Edgar Filing: ORLANDO PREDATORS ENTERTAINMENT INC

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-KSB

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[X] Annual report under Section 13 or 15(d) of the Securities Exchange Act
of 1934 for the fiscal year ended September 30, 2001, or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.

Commission File No. 0-29426

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
--------------------------------------------
(Name of small business issuer in its charter)

Florida 91-1796903
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)

4901 Vineland Road, Suite 150
Orlando, Florida 32811
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(Address of principal executive offices) (Zip Code)

Issuer's telephone number: (407) 648-4444

Securities to be registered under Section 12(b) of the Act: None

Securities to be registered under Section 12(g) of the Act:

No Par Value Class A Common Stock
Redeemable Class A Common Stock Purchase Warrants
--------------
(Title of Class)

Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities 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
----- -----

Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this report, and no disclosure will be
contained, to the best of the Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB.

As of September 30, 2001, 6,720,710 shares of the Registrant's no par value
Class A Common Stock were outstanding. As of September 30, 2001, the market
value of the Registrant's no par value Class A Common Stock, excluding shares
held by affiliates, was $17,675,467 based upon the closing price of $2.63 per
share of Class A Common Stock on the Nasdaq SmallCap Market.

The Registrant's revenues for its most recent fiscal year were $4,550,245.

The following documents are incorporated by reference into Part III, Items
9 through 12 hereof: None.

PART I

ITEM 1. DESCRIPTION OF BUSINESS
-------------------------------

The following is a summary of certain information contained in this Report
and is qualified in its entirety by the detailed information and financial
statements that appear elsewhere herein. Except for the historical information
contained herein, the matters set forth in this Report include forward-looking
statements within the meaning of the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
subject to risks and uncertainties that may cause actual results to differ
materially. These risks and uncertainties are detailed in the "Risk Factors"
section of this Item 1 and throughout this Report and will be further discussed
from time to time in periodic reports filed with the Commission. The
forward-looking statements included in this Report speak only as of the date
hereof.

Introduction

The Orlando Predators Entertainment, Inc. ("OPE", the "Company" or "we")
was organized as a Florida corporation in March 1997 and is in the sports and
entertainment business. OPE (i) owns and operates the Orlando Predators (the
Predators or the team), a professional arena football team of the Arena Football
League (the AFL or the League), (ii) owns and operates the Peoria Pirates (the
Pirates), a minor league team arenafootball2 League (af2), (iii) owns an
additional 8% net revenue interest in the League (in addition to its 4% League
ownership through the Predators) and (iv) owns rights to the operation of two
additional af2 teams. See arenafootball2 League. Arena football is played in an
indoor arena on a padded 50 yard long football field using eight players on the
field for each team. Most of the game rules are similar to college or other
professional football game rules with certain exceptions intended to make the
game faster and more exciting.

Strategy

OPE's strategy at the League level is to participate through the operation
of the Predators, the Pirates and through its League ownership in what we
believe will be the continued growth of the AFL and af2 which in turn is
expected to result in increased revenue to OPE generated from (i) national
(League) and regional (team) broadcast contracts, (ii) national League
sponsorship contracts, (iii) the sale of additional team memberships in the
League, and (iv) increased fan attendance at AFL and af2 games including
Predators' and Pirates' games, together with appreciation in the value of the
Predators and the Pirates as AFL/af2 teams. The trend toward ongoing League
growth is evidenced by the February 1999 announcement by the National Football
League (NFL) that it had obtained an option to purchase up to 49.9% of the
League and by the addition of two new AFL teams in 2001. In November of 2001,
the AFL announced the reduction of teams for the 2002 season to 16 teams to
allow for NFL owners to purchase expansion teams.

In a broader sense, OPE's strategy is to acquire and consolidate the
operations of minor league professional sports teams in order to realize the
significant economies of scale available through the operations of these sports
franchises. Consistent with this strategy, in October 2000, we entered into an
agreement with af2 Enterprises LLC (af2), which operates the arenafootball2
League to assist af2 in acquiring substantially all of the assets of the Indoor
Football League (IFL) through IFL Acquisition Company (IFL Acq.), a wholly-owned
subsidiary of af2.

Under the terms of our agreement with af2, we contributed (i) $1.1 million
in cash less credits of $251,165, (ii) a $1.75 million promissory note and (iii)
214,286 shares of redeemable common stock (which we agreed to repurchase from
the holders at their election for $3.50 per share). In exchange, af2 granted us
(i) three af2 memberships in IFL markets, (ii) the first $1 million in expansion
fees earned by the af2 in IFL markets and (iii) all of the tangible personal
property assets of the IFL such as turf fields, football equipment and the like.

