<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
x QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF
___ THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 30, 1998
________ TRANSITION REPORT UNDER SECTION 13 or 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____ to _____
Commission file number 0-22042
MILLENNIUM SPORTS MANAGEMENT, INC.
(Exact name of small business issuer as specified in its charter)
New Jersey 22-3127024
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Ross' Corner
U.S. Highway 206 and County Route 565
Augusta, New Jersey 07822
(Address of Principal Executive Offices) (Zip Code)
(973) 383-7644
(Issuer's telephone number)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Check whether the registrant filed all documents and reports required to be
filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court. Yes_____ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date 7,176,185 shares of common
stock outstanding as of August 7 1998.
TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE):
Yes _____ No X
-----
<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.
2
<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.
3
<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>
<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>
<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.
6
<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
7
<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.
8
<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.
9
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
information set forth in the unaudited financial statements and notes thereto
included elsewhere herein and the audited financial statements and the notes
thereto included in the 10-KSB.
OVERVIEW
Skylands Park is a 4,300-seat professional baseball stadium which, among other
things, has been and will be leased for sports and other entertainment events.
The Complex follows a courtyard village design theme, and includes, among other
things, a sports apparel and collectibles store, a wholesale and retail sporting
goods outlet, batting cages, and a video parlor.
The New Jersey Cardinals ("the Team"), which is a member of the Class "A" level
New York-Penn League, plays its regularly-scheduled home games and playoff home
games at Skylands Park. The Company has a minority ownership interest in Minor
League Heroes, L.P. ("Heroes"), which is the limited partnership that owns the
Team.
In February 1998, the Company entered into a three-year lease agreement,
commencing in 1998, with Ladies Professional Baseball ("LPB"), a women's
professional baseball league. Pursuant to the agreement, the New Jersey
Diamonds (the "Diamonds"), a league-owned team, was to play its regular season
home games, approximately 28 per year, at the Skylands Park during the months of
July through September. In July 1998, LPB canceled all further league games for
the balance of 1998, including the remaining 20 Diamonds' home games. The
Company is uncertain if LPB will satisfy the remaining lease payments,
consisting of the second half of payments for 1998 and all of 1999 and 2000.
The Company currently operates, in the Complex, the Skylands Sporting Goods
store, which sells, year-round both at retail and at wholesale, a broad range of
sporting goods relating to baseball and other sports, and Team paraphernalia.
The Company also operates, in the Complex, a year-round recreational facility
known as the "Barn", which contains batting cages, a sports video parlor, mini-
gym and children's party room, and a subleased space in which an unaffiliated
third party sells sports collectibles.
The Company also intends to utilize the professional skills and collective
sports-related backgrounds of its management team to provide strategic,
financial and operational consulting services to small to midsized professional
franchise owners and sports facility operators. Such backgrounds include Mr.
Stoffel's three years of experience as Vice President and Chief Controller of
the New York Yankees, Mr. Levine's five years of experience as an executive
officer of a publicly traded sports memorabilia and collectibles company, and
Mr. Gordon's and Mr. Klee's eight years of experience as managing owners and
operators of minor league baseball teams. However, the Company has not entered
into any definitive consulting agreements.
10
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
The Company anticipates receiving approximately $42,000 per year in rent from
the Team, which management does not believe will constitute a significant
portion of the Company's revenues. The Company expects to generate additional
revenues from, among other things, the rental of skyboxes and advertising signs
in Skylands Park, the rental of Skylands Park for other sports and entertainment
events, the operation of the related facilities in the Complex, and the
Company's direct and indirect ownership interest in the limited partnership that
owns the Team. As of June 30, 1998, the Company rented and received payment for
six skyboxes for the 1998 Team season for an aggregate annual rental of $55,000
(of which the Team is entitled to retain approximately $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.
In March 1998, the Company, entered into a joint venture (known as Stadium
Capital, Inc.) with third parties to develop a golf facility in Florida, and the
Company has invested $150,000 in cash capital, $25,000 in expense
reimbursements, and 1,000,000 Class D Warrants of the Company in respect of the
joint venture. The Company's joint venturers continue to seek financing
required in order to implement their business plan for the venture, and there
can be no assurance as to whether or when any of such financing may be obtained.
