U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
- - - --- Act of 1934
For the quarterly period ended March 31, 2000
Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from _______________ to _______________
Commission file number 000-21585
Worldwide Entertainment & Sports Corp.
(Exact Name of Small Business Issuer as Specified in Its Charter)
Delaware 22-3393152
(State or Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
29 Northfield Avenue, West Orange, New Jersey 07052
(Address of Principal Executive Offices)
(973) 325-3244
(Issuer's Telephone Number, Including Area Code)
(Former Name, Former Address and Former Fiscal Year, if Changed
Since Last Report)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required
to be filed by Section 12, 13 or 15(d) of the Exchange Act after the
distribution of securities under a plan confirmed by a court.
Yes No X
--- ---
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
Common Stock, $.01 par value - [ ] 19,206,771 as of May 15, 2000
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
PART I.
Item 1. Financial Statements
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
MARCH 31, 2000
(Unaudited)
ASSETS
Current assets
Cash $ 391,560
Certificates of deposit 286,430
Accounts receivable, less allowance for doubtful accounts of $278,135 404,306
Prepaid expenses and other current assets 1,163,150
Due from boxers and other related parties, net of allowances of $524,002 334,419
Investment in joint venture, net 75,000
Inventory of memorabilia 55,762
--------------
2,710,627
Total current assets
Property and equipment - at cost, net of accumulated depreciation 1,845,000
Goodwill, net of accumulated amortization 236,468
Security deposit and other assets 106,033
--------------
$ 4,898,128
==============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses $ 574,599
Loans payable 160,000
Income taxes payable 2,800
--------------
Total current liabilities 737,399
--------------
Stockholders' equity
Common stock, $.01 par value; 60,000,000 shares authorized,
18,921,771 shares issued and outstanding 189,218
Additional paid-in capital 28,166,304
Accumulated deficit (24,182,443)
Demand note receivable on private issuance of common stock (12,350)
--------------
4,160,729
--------------
Total liabilities and stockholders' equity $ 4,898,128
==============
See notes to unaudited condensed consolidated financial statements.
-2-
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
----------------------------------
2000 1999
------------ ------------
Purse income $ 17,000 $ 17,906
Contract and agency fees 39,734 -
Endorsements and marketing fees 56,000 25,765
Ticket revenues 3,465 60
Merchandise revenues 8,368 64,178
------------ ------------
124,567 107,909
------------ ------------
Cost of revenues 13,244 22,696
Training and related expenses 111,262 151,743
Promotional expenses 649,454 269,279
Selling, general and administrative expenses 2,669,552 827,069
------------ ------------
3,443,512 1,270,787
------------ ------------
Loss from operations (3,318,945) (1,162,878)
Other income 14,816 24,326
------------ ------------
Loss before income taxes (3,304,129) (1,138,552)
Income taxes 2,882 -
------------ ------------
Net loss $ (3,307,011) $ (1,138,552)
============ ============
Basic and diluted loss per share $ (0.18) $ (0.12)
============ ============
Weighted average common shares outstanding 18,536,811 9,217,333
============ ============
See notes to unaudited condensed consolidated financial statements.
-3-
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
--------------------------------
2000 1999
------------ ------------
Cash flows from operating activities $ (2,504,298) $(1,857,464)
Cash flows from investing activities (309,166) (500,000)
Cash flows from financing activities 471,974 5,493,788
------------ ------------
Net increase (decrease) in cash (2,341,490) 3,136,324
Cash and cash equivalents at beginning of period 2,733,050 115,160
------------ ------------
Cash at end of period $ 391,560 $ 3,251,484
============ ============
Supplemental cash flow disclosures
Income taxes $ 3,780 $ 3,000
Noncash financing activities
Issuance of common stock for consulting and other services 195,501 81,250
Stock-based compensation charged to expense 560,700 -
Undistributed stock in connection with acquisition 120,000 -
Issuance of common stock in connection with acquisition 37,846 -
Amounts payable in connection with acquisition 60,000 -
See notes to unaudited condensed consolidated financial statements.
