-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, H4bXLHoVgc4dq488iT0iYNjaodFrSWNT/WfLmHXgjfWLoCQO7X6SohckeAAGEJsK 1tTFXdrUnXLbpYlxtcHaWg== 0000950130-98-005540.txt : 19981118 0000950130-98-005540.hdr.sgml : 19981118 ACCESSION NUMBER: 0000950130-98-005540 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980930 FILED AS OF DATE: 19981116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MILLENNIUM SPORTS MANAGEMENT INC CENTRAL INDEX KEY: 0000904075 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-AMUSEMENT & RECREATION SERVICES [7900] IRS NUMBER: 223127024 STATE OF INCORPORATION: NJ FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-22042 FILM NUMBER: 98751535 BUSINESS ADDRESS: STREET 1: ROSS' CORNERS US HGWY 206 STREET 2: COUNTY RTE 565 CITY: AUGUSTA STATE: NJ ZIP: 07822-0117 BUSINESS PHONE: 9733837644 MAIL ADDRESS: STREET 1: PO BOX 117 CITY: AUGUSTA STATE: NJ ZIP: 07822-0117 FORMER COMPANY: FORMER CONFORMED NAME: SKYLANDS PARK MANAGEMENT INC DATE OF NAME CHANGE: 19930510 10QSB 1 FORM 10-Q FOR THE PERIOD ENDED SEPTEMBER 30, 1998 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB x QUARTERLY REPORT UNDER SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1998 __ TRANSITION REPORT UNDER SECTION 13 or 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission file number 0-22042 MILLENNIUM SPORTS MANAGEMENT, INC. (Exact name of small business issuer as specified in its charter) New Jersey 22-3127024 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) Ross' Corner U.S. Highway 206 and County Route 565 Augusta, New Jersey 07822 (Address of Principal Executive Offices) (Zip Code) (973) 383-7644 (Issuer's telephone number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---- ---- APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE YEARS: Check whether the registrant filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes No ---- ---- APPLICABLE ONLY TO CORPORATE ISSUERS: State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date 7,188,085 shares of common stock outstanding as of November 11, 1998. TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (check one): Yes No X ---- ---- MILLENNIUM SPORTS MANAGEMENT, INC. BALANCE SHEETS
September 30, December 31, 1998 1997 (Unaudited) (Note 1) ASSETS PROPERTY AND EQUIPMENT, AT COST, LESS ACCUMULATED DEPRECIATION $ 12,541,125 $ 12,799,986 CASH 392,218 115,295 INVENTORIES 50,832 85,170 INVESTMENT IN LIMITED PARTNERSHIP, AT EQUITY 486,561 485,555 OTHER ASSETS 110,461 108,680 ------------ ------------- $ 13,581,197 $ 13,594,686 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES: Amounts payable settled pursuant to Chapter 11 proceedings $ 90,865 $ 339,609 Accounts payable and accrued expenses 187,340 250,110 Accrued interest 63,542 209,297 Accrued compensation - officers and directors 170,775 170,775 ------------ ------------- Total Liabilities 512,522 969,791 STOCKHOLDERS' EQUITY: Preferred stock, no par value; 500,000 shares authorized, none issued -- -- Common stock, no par value, stated value $0.10 per share; 20,000,000 shares authorized 7,188,085 and 4,353,607 shares issued in 1998 and 1997, respectively 718,808 435,362 Additional paid-in capital 18,767,384 17,182,134 Accumulated deficit (6,417,517) (4,992,601) ------------ ------------- Total Stockholders' Equity 13,068,675 12,624,895 ------------ ------------- $ 13,581,197 $ 13,594,686 ============ ============
2 MILLENNIUM SPORTS MANAGEMENT, INC. STATEMENTS OF OPERATIONS (Unaudited)
Nine months ended Three months ended --------------------------------------------------------------------- September 30, September 30, --------------------------------------------------------------------- 1998 1997 1998 1997 REVENUES: Stadium and facility rentals and admissions $ 327,411 $ 300,817 $ 213,052 $ 168,765 Retail and concession sales 207,689 228,533 122,036 133,653 Other 8,645 13,492 1,159 992 ----------- ----------- ----------- ----------- Totals 543,745 542,842 336,247 303,410 ----------- ----------- ----------- ----------- COSTS OF SALES AND SERVICES: Costs of stadium operations 196,979 159,984 93,847 64,237 Costs of retail and concession sales 111,950 136,743 73,897 68,362 Selling, general and administrative 583,266 613,929 214,652 214,158 Stock compensation to officers and directors 734,375 -- -- -- Depreciation 273,825 276,108 91,275 92,436 ----------- ----------- ----------- ----------- 1,900,395 1,186,764 473,671 439,193 ----------- ----------- ----------- ----------- LOSS FROM OPERATIONS (1,356,650) (643,922) (137,424) (135,783) ----------- ----------- ----------- ----------- OTHER INCOME (EXPENSE) Equity income of limited partnership 100,000 100,000 100,000 100,000 Write down of investment joint venture (175,000) -- (175,000) -- Interest (net) 6,734 (59,247) 2,766 (9,464) ----------- ----------- ----------- ----------- (68,266) 40,753 (72,234) 90,536 ----------- ----------- ----------- ----------- NET LOSS $(1,424,916) $ (603,169) $ (209,658) $ (45,247) =========== =========== =========== =========== WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 6,434,515 1,644,391 7,177,194 2,256,604 =========== =========== =========== =========== NET LOSS PER COMMON SHARE $ (0.22) $ (0.37) $ (0.03) $ (0.02) =========== =========== =========== ===========
