
Gross receipts $1,844,000 $1,864,000
========== ==========
Net income $ 558,767 $ 642,000
========== ==========
</TABLE>
Note 6 - Employment Agreements:
The Company has employment agreements with certain officers and
employees. Amounts due are as follows:
Year Ending December 31,
<TABLE>
<S> <C>
1998 $ 234,000
1999 125,000
-----------
$ 359,000
===========
</TABLE>
F-11
<PAGE>
Note 7 - Stockholders' Equity:
Warrants - 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.
The exercise price was reduced from $4.00 to $2.80 per warrant in
December 1996, with each warrant continuing to entitle the exercising
holder to receive the increased amount of 2.8 shares of the Company's
common stock. A total of 894,928 Class A Warrants remain unexercised
at December 31, 1997. 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 of 30
consecutive trading days ending on the fifth day prior to the date of
the notice of redemption.
The Underwriter's Warrants (pursuant to an IPO) were amended, in 1996,
to provide for the right to purchase up to an aggregate of 1,500,000
shares of common stock at a price of $.10 per share if exercised prior
to November 6, 1997 (or $1.00 per share if exercised thereafter
through September 23, 1998) and up to an aggregate of 70,000 Class A
Warrants at $.165 each. The Class A Warrants issuable upon exercise of
the Underwriter's Warrants cannot be redeemed by the Company. The
Underwriter's Warrants grant to the holders thereof certain rights of
registration for the securities issuable upon exercise of the
Underwriter's Warrants. The Underwriter's Warrants were exercised in
full in October 1997, although the Company did not deposit the payment
thereof or issue the shares and Class A Warrants thereunder until
March 1998.
In February 1997, the Company authorized the issuance and sale of up
to 13,000,000 Class D Warrants. Each Class D Warrant entitles the
exercising holder to receive one share of the Company's common stock
upon payment of a $.10 per Class D Warrant purchase price and a $.50
per share exercise price. After giving effect to Class D Warrants
issued and exercised through December 31, 1997, a total of 10,185,000
Class D warrants remained reserved at December 31, 1997.
Stock Option Plan - The Board of Directors of the Company adopted the
1993 Stock Option Plan (the "Stock Option Plan") in April 1993, which
became effective in August 1993. The Stock Option Plan provides for
grants of options to key employees (including officers), non-employee
directors and consultants to purchase up to 53,571 shares of common
stock which are intended to qualify either as incentive stock options
("ISOs") within the meaning of Section 422 of the Internal Revenue
Code, as amended, or as options which are not intended to meet the
requirements of such section.
The exercise price of all options granted under the Stock Option Plan
must be at least equal to the fair market value of the Company's
common stock on the date of grant (at least 110% of the fair market
value in the case of an ISO granted to a holder of 10% or more of the
Company's outstanding common shares). The maximum exercise period for
which options may be granted is ten years from the
F-12
<PAGE>
date of grant (five years in the case of an ISO granted to a holder of
10% or more of the Company's outstanding common shares).
Through December 31, 1997, 49,500 options had been granted under the
Stock Option Plan, of which 42,500 options were exercised and 5,000
lapsed in 1997. The remaining 2,000 outstanding options provide for an
exercise price of $14.375 per share, are currently exercisable and
expire on November 1, 2005. No options were granted in 1997 under the
Stock Option Plan.
Shares Reserved for Issuance of Common Stock - Shares of common stock
reserved for issuance by the Company as of December 31, 1997 upon
exercise of options and warrants were as follows:
<TABLE>
<S> <C>
Class A Warrants 2,505,798
Underwriter's Warrants for:
Common stock 1,500,000
Class A Warrants 196,000
Class D Warrants 10,185,000
Stock option plan 11,071
Stock award plan 1,000,000
----------
Total 15,397,869
==========
</TABLE>
The number of shares issuable have been adjusted pursuant to
anti-dilution provisions of the respective warrant agreements for the
effects of the Company's 3-for-1 stock split in 1993, the 1994
issuance of the Class B Warrants and Class C Warrants, to reflect
voluntary amendments of the terms of the Underwriter's Warrants, to
reflect the Company's 1-for-10 reverse stock split in 1996, and to
reflect anti-dilution adjustments relating to the authorization of the
issuance of 13,000,000 Class D Warrants.
Reverse Stock Split - Effective November 7, 1996, following approval
by the Company's shareholders, the Company effectuated a one-for-ten
reverse stock split, which has been retroactively reflected in the
accompanying financial statements.