At the teams level, OPE's strategy is to increase fan attendance at
Predators' and Pirates' home games, expand the Predators' and Pirates'
advertising and sponsorship base, and contract with additional local and
regional broadcasters to broadcast Predators' games. Notwithstanding our efforts
in these regards, OPE has experienced operating losses of $1,813,365 for the
nine months ended September 30, 2000, $2,676,871 for the year ended September
30, 2001 and an aggregate loss since inception of $9,057,590.

OPE believes that fan attendance will increase based upon the game winning
success (if any) of the Predators in the AFL and the Pirates in the af2 and by
increasing media exposure of the teams in their local markets. Game winning
success requires the ongoing recruitment of superior players. In order to
recruit players, OPE employs a recruiting teams which include OPE's head coach
and Director of Player Personnel. In order to increase media exposure to the
team in central Florida and Peoria Illinois and expand our sponsorship base, we
call upon the media, corporate sponsors and other central Florida and Peoria
organizations. OPE also calls upon central Florida and Peoria businesses to
solicit advertising and sponsorship funds on behalf of the teams. The Predators
and Pirates participate in a number of charitable events during the year as a

part of a community relations and recognition program and maintain Internet
websites at www.orlandopredators.com and www.peoriapirates.net. OPE also employs
five to ten part-time telemarketing personnel prior to commencement of the AFL
season to assist in ticket sales. Notwithstanding the Predators' game winning
success, including its victories in the 1998 and 2000 Arena Bowl, game
attendance was less in the 2000 season than in the 1999 season. 2001 was the
first season for the Pirates.

Our strategy also includes maintaining and building community support for,
and recognition of, the team as an ongoing valuable entertainment institution in
central Florida and throughout the state and in the Peoria, Illinois area. We
believe that the value of the Predators and Pirates as sports team will increase
if community support and recognition are maintained. In this regard, the
Predators completed their eleventh AFL season in 2001, have played in the Arena
Bowl for the AFL championship on six occasions and won Arena Bowl XII in 1998
and Arena Bowl XIV in 2000. The Predators hold one of the best all-time win-loss
records among current and former AFL teams and have recorded the highest
announced average AFL per game attendance in a number of prior seasons.

History

The AFL governs the arena football teams that comprise the League and sell
team memberships (Memberships). The AFL's first season commenced in 1987.
Between 1987 and 2001, the League grew from four teams to 19 teams. 16 teams
will play in 2002 including an expansion team in Dallas. The League reduced the
number of teams in November 2001 to 16 teams. The membership fees for the next
team joining the AFL has increased from $125,000 in 1995 to an estimated $8
million currently. Since 1992, announced League attendance has grown from
736,000 to over 1.1 million (including play-off games). Game broadcasts during
this period have included local, regional, ESPN, ESPN 2, TNN and ABC coverage.
In the 2001 season, 25 games were broadcast on national cable television
stations, including ABC's live broadcast of Arena Bowl XV. From 11 million
television households in 1994, the AFL reached over 27.5 million households in
2001.

OPE has derived its revenue and operating funds from the arena football
operations of the Predators and the Pirates and its aggregate 12% net revenue
interest in the AFL in 2001. Revenue from football operations results from the
sale of tickets to the Predators' and Pirates' home games, the sale of
advertising and promotions to Predator and Pirates sponsors, the sale of local
and regional broadcast rights to Predators' games, the sale of merchandise
carrying the Predators' and Pirates' logos, and concession sales at Predators'
home games. Revenue from our League ownership results from our share of all
League revenue, primarily consisting of League contracts with national media
organizations, expansion team Membership fees, national corporate sponsorships
and League merchandising sales.

As indicated above, in February 1999 the NFL was granted a three year
option to purchase up to 49.9% of the League. Should the NFL exercise its
option, this shared ownership is expected to improve the AFL's ability to
negotiate national media contracts, to develop new league corporate sponsorships
and to sell AFL merchandise. In April, 1999, the NFL amended its by-laws to
allow its owners to purchase League and af2 teams. To date, the owners of nine
NFL teams have purchased or applied to purchase AFL teams in Dallas, New
Orleans, Philadelphia, Washington, Denver, Nashville, Jacksonville, San
Francisco and Detroit.

Arena Football and the Arena Football League

In 1985, Jim Foster, a professional football marketing executive,
formulated a plan for an indoor professional football game that included a
50-yard playing field, an eight player single platoon system and the use of drop
kicks and rebound nets. The first Arena Football game was played in Rockford,
Illinois on April 26, 1986 with a second game played on February 26, 1987 in
Chicago, Illinois.

In March 1987 the U.S. Patent Office issued a U.S. Patent (Patent) to
Gridiron Enterprises, Inc. an Illinois corporation (Gridiron) for the Arena
Football Game System and rules of play as well as trademarks for the logo and
names associated with Arena Football. In December 1991, the AFL was incorporated
as a non-profit membership corporation in the state of Delaware. Also in 1991,

Gridiron entered into an exclusive licensing agreement with the AFL to organize,
operate and market Arena Football throughout the United States by selling team
memberships in major markets across the United States. Pursuant to the licensing
agreement, the AFL granted to Gridiron a per team royalty of $20,000 per year in
return for using the game system and rules of play of Arena Football. In August
1998 the AFL purchased all patent and other rights to the Arena Football Game
System from Gridiron for $4,000,000, and the teams were no longer required to
pay the $20,000 per year royalty.

