About EDGAR Online | Login
 
Enter your Email for a Free Trial:
The following is an excerpt from a 10KSB SEC Filing, filed by MILLENNIUM SPORTS MANAGEMENT INC on 3/31/1998.
Next Section Next Section Previous Section Previous Section
MILLENNIUM SPORTS MANAGEMENT INC - 10KSB - 19980331 - PART_I

PART I

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 on and as of November 7, 1996.

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.

ITEM 1. DESCRIPTION OF BUSINESS

THE COMPANY

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 (comprised of the counties of Sussex, Warren, Passaic, Morris and Hunterdon), approximately 50 miles northwest of New York City. The Complex has been designed with a view to addressing both the entertainment interests and the sports and other recreational needs of the region's diverse population (including interest in spectator sports, and the need for equipment and practice facilities for participatory sports and activities), including tourists who visit the region 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., 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 1997 Minor League baseball seasons.

During the 1997 calendar year, in addition to the Team's 38 regular season home games, Skylands Park hosted a total of 91 college, high school and other amateur games, including 18 home games of the Sussex County Colonels (the "Colonels"), a member of the summer Atlantic Collegiate Baseball League (the "ACBL"), and the ACBL All-Star Game.

The remainder of the Complex follows a courtyard village design theme, and includes a recreation facility containing batting cages, a soft-play area, sports video parlor, mini-gym, children's party room and sports collectibles store; a wholesale and retail sporting goods outlet;

1

and an exhibit hall. The Company is currently exploring potential alternate uses of the exhibit hall.

In 1994 through 1996, the Company published six issues of BarnStorming: New Jersey's Baseball Magazine, a quarterly baseball magazine edited by Phil Pepe, a nationally syndicated sports columnist and author. The Company did not realize a profit from the magazine, and the Company has discontinued publication of BarnStorming.

The Company currently operates, in the Complex, a Skylands Sporting Goods store, which sells, both at retail and at wholesale, a broad range of sporting goods relating to baseball and other sports, and Team paraphernalia and apparel.

In 1998, the Company has 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 currently holds 50% of the outstanding capital stock of Stadium Capital, for which the Company has contributed to Stadium Capital an aggregate of $150,000 in cash, and up to 3,000,000 Class D Warrants of the Company (to the extent required to support a pending private placement of convertible notes and warrants of Stadium Capital) exercisable through June 30, 2001. In addition, the Company has paid the sum of $25,000 to Golf Stadiums, Inc. in reimbursement of certain pre-organization expenses relating to Stadium Capital, and has agreed to issue to two affiliates of the Rasmussens an aggregate of 1,000,000 Class D Warrants of the Company exercisable from time to time through March 31, 2003 (subject to a restriction prohibiting any shares issuable thereunder from being sold or transferred at any time prior to March 31, 2000 without the Company's written consent).

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. However, the Company has not yet entered into any definitive consulting arrangements.

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"). See "Item
6 - Management's Discussion and Analysis or Plan of Operations - Plan of Reorganization" below.

SKYLANDS PARK

The first and most significant of the businesses of the Company is the operation of Skylands Park, which includes clubhouses, concession stations and press accommodations as well as 10 private "skybox" suites. Each suite contains indoor and outdoor seats overlooking the

2

field and offers other amenities, including private food and beverage service. These suites are available for leasing primarily on an annual basis.

It is anticipated that the Team will play all of its home games during each Minor League baseball season at Skylands Park. The Company rents Skylands Park to the Team for a base rent of $1,100 per game plus utilities (prorated based on usage) and a 20% share of signage revenues, and the Company is entitled to retain all parking fees generated at Team games.

MINOR LEAGUE BASEBALL AT SKYLANDS PARK

The Company has executed a long-term lease (running through September 2008, subject to prior termination) with Minor League Heroes, L.P. ("Heroes"), the owner of the Team. The Team is a Class "A" Minor League affiliate of the St. Louis Cardinals Major League franchise.

The Minor Leagues are organized as the National Association of Professional Baseball Leagues and currently consist of four levels of playing ability. These levels, in descending order, are Class AAA, Class AA, Class A and Rookie. Each level has various organized leagues based upon geographic area. The New York- Penn League concluded its 57th year of operation in 1997, and is the longest continuously operating Class "A" professional baseball league in North America. Currently, the League has 14 franchises, all of which are affiliated with a Major League baseball franchise. One franchise is located in Ontario, Canada, two franchises are located in Pennsylvania, two franchises are located in Massachusetts, one franchise is located in Vermont, seven franchises are located in New York State, and one franchise (the Team) is located in New Jersey.