Stock Award Plan - In December 1996, and subsequently amended in
December 1997, the Board of Directors adopted a stock award plan (the
"Stock Award Plan") pursuant to which, subject to the achievement of
certain targets, the Board of Directors is given the authority to
grant, to such members of the Board, executive officers, key employees
and consultants to the Company as may be determined by the Board, the
right to purchase up to an aggregate of 1,000,000 shares of common
stock of the Company at a nominal price for a limited period of time.
Up to 250,000 shares of common stock may be awarded from time to time
if and after the Company receives gross proceeds of $2,000,000 on or
before December 31, 1997 from issuances of equity
F-13
<PAGE>
securities of the Company, and up to an additional 250,000 shares of
common stock may be awarded from time to time if and after the Company
receives additional gross proceeds (over and above the first
$2,000,000) of $2,200,000 or more, on or before December 31, 1998,
from issuances of equity securities of the Company. Up to an
additional 250,000 shares of common stock may be awarded from time to
time if and after the Company achieves a positive cash flows from
operations for any two consecutive fiscal quarters, and up to an
additional 250,000 shares of common stock may be awarded time to time
if and after the Company achieves an operating profit for any two
consecutive fiscal quarters. In the event and to the extent that any
person to whom any such award may be granted shall fail to timely
purchase the subject shares of common stock, then such shares will
again become available for award under this plan.
The Company received gross proceeds in excess of $2,000,000 from
issuances of equity securities between the date of the adoption of the
Stock Award Plan and December 31, 1997, thereby permitting the award
of up to 250,000 shares of common stock of the Company under the first
threshold stated above. As of this date, no awards from such 250,000
shares have been made.
Note 8 - Related Party Transactions:
Lease of Skylands Park to the Team - The Company entered into a
long-term lease (the "Stadium Lease") for the use of Skylands Park
with Heroes, the owner of the Team, which is a Class "A" minor league
affiliate of the St. Louis Cardinals and a member of the New York-Penn
League (the "League"). Under the terms of the Stadium Lease, the
Company is required to make available to Heroes a minor league
baseball stadium for the Team's home games. The Stadium Lease
commenced June 1, 1994 and expires September 30, 2008. Under the
Stadium Lease, Heroes is obligated to pay rent of $1,100 per game
scheduled to be played at Skylands Park subject to adjustment under
certain circumstances. Pursuant to this lease, the Company derived
rental income of approximately $42,000 in 1997 and $37,000 in 1996.
Such rent is subject to a 10% increase effective at the beginning of
each of the 2001 and 2005 minor league baseball seasons. Heroes will
retain all admission revenues from Team games (except certain revenues
from skyboxes that will be retained by the Company) and the net
concession revenues generated on the dates of Team games. The Company
will operate and retain all revenues derived from parking facilities.
Revenues received from sign rentals and advertising in Skylands Park
are divided 80% to Heroes and 20% to the Company. Heroes will be
required to pay for, among other things, game staff personnel (such as
ushers), security and medical personnel, and the cost of utilities
pro-rated according to use.
Heroes may terminate the Stadium Lease after the minor league baseball
seasons of 2003, 2004, 2005, 2006 and 2007 during the period from
October 1 through November 30 if the average paid attendance for the
immediately preceding baseball season was less than 900 people per
game and the Team did not realize an operating profit in its previous
fiscal year. The Stadium Lease will automatically terminate, and
Heroes will be required to pay specified damages to the Company, if
the League is disbanded and under certain other circumstances. Heroes
may voluntarily cancel the Stadium Lease by paying a lump sum equal to
75% of the remaining outstanding rent (based upon an assumed $35,000,
rent per year).
F-14
<PAGE>
The amount due from Heroes for the Team's share of utilities, and
signage, netted with Team merchandise sold in the Company's sporting
goods store and certain loans from Heroes of $30,000 approximated
$7,000 at December 31, 1997 and is included in other assets.
Note 9 - Income Taxes:
Deferred income taxes reflect the net effects of temporary differences
between the amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The temporary
differences arise principally from net operating loss carryforwards
and certain accruals and result in a deferred tax asset of
approximately $1,484,000 at December 31, 1997 and $1,192,000 at
December 31, 1996.
A valuation allowance is provided when it is more likely than not that
some portion of the deferred tax asset will not be realized. The
Company has determined, based on the Company's recurring net losses
from operations and lack of a continuing substantial revenue stream,
that a full valuation allowance is appropriate at December 31, 1997
and 1996.
