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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[x] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
Millenium Sports Management, Inc.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
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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
DECEMBER 29, 1999
To the Shareholders of MILLENNIUM SPORTS MANAGEMENT, INC.:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting (the "Annual Meeting")
of Shareholders of Millennium Sports Management, Inc. (the "Company"), will be
held at the Ramada Inn North at I-4 and S.R. 434, Exit 49, Longwood, Florida, on
Wednesday, December 29, 1999, at 10:00 a.m. local time, for the following
purposes:
1. To elect four directors to hold office until the 2000 Annual Meeting.
2. To ratify the appointment of Murphy & Townsend, LLC, as auditors of
the Company for the fiscal year ending December 31, 1999.
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 November 24, 1999, 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 November 24, 1999, will be entitled to vote at the Annual Meeting or
any adjournment(s) thereof.
By Order of the Board of Directors
Mary Anne Hartung, Secretary
WHETHER OR NOT YOU PLAN TO ATTEND, PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR
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PROXY FORM PROMPTLY IN THE ENCLOSED ENVELOPE PROVIDED FOR YOUR USE.
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<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 1999 Annual Meeting of Shareholders
(the "Annual Meeting") to be held at the Ramada Inn North at I-4 and S.R. 434,
Exit 49, Longwood, Florida, at 10:00 a.m. local time on Wednesday, December 29,
1999, 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 November 24, 1999, record date) on or about December 6, 1999.
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.
DESCRIPTION OF BUSINESS
Unless otherwise indicated, all descriptions of and references to the
Company's common stock, and all share and per share information, contained in
this report have been adjusted to give effect to a 1-for-10 reverse stock split
effected by the Company as of the close of business on January 4, 1999.
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 in this report.
Millennium Sports Management, Inc., formerly known as Skylands Park
Management, Inc. (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 (comprising the
<PAGE>
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
regularly. 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 37 regular season
home games, a total of 28 other baseball game dates were held at Skylands Park,
including eight 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 now
appears unlikely that LPB will resume operations or fulfill the balance of its
lease obligations running through the year 2000. In addition to baseball games,
a total of five other events were held at Skylands Park during the 1998 calendar
year, 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, pitching tunnels, a
soft-play area, a sports video parlor, half-court basketball, a children's party
room, a sports collectibles store, a wholesale and retail sporting goods outlet,
and an exhibit hall.
The Company currently operates in the Complex a Skylands Sporting Goods
store, which sells, both at retail and at wholesale, a broad range of sporting
goods relating to baseball and other sports, and Team paraphernalia and apparel.
In March 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 golf
courses) in Naples, Florida. The Company invested $150,000 in cash for capital,
$25,000 in expense reimbursements and Class D Warrants for 100,000 shares of
common stock of the Company, in respect of a 50% interest in the joint venture.
In September 1998, the Company determined that the prospects for the golf
facility had become remote and therefore determined to write off its investment
in the joint venture.
The Company anticipates receiving approximately $42,000 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, rental,
parking fees, and other revenues from other baseball games, the rental of
Skylands Park for other sports and entertainment events, the operation of the
retail, recreation and other related facilities in the Complex, and the
Company's ownership interest in Heroes. For the 1998 baseball season, the
Company rented and received payment for six skyboxes for the 1998 Team season
for an aggregate annual rental of $56,640. In addition, the Company is entitled
to 20% of all revenues from advertising sign rental commitments at Skylands
Park. The Company's 20% share of such revenues in 1998 was approximately
$75,000.
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"), and the Company has
since paid substantially all of its pre-petition obligations at their original
amounts, and has obtained releases of all liens on its assets and properties.
2
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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, 1998 and 1997 and the Company's
unaudited financial statements as of June 30, 1999, 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, 1999,
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 thereof.
Results of Operations
The following table sets forth operating data of the Company for the
Company's 1998 and 1997 fiscal years and for the first six months of 1999 and
1998. Six-month data is unaudited and not indicative of the operating results
to be expected for the full year.
<TABLE>
<CAPTION>
Year Ended December 31 Six Months Ended June 30
------------------------------------ ----------------------------------
1998 1997 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Total Revenues $ 648,112 $ 656,554 $ 277,406 $ 207,501
(13,876,517) (1,517,619) (592,468) (1,426,727)
Cost of sales and services (1) ------------- ----------- ---------- ------------
Loss from operations ($13,228,405) ($ 861,065) ($315,062) ($1,219,226
Other Income (Expense):
Income of limited partnership 88,698 93,985 --- ---
Interest income (expense) 11,670 (58,140) 460 3,968
Write-down of investment of joint venture (175,000) --- --- ---
------------- ----------- ---------- ------------
( 74,632) 35,845 460 3,968
------------- ----------- ---------- ------------
Net Loss ($3,303,037) ($825,220) ($314,602) ($1,215,258)
============= =========== ========== ============
Weighted average of common shares outstanding 662,780 220,304 722,337 605,491
------------- ----------- ---------- ------------
Basic and diluted loss per share ($ 20.07) ($ 3.75) ($ 0.44) ($ 2.01)
============= =========== ========== ============
</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, 1998, and 1997
Effective December 31, 1998, the Company wrote down the carrying value of
its fixed assets from $12,444,942 to $900,000, as more particularly described in
the next section titled "Asset Impairment." Because of the relative magnitude
and non-recurring nature of this write-down, the following comparison of year-
to-year results does not include or give effect to such write-down, thereby
yielding a clearer comparison of operating results from year to year.
During the year ended December 31, 1998, the Company's revenues were
approximately $648,000 consisting of approximately $347,000 of stadium rentals,
admissions, and parking fees, approximately $214,000 of retail and
3
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concession sales, and approximately $87,000 of advertising and subscription
revenues. Revenues in 1997 were approximately $657,000, and the decrease in
revenues from 1997 to 1998 is primarily attributable to a 13% decrease in retail
and concession sales and a 20% decrease in advertising and subscription
revenues, offset in substantial part by a 15% increase in stadium rentals and
admissions.