Four teams were fielded for the League's inaugural 1987 season. By 1991,
the League had eight teams and had played exhibition games in London and Paris.
In 1992 and 1993, the League fielded 12 teams and 10 teams, respectively, with
some games televised on the ESPN cable network. For 2001, 19 teams will play in
the League.

AFL games are generally played in an indoor basketball/hockey sports arena
which offers fans climate-controlled conditions and a more intimate view of the
game. As a result of the smaller playing field, the rebound nets and a general
emphasis on offensive play, Arena Football games are generally high scoring,
fast-paced action contests.

AFL game attendance has risen consistently with over 1.1 million in total
fan attendance announced for the 2001 season. Per game announced attendance
averaged approximately 10,000 during the 2001 season. Announced game attendance
represents attendance figures provided by League teams to the League and the
media and cannot be independently verified. We believe that approximately 66% of
AFL viewers are male and 34% are female with 60% of such viewers under the age
of 35. In terms of education, we believe that 47% have college or graduate
degrees, 28% have some college attendance and 87% hold at least high school
diplomas.

The membership fee for new teams joining the AFL has grown from $125,000
for the 1990 season to up to $8 million currently. In 2001 there were over 27.5
million households with AFL teams in their metropolitan areas, up from 11
million households in 1994. During the 2001 season, TNN, ESPN, ESPN 2 and ABC
broadcast a total of 25 games including 10 playoff games and the Arena Bowl.

AFL player salaries are subject to a collective bargaining agreement
between the League, its member teams and the Arena Football League Players'
Organizing Committee. See Collective Bargaining Agreement. For the 2001 season,
the Predators' players' total compensation was approximately $1,375,000 in the
aggregate. There are no player drafts, although expansion teams are allowed to
draw from a pool of players designated by existing AFL teams.

The Predators provide a $250,000 occupational health, accidental death and
disability insurance policy. Each team is required to pay the first $35,000 of
claims for an injured player up to an aggregate of $356,000 for the two Florida
based AFL teams.

Rules of Arena Football

Arena Football is played in an indoor arena on a field which consists of a
padded surface 85 feet wide and 50 yards long with eight-yard end zones. The
endzone goalposts are nine feet wide with a cross-bar height of 15 feet compared
to NFL goalposts which are 18 1/2 feet wide with a cross-bar height of 10 feet.
Eight feet above each endzone are goal-side rebound nets which are 30 feet wide
by 32 feet high.

There are eight players on the field for each team as part of a 24-man
active roster. Players play both offense and defense with the exception of the
kicker, quarterback, an offensive specialist, two defensive specialists and a
kick returner.

The game is played using an NFL-size football in four 15-minute quarters
with a 15-minute halftime. The game clock stops for out of bounds plays or
incomplete passes only in the last minute of each half, when necessary for
penalties, injuries and time-outs or following points after touchdowns, field
goals and safeties. Accordingly, the average AFL football game is played in
approximately two hours and 25 minutes compared to approximately three hours and
five minutes for an NFL game.

Four downs are allowed to advance the ball ten yards for a first down or to
score. Scoring consists of six points for a touchdown, one point for a
conversion by placekicking after a touchdown, two points for a conversion by
dropkick and two points for a successful run or pass after a touchdown. Three
points are awarded for a field goal by placement or four points for a field goal
by dropkick, with two points for a safety. Punting is illegal. On fourth down a
team may attempt a first down, touchdown or field goal. The receiving team may
field any kickoff or missed field goal that rebounds off the rebound nets.

Although passing rules for the AFL are similar to outdoor NCAA football, a
unique exception involves the rebound nets. A forward pass that rebounds off a
rebound net is a live ball and is in play until it touches the playing surface.

Overtime periods are 15 minutes during the regular season and the playoffs.
Each team has one possession to score. If, after each team has had one
possession and one team is ahead, that team wins. If the teams are tied after
each has had a possession, the next team to score wins.

AFL Teams

For the 2001 season, the AFL consisted of the following teams, aligned into
two conferences, with two divisions in each conference:

American Conference

Western Division Central Division
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Arizona Rattlers Chicago Rush
Oklahoma City Wranglers Milwaukee Mustangs
San Jose SaberCats Detroit Fury
Los Angeles Avengers Grand Rapids Rampage
Houston ThunderBears Indiana Firebirds

National Conference

Eastern Division Southern Division
---------------- -----------------

Toronto Phantoms Nashville Kats
New Jersey Red Dogs Orlando Predators
Buffalo Destroyers Tampa Bay Storm
New York Dragons Florida Bobcats
Carolina Cobras

Regular Season and Playoffs

Following two pre-season games, the regular AFL season extends from April
to August, with each team playing a total of 14 games against teams from both
conferences. Half of the games are played at home, and half are played away. At
the end of the regular season, the four division champions along with the eight
teams with the best winning records, qualify for the AFL playoffs to determine
the AFL's Arena Bowl champion for that season. Each playoff round is played in
the home arena of the team with the best winning record.