-4-
WORLDWIDE ENTERTAINMENT & SPORTS CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - NATURE OF ORGANIZATION AND BASIS OF PRESENTATION:
1. Nature of Organization:
Worldwide Entertainment & Sports Corp. (the "Company") was incorporated
in Delaware on August 15, 1995, for the purpose of providing management,
agency, and marketing services to professional athletes, artists and
entertainers, principally to boxers, football players and motor sports
teams and drivers.
2. Basis of Presentation:
The condensed consolidated financial statements included herein have
been prepared by the company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are
adequate to make the information presented not misleading. The condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's annual
report on Form 10KSB for the year ended December 31, 1999.
The condensed consolidated financial statements included herein reflect,
in the opinion of management, all adjustments (consisting primarily only
of normal recurring adjustments) necessary to present fairly the results
for the interim periods. The results of operations for the three months
ended March 31, 2000, are not necessarily indicative of results to be
expected for the entire year ending December 31, 2000.
NOTE B - GOING CONCERN
The Company's condensed consolidated financial statements have been
presented assuming that the Company will continue as a going concern.
The Company has accumulated deficits of $24,182,443 through March 31,
2000, which includes non-cash expenses of approximately $10,000,000 and
has annual operating costs of approximately $6 million to $12 million
and no significant current sources of revenue to substantially mitigate
these operating deficiencies. Management's plans include obtaining
continued financing by issuing common stock while developing various
marketing strategies, including increasing revenues from its expanding
clientele of professional athletes and aggressively reducing expenses.
In conjunction with these plans, the Company has engaged consultants to
provide financial advisory, marketing, and merger and acquisition
services. The Company has endeavored to conserve cash by paying for a
large portion of these consulting agreements with common stock and
options. There is no assurance that the Company will achieve or sustain
profitable operations.
These conditions indicate that the Company may be unable to continue as
a going concern. Its ability to do so is dependent on its ability to
achieve profitable operations, and its ability to obtain any necessary
financing. The condensed consolidated financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.
NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
1. The condensed consolidated financial statements include the accounts
of the Company and all of its are wholly owned and majority owned
subsidiaries. All significant intercompany balances and transactions
have been eliminated.
2. Purse revenue is recognized upon completion of a fight as a
percentage of the boxer's purse. Ticket and commission revenues are
recognized at the time of the fight. Contract and agency fee revenues
are recognized ratably over the various athletic seasons. Merchandise
revenue is recognized upon the sale of memorabilia merchandise.
3. Basic net loss per share is computed by dividing net loss by the
weighted average number of shares of common stock outstanding during the
year. Diluted EPS has not been presented because its effect would be
anti-dilutive.
4. The Company files a consolidated federal income tax return and has
net operating loss carryforwards for Federal income tax purposes,
expiring in 2020, amounting to approximately $16,703,000. No deferred
tax asset is reflected in the accompanying condensed consolidated
balance sheet due to a related valuation allowance equal to the balance
of the deferred tax asset.
5. For purposes of the statement of cash flows, all highly liquid
investments with original maturities of three months or less are
considered to be cash equivalents. Cash balances are maintained in
several financial institutions insured by the Federal Deposit Insurance
Corporation up to $100,000 for each bank. At March 31, 2000, the
Company's uninsured cash balances amounted to approximately $574,000.
6. Inventory is stated at cost or market, whichever is lower. Cost is
determined by the first-in, first-out method.
7. Certain reclassifications have been made to the prior period
financial statements to conform to the current period presentation.
NOTE D - ISSUANCE OF COMMON STOCK
During the three months ended March 31, 2000, the Company completed a
private placement, which began in 1999 and sold 429,396 shares of
restricted common stock. The sale of the shares generated net proceeds,
after deduction of underwriting discounts and offering expenses, of
approximately $478,500. In connection with this private placement which
was part of a series of private placements commencing in October 1999
which raised gross proceeds of $6,500,000 for the Company, 900,000
shares of restricted common stock were issued to an investment banker.