From 1997 to 1998, total operating expenses (excluding the amount of the
fixed asset write-down in 1998) increased from approximately $1,518,000 in 1997
to approximately $2,332,000 in 1998. Excluding the effects of the one-time non-
cash charge to earnings described in the next paragraph, operating expenses
increased by approximately 5% from 1997 to 1998, attributable primarily to an
11% increase in selling, general and administrative expenses, and a 17% increase
in costs of stadium operations, offset in part by a 33% decrease in costs of
retail and concession sales. Management intends to focus further efforts in 1999
to reducing the Company's selling, general, and administrative expenses, which
constitute the single largest category of the company's ongoing expenses.
In addition to normal operating expenses and the $11,545,000 write-down of
fixed assets, the Company incurred a one-time non-cash charge to earnings of
$734,375 (recorded as a compensation expense) in 1998, representing the
difference between the exercise price and the fair market value per share on the
date of grant for the full award of 25,000 shares of common stock for which
options were granted under the Stock Award Plan. Also in 1998, the Company took
a $175,000 charge as a write-off of investment in the Stadium Capital joint
venture, although this charge is recorded as a non-operating expense.
Excluding the $11,545,000 write-down of fixed assets in 1998, the Company
incurred a net loss of approximately $1,758,000 in 1998, as compared to a net
loss of approximately $825,000 in 1997. The increased loss is attributable
primarily to the compensation expense (non-cash) and investment write-off
described in the preceding paragraph. Excluding those non-recurring items, net
loss was approximately the same from year to year. Loss per share went from
$3.75 per share in 1997 to $2.65 per share in 1998; however, there were
approximately three times as many weighted average common shares outstanding in
1998 as compared to 1997.
Sources and Uses of Resources and Comparative Quarterly Results for the Six
Months Ended June 30, 1999, and 1998.
The Company's stadium and facility rentals and admissions during the three
and six months ended June 30, 1999, were approximately $145,000 and
approximately $181,000, respectively, as compared to approximately $87,000 and
approximately $114,000 for the three and six months ended June 30, 1998. The
increases are principally attributable to the lease with the Bears. Retail and
concession revenue decreased by approximately $9,000 for the three and six
months ended June 30, 1999, to approximately $63,000 and $74,000, respectively.
The decrease is principally attributable to an advance received from the
Company's concessionaire in 1998 and reduced merchandise selection in 1999.
Cost of stadium operations increased by approximately 10% to approximately
$79,000 and approximately $113,000 for the three and six months ended June 30,
1999, respectively, as compared to approximately $71,000 and approximately
$103,000 for the same periods in 1998. The increase reflects required
maintenance to the stadium in connection with the Bears games. Cost of retail
and concession sales as a percentage of retail and concession sales increased to
approximately 60% for the three and six months ended June 30, 1999,
respectively, as compared to 38% and 45% in the comparable prior year periods.
The increase is due to the absence of a $12,000 advance received from the
Company's concessionaire in 1998.
Selling, general, and administrative expenses increased by approximately
$24,000 and approximately $44,000 to approximately $213,000 and approximately
$412,000 for the three and six months ended June 30, 1999, respectively, as
compared to approximately $189,000 and approximately $369,000 for the same
periods in 1998. The increase is due principally to an increase in insurance
costs, stock transfer fees relating to the January 1999 reverse split, and
certain professional fees.
Depreciation and amortization expense decreased to approximately $10,000
and approximately $20,000 for the three and six months ended June 30, 1999,
respectively, from approximately $91,000 and approximately $183,000 for the same
periods in 1998. The decrease is attributable to the write-down of the
Company's fixed assets by
4
<PAGE>
approximately $11,545,000 in the fourth quarter of 1998. The write-down reduced
the depreciable basis of the underlying fixed assets.
Net loss in the three and six months ended June 30, 1999, was approximately
$110,000 and approximately $315,000, respectively, as compared to approximately
$941,000 and approximately $1,215,000 in the three and six months ended June 30,
1998, respectively. The decrease is primarily attributable to a non-recurring
charge for stock-based compensation recognized in the second quarter 1998 of
approximately $734,000 and to the decrease in depreciation and amortization in
the 1999 periods.
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 and accrued interest
on the Creditors' Note, primarily out of net equity proceeds from the sale of
common stock by the Company.
Claims held by insiders (consisting primarily of former 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 $339,000,
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, 1999, approximately $6,000 was
repaid upon conversion of such insider claims into 10,000 shares of common
stock, leaving an unpaid balance of approximately $82,000 at September 30, 1999.
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 1998. As of December 31, 1998,
all unexercised Class A Warrants expired, and the Company had ceased any further
offering of Class D Warrants.
As of September 30, 1999, the Company had cash totaling approximately
$524,000.
In August 1999, the Company issued, in a private placement, 500,000 shares
of the Company's common stock to Robert J. Hartung for $250,000. In addition,
Mr. Hartung has loaned to the Company $250,000 payable in August 2001 with 10%
interest per annum. The loan is collateralized by the real estate and
improvements of the
5
<PAGE>
Company, and is convertible as to principal in whole (but not in part) at any
time into shares of common stock of the Company at $.50 per share. Upon
conversion of the principal of this note, all accrued interest (other than
interest on any principal) will be forgiven.
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 interest was $284,375 paid in cash, including cash payments
totaling $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.
6
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL SHAREHOLDERS
At the close of business on the Record Date, there were outstanding
1,230,000 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 bylaws, 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>
Robert J. Hartung Director, Nominee for Director 1,072,500 (3) 62.0%
President, Chief Executive Officer
Robert N. Adams Director, Nominee for Director 28 0.0%
Allen J. Schwalb Director, Nominee for Director 0 0.0%
Craig McElroy Director, Nominee for Director 0 0.0%
William F. Rasmussen None 50,000 (4) 2.9%
Glenn J. Rasmussen None 50,000 (5) 2.9%
All directors and executive officers as a group (four persons) 1,072,528 (3) 62.0%
</TABLE>
- ---------------------------------------------
(1) The address for all persons is c/o Millennium Sports Management, Inc., P.O.
Box 117, Augusta, NJ 07822-0117.
(2) All shares are directly held unless otherwise stated.
(3) Includes 500,000 shares which are subject to currently exercisable stock
options.