Gate Receipts, AFL Assessments and Distributions

AFL teams are entitled to keep all gate receipts from pre-season home
games, regular season home games and playoff home games. Teams do not receive
any gate receipts from away games except that visiting teams are reimbursed for
hotel expenses by the home team. Each team is required to pay an annual
assessment to the AFL which is generally equal to the team's share of the
League's annual operating costs and each team is contingently liable for other

team membership purchases, team repurchases by the League and League litigation.
During the 2001 and 2000 seasons, League assessments were $419,000 and $282,416,
respectively. OPE is not aware of any material League liabilities for which it
has contingent liability. Each team's assessment is generally funded by its
share of revenue derived from the League's national television contracts, from
the sale of AFL licensed merchandise and from revenues generated by the League's
sale of expansion team memberships. Each visiting team participating in the
playoffs is reimbursed for hotel expenses and receives a fixed payment of
$45,000 for each playoff game and $50,000 for the Arena Bowl.

AFL Licensing

The AFL operates a League licensing program on behalf of its teams. Under
the program, product manufacturers sign agreements allowing them to use the
names and logos of all AFL teams, the AFL itself and AFL's special events
(including playoffs and the Arena Bowl) in exchange for royalty and guarantee
payments. For the year ended September 30, 2001, OPE's share of net revenues
from licensing was $80,000. In 2001 our share of net revenue from the League
(the Team Share) was equal to 1/25 of the AFL's net revenue. Our Team Share was
equal to the AFL's net revenue divided by the total number of League teams (19
in 2001), two Gridiron Team Shares, two Team Shares owned by OPE and four
expansion teams. League assessments are also based upon the Team Share. Each
team is also permitted to license its club identified products locally for sale
at its arena, at team owned and operated stores and through team catalogs. We
purchased two non-voting equity interests in 1998, and in 2001 our Team Share
was 4% together with an additional 8% for our two non-voting equity interests.

League Governance

The AFL is generally responsible for regulating the conduct of its member
teams. The AFL establishes the regular season and playoff schedules of the
teams, and negotiates, on behalf of its members, the League's national and
network broadcast contracts. Each of the AFL's members is, in general, liable on
a pro rata basis for the AFL's liabilities and obligations and shares pro rata
in its profits. Under the Bylaws of the AFL, League approval is required to
complete a public offering of any team's securities and for the sale or
relocation of a team.

The AFL is governed by a Board of Directors, which consists of one
representative from each team. The Board of Directors selects the AFL
Commissioner, who administers the daily affairs of the AFL including
interpretation of playing rules and arbitration of conflicts among member teams.
The Commissioner also has the power to impose sanctions, including fines and
suspensions, for violations of League rules. David Baker has been the
Commissioner of the AFL since 1996. OPE believes it is in compliance with all
League rules.

arenafootball2 League

In August 1999 the AFL established the arenafootball2 League (af2) to be
comprised of smaller market farm teams. To date, 36 teams have joined the new
league, which commenced play in April 2000 with an 18-week, 120-game schedule.
The 36 teams are primarily located in the midwest and southeast.

In October 2000 af2 acquired substantially all of the assets of the Indoor
Football League, and we acquired rights to operate three af2 teams without
payment of membership fees to the af2. See Strategy, above.

Restrictions on Ownership

The AFL Charter and Bylaws contain provisions which may prohibit a person
from acquiring the Common Stock and affect the value of the Common Stock. In
general, any acquisition of shares of Common Stock which will result in a person
or a group of persons holding 5% or more of our outstanding Common Stock will
require the prior approval of the AFL, which may be granted or withheld in the
sole discretion of the AFL. The prospective purchaser would be required to
submit an AFL application, in form prescribed by the AFL, providing certain
information relating to that person's background. Upon receipt of such
application, the AFL has the right to conduct an investigation of the
prospective purchaser. In addition, the AFL may condition its approval upon the
execution, delivery and performance by the prospective purchaser of such
documents as the Charter or Bylaws shall prescribe. If a prospective purchaser

obtains the AFL's consent to acquire a 5% or more interest in OPE, such
prospective purchaser will be required to acknowledge that the purchaser will be
bound by the applicable provisions of the AFL Charter and Bylaws. AFL approval
is not required for private placements of our securities.