On February 5, 2000, the Board of Directors authorized the issuance of
25,000 shares of restricted common stock pursuant to the asset purchase
agreement of Houseofboxing.com, Inc. (See Note F.)
On March 7, 2000, the Board of Directors authorized the issuance of
130,000 shares of restricted common stock in consideration for legal and
consulting services rendered to the Company.
NOTE E - STOCK OPTION GRANTS
On March 1, 2000, the Board of Directors authorized the issuance of
12,500 non-qualified options exercisable at $1.594 per share in
connection with boxing consulting services rendered to the Company.
On March 15, 2000, the Board of Directors authorized the issuance of
50,000 non-qualified options to WWES' employees exercisable at $2.00 for
a five-year term.
On March 15, 2000, the Board of Directors authorized the issuance
350,000 non-qualified options to a consultant excerisable at $1.625 for
a five-year term.
On March 27, 2000, the Board of Directors authorized the issuance of
20,000 non-qualified options exercisable at $1.50 per share for a
three-year term in connection with consulting services rendered to the
Company.
NOTE F - BUSINESS COMBINATION
On February 5, 2000, the Company acquired Houseofboxing.com, an internet
boxing web site, for $100,000 cash and 100,000 shares of restricted
common stock, valued at $158,000, to be paid over a term of 24 months.
The acquisition has been accounted for using the purchase method of
accounting. As a result of this transaction approximately $240,000 of
goodwill was recorded. The acquired Company did not have any significant
operations for the three maonths ended March 31, 2000.
NOTE G - REPORTABLE SEGMENTS
The Company has two reportable segments: representation of professional
athletes ("PA") and website e-commerce ("website") business in
connection with sports and entertainment. The accounting policies of the
segments are substantially the same as those described in the summary of
significant accounting policies, as presented in Note C. All revenues
generated in the segments are external. The website e-commerce business
has been operational since November 1999. For the three months ended
March 31, 2000, reportable segment information is as follows:
PA Website Total
------------ --------------- ------------
Reportable segments
External revenues $ 115,872 $ 8,695 $ 124,567
Depreciation and amortization 6,033 108,633 114,666
Operating loss (2,006,088) (1,312,857) (3,318,945)
Assets 2,697,967 2,200,161 4,898,128
Capital expenditures 3,038 252,679 255,717
The table below presents external revenues for groups of similar
products and services for the three months ended March 31, 2000:
Purses revenue from boxers $ 17,000
Contract and agency fees 39,734
Endorsement and marketing fees 56,000
Ticket revenues 3,465
Merchandise revenues 8,368
-----------
$ 124,567
===========
Both segments of the company are operating in and have derived their
revenues in the United States.
NOTE H - GOODWILL
Goodwill represents cost in excess of fair value of net assets acquired
from the purchase of the internet website transaction, and is being
amortized over 10 years. The company periodically re-evaluates its
recoverability. In management's opinion there has been no impairment of
goodwill at March 31, 2000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations
General
THE COMPANY
Worldwide Entertainment & Sports Corp. is a management and agency
company providing services to professional athletes and entertainers,
principally through its NFL agency business, its Motorsports Division, and its
Boxing Division. The Company has also expanded its business substantially in
1999 to the Internet through the incubation of its Internet subsidiary,
Sportcut.com, Inc. ("Sportcut"), a sports website successfully launched in
November 1999. Sportcut.com is focused on becoming a primary online destination
for cutting-edge and in-depth sports entertainment content and interactive
web-casting opportunities. In February 2000, the Company expanded its Internet
business through the acquisition of Houseofboxing.com, a popular boxing content
website ("HOB.com"). The Company is seeking to enhance the prospects for its
Internet subsidiaries Sportcut.com and HOB.com through the leveraging of the
Company's experience in the sports agency business and relationships, as well as
the entertainment experience and relationships of Sportcut.com's Chairman,
Charles Koppelman. The Company seeks to provide visitors to its Internet
subsidiaries with compelling sports and sports-celebrity coverage with an
insiders' look into the business and celebrity of sports with an added focus on
providing such coverage through interactive web-casting opportunities to enhance
the visitor's experience.