3
Common Stock ----------------------- Additional Number Paid-in Accumulated of Shares Amount Capital Deficit Total -------------------------------------------------------------------- BALANCE, DECEMBER 31, 1997 4,353,623 $ 435,362 $ 17,182,134 $ (4,992,601) $ 12,624,895 Issuance of common stock upon exercise of: Underwriter warrants 1,500,000 150,000 -- -- 150,000 Class A warrants 115,844 11,584 104,260 -- 115,844 Class D warrants 925,000 92,500 370,000 -- 462,500 Issuance of common stock upon conversion of debt 138,390 13,839 261,405 -- 275,244 Stock compensation to officers and directors -- -- 734,375 -- 734,375 Common stock issued to officers and directors 155,228 15,523 23,196 -- 38,719 Issuance of Class D Warrants -- -- 80,464 -- 80,464 Issuance of Class A Warrants -- -- 11,550 -- 11,550 NET LOSS -- -- -- (1,424,916) (1,424,916) --------- ------------ ------------ ------------ ------------ BALANCES, SEPTEMBER 30, 1997 7,188,085 $ 718,808 $ 18,767,384 $ (6,417,517) $ 13,068,675 --------- ------------ ------------ ------------ ------------
4 MILLENNIUM SPORTS MANAGEMENT, INC. STATEMENTS OF CASH FLOWS (Unaudited)
Nine months ended September 30, ----------------------------------- 1998 1997 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (1,424,916) $ (603,169) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization 273,825 276,108 Stock compensation awarded to officers and directors 734,375 Equity in income of limited partnership (100,000) (100,000) Write down of investment in joint venture 175,000 -- Common stock issued for services rendered -- 375 Changes in operating assets and liabilities: Inventory 34,338 40,133 Other assets (12,781) (125,147) Accounts payable and accrued expenses (208,525) (28,541) ------------ ------------ Net cash flows from operating activities (528,684) (540,241) ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and improvements (14,964) (33,705) Investment in joint venture (134,000) Distribution from limited partnership 98,994 30,469 ------------ ------------ Net cash flows from investing activities (49,970) (3,236) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES - Proceeds from notes payable -- 75,000 Repayments of creditors' notes payable and amounts due insiders (3,500) (398,808) Proceeds from issuance of common stock upon exercise of warrants, net of costs 767,063 839,298 Proceeds from issuance of warrants 92,014 142,279 Payments of offering costs -- (46,324) ------------ ------------ Net cash flows from by financing activities 855,577 611,445 ------------ ------------ NET CHANGE IN CASH 276,923 67,968 CASH, BEGINNING OF PERIOD 115,295 8,600 ------------ ------------ CASH, END OF PERIOD $ 392,218 $ 76,568 ============ ============ SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid $ -- $ 38,480 ============ ============ Income taxes paid $ -- $ -- ============ ============ Issuance of common stock upon conversion of outstanding debt $ 275,244 $ -- ============ ============
5 MILLENNIUM SPORTS MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) Note 1 - Basis of Presentation: The balance sheet at the end of the preceding fiscal year has been derived from the audited balance sheet contained in Millennium Sports Management, Inc.'s (the "Company's") Annual Report on Form 10-KSB for the year ended December 31, 1997 (the "10-KSB") and is presented for comparative purposes. All other financial statements are unaudited. In the opinion of management, all adjustments, which include only normal recurring adjustments necessary to present fairly the financial position, results of operations and cash flows for all periods presented, have been made. The results of operations for interim periods are not necessarily indicative of the operating results for the full year. Footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted in accordance with the published rules and regulations of the Securities and Exchange Commission. These financial statements should be read in conjunction with the financial statements and notes thereto included in the 10-KSB. Net Income (Loss) Per Common Share - In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards 128, Earnings Per Share ("SFAS 128") which is effective for financial statements for both interim and annual periods ending after December 31, 1997. The Company adopted SFAS 128 in the fourth quarter of 1997. SFAS 128 replaces the presentation of primary and fully diluted earnings per share with basic and diluted earnings per share. Basic earnings per share is calculated based on the weighted average number of common shares outstanding during the period and excludes all dilution. Diluted earnings per share is calculated by using the weighted average number of common shares outstanding, while also giving effect to all dilutive potential common shares that were outstanding during the period. Such dilutive potential common shares have been excluded since the effect would be anti-dilutive, due to net losses for all periods presented. SFAS 128 had no impact on the loss per share for the three and nine months ended September 30, 1997. Reclassification - Certain amounts previously reported have been reclassified to conform to current year presentation. 