A reconciliation of the provision (benefit) for income taxes computed
at the federal statutory rate of 34% and the effective tax rate of
income (loss) before income taxes is as follows:
<TABLE>
<CAPTION>
Year Ended
December 31,
---------------------------
1997 1996
---- ----
<S> <C> <C>
Computed tax benefit on net loss
at federal statutory rate $ (281,000) $ (295,000)
State income tax, net of federal income
tax effect (49,000) (52,000)
Tax effect of net operating losses not
currently usable 330,000 347,000
----------- -----------
Provision (benefit) for income taxes $ -- $ --
=========== ===========
</TABLE>
The significant components of the Company's deferred tax assets as of
December 31, 1997 are summarized below:
<TABLE>
<S> <C>
Net operating loss tax carryforwards $1,332,000
Accrued interest 84,000
Accrued compensation - officers and directors 68,000
----------
1,484,000
Valuation allowance (1,484,000)
----------
$ --
==========
</TABLE>
F-15
<PAGE>
The Company has available at December 31, 1997 net operating loss
carryforwards totaling approximately $3,356,000 that may be applied
against future federal taxable income. The loss carryforwards will
expire through 2012. Certain losses are subject to limitation by the
provisions of Section 382 of the Internal Revenue Code due to a more
than 50% change in ownership which occurred through the sale of common
stock.
Note 10 - Stock Based Compensation:
The Stock Option Plan (see Note 7) provides for the granting of either
incentive stock options or non-qualified stock options to purchase
shares of the Company's common stock to officers, directors and key
employees responsible for the direction and management of the Company
and to non-employee consultants and independent contractors.
As required by SFAS 123, the Company has determined the pro forma
information as if the Company had accounted for stock options granted
under the fair value method of SFAS 123. The Black Scholes option
pricing model was used with the following weighted-average
assumptions; risk-free rate of 6.0%; expected common stock market
price volatility factor of 2.81; and an expected life of the options
of eight years. The fair value of options granted was $.3125. No
options were granted in 1997. The pro forma effect on net loss and net
loss per share would have been as follows as of December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
<S> <C> <C>
Net loss:
As reported $ 825,220 $ 867,380
Pro forma $ 825,220 $ 889,000
Basic and diluted loss per share:
As reported $0.37 $0.72
Pro forma $0.37 $0.73
</TABLE>
Note 11 - Subsequent Event:
Ladies Professional Baseball - In February 1998, the Company entered
into a three-year lease agreement, commencing in 1998, with Ladies
Professional Baseball. Pursuant to the agreement, the New Jersey
Diamonds (the "Diamonds"), a league-owned team, will play its regular
season home games, approximately 28, at the Stadium during the months
of July through September. The Diamonds will pay rent of approximately
$37,000. The Company will retain the proceeds for parking and alcohol
revenue, and a portion of the food revenue.
Note 12 - Event Subsequent to Date of Auditors' Report:
Investment in Joint Venture Corporation - In March 1998, the Company
purchased a 50% interest in a corporate joint venture to develop a
resort golf facility. The Company has committed to fund a total of
$175,000 to this venture, of which $41,000 was advanced through
December 31, 1997 for feasibility studies.