The Team has been affiliated with the St. Louis Cardinals Major League franchise since 1982, and currently operates under a player development contract which expires after the 2002 Minor League season.

During the 1994 Minor League season, the Team held 38 regular-season and four playoff home games at Skylands Park. During each of the 1995, 1996 and 1997 Minor League seasons, the Team held 38 regular season home games at Skylands Park. Average attendance for each of these games exceeded 4,000 paid admissions. All ticket receipts from Team home games played at Skylands Park are revenues belonging to the Team.

In the first quarter of 1994, the Company purchased limited partnership interests in Heroes, and the Company now owns a 16.82% interest in Heroes.

OTHER EVENTS AT SKYLANDS PARK

Based on its experience in the 1994 through 1997 seasons, the Company believes that baseball at Skylands Park will not be limited to the professional ranks. College games, both regular and post-season tournament play, as well as high school and other amateur leagues, have used and continue to seek to use the Skylands Park facilities. In the 1994 calendar year, a total of 53 college, high school and other amateur baseball games were held at Skylands Park, and for the 1995, 1996 and 1997 calendar years, a total of 98, 61 and 91, respectively, amateur baseball

3

games were played at Skylands Park, which included home games of the Colonels, a team which the Company operated in 1995 and 1996, and which leased Skylands Park in 1997. The Company and the owner of the Colonels have since terminated the Colonels' lease at Skylands Park, and the Company has entered into a lease with Ladies Professional Baseball ("LPB") pursuant to which LPB has committed to have its New Jersey franchise play all of its home games at Skylands Park in each of the 1998, 1999 and 2000 baseball seasons.

In the 1994 calendar year, the Company also held seven concerts at Skylands Park, and leased a portion of the Complex for two professional wrestling events. In 1995, such additional events, including concerts, antique and craft fairs, sports card shows, and art and travelling exhibits, utilized the Company's facilities for a total of 24 calendar dates. Although the Company did not host any such additional events in 1996, and only one concert in 1997, management of the Company is pursuing alternative arrangements for hosting such types of events on a basis which will minimize the Company's risk of incurring losses from such events. All of these events have produced revenue for the Company in the form of concession sales, facility rental fees or ticket sales, parking fees, corporate sponsorship of events, and value enhancement of fence signs and corporate skyboxes; however, in many instances, cash revenues from these events were not sufficient to cover the Company's cash expenses. The profitability of Skylands Park will be largely dependent upon receiving adequate revenues from these ancillary events.

The Complex also includes a 6,300 square foot exhibit hall, which houses baseball and other sports exhibits of local, regional, and national interest. The Company held a dedication ceremony for the exhibit hall in December 1995, at which time the initial exhibits included a 38-piece collection of limited edition lithographs portraying great moments in Major League baseball parks; photographs, newspapers and paraphernalia chronicling the history of the New Jersey Cardinals franchise and the Sussex County Colonels; commemorative plaques and photographs from the Sussex County Sports Hall of Fame; and autographs and memorabilia of past and present Major League baseball players. Management of the Company is currently considering other potential uses for the exhibit hall space, with a view to generating increased revenues from that space.

LAND ACQUISITION

The Complex is located on a tract of land owned by the Company, consisting of approximately 28.5 acres located in Frankford Township, New Jersey at the intersection of U.S. Highway 206 and Sussex County Route 565. The land was acquired by the Company at a cost of approximately $1,202,000, and as part of the purchase agreement, the seller of the land agreed to pay up to 50% of the costs for installing certain roads and other sitework improvements. The Company does not expect to receive any such payments in respect of sitework improvements until the seller begins to develop its adjoining properties at some indeterminate time in the future.

CONSTRUCTION OF THE COMPLEX AND GOVERNMENT REGULATIONS

Baseball facilities to be used by Minor League teams must meet certain standards established by Major League Baseball and the National Association of Professional Baseball

4

Leagues. Skylands Park has been designed to meet or exceed all such required standards for Class "A" teams. Gould Evans Associates, the architectural consultant for Major League Baseball, has issued its approval of the stadium design on behalf of Major League Baseball.