6 MILLENNIUM SPORTS MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) Note 2 - Organization, Proceedings Under Chapter 11 And Subsequent Operation Organization and development - The Company operates a regional sports entertainment and recreation center in Sussex County, New Jersey, known as the Skylands Park Sports and Recreation Center (the "Complex"). The Complex includes a professional baseball stadium ("Skylands Park") used for sports and other entertainment events, and other adjacent recreational and commercial facilities (the "Related Facilities") that include, among other things, a sports apparel and collectibles store, a wholesale and retail sporting goods outlet, batting cages, and a video parlor. During the nine months ended September 30, 1998, the years ended December 31, 1997 and 1996 and since inception, the Company has generated only limited amounts of revenues from the events held at Skylands Park and the operation of the Related Facilities and, as a result, the Company incurred significant net losses during such periods. Management expects that revenues from the rental of Skylands Park to its primary tenant will not be significant. Instead, management expects that the Company will generate revenues primarily from the rental of skyboxes and advertising signs in Skylands Park, the rental of Skylands Park for certain other sports and entertainment events, concession sales, and the operation of the Related Facilities in the Complex. Accordingly, the Company's ability to generate significant additional revenues will be dependent upon, among other things, its ability to generate future attendance at events and the success of its other commercial operations. Management believes that the Company may need to obtain additional liquid resources to enable it to sustain operations beyond 1998. Therefore, management expects that to sustain future operations, the Company will need to obtain additional financing through the exercise of its remaining outstanding warrants or the issuance of other equity securities. Although management continues to explore various financing alternatives, the Company does not have any commitments with respect to any additional financing. Chapter 11 Filing and Confirmation of Plan of Reorganization -The Company's Plan of Reorganization (the "Plan") was confirmed by the Company's creditors and the United States Bankruptcy Court on April 13, 1995 (the "Confirmation Date"). Since the Confirmation Date, the Company has paid the unsecured pre-petition liabilities pursuant to the terms of a secured promissory note (the "Creditors' Note"). The Creditors' Note bore interest on the unpaid principal balance at the prime rate plus 3%. The difference between the interest paid and the interest accrued became due 7 MILLENNIUM SPORTS MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) on April 26, 1998. The Company has set aside sufficient funds to make such final payment under the Creditors' Note, and intends to make such payment upon final reconciliation of the amount due. Claims of "insiders" (generally, former directors and executive officers of the Company and certain of their affiliates) of approximately $339,609 as of the Confirmation Date (including accrued salaries and loans and advances made to the Company) has been reduced, through the issuance of common stock, to approximately $91,000 as of September 30, 1998, and may be paid from time to time after payment in full of the Creditors' Note, as the cash flow of the Company may permit; however, each insider has the option to elect to be paid in shares of common stock of the Company valued at the then current market price of such common stock as reported on "NASDAQ," and approximately $248,000 of such claims has been paid in such manner through September 30, 1998. Equity interests, including interests of stockholders and warrant holders, were not altered or impaired under the terms of the Plan. However, the terms of the Plan prohibit the Company from paying dividends until all payments required under the Plan have been made. Pursuant to SOP 90-7, the Company was not required to adopt "fresh-start" reporting (and, as a result, revalue all of its assets and liabilities) since the holders of the Company's existing voting stock immediately prior to confirmation held the same relative voting interests after confirmation. In addition, since the Company will be paying all of its pre-petition liabilities at their original principal amounts, the Company did not recognize any material gain or loss as a result of the