The Company's sports agency business is focused on three major sports:
the NFL, motorsports and boxing. In 1997, the Company established Worldwide
Football Management, Inc. ("WWFM"), as a separate entity to continue its agency,
marketing and management services to professional football players. WWFM
presently represents 42 NFL players, including, among others, Antonio Freeman of
the Green Bay Packers, Tyrone Wheatley of the Oakland Raiders, O.J. McDuffie of
the Miami Dolphins and Curtis Enis of the Chicago Bears. WWFM recently had its
finest draft results in its history during the NFL 2000 draft completed on April
16, 2000 with six of its players selected by NFL teams. Three of WWFM's players
were selected in the second round of the draft and were among the top 47 players
taken in the draft: cornerback Mark Roman, LSU, 2nd round, Cincinnati Bengals
(34th player selected); wide receiver Todd Pinkston, S. Miss., 2nd round
Philadelphia Eagles (36th player selected); and wide receiver Jerry Porter, W.
Virginia, 2nd round Oakland Raiders (47th player selected). The Company also
views its large NFL sports agency business as a fertile area for providing
inside access to its Internet companies, Sportcut.com and HOB.com.
In 1998, the Company established a Motorsports Division to generate
corporate sponsorships for race teams competing in different racing circuits, to
procure corporate endorsements for race teams and drivers and to develop
licensing opportunities to sell merchandise bearing the name and mark of certain
racing teams and drivers. In November 1998, the Company's Motorsports Division
procured a three year primary sponsorship from Castrol North America, Inc. for
the Brewco Motorsports racing car driver by Mr. Casey Atwood in the NASCAR Busch
Grand National Series. In March 2000, the Motorsports Division announced that it
had procured seven licensing contracts on behalf of Crews, Inc., a worldwide
leader in eye and face protection products based in Memphis, Tennessee. The
licensing contracts are with prominent NASCAR race car teams, drivers and
sponsors, including Dale Jarrett, the 1999 Winston Cup champion and the Winner
of the 2000 Daytona 500 winner; 1999 NASCAR rookie of the year, Tony Stewart;
prominent Winston Cup drivers Bobby Labonte; Rusty Wallace; Terry Labonte, Ricky
Rudd and Busch Grand National Series driver Casey Atwood. These licensing
contracts relate to Crews, Inc.'s licensing the marks for the drivers' names,
likeness, likeness of car, name of sponsor, team names and logos for the use on
Crews' eye and face safety glasses. Production and sale of these items on a mass
scale is planned by Crews to commence in the spring of 2000. The Company is
entitled to receive 20% of all royalties paid to the licensors under these
licensing contracts.
The Company's Boxing Division presently represents thirteen
professional boxers. The Company is a party to exclusive management contracts
with two boxers -- Shannon Briggs, and Danell Nicholson pursuant to which the
Company retains a percentage, ranging from 15% to 27-1/2%, of the boxers' purses
from all professional boxing contests and exhibitions during the term of the
contracts. Pursuant to those contracts, the Company is also entitled to receive
10% to 20% of all fees, honoria or other compensation payable to the boxers for
product endorsements, speaking engagements, personal appearances or other
commercial performances. In addition, the Company has entered into Management
Agreements, Promotion Agreements and Joint Venture Agreements by which it is
entitled to percentages of purses earned, and other revenues generated by,
eleven other boxers, including the current undefeated North American Boxing
Federation (NABF) heavyweight champion, Robert Davis. The Company similarly
intends to leverage its sports agency experience in boxing to provide content
and an insiders' access to its Internet subsidiaries, Sportcut.com and HOB.com.