The Company has been issued a permanent certificate of occupancy for all of the existing facilities in the Complex, and has received final site plan approval from Frankford Township. The Company has also received and has in effect all other required licenses and permits (including food, beverage and liquor licenses) for the operation of Skylands Park and the Complex. Sales of alcoholic beverages at Skylands Park entails the risk of liability under so- called "dram shop" laws.

THE BARN

The Company has built a 16,500 square foot indoor recreational facility on the grounds of the Complex, known as "The Barn." The Barn is intended to provide sports and entertainment activities for fans on game days, including facilities for the casual visitor to Skylands Park, for the serious athlete looking to improve his or her skill level in baseball, and for those seeking a specially planned program such as a birthday party or a group sports activity. The Barn is open twelve months a year, and contains five baseball and softball batting cages, a soft-play area, a sports video parlor, a children's party room, a mini- gym for half-court basketball, and an aerobics court. A professional batting/pitching tunnel, which is used by the Team during the Minor League baseball season, is also available for private instruction. The Barn also houses Bob's Hot Corner, which is space subleased by an unaffiliated third party, in which such third party sells sports collectibles for his own account.

SKYLANDS SPORTING GOODS

Since May 1993, the Company has operated Skylands Sporting Goods as both a retail seller and wholesale distributor of a broad range of sporting goods, including baseballs, bats and gloves, Team paraphernalia and apparel, and equipment related to other sports such as basketball, football and hockey. The store encompasses approximately 3,000 square feet, of which approximately one- half is dedicated to the retail business. It is expected that volume purchasing derived from outfitting school teams, recreation leagues, and local amateur teams will enable the Company to provide discounted prices to retail customers.

STADIUM GOLF

In the first quarter of 1998, the Company began to implement the transactions contemplated by its October 1997 letter of intent with certain affiliates of Golf Stadiums, Inc., William F. Rasmussen and Glenn J. Rasmussen. Pursuant to such transactions, the Company and the Rasmussens' affiliates have formed Stadium Capital, which has as its purpose the planning, construction, development and operation of a "Stadium Golf" resort destination (including two 18-hole golf courses and a related "Stadium" facility containing luxury boxes and/or condominium units, grandstand seating, telecast facilities, professional golf facilities and dining and locker room amenities) in Naples, Florida. The Company currently owns 50% of the outstanding stock of Stadium Capital, in consideration of which the Company has contributed to

5

Stadium Capital an aggregate of $150,000 in cash, and up to 3,000,000 Class D Warrants of the Company (to the extent required to support Stadium Capital's pending private placement of convertible notes and warrants) exercisable through June 30, 2001. In addition, the Company has paid the sum of $25,000 to Golf Stadiums, Inc. in reimbursement of certain pre-organization expenses relating to Stadium Capital, and has agreed to issue to two affiliates of the Rasmussens an aggregate of 1,000,000 Class D Warrants of the Company exercisable from time to time through March 31, 2003 (subject to a restriction prohibiting any shares issuable thereunder from being sold or transferred at any time prior to March 31, 2000 without the Company's written consent).

Stadium Capital has entered into binding commitments for the purchase of the land in Naples, Florida on which it proposes to develop this golf facility. Stadium Capital's current budget calls for a total of $66,250,000 to be spent for the acquisition, development and initial promotion of this facility, and Stadium Capital proposes to raise the first $10,000,000 of this budget through its pending private placement, which includes as a feature thereof the right of investors, under certain circumstances, to exchange their convertible notes in Stadium Capital for shares of common stock of the Company (which Stadium Capital would obtain through the exercise of some or all of the Class D Warrants contributed by the Company to Stadium Capital, as described above). There can be no assurance as to whether or when Stadium Capital will be able to obtain any or all of the required financing for its business plan, although the Company is hopeful that its investment in Stadium Capital may eventually enable the Company to avoid the problems of seasonality inherent in the Company's current business.

BARNSTORMING MAGAZINE

In 1994 through 1996, the Company published six issues of BarnStorming: New Jersey's Baseball Magazine, featuring nationally syndicated baseball journalist Phil Pepe as its Senior Editor. The Company did not realize a profit from the magazine, and the Company has discontinued publication of BarnStorming.