In addition, no person who directly or indirectly owns any interest in an
AFL team, may own, directly or indirectly, a 5% or more interest in any other
team, without the prior approval of the AFL. The AFL Bylaws also contain
provisions which prohibit team owners from engaging in certain activities, such
as wagering on any game in which an AFL team participates. AFL players and
referees and employees of the AFL and its member clubs (other than OPE) are not
eligible to purchase or hold Common Stock. The AFL could in the future adopt
different or additional restrictions which could adversely affect the
shareholders.

The grant of a security interest in any of the assets of OPE or the
Predators or any direct or indirect ownership interest in OPE, of 5% or more,
requires the prior approval of the AFL, which may be withheld in the AFL's sole
discretion. AFL rules limit the amount of debt that may be secured by the assets
of, or ownership interests in, an AFL team and require that the parties to any
secured loan that is approved execute an agreement limiting the rights of the
lenders and the team (or stockholder) under certain circumstances, including
upon an event of default or foreclosure. These limitations may adversely affect
the rights of the team (or stockholder) under certain circumstances.

Failure by a holder of a 5% or more interest in OPE to comply with these
restrictions may result in a forced sale of such holder's interest in OPE or the
repurchase of such interests by OPE. Our Bylaws provide that we may redeem, at
the lower of fair market value or cost, shares held by any person or entity who
becomes the owner of 5% or more of our Common Stock without the approval of the
AFL. These restrictions are and will continue to be contained in a legend on
each certificate issued evidencing shares of Class A Common Stock.

Neither the AFL, any of its affiliates or members nor any of their
respective officers, employees or representatives, other than OPE, assume any
responsibility for the accuracy of any representations made by OPE in this
Report.

We have issued 1,000 shares of Class B Common Stock to our two controlling
shareholders, each share of which votes the equivalent of 10,000 shares of Class
A Common Stock.

Current Operations of OPE

We derive substantially all of our revenue from the Arena Football
operations of our teams (the Predators and the Peoria Pirates of the af2) and
our net revenue interest in the League. This revenue is primarily generated from
(i) the sale of tickets to the teams' home games, (ii) the sale of advertising
and promotions to team sponsors, (iii) the sale of local and regional broadcast
rights to Predators' games, (iv) our share of League media contracts, Membership
fees paid by expansion teams and League licensing sales, and (v) the sale of
merchandise carrying the Predators' logos.

In March 1998, we entered into an agreement with the AFL pursuant to which
we agreed to purchase two additional Team Shares in the League (which then
represented 2/19 of the League's revenue) for $6,000,000. Under the terms of the
agreement (which was amended in March 2000), we receive a minimum of $480,000
per year including principal and interest until total distributions reach
$6,000,000. Distributions from our two additional Team Shares are accounted as a
reduction of debt until paid in full. When the debt is repaid in full, then the
Team Shares will be recognized as revenue.

Ticket Sales. The Predators played seven home games and seven away games
during the 2001 AFL regular season together with one home and one away
pre-season exhibition game. Under the AFL Bylaws, OPE receives all revenue from
the sale of tickets to regular season and pre-season home games and no revenue
from the sale of tickets to regular season and pre-season away games. The
Pirates play eight home games and eight away games, with no preseason games.

The Predators play all home games at the TD Waterhouse Center, which holds
approximately 16,000 spectators. Ticket prices for regular season home games
during the 2001 season at the TD Waterhouse Center ranged from $5 to $200 per
game. The following table sets forth certain information relating to the
Predators' pre-season and regular season revenue generated by the sale of
tickets for the 1999 through 2001 seasons:

Season Number of Average Per Game Average Paid Average Ticket
Season Tickets Paid Attendance Ticket Price Revenue Per Game

1999 7,612 9,509 $21.78 $207,103
2000(1) 5,941 8,676 $24.42 $211,853
2001 7,398 9,004 $23.74 $213,783

(1) The League threatened to cancel the 2000 season due to player disagreements,
but later elected to play the full season. However, the threat of cancellation
reduced ticket sales in the 2000 season.

Peoria Pirates. Ticket sales for the Pirates in the 2001 season were
$577,647, with average game attendance of 7,370 and an average paid ticket price
of $9.96. The Pirates do not have local media contracts nor are there national
broadcasts of af2 teams. The Pirates play in the Peoria Civic Center, paying
$8,500 rental for each home game.

Advertising and Promotion. OPE generates revenue from the sale of
advertising displayed on signs located throughout the TD Waterhouse Center and
the Peoria Civic Center (the "arenas"), and through other promotions utilizing
the teams' name or logos. In addition, OPE markets team sponsorships to local
and regional businesses which provide a combination of advertising rights,
promotional rights and VIP ticket privileges. Advertising rights include the use
of corporate logos within the arenas, commercials on radio and television,
advertisements in the FanGuide magazine, display of the sponsor's name on the
Jumbotron (a large, four sided electronic sign located in the center of the TD
Waterhouse Center, public address announcements, the inclusion of customer names
on team posters and the like. Promotional rights include banners displayed in
the team's VIP room at the arenas), availability of blocks of seats in the upper
bowl endzone for specific games, the use of the team's logos and autographed
helmets. VIP privileges include high priority seating selections, parking
passes, VIP room passes and travel packages, which include attendance at team
away games.