F-16
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ -----------
(Unaudited) (Note 1)
------------ -----------
<S> <C> <C>
ASSETS
PROPERTY AND EQUIPMENT, AT COST,
LESS ACCUMULATED DEPRECIATION $ 12,634,199 $ 12,799,986
CASH 528,244 115,295
INVENTORIES 62,886 85,170
INVESTMENT IN LIMITED PARTNERSHIP, AT EQUITY 386,561 485,555
INVESTMENT IN JOINT VENTURE 175,000 41,000
RECEIVABLE - MINOR LEAGUE HEROES 8,800 6,616
OTHER ASSETS 71,169 61,064
------------ ------------
$ 13,866,859 $ 13,594,686
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Amounts due insiders, pursuant to
Chapter 11 proceedings $ 117,265 $ 339,609
Accounts payable and accrued expenses 263,256 250,110
Accrued interest 63,542 209,297
Accrued compensation - officers and directors 170,775 170,775
------------ ------------
Total Liabilities 614,838 969,791
------------ ------------
STOCKHOLDERS' EQUITY:
Preferred stock, no par value; 500,000 shares
authorized, none issued - -
Common stock, no par value, stated value $0.01
per share; 20,000,000 shares authorized
7,166,169 and 4,353,607 shares issued in 1998
and 1997, respectively 716,617 435,361
Additional paid-in capital 18,743,263 17,182,135
Accumulated deficit (6,207,859) (4,992,601)
------------ ------------
Total Stockholders' Equity 13,252,021 12,624,895
------------ ------------
$ 13,866,859 $ 13,594,686
============ ============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-17
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30, Three months ended June 30,
---------------------------------------- ------------------------------
1998 1997 1998 1997
---------- ---------- -------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Stadium and facility rentals and
admissions $ 126,525 $ 132,033 $ 99,380 $ 106,155
Retail sales 73,490 94,880 58,419 78,618
Other 7,486 12,519 7,477 12,500
---------- ---------- -------- ---------
Totals 207,501 239,432 165,276 197,273
---------- ---------- -------- ---------
COSTS OF SALES AND SERVICES:
Costs of stadium operations 101,444 95,746 69,531 75,324
Costs of retail sales 35,368 68,383 22,998 53,553
Selling, general and administrative 372,990 399,996 192,898 224,603
Stock compensation to officers and
directors (Note 4) 734,375 - 734,375 -
Depreciation 182,550 183,672 91,278 91,836
---------- ---------- -------- ---------
1,426,727 747,797 1,111,080 445,316
---------- ---------- -------- ---------
LOSS BEFORE INTEREST EXPENSE (1,219,226) (508,365) (945,804) (248,043)
INTEREST EXPENSE (INCOME), NET (3,968) 49,558 (4,518) 21,962
---------- ---------- -------- ---------
NET LOSS $ (1,215,258) $ (557,923) $ (941,286) $ (270,005)
========== ========== ======== =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 6,054,907 1,333,611 6,991,378 1,492,768
========== ========== ======== =========
BASIC AND DILUTED LOSS PER
COMMON SHARE $ (0.20) $ (0.42) $ (0.13) $ (0.18)
========== ========== ======== =========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
F-18
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
<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 4,353,607 $ 435,361 $ 17,182,135 $ (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 116,490 11,649 237,195 - 248,844
Stock compensation to officers and directors - - 734,375 734,375
Common stock issued to officers and directors 155,228 15,523 23,284 - 38,807
Issuance of Class D Warrants - - 80,464 - 80,464
Issuance of Class A Warrants - - 11,550 - 11,550
NET LOSS - - - (1,215,258) (1,215,258)
--------- --------- ------------ ------------ ------------
BALANCES, JUNE 30, 1998 7,166,169 $ 716,617 $ 18,743,263 $ (6,207,859) $ 13,252,021
========= ========= ============ ============ ============
</TABLE>
F-19
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
--------------------------------------
1998 1997
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,215,258) $ (557,923)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 182,550 183,672
Stock compensation awarded to officers and directors 734,375 -
Common stock issued for services rendered - 375
Changes in operating assets and liabilities:
Inventory 22,284 24,475
Other assets 17,711 (65,898)
Accounts payable and accrued expenses (132,609) 152,719
------------ -----------
Net cash flows from operating activities (390,947) (262,580)
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net disbursements of restricted cash - -
Purchases of property and improvements (16,763) (7,190)
Investment in limited partnership (134,000) -
Distribution from limited partnership 98,994 30,469
------------ -----------
Net cash flows from investing activities (51,769) 23,279
------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES -
Proceeds from notes payable - 75,000
Repayments of creditors' notes payable and amount due insiders (3,500) (52,163)
Proceeds from issuance of common stock upon exercise
of warrants, net of costs 578,344 115,861
Proceeds from issuance of common stock, net of costs 188,807 212,500
Proceeds from issuance of warrants 92,014 42,489
Deferred offering costs - (38,090)
------------ -----------
Net cash flows from by financing activities 855,665 355,597
------------ -----------
NET CHANGE IN CASH 412,949 116,296
CASH, BEGINNING OF PERIOD 115,295 8,600
------------ -----------
CASH, END OF PERIOD $ 528,244 $ 124,896
============ ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 145,755 $ 23,480
============ ===========
Income taxes paid $ - $ -
============ ===========
Issuance of common stock upon conversion of
outstanding debt $ 248,844 $ -
============ ===========
</TABLE>
F-20
<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 10KSB for
the year ended December 31, 1997 (the "10KSB") 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 10KSB.