confirmation of the Plan. Note 3 - Stockholders' Equity: In December 1997, the Company again extended the expiration date of the outstanding Class A common stock warrants to June 30, 1998 from the original expiration date of September 23, 1995, at which time the exercise price was reduced from $4.00 to $2.80 per warrant, with each warrant continuing to entitle the exercising holder to receive the increased amount of 2.8 shares of the Company's common stock. In April 1998, such expiration date was further extended to September 30, 1998, and was subsequently further extended to December 31, 1998. A total of 923,775 Class A Warrants remain unexercised at September 30, 1998. The Class A Warrants are subject to redemption at $.10 per Class A Warrant on 30 days' prior written notice if the closing bid price of the Company's common stock equals or exceeds $32.70 per share for any 20 trading days within a period 8 MILLENNIUM SPORTS MANAGEMENT, INC. NOTES TO FINANCIAL STATEMENTS (Unaudited) of 30 consecutive trading days ending on the fifth day prior to the date of the notice of redemption. Note 4 - Stock Award Plan: On April 29, 1998, pursuant to the Company's stock award plan adopted in December 1996 (the "Stock Award Plan"), the Company granted the right to purchase a total of 250,000 shares of stock at $.25 per share to members of the Company's Board of Directors. In accordance with generally accepted accounting principles, a non-cash charge to earnings of $734,375 was recorded as compensation expense, representing the difference between the exercise price and the fair market value per share on the date of grant for the full award of 250,000 shares. As of September 30, 1998, rights to purchase 155,228 of such shares have been exercised, and rights to purchase 94,772 shares remain outstanding. Note 5 - Lease Cancellation: In July 1998, the Ladies Professional Baseball league ("LPB"), a secondary tenant of Skylands Park, canceled all further league games for the balance of 1998, including the remaining 20 home games for 1998 of the LPB's New Jersey franchise, which were to be played at Skylands Park. The Company is uncertain if LPB will satisfy the remaining lease payments, consisting of the second half of payments for 1998 and all of 1999 and 2000. 9 MILLENNIUM SPORTS MANAGEMENT, INC. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS The following discussion and analysis should be read in conjunction with the information set forth in the unaudited financial statements and notes thereto included elsewhere herein and the audited financial statements and the notes thereto included in the 10-KSB. Overview Skylands Park is a 4,300-seat professional baseball stadium which, among other things, has been and will be leased for sports and other entertainment events. The Complex follows a courtyard village design theme, and includes, among other things, a sports apparel and collectibles store, a wholesale and retail sporting goods outlet, batting cages, and a video parlor. The New Jersey Cardinals ("the Team"), which is a member of the Class "A" level New York-Penn League, plays its regularly-scheduled home games and playoff home games at Skylands Park. The Company has a minority ownership interest in Minor League Heroes, L.P. ("Heroes"), which is the limited partnership that owns the Team. In February 1998, the Company entered into a three-year lease agreement, commencing in 1998, with Ladies Professional Baseball ("LPB"), a women's professional baseball league. Pursuant to the agreement, the New Jersey Diamonds (the "Diamonds"), a league-owned team, was to play its regular season home games, approximately 28 per year, at the Skylands Park during the months of July through September. In July 1998, LPB canceled all further league games for the balance of 1998, including the remaining 20 Diamonds' home games. The Company is uncertain if LPB will satisfy the remaining lease payments, consisting of the second half of payments for 1998 and all of 1999 and 2000. The Company currently operates, in the Complex, the Skylands Sporting Goods store, which sells, year-round both at retail and at wholesale, a broad range of sporting goods relating to baseball and other sports, and Team paraphernalia. The Company also operates, in the Complex, a year-round recreational facility known as the "Barn", which contains batting cages, a sports video parlor, mini-gym and children's party room, and a subleased space in which an unaffiliated third party sells sports collectibles. The Company also intends to utilize the professional skills and collective sports-related backgrounds of its management team to provide strategic, financial and operational consulting services to small to mid-sized professional franchise owners and sports facility operators. Such backgrounds include Mr. Stoffel's three years of experience as Vice President and Chief Controller of the New York Yankees, Mr. Levine's five years of experience as an executive officer of a publicly traded sports memorabilia and collectibles company, and Mr. Gordon's and Mr. Klee's eight years of experience as managing owners and operators of minor league baseball teams. However, the Company has not entered into any definitive consulting agreements. 