PLAN OF REORGANIZATION
In April 1995, the Company paid $1,600,000 in respect of its pre-petition
unsecured liabilities (including payment in full of de minimis claims, and
subject to the Company's reservation of rights to contest a limited number of
unsecured claims), leaving a balance due in respect of such claims of
approximately $2,608,000, which was payable pursuant to the terms of the
Creditors' Note. The Company has fully paid the principal on the Creditors'
Note, primarily out of net equity proceeds from the sale of common stock by the
Company, leaving a balance of accrued interest of approximately $64,000 (for
which the Company has set aside funds sufficient to pay such amount in full).
The Creditors' Note is secured by substantially all of the assets of the Company
as same are constituted from time to time. Until the Creditors' Note and
related accrued interest have been paid in full, the Company continues to report
to and operate under the review of the independent accountants retained by the
official committee of the unsecured creditors of the Company.
Claims held by insiders (consisting of past and present directors and executive
officers of the Company and certain of their affiliates) in respect of pre-
petition obligations (including but not limited to pre-petition loans made to
the Company), originally in the aggregate amount of approximately $339,609, may
be paid from time to time after payment in full of the Creditors' Note, as the
cash flow of the Company may permit; or, at the option of each insider, may be
paid at any time or from time to time in shares of common stock of the Company
valued at the then-current market price of such common stock as reported on
NASDAQ. During the six months ended June 30, 1998, approximately $222,000 was
repaid upon conversion of such insider claims into 56,490
11
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
shares of common stock, leaving an unpaid balance of approximately $117,000 at
June 30, 1998.
Equity interests, including interests of stockholders and warrantholders, are
not altered or impaired under the terms of the Plan. However, pursuant to the
Plan, the Company is not permitted to pay any dividends on its common stock
until all required payments under the Plan have been made.
The foregoing information regarding the Plan is merely a summary of certain
material provisions thereof, and is qualified in its entirety by the specific
provisions of the Plan, a copy of which was previously filed as an exhibit to
the Company's Annual Report on Form 10-KSB for the year ended December 31, 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary sources of liquidity since its inception have been the
sale of shares of common stock to and short-term borrowings from certain
shareholders, which were used during the period from inception through March
1993; the net proceeds of approximately $739,000 from a private placement of
common stock and warrants, which were used during the period from March 1993
through September 1993; the net proceeds of approximately $5,815,000 from an
initial public offering of common stock and Class A Warrants, which were used
during the last quarter of 1993 and the first quarter of 1994; short-term
borrowings from certain officers, former shareholders and other related and
unrelated parties during March, April and May 1994, which were used during the
first and the beginning of the second quarter of 1994; proceeds from the
exercise of Class A Warrants and Class B Warrants, which were received during
the fourth quarter of 1994, and in 1995; net proceeds of $1,500,000 from a
private placement of common stock in August 1995 (all of which net proceeds were
utilized for partial prepayment of the Creditors' Note); and net proceeds of
$2,965,228 from the issuance of and exercise of Class A Warrants and Class D
Warrants and underwriter's warrants in 1997 and the first six months of 1998.
As of June 30, 1998, the Company had cash totaling approximately $528,000. The
Company may need to obtain additional liquid resources to enable the Company to
sustain future operations beyond 1998, whether through the exercise of its
remaining outstanding warrants, through the issuance of other equity securities,
and/or through other means. Although management continues to explore various
financing alternatives, the Company does not have any commitments with respect
to any additional financing.
COMPARATIVE QUARTERLY RESULTS
The Company's stadium and facility rentals and admissions during the three and
six months ended June 30, 1998 was approximately $99,000 and $127,000, as
compared to approximately $106,000 and $132,000 in the three and six months
ended June 30, 1997. The 7% and 4% decreases are principally attributable to a
reduction in the number of high school and college games played at Skylands
Park. Retail sales decreased approximately $21,000 and $22,000 to approximately
$58,000 and $73,000 for the
12
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
three and six months ended June 30, 1998, from approximately $ 79,000 and
$95,000 for the three and six months ended June 30, 1997. The decrease is
principally attributable the reduction in traffic in the stadium and reduced
merchandise selection.