INSURANCE

The Company maintains all-risk and general liability insurance covering personal injury which may be suffered by patrons of Skylands Park and the other facilities in the Complex, with limits of coverage of $1,000,000 per occurrence and $2,000,000 in the aggregate. The Company also maintains approximately $9,000,000 of property damage insurance coverage. The Company is also named as an additional insured on its concessionaire's liability insurance coverage, which includes coverage relating to "dram shop" liability. Although the Company believes that such insurance coverage will be adequate to insure against the risks relating to the ownership and operation of the Complex, there is no assurance that such insurance coverage will continue to be available at commercially reasonable rates, or at all, or that if available, such coverage will be sufficient to insure against potential liability which the Company may incur in the future.

The Company also maintains casualty and liability coverage in respect of the Skylands Sporting Goods store, in amounts which the Company believes to be normal and customary for such types of operations.

6

COMPETITION

Located in northwest New Jersey, Sussex County is part of the State's Skylands region, comprising the counties of Sussex, Warren, Passaic, Morris and Hunterdon. According to a 1993 report of the Sussex County Office of Economic Development and the Sussex County Chamber of Commerce (which report relied in substantial part on information contained in a 1992 survey by the New Jersey Department of Travel & Tourism), the Skylands Region generated $1.6 billion in tourism expenditures in 1991, with Sussex County accounting for more than $125 million. Approximately 4,200 people in Sussex County are employed in tourism- related jobs. Among Sussex County's major tourist attractions are Action Park, Wild West City, Waterloo Village, and Space Farms. Other recreation facilities, including the Meadowlands sports facility located in East Rutherford, New Jersey, are also within driving distance from Sussex County. However, the closest Minor League baseball franchises are a Class "A" New York-Penn League team located in Hudson Valley, New York, which is approximately a 55-mile drive from Skylands Park, a Class "AAA" team located in Scranton, Pennsylvania, which is approximately a 70-mile drive from Skylands Park, and a Class "AA" team located in Trenton, New Jersey, which is approximately a 110-mile drive from Skylands Park; and, in addition, developers in the new independent Atlantic League have announced that they are building and/or have proposed the construction of minor league-sized baseball stadiums in Newark, Camden, Somerset and Atlantic City, New Jersey. The closest Major League baseball franchises are the New York Yankees and the New York Mets, respectively located in Bronx County and Queens County, New York. The Company's revenues have been generated primarily from ticket and concession sales generated from events scheduled at Skylands Park (other than Team events), parking fees from events at Skylands Park (including Team games), a percentage of advertising charges for the rental of signs and other advertising at Skylands Park, and the Company's recreational facilities, sporting goods store and other businesses. Although the Company believes that Sussex County is a growing market for sports-oriented entertainment, especially as a result of its growing tourism attractions, there can be no assurance that the Company will be successful in marketing its businesses. In this connection, the Company is competing with established companies having substantially greater financial resources than those of the Company, and there can be no assurance that the Company will be able to successfully compete against such companies for the public's entertainment expenditures. The Company's sporting goods business also competes with sporting goods stores operating in the locality of the Complex, and national mail order and catalogue businesses.

EMPLOYEES

As of March 20, 1998, the Company had a total of nine employees, consisting of four full-time employees and five part-time employees. The Company also hires additional part-time employees in the spring through the fall season, as required for the operation of Skylands Park in connection with games and other events.

None of the Company's employees is represented by any labor union or other collective bargaining unit. The Company has not experienced any significant degree of employee turnover, and the Company believes that its relations with its employees are satisfactory.

7

ITEM 2. DESCRIPTION OF PROPERTY

THE COMPLEX

The Company's primary property consists of the 28.5 acres (approximate) on which Skylands Park and the Complex are located. Such land is located in Frankford Township, New Jersey at the intersection of U.S. Highway 206 and Sussex County Route 565. In addition to the Company's lease with the Team (described below), the Company has also entered into rental agreements for the use of Skylands Park and/or other portions of the Complex with the NCAA, colleges, high schools, LPB, the Colonels, concert promoters, and a professional wrestling promoter.