10 MILLENNIUM SPORTS MANAGEMENT, INC. The Company anticipates receiving approximately $42,000 per year in rent from the Team, which management does not believe will constitute a significant portion of the Company's revenues. The Company expects to generate additional revenues from, among other things, the rental of skyboxes and advertising signs in Skylands Park, the rental of Skylands Park for other sports and entertainment events, the operation of the related facilities in the Complex, and the Company's direct and indirect ownership interest in the limited partnership that owns the Team. For the 1998 baseball season, the Company rented and received payment for six skyboxes for the 1998 Team season for an aggregate annual rental of $56,640. In addition, the Company is entitled to 20% of all revenues from advertising sign rental commitments at Skylands Park. The Company's 20% share of such revenues in 1998 is approximately $75,000. In March 1998, the Company, entered into a start-up joint venture (known as Stadium Capital, Inc.) as a 50% owner with third parties to develop a golf facility in Florida, and the Company has invested $150,000 in cash for capital, $25,000 in expense reimbursements, and 1,000,000 Class D Warrants of the Company in respect of the joint venture. In September 1998, the Company determined that the possibility of development of a golf facility was remote and therefore has determined to write down its investment in such joint venture. Plan of Reorganization In April 1995, the Company paid $1,600,000 in respect of its pre-petition unsecured liabilities (including payment in full of de minimis claims, and subject to the Company's reservation of rights to contest a limited number of unsecured claims), leaving a balance due in respect of such claims of approximately $2,608,000, which was payable pursuant to the terms of the Creditors' Note. The Company has fully paid the principal on the Creditors' Note, primarily out of net equity proceeds from the sale of common stock by the Company, leaving a balance of accrued interest of approximately $64,000 (for which the Company has set aside funds sufficient to pay such amount in full). The Creditors' Note is secured by substantially all of the assets of the Company as same are constituted from time to time. Until the Creditors' Note and related accrued interest have been paid in full, the Company continues to report to and operate under the review of the independent accountants retained by the official committee of the unsecured creditors of the Company. Claims held by insiders (consisting of past and present directors and executive officers of the Company and certain of their affiliates) in respect of pre-petition obligations (including but not limited to pre-petition loans made to the Company), originally in the aggregate amount of approximately $339,609, may be paid from time to time after payment in full of the Creditors' Note, as the cash flow of the Company may permit; or, at the option of each insider, may be paid at any time or from time to time in shares of common stock of the Company valued at the then-current market price of such common stock as reported on NASDAQ. During the nine months ended September 30, 1998, approximately $248,000 was repaid upon conversion of such insider claims into 78,390 shares of common stock, leaving an unpaid balance of approximately $91,000 at September 30, 1998. 11 MILLENNIUM SPORTS MANAGEMENT, INC. Equity interests, including interests of stockholders and warrantholders, are not altered or impaired under the terms of the Plan. However, pursuant to the Plan, the Company is not permitted to pay any dividends on its common stock until all required payments under the Plan have been made. The foregoing information regarding the Plan is merely a summary of certain material provisions thereof, and is qualified in its entirety by the specific provisions of the Plan, a copy of which was previously filed as an exhibit to the Company's Annual Report on Form 10-KSB for the year ended December 31, 1994. Liquidity and Capital Resources The Company's primary sources of liquidity since its inception have been the sale of shares of common stock to and short-term borrowings from certain shareholders, which were used during the period from inception through March 1993; the net proceeds of approximately $739,000 from a private placement of common stock and warrants, which were used during the period from March 1993 through September 1993; the net proceeds of approximately $5,815,000 from an initial public offering of common stock and Class A Warrants, which were used during the last quarter of 1993 and the first quarter of 1994; short-term borrowings from certain officers, former shareholders and other related and unrelated parties during