(4) Consists of 50,000 shares which are subject to currently exercisable
warrants issuable to William F. Rasmussen's affiliate, TGT of Naples, Inc.
(5) Consists of 50,000 shares which are subject to currently exercisable
warrants issuable to Glenn J. Rasmussen's affiliate GTG of Naples, Inc.
7
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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 or nominee for director of the Company is a party adverse to the
Company.
<TABLE>
<CAPTION>
Name Age Position
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
Robert J. Hartung 60 Director, Nominee for Director, President, Chief Executive
Officer, Chief Financial Officer, Chief
Accounting Officer
Robert N. Adams 49 Director, Nominee for Director
Allen J. Schwalb 61 Director, Nominee for Director
Craig McElroy 37 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.
Robert J. Hartung was elected a Director and President and Chief Executive
Officer of the Company in August of 1999. From 1995 to present, Mr. Hartung has
been the Chief Executive Officer of Sports World USA, Inc., a Florida real
estate development corporation, engaged in the planning of a large resort and
sports development. Previously, from 1985 to 1994, served as President and CEO
of Champion Game Corporation, developer of the "Takeover" board game, and
president and CEO of Sports World International, Inc., a real estate development
company. From 1980-1985, Mr. Hartung was an adjunct Professor of Finance at
Daytona Beach Community College. Earlier (from 1970 to 1980), he was involved
in real estate development and ownership of numerous hotel, apartments,
restaurants and lounges in Pennsylvania, Ohio, and Florida.
Robert N. Adams has been a Director of the Company since April of 1999.
For the past 18 years, Mr. Adams has been the owner, operator, and President of
Bob's Collectibles and Bob's Hot corner, retail sellers of sports memorabilia
and collectibles. Since 1993, Bob's Hot Corner has operated in space leased from
the Company.
Allen J. Schwalb has been a Director of the Company since August of 1999.
Mr. Schwalb is President and Founder of Professional Sports Investments, Inc.,
which buys and sells sport franchises and provides equity capital for sport
franchises. Since 1980, Mr. Schwalb's Star Partners International, one of the
nation's largest independent financiers of films, brought over 60 major motion
pictures to the screen.
Craig McElroy has been a Director of the Company since August of 1999. Mr.
McElroy is a registered professional engineer with Paul F. Ford and Company
since August of 1990. He is responsible for supervising the design and drafting
of the construction documents and performs construction administration for
assigned projects. The Orlando Science Center and the Marriott Grande Vista
Resort were two of his recent projects.
8
<PAGE>
EXECUTIVE COMPENSATION
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>
Total Compensation
Name and Principal Position Year Salary Options/SARs (#) Paid or Accrued
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Robert A. Hilliard
Chairman of the Board of Directors
and Chief Executive Officer 1996 $ 81,000/(2)/ 5,000/(3)/ $ 81,000/(1)/ /(2)/
Barry M. Levine
President and Chief Executive Officer 1996 $ 31,250/(4)/ 15,000 $ 31,250/(1)/ /(4)/
1997 $ 125,000 0 $ 125,000/(1)/
1998 $ 125,000 7,000 $ 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 $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.
(3) Consists of 5,000 stock options which were repriced in 1996 and have since
lapsed without exercise.
(4) Represents accrued compensation for the months of October through December
1996.
EMPLOYMENT AND INCENTIVE COMPENSATION AGREEMENTS
Employment Agreement
The Company entered into an employment agreement with Mr. Hartung in August
of 1999, pursuant to which Mr. Hartung is to serve as President and Chief
Executive Officer of the Company through July 31, 2001, at an annual salary of
$48,000. Under the terms of his agreement, Mr. Hartung is required to devote
the majority of his business time to the affairs of the Company. The Company
terminated Mr. Levine's and Mr. Stoffel's employment agreements effective August
1, 1999.
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, no such director fees or expenses have been paid
or accrued, and all of such fees in respect to prior meetings have been waived.
Stock Option Plan
The Company's 1993 Stock Option Plan (the "Stock Option Plan") adopted by
the Company's Board of Directors on April 14, 1993, and approved by a majority
of the Company's shareholders on July 23, 1993, and which became effective on
August 9, 1993, was terminated by the Company's Board of Directors on August 15,
1999.
No options were awarded under the Stock Option Plan in 1998 or 1999.
9
<PAGE>
Stock Award Plan
In December 1996, the Board of Directors adopted a Stock Award Plan
pursuant to which, subject to the achievement of certain targets, the Board of
Directors was 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 100,000
shares of common stock of the Company at a nominal price for a limited period of
time. Up to 25,000 shares of common stock could be awarded from time to time if
and after the Company received gross proceeds of $2,000,000 between the date of
adoption of the Stock Award Plan and December 31, 1997, from issuances of equity
securities of the Company, and up to an additional 25,000 shares of common stock
could be awarded from time to time if and after the Company received 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 25,000 shares of common stock could be awarded from time to
time if and after the Company achieved a positive cash flow from operations for
any two consecutive fiscal quarters.
The first threshold for awards under the Stock Award Plan was met, and,
accordingly, in April 1998, options for an aggregate of 25,000 shares of common
stock were awarded to members of the Board of Directors. When such options
expired on October 31, 1998, options for an aggregate of 15,524 shares of common
stock had been exercised, and the remaining 9,476 options lapsed with exercise.
Thereafter, the Board of Directors determined to terminate the Stock Award Plan.
The following table sets forth the stock options exercised under the Stock
Award Plan during the fiscal year ended December 31, 1998, and the "value"
(i.e., the amount by which the fair market value of the underlying common stock
exceeded the option exercise price on the dates of exercise) realized upon such
exercises.
<TABLE>
<CAPTION>
Shares Acquired Value
Name on Exercise/(1)/ Realized
- -------------------------- ------------------ ----------
<S> <C> <C>
Barry M. Levine 38,807 $102,269
Robert H. Stoffel, Jr. 38,807 $102,269
Barry J. Gordon * 38,807 $102,269
Marc H. Klee * 38,807 $102,269
</TABLE>
________________________
* Resigned as a director in February 1999.