Local and Regional Television, Cable and Radio Broadcasts. OPE's television
contract with the Sunshine Network provides only negligible revenue per season.
OPE also enters into an annual radio contract with Clear Channel Communications.
In the past, most of the proceeds from the two media contracts have been paid in
the form of bartered commercial television and radio time made available to us
rather than cash.

National Television. For the 2001 season, the AFL granted TNN, ESPN, ESPN 2
and ABC broadcast rights to televise 15 AFL games, which were live rather than
tape delayed (all in prime time), 11 playoff games and ABC's telecast of the
Arena Bowl.

Sale of Merchandise. OPE generates a small amount of revenue from the sale
of merchandise carrying the Predator and Pirates logos (primarily athletic
clothing such as sweatshirts, T-shirts, jackets and caps) at the arenas and at
our corporate offices.

Telemarketing. In addition to using telemarketing techniques to improve the
Predators' ticket sales, we use our telemarketing staff to market tickets for
other minor league teams.

Performance

The following table describes the performance of the Predators during the
last four AFL seasons:

Season Record Finish in Division Playoff Results
------ ------ ------------------ ---------------
1998 9-5 2nd Won the Arena Bowl Championship
1999 7-7 3rd Lost the ArenaBowl Championship
2000 11-3 1st Won the Arena Bowl Championship
2001 8-6 3rd Lost first playoff Game

Coaches

Fran Papasedero, who was an Assistant Coach for the Predators for four
years, was named Head Coach for the 2002 season. A former Arena Football League
star lineman, Coach Papasedero played five seasons in the League playing for
Nashville, St. Louis, Massachusetts and Albany. He was a first team All-Arena
selection with the St. Louis Stampede in 1996. Coach Papasedero lettered four
years for Springfield College, where he was an All-America lineman as a senior.
During the off-season, he works in sponsorship sales and promotions for the
Predators. Coach Papasedero's staff includes one paid and three unpaid assistant
coaches.

Bruce Cowdry, who was the head coach of the Pensacola Barracudas for 2001
af2 season was named head coach of the Pirates in September 2001. Coach Cowdry
was the head coach of the Peoria Indoor Football League (IFL)team for the 1999
and 2000 seasons. He was undefeated as head coach of the IFL team.

Players

In general, the rules of the AFL and af2 permit each team to maintain an
active roster of 24 and 18 players during the regular season, respectively.

The Collective Bargaining Agreement

In 2001 the League entered into a Collective Bargaining Agreement ("CBA")
with its players. Under the terms of the CBA, the League has agreed with the
NFLPA (the players' bargaining unit) to a salary cap equal to the greater of
$1,643,000 per team, or 61% of team revenue as defined in the CBA, increasing to
63% by 2006. Minimum per player salaries are $1,484 per game. The effect of the
CBA has been to significantly increase player costs for all League teams. The
af2 does not have a collective bargaining agreement with its players. Player
payroll is limited to $86,000 per season.

TD Waterhouse Center

The Predators have played in the TD Waterhouse Center, which has a seating
capacity of approximately 16,000, since 1991. In March 1998, OPE signed a
five-year lease (with an additional five-year option) with the TD Waterhouse
Center commencing in the 1998 season at approximately the same per game rental
(approximately $12,000 per game) as its previous lease, but which provides OPE
with an approximately 20% share of revenue generated from food and beverage
concessions in exchange for OPE reducing ticket prices by approximately 10% to
20%, depending upon seat location. OPE also receives a rebate against rent of $3
per person (up to $10,000) for games in which attendance exceeds 9,000 persons.

Peoria Civic Center

The Pirates play their home games at the Peoria Civic Center, which has a
seating capacity of approximately 8,700. In September 2000, the Company signed a
five-year license agreement with SMG, for use of the Peoria Civic Center. The
agreement requires the Company to pay a fee of $8,500 per game for rent and game
day services. The Company receives an incentive of $.50 per person for games in
which attendance exceeds 7,000 attendees.

Competition

The Predators and Pirates compete for sports entertainment dollars with
other professional sports teams and with college athletics and other
sports-related entertainment. During portions of the AFL season, the Predators
compete with professional basketball (NBA and WNBA) teams playing in Orlando and
with professional hockey in Orlando and professional baseball in other locations
in Florida. In addition, the colleges and universities in central Florida, as
well as public and private secondary schools, offer a full schedule of athletic
events throughout the year. The Predators also compete for attendance and
advertising revenue with a wide range of other entertainment and recreational
activities available in central Florida. On a broader scale, AFL and af2 teams
compete with football teams fielded by high schools and colleges, other indoor
football teams, the NFL, the Canadian Football League and NFL Europe.