March, April and May 1994, which were used during the first and the beginning of the second quarter of 1994; proceeds from the exercise of Class A Warrants and Class B Warrants, which were received during the fourth quarter of 1994, and in 1995; net proceeds of $1,500,000 from a private placement of common stock in August 1995 (all of which net proceeds were utilized for partial prepayment of the Creditors' Note); and net proceeds of $2,965,228 from the issuance of and exercise of Class A Warrants and Class D Warrants and underwriter's warrants in 1997 and the first nine months of 1998. As of September 30, 1998, the Company had cash totaling approximately $392,000. The Company may need to obtain additional liquid resources to enable the Company to sustain future operations beyond 1998, whether through the exercise of its remaining outstanding warrants, through the issuance of other equity securities and/or from other sources. Although management continues to explore various financing alternatives, the Company does not have any commitments with respect to any additional financing. Comparative Quarterly Results The Company's stadium and facility rentals and admissions during the three and nine months ended September 30, 1998 was approximately $213,000 and $327,000, as compared to approximately $169,000 and $301,000 in the three and nine months ended September 30, 1997. The 26% and 9% increases are principally attributable to additional skybox rentals and greater use of the other facilities (i.e., batting cages). Retail and concession sales decreased approximately $12,000 and $21,000 to approximately $122,000 and $208,000 for the three and nine months ended September 30, 1998, from approximately $134,000 and $229,000 for the three and nine months 12 MILLENNIUM SPORTS MANAGEMENT, INC. ended September 30, 1997. The decrease is principally attributable the reduction in traffic in the stadium and reduced merchandise selection. Cost of stadium operations increased by approximately 46% to approximately $94,000 for the three months ended September 30, 1998, as compared to approximately $64,000 for the same period in 1997; and increased by approximately 23% to approximately $197,000 for the nine months ended September 30, 1998 as compared to approximately $160,000 for the same period in 1997. The overall increase for the three and nine months reflects an increase in employees for special events and repairs to a water treatment facility. Cost of retail and concession sales as a percent of retail and concession sales increased to 61% for the three months ended September 30, 1998 and 1997 as compared to 51% in the comparable prior year period. Cost of retail sales as a percent of retail sales decreased to approximately 54% for the nine months ended September 30, 1998 as compared to 60% in the comparable prior year period. The decrease for the nine months ended September 30, 1998, is due primarily to a continued change in the product mix allowing for higher profit margins. Selling, general and administrative expenses decreased by approximately $31,000 to approximately $583,000 for the nine months ended September 30, 1998, as compared to approximately $614,000 for the same period in 1997. The reduction is due principally to reduced costs for the electric service to the Complex. Selling, general and administrative expenses for the three months ended September 30, 1998 and 1997 remained relatively constant at approximately $214,000. On April 29, 1998, pursuant to the Company's stock award plan adopted in December 1996 (the "Stock Award Plan"), the Company granted the right to purchase a total of 250,000 shares of stock at $.25 per share to members of the Company's Board of Directors. In accordance with generally accepted accounting principles, a non-cash charge to earnings of $734,375 was recorded as compensation expense, representing the difference between the exercise price and the fair market value per share on the date of grant for the full award of 250,000 shares. As of September 30, 1998, rights to purchase 155,228 of such shares have been exercised, and rights to purchase 94,772 shares remain outstanding. Depreciation and amortization remained relatively stable at approximately $92,000 and $274,000 for the three and nine months ended September 30, 1998 as compared to $92,000 and $276,000 for the three and nine months ended September 30, 1997. The charge for $175,000 as a write down of investment in a joint venture is a result of the Company's determination that the probability of the Stadium Capital golf stadium facility coming to fruition was remote. Net loss in the three and nine months ended September 30, 1998, was approximately $210,000 and $1,425,000 as compared to approximately $45,000 and $603,000 in the three and nine months ended September 30, 1997. The increase is primarily attributable to the charges relating to stock compensation to directors and the write-off of investment in joint venture, offset by a decrease in interest expense of approximately $9,000 and $59,000 for the three and nine months. 