Establishing and maintaining a presence in each of the foregoing areas
of sport-specific concentration requires significant expenditures. Each such
sports-specific division must develop a roster of clients, establish
relationships within their prospective sports and develop support services to
provide to their athletes. Only a portion of such expenses incurred by the
Company will result in the engagement by a client of the Company's services, and
it is often uncertain the extent to which, even if retained, a target client
will generate significant revenues to the Company. For example, the Company
incurs significant training expenses for the boxers under the Company's
management. Not all of such expenses are directly reimbursed pursuant to bout
agreements for such boxers. The Company must continuously incur such expenses in
contemplation of future revenues, the receipt of which is uncertain. For a more
complete description of the Company's business, see Form 10-KSB.
THE INTERNET BUSINESSES
In April 1999, the Company formed a subsidiary, Sportcut.com through
which the Company is developing and operating a sports-themed Internet business
located at www.sportcut.com (the "Sportcut Website"). The Sportcut Website
entertains its visitors through a combination of cutting edge and in-depth
sports and entertainment content, interactive webcasting opportunities and the
sale of sports merchandise. Sportcut.com seeks to integrate sports and
entertainment programming in an interactive fashion through the implementation
of its integrated web production strategy. The Company believes that
Sportcut.com will benefit from the Company's experience and relationships in the
sports agency business and will be able to leverage the Company's representation
of numerous professional athletes in the National Football League, NASCAR and
boxing to enhance Sportcut.com's content offerings to its visitors, providing
users with a close look at the sports business and the celebrity of sports. The
Sportcut Website presently offers several features including an online sports
magazine, online games, and an online community section. As of March 31, 2000,
Sportcut.com employed thirty full-time employees. Subsequently, in May 2000,
Sportcut.com reduced its staff to sixteen full-time employees in a
reorganization designed to eliminate labor redundancies and promote more
efficient business operations with less operating expenses.
Sportcut.com launched the Sportcut Website on November 30, 1999, and
received 12 million "hits" during its launch date according to
Nielsen/NetRatings, which Sports Illustrated Magazine called "a record for a web
sports site." The Sportcut.com launch coincided with the announcement that the
Sportcut Website was authorized by Pete Rose to serve as the home of the
exclusive online poll for visitors to express their support or opposition to
Pete Rose's induction into the Baseball Hall of Fame. The extraordinary success
of the launch of the Sportcut Website created widespread publicity for its brand
name, including obtaining approximately 250,000 registered users, and receiving
over 600 print placements discussing the Pete Rose on-line petition, including
two USA Today cover stories, a Newsweek cover story, and two Sports Illustrated
placements, among other print media as well as coverage/interviews with Mr. Rose
on the CBS Early Show, two segments on the Today Show, World News Tonight with
Peter Jennings, CBS Network News, The Late Show with Craig Kilborn, Extra,
Rivera Live, ESPN Sports Center, CNN, Fox Sports Network, WABC-NY, WCBS-NY,
WNBC-NY, and the Howard Stern Radio Show.
The Company believes that by offering visitors access to sports
entertainment content through its integrated web productions, Sportcut.com will
be able to generate revenues from direct sales, advertising, sponsorship and
strategic alliances. Sportcut.com has a seasoned and capable management team
which is executing this business strategy. In September 1999, the Company
announced that it had retained Jordan Schlachter to serve as Chief Executive
Officer to lead this business. Mr. Schlachter was previously employed as
Director of Financial Planning and Analysis of NBA Properties where he was
involved in financial operations, business planning, marketing and
administration. Pursuant to an Agreement dated as of October 12, 1999 between
Charles Koppelman, the Company and Sportcut, Mr. Koppelman agreed to serve as
Chairman of Sportcut.com for a minimum three year term through October 31, 2002.