Cost of stadium operations decreased by approximately 7% to approximately
$70,000 for the three months ended June 30, 1998, as compared to approximately
$75,000 for the same period in 1997; and 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 1997. The overall increase for the
six months reflects a more proactive approach in maintaining the Complex. Cost
of retail sales as a percent of retail sales remained relatively constant at
approximately 68% for the three months ended June 30, 1998 and 1997. Cost of
retail sales as a percent of retail sales decreased to approximately 48% from
72% for the six months ended June 30, 1998 and 1997. The decrease is due
primarily to the change in product mix allowing for higher profit margins.
Selling, general and administrative expenses decreased by approximately $32,000
and $27,000 to approximately $193,000 and $373,000 for the three and six months
ended June 30, 1998, as compared to approximately $225,000 and $400,000 for the
same period in 1997. The reduction 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 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.
Depreciation and amortization remained relatively stable at approximately
$92,000 and $183,000 for the three and six months ended June 30, 1998 and 1997.
Net loss in the three and six months ended June 30, 1998, was approximately
$941,000 and $1,215,000 as compared to approximately $270,000 and $558,000 in
the three and six months ended June 30, 1997. The increase is 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 approximately $27,000 and $54,000 for the three and six months.
In 1998, management of the Company has undertaken a close analysis of the
Company's expenses, with a view to eliminating unnecessary and/or duplicative
expenses, while maintaining the Complex in good condition. Management believes
that it has implemented all expense reductions that are prudent and reasonably
possible, and that efforts to improve the Company's business are now best
focused on increasing gross revenues through the development of additional
sources of revenues, preferably during the winter months or on a year-round
basis. Although management is actively exploring possible additional business
activities, the Company has not entered into any agreements or commitments with
respect to any such matters. Certain. of such proposed business
13
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
activities could require the Company to obtain additionally financing, and there
can be no assurance that the Company would be able to obtain any such financing.
SEASONALITY
It is anticipated that the Company's cash flow from operations will be
significantly greater in each spring, summer and fall than in the winter months,
when Skylands Park is not likely to be rented for outdoor events, and the
Company will be relying 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, 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
systems, nor, to the Company's knowledge, are any of its customers dependent on
computer systems in such customers' dealings with the Company. Certain of the
Company's vendors and suppliers may, however, be so dependent, although the
Company has not undertaken any investigation to determine the nature or extent
of any Year 2000 issues that may be posed by vendor unpreparedness. Thus, while
the Company will not be required to incur any material costs or expenses in
order to adapt, modify or upgrade its systems to be Year 2000 compliant, the
Company still needs to determine the degree of its vendors' preparedness and
whether alternate suppliers will be needed or available in the event of any
disruption in supply of goods or services to the Company.
14
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8K.
(a) Exhibit 27 - Financial Data Schedule
(b) On April 29, 1998, the Company filed a current report on Form 8-
K, in respect of the extension of the exercise period for its
outstanding Class A Warrants, and the termination of further offering
of Class D Warrants.
15
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
MILLENNIUM SPORTS MANAGEMENT, INC.
- ----------------------------------
(Registrant)
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Robert H. Stoffel, Jr. Chief Financial Officer August 12, 1998
- --------------------------------------
Robert H. Stoffel, Jr.
</TABLE>
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
FOR 6/30/98 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<CASH> 528,244
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 62,886
<CURRENT-ASSETS> 591,130
<PP&E> 14,076,317
<DEPRECIATION> 1,442,118
<TOTAL-ASSETS> 13,866,859
<CURRENT-LIABILITIES> 614,838
<BONDS> 63,542
0
0
<COMMON> 716,617
<OTHER-SE> 12,535,404
<TOTAL-LIABILITY-AND-EQUITY> 13,866,859
<SALES> 73,440
<TOTAL-REVENUES> 207,501
<CGS> 35,368
<TOTAL-COSTS> 319,362
<OTHER-EXPENSES> 1,107,365
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (3,968)
<INCOME-PRETAX> (1,215,258)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,215,258)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,215,258)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