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 six months ended June 30, 1997.
RECLASSIFICATION Certain amounts previously reported have been
reclassified to conform to current year presentation.
F-21
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 - ORGANIZATION, PROCEEDINGS UNDER CHAPTER 11 AND SUBSEQUENT OPERATIONS:
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 six months ended June 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
tenants 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 prepetition 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 on April 26, 1998. The Company has set
aside sufficient funds to make such
F-22
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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 $339,000 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 $117,000 as of
June 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 $222,000
of such claims has been paid in such manner through June 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
"freshstart" 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 prepetition 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.
A total of 923,775 Class A Warrants remain unexercised at June 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 of 30 consecutive trading days ending
on the fifth day prior to the date of the notice of redemption.
F-23
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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 June 30, 1998 and the date of this report, rights to purchase
155,228 of such shares have been exercised, and rights to purchase
94,772 shares remain outstanding.
NOTE 5 - SUBSEQUENT EVENT:
In July 1998, the Ladies Professional Baseball league ("LPB") which is
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.
F-24
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
PROXY - 1998 ANNUAL MEETING OF SHAREHOLDERS
NOVEMBER 25, 1998
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS IN CONNECTION WITH THE 1998
ANNUAL MEETING OF SHAREHOLDERS OF MILLENNIUM SPORTS MANAGEMENT, INC., TO BE HELD
ON NOVEMBER 25, 1998. THE SHAREHOLDER HAS THE RIGHT TO APPOINT AS HIS PROXY A
PERSON (WHO NEED NOT BE A SHAREHOLDER) OTHER THAN A PERSON DESIGNATED BELOW, BY
INSERTING THE NAME OF SUCH OTHER PERSON IN THE BLANK SPACE PROVIDED OR BY
COMPLETING ANOTHER PROPER FORM OF PROXY.
The undersigned, a shareholder of Millennium Sports Management, Inc. (the
"Company"), hereby revoking any proxy heretofore given, does hereby appoint
Barry M. Levine, Robert H. Stoffel, Jr. or Shahe Sinanian or any of them [or
_________________________], as his proxy with full power of substitution, for
and in the name of the undersigned to attend the 1998 Annual Meeting of
Shareholders to be held at Skylands Park, Ross' Corner, U.S. Highway 206 and
County Route 565, Augusta, New Jersey 07822, at 10:00 a.m. local time on
November 25, 1998, and at any adjournment(s) thereof, and there to vote upon all
matters specified in the notice of said meeting, as set forth herein, and upon
such other business as may properly come before the meeting, all shares of stock
of the Company which the undersigned would be entitled to vote if personally
present at the meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS GIVEN, SUCH SHARES WILL BE
VOTED FOR ALL PROPOSALS.
A. Election of the following proposed Directors to hold office until the
1999 Annual Meeting of Shareholders or until their respective successors
shall be elected and shall qualify:
Nominee FOR WITHHOLD ABSTAIN
------- --- -------- -------
Barry M. Levine ( ) ( ) ( )
Robert H. Stoffel, Jr. ( ) ( ) ( )
Barry J. Gordon ( ) ( ) ( )
Marc H. Klee ( ) ( ) ( )
B. Ratify the appointment of Wiss & Company, LLP as independent auditors for
the Company for the fiscal year ending December 31, 1998.
( ) FOR ( ) WITHHOLD ( ) ABSTAIN
3. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.
( ) GRANT AUTHORITY ( ) WITHHOLD AUTHORITY
Dated _____________, 1998
-------------------------
Signature
-------------------------
Signature, if jointly held
PLEASE SIGN EXACTLY AS YOUR NAME APPEARS HEREIN. IF SIGNING AS ATTORNEY,
EXECUTOR, ADMINISTRATOR, TRUSTEE OR GUARDIAN, INDICATE SUCH CAPACITY. ALL JOINT
TENANTS MUST SIGN. IF A CORPORATION, PLEASE SIGN IN FULL CORPORATE NAME BY
PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A PARTNERSHIP, PLEASE SIGN IN
PARTNERSHIP NAME BY AUTHORIZED PERSON.
THE BOARD OF DIRECTORS REQUESTS THAT YOU FILL IN, DATE AND SIGN THE PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE.
IF THE PROXY IS NOT DATED IN THE ABOVE SPACE, IT IS DEEMED TO BE DATED ON THE
DAY ON WHICH IT WAS MAILED TO THE COMPANY.