Previously, in June 1999, the Company announced that Mr. Koppelman had joined
the Company's Board of Directors. Mr. Koppelman is currently chairman and Chief
Executive Officer of CAK Universal Credit Corp., a leading entertainment finance
company and was previously Chairman and Chief Executive Officer of EMI Records
Group North America. In the Company's view, the parent-subsidiary relationship
between the Company and Sportcut.com coupled with Charles Koppelman's reputation
and experience in building prominent entertainment companies may provide
Sportcut.com with an advantage in accessing the business and celebrity of
sports.
From October 1999 through February 2000, the Company closed on series
of private placements of its common stock, totaling $6,500,000 in gross
proceeds, concluding with a final private placement of $550,000 in February
2000. The proceeds from the private placements have been and will be used as
working capital for Sportcut.com and for the Company's general corporate
purposes. The Company believes that Sportcut.com will need substantial
additional capital during 2000 to fund its operations.
In February 2000, the Company announced its intention to build a
network of sports and entertainment companies on the Internet through a
combination of acquisitions and in-house development. As an initial step in
implementing this strategy, the Company, through its wholly owned subsidiary,
Worldwide Houseofboxing.com, Inc., acquired HOB.com, an Internet boxing website
located at www.Houseofboxing.com (the "HOB Website"), for cash and stock
totaling approximately $258,000, payable over five years. The HOB Website
acquisition is part of the Company's strategy to acquire and invest in
entertainment and sports related Internet businesses in order to leverage the
inter-company synergies between acquired Internet companies, Sportcut.com and
the Company's core athlete management business. The Company intends to seek the
necessary resources to acquire and grow such companies which in turn will
provide Sportcut.com with additional content and help drive traffic to the
Sportcut Website. The Company is also pursuing additional acquisitions in sports
Internet verticals, although there is no assurance that such acquisitions will
be effected.
In connection with the HOB Website acquisition, the principals of the
HOB Website, Gary Randall and Douglass Fischer, executed five-year employment
agreements with HOB.com pursuant to which they will continue to be responsible
for the overall operations of the HOB Website. The HOB Website is one of the
most comprehensive sources for boxing information on the Internet. HOB.com
provides boxing fans with fight news, streaming video and audio profiles of
prominent fighters and other personalities involved in boxing and pre-and
post-fight interviews with the top fighters and personalities in the sport and
business of boxing. In addition, HOB.com provides branded content distribution
to other sports publications and is developing an e-commerce store for its web
site through which HOB.com presently plans to sell boxing equipment and apparel
and boxing memorabilia. HOB.com is also exploring the prospects of marketing
pay-per-view licenses to view major boxing matches on-line at the HOB Website or
on the additional boxing related web site ownd by HOB.com,
www.boxingpayperview.com and is also considering the prospects of engaging in
live webcasts of boxing matches on the HOB Website, although there is no
assurance that HOB.com will enter such potential areas of business or that
available technology will make such business plans feasible. The Company
recently announced that the HOB Website attracted 843,000 page views during the
period from March 7 through April 8, 2000, as reported by Stargate LLC, which
provides server facilities for the HOB Website.
The Company expects to provide content to HOB.com through leveraging
its relationships with boxers managed by the Company's boxing division and
utilizing the professional relationships established by Chief Executive Officer
Marc Roberts who has twenty years experience as a boxing manager and promoter.
In March 2000, the Company announced that HOB.com had executed a five year
employment agreement with Mr. Michael Katz, the long-time prominent boxing
sports writer for The New York Daily News, to write boxing content exclusively
for HOB on a full-time basis. Mr. Katz has won numerous writing awards including
the Nat Fleischer Award for `excellence in boxing journalism", the sports
equivalent of a Pulitzer. The hiring of Michael Katz exemplifies the Company's
ability to leverage its contacts in the sports agency business to help provide
valuable content to its Internet subsidiary, HOB.com.