13 MILLENNIUM SPORTS MANAGEMENT, INC. In 1998, management of the Company has undertaken a close analysis of the Company's expenses, with a view to eliminating unnecessary and/or duplicative expenses, while maintaining the Complex in good condition. Management believes that it has implemented all expense reductions that are prudent and reasonably possible, and that efforts to improve the Company's business are now best focused on increasing gross revenues through the development of additional sources of revenues, preferably during the winter months or on a year-round basis. Although management is actively exploring possible additional business activities, the Company has not entered into any agreements or commitments with respect to any such matters. Certain of such proposed business activities could require the Company to obtain additional financing, and there can be no assurance that the Company would be able to obtain any such financing. Seasonality The Company's cash flow from operations is significantly greater in each spring, summer and fall than in the winter months, when Skylands Park is not rented for outdoor events, and the Company relies upon income generated by its other businesses. In the event that the Company is unable to generate sufficient cash flow from operations during the seasons of full operations, or the Company is unable to develop or acquire additional business which will generate cash flow in the off season, the Company may be required to utilize other cash reserves (if any) or seek additional financing to meet operating expenses, and there can be no assurance that there will be any other cash reserves or that additional financing will be available or, if available, on reasonable terms. Year 2000 Compliance The Company is not itself dependent to any significant extent on computer or other embedded information systems, nor, to the Company's knowledge, are any of its customers dependent on computer or other embedded information systems in such customers' dealings with the Company. Certain of the Company's vendors and suppliers may, however, be so dependent, although the Company has not undertaken any investigation to determine the nature or extent of any Year 2000 issues that may be posed by vendor unpreparedness. Thus, while the Company will not be required to incur any material costs or expenses in order to adapt, modify or upgrade its systems to be Year 2000 compliant, the Company still needs to determine the degree of its vendors' preparedness and whether alternate suppliers will be needed or available in the event of any disruption in supply of goods or services to the Company. The Company expects to discuss with its key vendors the status of their Year 2000 readiness in the fourth quarter of 1998, and to promptly thereafter identify possible alternative suppliers to the extent that such action may be called for based on any relative lack of Year 2000 readiness by existing suppliers. The Company does not expect the cost of this investigation to be material. 14 MILLENNIUM SPORTS MANAGEMENT, INC. PART II - OTHER INFORMATION Item 1 - Legal Proceedings None Item 6 - Exhibits and Reports on Form 8-K. (a) Exhibit 11 - Weighted Average Shares (b) Exhibit 27 - Financial Data Schedule (c) On September 21, 1998, the Company filed a current report on Form 8-K, in respect of the extension of the exercise period for its outstanding Class A Warrants. 15 MILLENNIUM SPORTS MANAGEMENT, INC. SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MILLENNIUM SPORTS MANAGEMENT, INC. - ---------------------------------- (Registrant) Signature Title Date /s/ Robert H. Stoffel, Jr. Chief Financial Officer November 12, 1998 - -------------------------- Robert H. Stoffel, Jr. 16 1997 Month Shares Weighted Weighted Issued 9 3 Opening 1,214,887 1,214,887 1,214,887 January -- -- -- February -- -- -- March 86,800 67,029 86,800 April -- -- -- May 125,000 68,750 125,000 June 332,280 147,751 332,380 July 215,000 62,637 187,624 August 420,000 75,693 227,080 September 400,000 27,644 82,933 October 1,066,668 -- -- November 201,852 -- -- December 291,120 -- -- 4,353,607 1,664,391 2,256,604 1998 Month Shares Weighted Weighted Issued 9 3 Opening 4,353,623 4,353,623 7,166,185 January 223,504 216,302 -- February 17,360 14,872 -- March 2,096,406 1,563,036 -- April 309,424 196,312 -- May 160,268 83,874 -- June 5,600 2,308 -- July 10,000 3,011 8,333 August 2,000 380 1,000 September 9,900 781 1,660 October -- -- -- November -- -- -- December -- -- -- 7,188,085 6,434,499 7,177,179 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB FOR 9/30/98 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1998 JAN-01-1998 SEP-30-1998 392,218 0 0 0 50,832 443,050 14,076,317 1,535,192 13,581,197 512,222 63,542 0 0 718,808 12,349,867 13,581,197 207,689 543,745 111,950 582,754 1,317,641 0 (6,734) (1,424,916) 0 (1,424,916) 0 0 0 (1,424,916) (0.22) (0.22)
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