(1) Share amounts in this table are not adjusted to reflect the 1-for-10 reverse
stock split which became effective as of the close of business on January 4,
1999.
10
<PAGE>
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 from January 1,
1997, through November 24, 1999, as reported on the Small Cap 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 at the close of
business on January 4, 1999.
The reverse stock split effected in January 1999 represented an attempt by
the Company to comply with the $1.00 minimum bid price per share requirement for
continued listing of the Company's common stock on NASDAQ; however, subsequent
to the reverse split, the closing bid price of the Company's common stock
occasionally dipped below $1.00 per share, and the aggregate value of the public
float of the Company's common stock remained under the $1,000,000 minimum
requirement for extended periods of time. As a result of such failures to meet
NASDAQ's listing criteria, effective at the close of business on March 10, 1999,
the Company's common stock was delisted from NASDAQ, and thereafter has been
quoted on the OTC Bulletin Board.
Period High Low
- ------ ---- ---
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 $0.093
1st Quarter 1999 $ 1.25 $0.125
2nd Quarter 1999 $ 1.00 $0.563
3rd Quarter 1999 $0.875 $0.375
4th Quarter 1999 $0.625 $ 0.25
(through November 24, 1999)
On November 24, 1999, the closing bid price for the Company's common stock
was $0.406, and the Company had 1,603 stockholders of record as of that date.
The Company has not paid cash dividends to its shareholders since its inception
and has no intentions 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.
11
<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 share 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 Murphy &
Townsend, LLC as the Company's auditors for the fiscal year ending December 31,
1999; 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 2000 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.
Name Age Director Since Principal Occupation Last 5 Years
Robert J. Hartung 60 * *
Robert N. Adams 49 * *
Allen J. Schwalb 61 * *
Craig McElroy 37 * *
- ----------------------------------
* See Directors, Nominees for Director, and Executive Officers of the
Company on pages 8 and 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, 1998, the Board of
Directors met a total of seven 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 9, 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 Bylaws 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, 1999.
At the Annual Meeting, a vote will be taken on a proposal to ratify the
appointment by the Board of Directors of Murphy & Townsend, LLC, independent
certified public accountants, as the independent auditors of the Company for the
fiscal year ending December 31, 1999. Such firm has no interest in or
relationship with the Company except as its auditors.
Management believes the appointment to be in the best interest of the
Company and recommends that it be ratified.
12
<PAGE>
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 2000 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, 2000. 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 at 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, 1998.
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.
13
<PAGE>
Index to Financial Statements
Financial Statements as of December 31, 1998, and for the Years Ended December
31, 1998 and December 31, 1997.
Report of Independent Public Accounts....................................... F-2
Balance Sheet, December 31, 1998............................................ F-3
Statements of Operations for the years ended
December 31, 1998 and December 31, 1997............................ F-4
Statements of Changes in Shareholders' Equity for the years ended
December 31, and December 31, 1997................................. F-5
Statements of Cash Flows for the years ended
December 31, 1998 and December 31, 1997............................ F-6
Notes to Financial Statements............................................... F-7
Unaudited Financial Statements as of June 30, 1999 and for six Months Ended
June 30, 1999 and June 30, 1998.
Unaudited Balance Sheet, June 30, 1999..................................... F-17
Unaudited Statements of Operations for the six months
ended June 30, 1999 and June 30, 1998............................. F-18
Unaudited Statement of Changes in Shareholders' Equity for the
six months ended June 30, 1999.................................... F-19
Unaudited Statements of Cash Flows for the six months
ended June 30, 1999 and June 30, 1998............................. 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.
We have audited the balance sheet of Millennium Sports Management, Inc. as of
December 31, 1998 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. at December 31, 1998, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1998 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 12, 1999, except as to Note 2 for
which the date is March 4, 1999
F-2
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
PROPERTY AND EQUIPMENT $ 900,000
CASH 221,975
INVENTORIES 71,335
INVESTMENT IN LIMITED PARTNERSHIP, AT EQUITY 466,759
OTHER ASSETS 118,048
------------
$ 1,778,117
============
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Amounts due insiders, pursuant to Chapter 11 proceedings $ 88,513
Accounts payable 262,293
Accrued interest 63,542
Accrued compensation - officers and directors 170,775
------------
Total Liabilities $ 585,123
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
718,809 shares issued 71,980
Additional paid-in capital 19,416,652
Accumulated deficit (18,295,638
------------
Total Stockholders' Equity 1,192,994
------------
$1,778,l17
============
See accompanying notes to financial statements.
F-3
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
STATEMENTS OF OPERATIONS
Year Ended December 31,
-----------------------------
1998 1997
------------- -------------
REVENUES:
Stadium rentals and admissions $ 346,876 $ 301,293
Retail and concession sales 213,723 245,644
Advertising and subscription revenues 87,513 109,617
------------- -------------
Totals 648,112 656,554
------------- -------------
COSTS OF SALES AND SERVICES:
Costs of stadium operations 246,492 210,178
Costs of retail and concession sales 104,006 154,689
Selling, general and administrative expenses 867,623 783,923
Stock compensation award to officers and
directors 734,375 --
Impairment of long-lived assets 11,544,942 --
Depreciation and amortization 379,079 368,829
------------- -------------
13,876,517 1,517,619
------------- -------------
LOSS FROM OPERATIONS (13,228,405) (861,065)
------------- -------------
OTHER INCOME (EXPENSE):
Equity in income of limited partnership 88,698 93,985
Write-down of investment in joint venture (175,000) --
Interest (net) 11,670 (58,140)
------------- -------------
(74,632) 35,845
------------- -------------
NET LOSS $(13,303,037) $ (825,220)
============= =============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 662,780 220,304
============= =============
BASIC AND DILUTED LOSS PER COMMON SHARE $ (20.07) $ (3.75)
============= =============
See accompanying notes to financial statements.