LEASE WITH THE TEAM

The Company has entered into a long-term lease (the "Stadium Lease") for Skylands Park with Heroes, the owner of the Team. Under the terms of the Stadium Lease, the Company was required to construct and make available to Heroes a new Minor League baseball stadium for the Team to play its home games by the spring of 1994. The Stadium Lease commenced June 1, 1994 and expires September 30, 2008. Under the Stadium Lease, Heroes is currently obligated to pay rent of $1,100 per game scheduled to be played at Skylands Park subject to adjustment in certain instances. Such rent is subject to a 10% increase effective at the beginning of each of the 2001 and 2005 Minor League baseball seasons. The rent is payable in installments (each approximately 50%) on August 1 and October 1 of each year. Heroes may cancel the Stadium Lease if: (a) Skylands Park is not constructed as required by the terms of the Stadium Lease,
(b) Skylands Park does not meet all minimum requirements under the Professional Baseball Agreement ("PBA") among the Minor Leagues' governing organizations, or
(c) at any time during any Minor League baseball season, Skylands Park does not meet the requirements as set forth in the PBA. In addition, Heroes may terminate the Stadium Lease after the Minor League baseball seasons of 2003, 2004, 2005, 2006 and 2007 during the period from October 1 through November 30 if: (i) the average paid attendance for the immediately preceding baseball season was less than 900 people per game, and (ii) the Team did not realize an operating profit in its previous fiscal year. The Stadium Lease will automatically terminate if the New York-Penn League is disbanded, or if the Team is required to relocate from Skylands Park or is disbanded by the New York-Penn League or Major League Baseball (other than for reasons of Heroes' or the Team's bankruptcy, financial mismanagement or non-compliance with rules and regulations). In the event of such termination, a penalty of $70,000 will be payable by Heroes to the Company. Heroes may voluntarily cancel the Stadium Lease by payment of a lump sum equal to 75% of the remaining outstanding rent (based upon an assumed $35,000 rent per year). In addition, if the New York- Penn League is disbanded, the Stadium Lease will be terminated without any further obligation of the parties.

The Team is entitled to play its regular season and post-season home games and hold pre-season training and practice sessions open to the public at Skylands Park. The Team is entitled to exclusive use of the home clubhouse and batting/pitching tunnel on days that Team home

8

games are to be played ("Game Days"). The Company has the right to schedule other activities at Skylands Park for such times as will not materially interfere with the Team's scheduled games.

All parking facilities are operated by the Company and the Company is entitled to retain all revenues derived therefrom. Heroes is required to provide and pay for the following with respect to Game Days: (i) game staff personnel, such as ushers, ticket takers and P.A. announcers, (ii) security personnel during the Team games and open practices, (iii) medical personnel, and (iv) skybox attendants. The Company is required to provide all utilities but Heroes pays the cost of such utilities pro-rated according to their use.

Heroes sets admission prices for Game Days and retains all Game Day admission revenues, except that the Company is entitled to establish the price for, and retain all revenues from, admissions to skyboxes at Skylands Park for all events; provided that (a) the price of game tickets for Team games (valued at box seat prices) is payable to Heroes out of the Company's skybox revenues, and
(b) Heroes is provided with one skybox during the Minor League baseball season. On Game Days, Heroes has the exclusive right to sell, and retain revenues from the sale of, food, beverages and souvenirs of the Team. During the off-season, Heroes has the right to use the Skylands Park souvenir shop to sell Team souvenirs subject to paying a 20% commission to the Company on all such sales, or, at Heroes' option, a fixed fee of $825 per month (subject to 10% escalations commencing with each of the 2000 and 2004 Minor League baseball seasons).

The Company is required, at its sole expense, to (i) perform all maintenance work necessary both before and during the Minor League baseball season to maintain Skylands Park in conformity with standards maintained generally by Minor League baseball facilities, (ii) provide the Team with an administrative office at Skylands Park, and (iii) provide and maintain radio and television broadcast facilities at Skylands Park. Heroes is entitled to all revenues derived from broadcasts of the Team's activities, as well as revenues from the sale of, and advertising in, scorebooks, yearbooks, media guides and other sponsorships associated with the Team. The Company, on the other hand, retains the exclusive right to sell, and retain revenues from the sale of, sponsorships attributable to the name of Skylands Park and the exhibition space within Skylands Park. However, if the Company sells a sponsorship package which includes the name of Skylands Park for in excess of $250,000, Heroes will receive 10% of the price of such sponsorship. Revenues received from sign rentals and certain advertising in Skylands Park are divided 80% to Heroes and 20% to the Company.