Employees

In addition to its active football players, the teams employ five football
personnel, fourteen non-football personnel and five telemarketing personnel.
During the AFL season, the teams also use volunteer part-time employees from
time to time.

Risk Factors

Prospective investors should consider carefully the following risk factors,
together with the other information contained in this prospectus, in evaluating
our securities.

We have a history of losses and uncertainty of future results.

We incurred net losses of $3,218,503 for the year ended September 30, 2001
and $1,476,116 for the transition year ended September 30, 2000. Since our
inception, we have lost an aggregate of $9,057,590. There can be no assurance
that we will ever achieve a profitable level of operations or that
profitability, if achieved, can be sustained on an ongoing basis.

We compete for sport entertainment dollars with other sports and entertainment
venues.

The Predators, as well as our af2 teams, compete for sports entertainment
dollars with other professional sports teams and with college teams and with
other sports-related entertainment. During portions of the Arena Football
season, the Predators compete for attendance and fan support with a professional
basketball team in the Orlando area and with professional hockey and baseball
teams in other parts of Florida. In addition, the colleges and universities in
central Florida, as well as public and private secondary schools, offer a full
schedule of athletic events throughout the year. The Predators also compete for
attendance and advertising revenue with a wide range of other entertainment and
recreational activities available in central Florida, such as Walt Disney World
and Universal Studios. Our af2 teams compete with other entertainment venues in
their home cities. On a broader scale, Arena Football League and af2 teams
compete with football teams fielded by high schools and colleges, the National
Indoor Football League, the National Football League, the Canadian Football
League and the National Football League Europe.

We are subject to League obligations.

The membership agreements with the Arena Football League generally make the
Predators and other teams of the AFL liable on a pro rata basis for the debts
and obligations of the AFL. Any failure of other members of the AFL to pay their
pro rata share of any such debts or obligations could adversely affect the
Predators by requiring us to make additional payments on behalf of failing or
defaulting teams. To date, we have not been required to pay any material debts
or obligations. The success of the AFL and its members depends in part on the
competitiveness of the teams in the AFL and their ability to maintain fiscally
sound operations. Certain AFL teams have encountered financial difficulties in
the past, and there can be no assurance that the AFL and its teams will continue
to operate. If the AFL is unable to continue operations, the Predators and the
other teams forming the AFL would be unable to continue their own operations. In
addition, the Predators and their personnel, as well as our af2 teams, are bound
by a number of rules, regulations and agreements imposed upon them by their
Leagues as well as by national television contracts. Any change in these rules,
regulations and agreements will be binding upon our teams and their personnel,
regardless of whether they agree with such changes, and it is possible that any
such change could adversely affect them.

We will be subject to increased competition as a result of AFL and af2 ("AFL")
expansion.

The AFL will add additional teams in the future. While such expansion
affords the AFL the opportunity to enter new markets and increase revenue, it
also increases the competition for talented players among AFL teams. Expansion
teams are permitted to select in an expansion draft designated unprotected
players playing for existing AFL teams. There can be no assurance that the
Predators will be able to retain all of the team's key players during an
expansion draft or that the rules regarding the expansion draft will not change
to the detriment of the Predators. In addition, we may receive less revenue from
the AFL as the result of League expansion since AFL teams share equally in the
revenue generated from national television contracts and sale of AFL
merchandise.

We may need additional capital in the future which could dilute the ownership of
current stockholders or make our cash flow vulnerable to debt repayment
requirements.

Historically, we have raised equity and debt capital to support our
operations. To the extent that we raise additional equity capital, existing
stockholders will experience a dilution in the voting power and ownership of
their common stock, and earnings per share, if any, would be negatively
impacted. Our inability to use our equity securities to finance our operations
could materially limit our growth.

Any borrowings made to finance operations could make us more vulnerable to
a downturn in our operating results, a downturn in economic conditions, or
increases in interest rates on borrowings that are subject to interest rate
fluctuations. If our cash flow from operations is insufficient to meet our debt
service requirements, we could be required to sell additional equity securities,
refinance our obligations, or dispose of assets in order to meet debt service
requirements. There can be no assurance that any financing will be available to
us when needed or will be available on terms acceptable to us. Our failure to
obtain sufficient financing on favorable terms and conditions could have a
material adverse effect on our growth prospects and our business, financial
condition and results of operations.

We depend upon the competitive success of the teams for ticket and merchandise
sales.

Our financial results depend in part upon the teams continuing to achieve
game winning success in the AFL/af2. By achieving and maintaining such success,
the teams expect to (1) generate greater fan enthusiasm, resulting in higher
ticket and merchandise sales throughout the regular season and (2) capture a
greater share of local television and radio audiences. Failure to participate in
the AFL/af2 playoffs would deprive the teams of additional revenue that may
result from sales of tickets for home playoff games and from media contracts.
Revenue is, therefore, significantly adversely affected by a poor game winning
performance, especially involving losses of home games. The Predators win-loss
record for the 2001 season was eight wins and seven losses, including our
playoff game loss and the Pirates had seven wins and nine losses.