Three Months Ended March 31, 2000 Compared with Three Months Ended March 31,
1999
Net revenues for the three months ended March 31, 2000 were $124,567,
as compared to $107,909 for the three months ended March 31, 1999. Purse income
decreased minimally to $17,000 for the 2000 period, as compared to $17,906 for
the 1999 period. In addition, during the three months ended March 31, 2000, the
Company recognized merchandise revenues from the sale of memorabilia amounting
to $8,368 compared to memorabilia sales of $64,178 during the 1999 period. This
decrease was principally the result of the Company's having terminated its
relationship in 1999 with the executive principally responsible for memorabilia
sales. The three months ended March 31, 2000, the Company recognized $39,734 of
contract and agency fees, as compared to no contract agency fees reflected
during the comparable 1999 period. In addition, during the 2000 period,
marketing fee income was $56,000, as compared to $25,765 for the 1999 period, as
a result of increased activities by the Marketing Division of WWTS.
Total expenses for the three months ended March 31, 2000 increased to
$3,443,512, as compared to $1,270,787 for the 1999 period. Boxing, training and
related expenses amounted to $111,262 for the three months ended March 31, 2000
compared to $151,743 for the 1999 period. The principal reason for the decrease
was fewer number of bouts in the 2000 period, offset by costs incurred with new
joint venture arrangements commenced in 1999. Promotion and selling, general and
administrative expenses increased to $3,319,006 for the 2000 three-month period
as compared to $1,096,348 for the corresponding 1999 three-month period. Such
increases were attributable to the increase in total salaries, the operational
costs of the internet business and acquisition of HOB.com during the 2000
period. Included in the expenses for the three months ended March 31, 2000 is
$13,244 of costs of products sold relating to sports memorabilia sold by the
Company during this period. In addition, promotional and recruiting expenses,
consisting largely of travel and entertainment expenses, increased in the 2000
three month period in conjunction with the Company's increased level of
activities in the player agency and marketing areas and approximately $515,000
of expenses, primarily consulting fees, related to the Company and its internet
operation.
As a result of the foregoing, net loss for the three months ended March
31, 2000 increased to $3,307,011 as compared to $1,138,552 for the comparable
March 31, 1999 period.
Liquidity and Capital Resources
The Company's principal source of operating capital has been provided
by public and private sales of the Company's equity securities, as supplemented
by revenues from operations. At March 31, 2000, the Company had working capital
of $1,973,228 which amount was primarily the remaining net proceeds from the
Company's private placement of its common stock which was completed in February
2000.
The Company's material commitments for capital expenditure are
management salaries, anticipated training expenses and recruitment expenses. The
Company's Internet subsidiaries, Sportcut.com and HOB.com will continue to need
substantial capital funding in excess of $1,000,000 during the next twelve
months. Management salaries are approximately $875,000 per annum, which could
increase if the Company develops a need for additional executive management.
Training expenses for the year are estimated at approximately $600,000,
depending upon the number of bouts. Recruitment and promotional expenses are
estimated at approximately $1,000,000, subject to variations
depending upon player availability and recruiting success. The foregoing
represents the expected significant uses of working capital during the next
twelve months. The Company believes that its current cash and cash equivalents
will be sufficient to fund its operations over the next 3 months or longer.
However there can be no assurance that the Company will have sufficient revenues
after such time to fund its operating requirements. Accordingly, the Company may
be required to seek additional financing through bank borrowings, private or
public debt or equity financing or otherwise. The Company is presently raising
capital through a private placement of its securities through Janssen Partners,
Inc. as placement agent. Through May 12, 2000, the Company has raised $511,120
in net proceeds from such private placement. In addition, the Company is
presently in negotiation with several investment banks regarding providing
additional financing to the Company as well as to its Internet subsidiaries
Sportcut.com and HOB.com. There can be no assurance that such additional
financing will be available to the Company on favorable terms, if at all.
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
1. On February 18, 2000 the Company filed a Current Report on Form 8-K
to report the acquisition of HOB.com.
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Worldwide Entertainment & Sports Corp.
(Registrant)
Date: May 15, 2000 /s/ Marc Roberts
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Marc Roberts, President
Date: May 15, 2000 /s/ Roy Roberts
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Roy Roberts