F-4
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
STATEMENTS OF CHANCES IN STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Additional
---------------------
Number Paid-in Accumulated
of Shares Amount Capital Deficit Total
----------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES, JANUARY 1, 1997 121,489 $ 12,149 $ 15,675,975 $ (4,167,381) $ 11,520,743
YEAR ENDED DECEMBER 31, 1997:
Issuance of common stock upon exercise of warrants:
Class A warrants 27,972 2,797 235,588 238,385
Class D warrants 272,500 27,250 1,304,171 1,331,421
Issuance of common stock for
services rendered by an officer 150 15 360 375
Issuance of common stock upon
conversion of debt 9,000 900 44,100 45,000
Issuance of Class D Warrants -- -- 300,922 300,922
Exercise of options under Stock Option Plan 4,250 425 12,844 13,269
Net loss -- -- -- (825,220) (825,220)
----------- ---------- ------------ ------------
BALANCES, DECEMBER 31, 1997 435,361 43,536 17,573,960 (4,992,601) 12,624,895
YEAR ENDED DECEMBER 31, 1998:
Issuance of common stock upon exercise of:
Underwriter warrants 150,000 15,000 135,000 -- 150,000
Class A warrants 11,584 1,158 114,686 -- 115,844
Class D warrants 92,500 9,250 453,250 -- 462,500
Issuance of common stock upon conversion of
debt 14,839 1,484 276,112 -- 277,596
Stock compensation to officers and directors -- -- 734,375 734,375
Common stock issused to officers and directors 15,525 1,552 37,255 -- 38,807
Issuance of Class D Warrants -- -- 80,464 -- 80,464
Issuance of Class A Warrants -- -- 11,550 -- 11,550
Net loss -- -- -- (13,303,037) (13,303,037)
----------- ---------- ------------ ------------ ------------
BALANCES, DECEMBER 31, 1998 719,809 $ 71,980 $ 19,416,652 (18,295,638) $ 1,192,994
----------- ---------- ------------ ------------ ------------
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1998 1997
------------- -------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $(13,303,037) $ (825,220)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 379,079 368,829
Loss in impairment of long-lived assets 11,544,942 --
Stock compensation awarded to officers and directors 734,375
Equity in income of limited partnership (88,698) (93,985)
Write down of investment in joint venture 175,000
Common stock issued for services rendered -- 375
Changes in operating assets and liabilities:
Inventories 13,835 39,007
Other assets (20,368) (40,945)
Accounts payable and accrued expenses (133,572) (299,089)
------------- -------------
Net cash flows from operating activities (698,444) (851,028)
------------- -------------
INVESTING ACTIVITIES:
Investment in joint venture (134,000) --
Purchases of property and improvements (15,535) (41,616)
Distribution from limited partnership 98,994 30,469
------------- -------------
Net cash flows from investing activities (50,541) (11,147)
------------- -------------
FINANCING ACTIVITIES:
Repayments of creditors' notes payable and amounts
due insiders (3,500) (940,627)
Proceeds from issuance of common stock
and warrants, net of costs 767,151 --
Proceeds from issuance of warrants 92,014 1,909,497
------------- -------------
Net cash flows from financing activities 855,665 968,870
------------- -------------
NET CHANGE IN CASH 106,680 106,695
CASH, BEGINNING OF YEAR 115,295 8,600
------------- -------------
CASH, END OF YEAR $ 221,975 $ 115,295
============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ -- $ 151,002
============= =============
Income taxes paid $ -- $ --
============= =============
NON-CASH FINANCING ACTIVITIES:
Issuance of common stock and warrants upon
conversion of outstanding debt $ 277,596 $ 45,000
============= =============
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Basis of Presentation:
The accompanying financial statements of Millennium Sports 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 $13,303,000, inc1uding a
write-down for impairment of assets (see below) and $18,296,000 for
the years ended December 31, 1998 and 1997, respectively. In addition,
the Company had an accumulated deficit of approximately $6,731,000 at
December 31, 1998. Revenues from operations in 1998 and 1997 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 1999, and will also be required to pay the
remaining accrued interest balance of the pre-petition liabilities in
1999 (See Note 2). Accordingly, the Company will need to obtain
additional financing. Although management continues to explore various
financing alternatives, the Company does not have any commitments with
respect to any additional financing, and there can be no assurance
that the Company will be successful in obtaining additional
financing.
During 1998, management undertook a close analysis of the Company's
expenses, with a view to eliminating unnecessary or duplicative
expenses. Management believes that it has implemented all expense
reductions that are reasonably possible. Management continues to focus
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 exploring additional business
activities, the Company has not entered into any agreements or
commitments with respect to any such matters. Certain of such proposed
business activities could require the Company to obtain additional
financing, and there can be no assurance that the Company would be
able to obtain any such financing.
Reference should be made to "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere
herein for additional information.
Annual Review for Impairment of Long-lived Assets - In accordance with
generally accepted accounting principles, management reviews its
property and equipment to determine its recoverability through future
profitable operations due to the Company operating at a loss since it
emerged from Chapter 11 of the Bankruptcy Code in 1995. In prior
years, management believed that profitability could be achieved
through, among other things, leases with additional teams and leagues,
lease of the stadium name, reduction in administrative costs, leasing
the museum and store facilities for other uses, development of the
property into a year round facility and leasing
F-7
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
a portion of the parking facilities and water treatment equipment to
adjacent land owners upon construction of a strip mall.
One of management's attempts to reduce costs is an appeal of its real
estate tax assessment. In connection with tax appeal litigation in the
New Jersey Tax Court scheduled in April 1999, the Company engaged an
appraiser to present its belief that the assessment is excessive. The
appraiser estimated, in a report dated January 20, 1999, that (1) the
cost to replace the building and the value of the land as of October
1, 1996 (the valuation date being used by the appraiser) was
$9,661,000, (2)because of the continuing losses of the Company, fair
market value could not be determined by capitalization of the
Company's earnings and (3)comparable sales could not be identified by
the appraiser. In the circumstances, the appraiser estimated fair
value at $900,000 by capitalizing estimated "stabilized net operating
income" of property similar to the Company's stadium and land.
In view of the continuing doubt about the Company's ability to achieve
substantial improvements in operating results necessary to fully
recover their cost, management decided that a writedown of the stadium
and land to $900,000 would be appropriate as of December 31, 1998;
accordingly, a writedown of $11,544,942 was made in the fourth quarter
of 1998.
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.
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.