In the event of casualties such as fire, earthquake, rain, flood or any other acts of God, the Company is not required to restore or rebuild Skylands Park, and Heroes may terminate the Stadium Lease. In the event any portion of the property is taken by eminent domain which results in loss of use of Skylands Park by the Team, Heroes may terminate the Stadium Lease. The Company and Heroes have agreed to indemnify each other from all damages, losses and liabilities caused by or arising from any breach of the Stadium Lease.

AGREEMENT WITH LADIES PROFESSIONAL BASEBALL

In February 1998, the Company entered into a lease agreement with Ladies Professional Baseball ("LPB"), which owns and operates a professional women's baseball league which is to include,

9

commencing in the 1998 baseball season, a franchise to be owned and operated by the league and to be known as the New Jersey Diamonds (the "Diamonds"). Pursuant to the lease agreement, the Diamonds are expected to play all of their home games at Skylands Park in each of the 1998, 1999 and 2000 baseball seasons. Base rent under the lease is at the rate of $1,300 per game. In 1998, the Diamonds are scheduled to play 28 home games at Skylands Park, resulting in a base rent of $36,400 for the year, which will be payable (as in each year of the lease) one-half on or before April 1, and one-half on or before August 1. LPB is further responsible for providing game day personnel and security, and the Company is responsible for stadium maintenance, traffic control and parking. LPB is entitled to retain all revenues from admissions to Diamonds games and all revenues from the sale of LPB's souvenirs, and to receive 30% of all receipts from sales of food and non-alcoholic beverage concessions during Diamonds games. The Company will retain 70% of all food and non-alcoholic beverage concession receipts, 100% of alcoholic beverage concession receipts, and 100% of parking fees.

OTHER LEASES

The Company is party to a lease with Robert Adams d/b/a Bob's Hot Corner ("Adams") which expires on December 31, 1998, pursuant to which the Company is leasing to Adams a 400 square foot area in the Barn, within which Adams operates his own store. The lease provides for average rent of $500 per month plus various escalations calculated as a percentage of annual sales, if any, in excess of $75,000. Adams' store uses the leased space to display and sell trading cards and sports memorabilia except cards depicting or relating to the New Jersey or St. Louis Cardinals or the New York-Penn League. The Company is required to supply heating, cooling and electricity and the use of a cash register, display cases and storage space. Adams is obligated to organize and conduct, for the Company, sports card shows in Skylands Park or any other location reasonably selected by the Company, in consideration of which he will receive 10% of the total fees received by the Company from exhibitors at the shows.

INVESTMENT POLICIES

The Company generally acquires its assets for the purpose of producing revenues from the use of such assets in the Company's operations. The Company invests any excess cash on hand primarily in interest-bearing demand deposit accounts, short-term certificates of deposit and United States Treasury instruments.

The Company's primary assets are the land, buildings and improvements constituting the Complex, which is located in Frankford Township, New Jersey, at the intersection of U.S. Highway 206 and Sussex County Route 565. The Company operates such property so as to derive revenues therefrom as described above. The Company owns fee simple title to such property. Such property, and the improvements thereon, are presently subject to a mortgage which secures the current $63,542 unpaid balance of accrued interest of the Creditors' Note issued pursuant to the Company's plan of reorganization (the "Plan"); and as of the date of this report, the Company has set aside funds sufficient to pay such unpaid balance in full. Through December 31, 1997, the Company had expended approximately $14,000,000 (before

10

depreciation) for land acquisition and the planning, development and construction of the Complex.

ITEM 3. LEGAL PROCEEDINGS

On June 1, 1994, the Company filed a voluntary petition for reorganization under Chapter 11 of the United States Bankruptcy Code. The petition was filed in the United States Bankruptcy Court for the District of New Jersey, and the case was assigned Case No. 94-23761. On April 13, 1995, with the requisite approval of the Company's creditors, the Plan was approved and confirmed by the Court. The Company has implemented the Plan, and is no longer a debtor-in- possession. However, until the Creditors' Note issued under the Plan is paid in full (for which adequate funds are currently set aside), the Company will continue to report to and operate under the review of the independent accountants retained by the official committee of unsecured creditors of the Company. See "Plan of Operations and Management's Discussion and Analysis of Financial Condition and Results of Operations - Plan of Reorganization."

The Company is not party to any other material legal proceedings.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders during the fourth quarter of the Company's fiscal year ended December 31, 1997.

11

BROKERAGE PARTNERS