Since inception, 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 has incurred
significant net losses. Revenues from the rental of Skylands Park to
its primary tenant have not and will not be significant. The Company
generates additional revenues from the
F-8
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
rental of skyboxes and advertising, signs in the Skylands Park,
parking fees and other revenues from other baseball games, the rental
of Skylands Park for other sports and entertainment events, the
operation of the retail, recreation and other related facilities in
the Complex, and the Company's ownership in Heroes. 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 unsecured pre-petition liabilities pursuant to the terms of a
secured promissory note (the "Creditors' Note"). The Creditors' Note
bore interest on the unpaid principal balance at the prime rate plus
3%. The final payment under the Creditors' Note was paid on March 4,
1999. 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."
Through December 31, 1998, approximately $250,000 has been paid on the
claims of insiders, principally through the issuance of common stock.
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 Statement of Position 90-7, the Company did not 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 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
F-9
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
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 the
fair value (see Note 1). Property and equipment will be depreciated
using straight line and accelerated methods over the remaining
estimated useful lives of the assets. The estimated useful lives used
in computing depreciation are: buildings and improvements - 20 years,
and equipment - 5 to 10 years.
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
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 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
F-10
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
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 $136,000
at December 31, 1998.
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 antidilutive, due to net
losses for all periods presented.
Reclassification - Certain amounts previously reported have been
reclassified to conform to current year presentation.
Note 4 - Property and Equipment:
Property and equipment at December 31, 1998 consists of the following:
Land, buildings and improvements $882,000
Equipment 18,000
--------
$900,000
========
Note 5 - Investment in Limited Partnership:
The Company's statement of operations includes income of $88,698
(1998) and $93,985 (1997)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 $98,994 in 1998 and
$30,469 in 1997.
F-11
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
Summary balance sheet and operating data for Heroes as of December 31,
1998 and 1997 and for the years then ended follows:
1998 1997
---------- ----------
Balance sheet data:
Current assets $1,213,000 $1,450,000
Noncurrent assets 782,000 805,000
---------- ----------
$1,995,OO0 $2,255,000
========== ==========
Current liabilities $ 275,000 $ 474,000
Partners' capital 1,72O,OO0 1,781,OOO
---------- ----------
$1,995,OO0 $2,255,000
========== ==========
Operating data:
Gross receipts $1,877,000 $1,844,000
========== ==========
Net income $ 527,000 $ 558,000
========== ==========
Note 6 - Stockholders' Equity:
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 5,357 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 IS0 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 date of grant (five
years in the case of an IS0 granted to a holder of 10% or more of the
Company's outstanding common shares).
Through December 31, 1998, 4,950 options had been granted under the
Stock Option Plan, of which 4,250 options were exercised and 500
lapsed in 1997. The remaining 200 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 1998 under the
Stock Option Plan.
F-12
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
Shares Reserved for Issuance of Common Stock - Shares of common stock
reserved for issuance by the Company as of December 31, 1998 upon
exercise of options and warrants were as follows:
Class D Warrants 101,200
Stock option plan 1,107
-------
Total 102,307
=======
The number of shares issuable has been adjusted to reflect the
Company's l-for-l0 reverse stock split in 1999.
Reverse Stock Split - Effective at the close of business on January 4,
1999, 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 was 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 100,000 shares of common stock
of the Company at a nominal price for a limited period of time. Up to
25,000 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 25,000 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,OOO or more,
on or before December 31, 1998, from issuances of equity securities of
the Company. Up to an additional 25,000 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 25,000 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.
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 25,000 shares of common stock of the Company under the first
threshold stated above. In April 1998, pursuant to the Stock Award
Plan, the Company granted the right to purchase a total of 25,000
shares of stock at $2.50 per share to members of the Company's Board
of Directors. During the three months ended June 30, 1998, a charge of
$734,375 was recorded for the difference between the exercise price
and the price per share as reported on the NASDAQ SmallCap Market on
the date of grant, April 29, 1998. Through
F-13
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
December 31, 1998, 15,525 of the options had been exercised before the
remaining options expired. The Stock Award Plan was subsequently
terminated.
Note 7 - 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 $41,000 in 1998 and 542,000 in 1997.
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, 2OO5, 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).
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 approximated $46,000 at December 31, 1998 and is included
in other assets.
F-14
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC
NOTES TO FINANCIAL STATEMENTS
Note 8 - 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,
write down of property and equipment and certain accruals and result
in a deferred tax asset of approximately $ 1,484,000 at December 31,
1998 and $ 1,192,000 at December 31, 1997.
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, 1998
and 1997.
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:
Year Ended
December 31,
--------------------------
1998 1997
---------- ----------
Computed tax benefit on net loss
at federal statutory rate $ (4,523,000) $(281,000)
State income tax, net of federal
income tax effect (798,000) (49,000)
Writedown of property and
equipment 4,618,000 --
Effect of deductions not allowed in
prior years (58,000) --
Tax effect of net operating losses
not currently usable 761,000 330,000
---------- ---------
Provision (benefit) for income taxes $ -- $ --
========== =========
The significant components of the Company's deferred tax assets as of
December 31, 1998 are summarized below:
Net operating loss tax carryforwards $1,745,000
Net book value of assets written down 4,717,000
Accrued expenses 96,000
----------
6,558,000
(6,558,000)
----------
Valuation allowance --
==========
F-l5
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The Company has available at December 31, 1998 net operating loss
carryforwards totaling approximately $5,435,000 that may be applied
against future federal taxable income. The loss carryfowards will
expire through 2018. 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 9 - Subsequent Event:
Newark Bears - In February 1999, the Company entered into a lease
agreement, commencing in May 1999 and expiring in June 1999, with the
Newark Bears, Inc. (" Bears") a professional baseball team, which is a
member of the Independent Atlantic League. Pursuant to the agreement,
the Bears will play approximately 24 of its regular 1999 season home
games at Skylands Park during the months of May and June 1999. The
Bears will pay rent of approximately $72,000. The Company will also
retain the net proceeds of all alcohol beverage concessions.
F-16
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC
BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
----------- -----------
(Unaudited) (Note 1)
----------- -----------
ASSETS
PROPERTY AND EQUIPMENT, AT COST,
<S> <C> <C>
LESS ACCUMULATED DEPRECIATION $ 879,170 $ 900,000
CASH 59,739 221,975
INVENTORIES 54,401 71,335
INVESTMENT IN LIMITED PARTNERSHIP, AT EQUIT 371,978 466,759
OTHER ASSETS 94,487 118,048
----------- -----------
$ 1,459,775 $ 1,778,117
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Amounts due insiders, pursuant to Chapter 11 proceedings $ 82,115 $ 88,513
Accounts payable and accrued expenses 324,270 262,293
Accrued interest -- 63,542
Accrued compensation - officers and directors 168,600 170,775
----------- -----------
Total Liabilities 574,985 585,123
----------- -----------
STOCKHOLDERS' EQUITY:
Preferred stock, no par value; 500,000 shares
authorized, none issued -- --
Common stock, no par value, stated value $0.01
per share; 2,000,000 shares authorized
729,809 and 719,809 shares issued in 1999
and 1998, respectively 72,980 71,980
Additional paid-in capital 19,422,050 19,416,652
Accumulated deficit (18,610,240) (18,295,638)
----------- -----------
Total Stockholders' Equity 884,790 1,192,994
----------- -----------
$ 1,459,775 $ 1,778,117
=========== ===========
</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,
------------------------- ---------------------------
1999 1998 1999 1998
--------------- ---------------- --------------- ---------------
REVENUES:
<S> <C> <C> <C> <C>
Stadium and facility rentals and
admissions $ 180,813 $ 114,361 $ 144,591 $ 87,216
Retail sales 42,200 48,841 30,595 33,770
Concession sales 32,275 36,813 32,275 36,813
Other 22,118 7,486 22,118 7,477
----------- ----------- ----------- -----------
Totals 277,406 207,501 229,579 166,276
----------- ----------- ----------- -----------
COSTS OF SALES AND SERVICES:
Costs of stadium operations 113,467 103,290 79,187 71,220
Costs of retail and concession sales 46,132 38,054 37,878 25,683
Selling, general and administrative 412,039 368,458 212,532 188,527
Stock compensation to officers and
directors -- 734,375 -- 734,375
Depreciation 20,830 182,550 10,415 91,275
----------- ----------- ----------- -----------
592,488 1,426,727 340,012 1,111,080
----------- ----------- ----------- -----------
LOSS BEFORE INTEREST EXPENSE (315,062) (1,219,226) (110,433) (945,804)
INTEREST EXPENSE (INCOME), NET (460) (3,968) -- (4,518)
----------- ----------- ----------- -----------
NET LOSS $ (314,602) $1,215,258) $ (110,433) $ (941,286)
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 722,337 605,491 724,809 699,138
=========== =========== =========== ===========
BASIC AND DILUTED LOSS PER
COMMON SHARE $ (0.44) $ (2.01) $ (0.15) $ (1.35)
=========== =========== =========== ===========
</TABLE>
See notess to financial statements.
F-18
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
SIX MONTHS ENDED JUNE 30, 1999
(Unaudited)
<TABLE>
<CAPTION>
Common Stock Additional
------------------------------
Number of Amount Paid-in Accumulated
Shares Capital Deficit Total
------------------------------ ------------- ---------------- ---------------
<S> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 719,809 $ 71,980 $ 19,416,652 $ (18,295,638) $ 1,192,994
issuance of common stock upon
conversion of debt 10,000 1,000 5,398 6,398
NET LOSS (314,602) (314,602)
------------------------- ------------ -------------- -----------
BALANCES, JUNE 30, 1999 729,809 $ 72,980 $ 19,422,050 $ (18,610,240) $ 884,790
------- ------------ ------------ -------------- -----------
</TABLE>
See notes to financial statements.
F-19
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended June 30,
-------------------------
1999 1998
---------- ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net loss $ (314,602) $ (1,215,258)
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 20,830 182,550
Stock compensation awarded to officers and directors -- 734,375
Changes in operating assets and liabilities:
Inventory 16,934 22,284
Other assets 23,561 17,711
Accounts payable and accrued expenses (3,740) (132,609)
========== ============
Net cash flows from operating activities (257,017) (390,947)
---------- ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and improvements -- (16,763)
Investment in limited partnership -- (134,000)
Distribution from limited partnership 94,781 98,994
---------- ------------
Net cash flows from investing activities 94,781 (51,769)
---------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of creditors' notes payable and amount due insider -- (3,500)
Proceeds from issuance of common stock upon exercise
of warrants, net of costs -- 578,344
Proceeds from issuance of common stock, net of costs -- 188,807
Proceeds from issuance of warrants -- 92,014
---------- ------------
Net cash flows from by financing activities -- 855,685
---------- ------------
NET CHANGE IN CASH (162,236) 412,949
CASH, BEGINNING OF PERIOD 221,975 8,600
---------- ------------
CASH, END OF PERIOD $ 59,739 $ 124,896
========== ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ -- $ 145,755
========== ============
Income taxes paid $ -- $ --
========== ============
Issuance of common stock upon conversion of
outstanding debt $ 6,398 $ 248,844
========== ============
</TABLE>
See notes to financial statements
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 l0-KSB for
the year ended December 31, 1998 (the "l0-KSB") and is presented for
comparative purposes. All other financial statements are unaudited. In
the opinion of management, all adjustments, which include only normal
recurring adjustments necessary to present fairly the financial
position, results of operations and cash flows for all periods
presented, have been made. The results of operations for interim
periods are not necessarily indicative of the operating results for
the full year.
Footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been omitted in accordance with the published rules and
regulations of the Securities and Exchange Commission. These financial
statements should be read in conjunction with the financial
statements and notes thereto included in the l0-KSB.
Annual Review for Impairment of Long-lived Assets - In accordance with
generally accepted accounting principles, management reviews its
property and equipment to determine its recoverability through future
profitable operations due to the Company operating at a lose since it
emerged from Chapter 11 of the Bankruptcy Code in 1995. In years prior
to 1998 management believed that profitability could be achieved
through, among other things, leases with additional teams and leagues,
lease of the stadium name, reduction in administrative costs, leasing
the museum and store facilities for other uses, development of the
property into a year-round facility, and leasing a portion of the
parking facilities and water treatment equipment to adjacent land
owners upon construction of a strip mall.
One of management's attempts to reduce costs is an appeal of its real
estate tax assessment. In connection with tax appeal litigation in
the New Jersey Tax Court, which commenced in April 1999 and the
testimony phase was completed in May 1999, the Company engaged an
appraiser to present its belief that the assessment is excessive. The
appraiser estimated, in a report dated January 20, 1999, that (1) the
cost to replace the building and the value of the land as of October
1, 1996 (the valuation date being used by the appraiser) was
$9,661,000, (2) because of the continuing losses of the Company, fair
market value could not be determined by capitalization of the
Company's earnings and (3) comparable sales could not be identified by
the appraiser. In the circumstances, the appraiser estimated fair
value at $900,000 by capitalizing estimated "stabilized net operating
income" of property similar to the Company's stadium and land. The
appeal resulted in a valuation judgement of approximately $3.5
million, which would result in an estimated reduction in real estate
taxes of approximately $22,000, annually. The reduction is
retroactive to January 1, 1997. Management has determined a further
appeal will be filed.
In view of the continuing doubt about the Company's ability to achieve
substantial improvements in operating results necessary to fully
recover their cost, management
F-21
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
decided that a write-down of the stadium and land to $900,000 would be
appropriate as of December 31, 1998; accordingly, a write-down of
$11,544,942 was made in the fourth quarter of 1998.
Reclassification - Certain amounts previously reported have been
reclassified to conform to current year presentation.
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.
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 periods presented herein and since inception, 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 has incured significant net losses. Revenues from
the rental of Skylands Park to its primary tenant have not and will
not be significant. The Company generates additional revenues from the
rental of skyboxes and advertising signs in the Skyland Park, parking
fees and other revenues from other baseball games, the rental of
Skylands Park for other sports and entertainment events, the operation
of the retail, recreation and other related facilities in the
Complex, and the Company's ownership in Minor League Heroes, L.P.
("Heroes"), which is the limited partnership that owns and operates
the Company's primary tenant. 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 is in need of additional liquid
resources to enable the Company to sustain operations, and there can
be no assurance that the Company will be able to obtain such
additional liquid resources. In August 1999, the Company received
$500,000 in cash proceeds from an equity issuance and convertible loan
(see Note 4).
F-22
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
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 unsecured pre-petition liabilities pursuant to the terms of a
secured promissory note (the "Creditors' Note"). The Creditors' Note
bore interest on the unpaid principal balance at the prime rate plus
3%. The final payment under the Creditors' Note was paid on March 4,
1999. The Creditors' Note was secured by substantially all of the
assets of the Company.
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) 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 currant market price of such common stock
as reported on "NASDAQ". Through Sept 30, 1999, approximately
$257,000 has been paid on the claims of insiders, principally through
the issuance of common stock.
Equity interests, including interests of stockholders and warrant
holders, were not altered or impaired under the terms of the Plan.
However the terms of the Plan prohibit the Company from paying
dividends until all payments required under the Plan have been made.
Pursuant to SOP 90-7, the Company was not required to adopt
"fresh-start" reporting (and, as a result, revalue all of its assets
and liabilities) since the holders of the Company's existing & voting
stock immediately prior to confirmation held the same relative voting
interests after confirmation. In addition, since the Company will be
paying all of its pre-petition liabilities at their original principal
amounts, the Company did not recognize any material gain or loss as a
result of the confirmation of the Plan.
Note 3 - Stockholders' Equity:
Reverse Stock Split -Effective at the close of business on January 4,
1999, the Company effectuated a one-for-ten reverse stock split,
which has been retroactively reflected in the accompanying final
statements.
Note 4 - Subsequent Events:
On August 5, 1999, the Company issued, in a private placement, 500,000
shares of the Company's common stock to Robert J. Hartung for
$250,000. In addition. Mr. Hartung has loaned to the Company $250,000
payable in August 2001 with 10% interest per annum; the loan is
collateralized by the real estate and improvements of the Company, and
is convertible as to principal in whole (but not in part) at any time
into shares of common stock of the Company at $.50 per share. Upon
conversion of the principal of this note, all accrued interest
(other than interest on any prepaid principal) will be forgiven.
F-23
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Simultaneous with these transactions, Barry M. Levine and Robert H.
Stoffel, Jr. resigned as directors and officers of the Company, and
Mr. Hartung was elected to the board of directors and assumed the
responsibilities of President, Chief Operating Officer and Chief
Financial Officer.
F-24
<PAGE>
MILLENNIUM SPORTS MANAGEMENT, INC.
PROXY - 1999 ANNUAL MEETING OF SHAREHOLDERS
DECEMBER 29, 1999
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS IN CONNECTION WITH THE
1999 ANNUAL MEETING OF SHAREHOLDERS OF MILLENNIUM SPORTS MANAGEMENT, INC., TO BE
HELD ON DECEMBER 29, 1999. 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 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
Robert J. Hartung, Allen J. Schwalb or Robert N. Adams or any of them (or
________________________________), as his proxy with full power of substitution,
for and in the name of the undersigned to attend the 1999 Annual Meeting of
Shareholders to be held at the Ramada Inn North at I-4 and S.R. 434, Exit 49,
Longwood, Florida, at 10:00 a.m. local time on December 29, 1999, 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.
1. Election of the following proposed Directors to hold office until the Year
2000 Annual Meeting of Shareholders or until their successors shall be elected
and shall qualify:
Nominee
- -------
Robert J. Hartung [ ] FOR [ ] WITHHOLD
Robert N. Adams [ ] FOR [ ] WITHHOLD
Allen J. Schwalb [ ] FOR [ ] WITHHOLD
Craig McElroy [ ] FOR [ ] WITHHOLD
2. Ratify the appointment of Murphy & Townsend, LLC, as independent auditors for
the Company for the fiscal year ending December 31, 1999
[ ] FOR [ ] AGAINST [ ] 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
<PAGE>
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.
Dated____________________________ , 1999
________________________________________
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.