We depend upon attracting talented players to achieve game winning success.

The success of the teams depends, in part, upon the team's ability to
attract and retain talented players. The teams compete with other AFL and af2
teams as well as teams fielded by the National Football League, the Canadian
Football League and the NFL Europe, among others, for available players. There
can be no assurance that the Predators will be able to retain players upon
expiration of their contracts or obtain new players of adequate talent to
replace players who retire or are injured, traded or released. Even if the teams
are able to obtain and retain players who have had previously successful
football careers, there can be no assurance of the quality of their future
performance.

Our players' salaries may increase in the future, thereby increasing our
operating expenses.

Although our player salaries are low compared to salaries currently paid by
other professional sports teams, there can be no assurance that salaries payable
by us will not increase significantly in the future, thereby increasing our
operating expenses and adversely affecting our financial condition and results
of operations.

Football injuries could adversely affect our financial condition.

Player contracts entitle players to receive their salary even if unable to
play as a result of injuries sustained from arena football-related activities
during the course of employment. Although we carry occupational health,
accidental death and disability insurance on our players, we must pay deductible
portions of the insurance. Payment of insurance premiums, insurance deductibles
and salary payments that must be made directly to injured players could have an
adverse effect upon our financial condition and results of operations.

There are League restrictions on the purchase of our securities.

The AFL Charter and Bylaws contain provisions that may restrict a person
from acquiring our common stock and affect the value of the common stock or the
value of any team, including the Predators. In general, any acquisition of
shares of common stock that will result in a person or group of persons holding
5% or more of our outstanding common stock requires the prior approval of the
AFL, which may be granted or withheld in the sole discretion of the AFL. Failure
by a holder of a 5% or more interest to comply with these restrictions may
result in a forced sale of such holder's interest or the repurchase of such
interests by us. Our Bylaws provide that we may redeem, at the lower of fair
market value or cost, shares held by any person or entity who becomes the owner
of 5% or more of our common stock without the approval of the AFL.

A failure by the AFL to renew broadcast contracts would significantly reduce our
revenue.

The AFL's contracts with cable networks for the national broadcast of
certain AFL games in the United States are renewable annually. A percentage of
the revenue generated from those contracts and any future national or network
media contracts after payment of AFL expenses is divided equally among the
members of the AFL. There can be no assurance that any national broadcaster will
enter into broadcast contracts with the AFL upon the expiration of the current
contracts. Our television and radio contracts for the local broadcast of the
Predators' pre-season, regular season and certain post-season games are also
subject to periodic renewal. The failure to renew national or local television
or radio contracts would significantly reduce our revenue.

Our cash flow is seasonal, limiting our cash resources.

The arena football season begins in April and ends in August. As a result,
we realize a significant portion of our revenue and incur a significant portion
of our expenses during that period. This seasonality can create cash flow
difficulties for us outside the AFL and af2 seasons.

We may issue preferred stock, which could prevent a change in our control.

Our Articles of Incorporation authorize the issuance of up to 1,500,000
shares of preferred stock with such rights and preferences as may be determined
from time to time by our Board of Directors. Accordingly, under the Articles of
Incorporation, the Board of Directors, without shareholder approval, may issue
preferred stock with dividend, liquidation, conversion, voting, redemption or
other rights that could adversely affect the voting power or other rights of the
holders of our common stock. The issuance of any shares of preferred stock,
having rights superior to our common stock, may result in a decrease in the
value or market price of our common stock and could prevent a change in our
control. We have no other anti-takeover provisions in our Articles of
Incorporation or Bylaws. Holders of the preferred stock may also have the right
to receive dividends, certain preferences in liquidation and conversion rights.

One holder of our Class B Common Stock elects all of our directors and controls
our operations.

We have issued a total of 1,000 shares of our Class B Common Stock to two
persons, the New Era Growth and Venture Fund, which owns 925 Class B shares, and
Alan Gagleard, who owns 75 shares. Each share of Class B Common Stock votes the
equivalent of 10,000 shares of Class A Common Stock. Accordingly, New Era can
elect all of our directors and control our operations. New Era has entered into
an agreement to sell its Class B shares to Eric A. Margenau, our Chief Executive
Officer, and Brett L. Bouchy, one of our employees. In turn Mr. Bouchy has
entered into a voting trust agreement with Mr. Margenau, allowing Mr. Margenau
to vote the shares until January 2010. Accordingly, if the sale is consummated,
Mr. Margenau will elect all of our directors and control our operations.

We do not pay dividends on our Common Stock.

We have not paid any dividends on our common stock since our inception and
do not anticipate paying dividends in the foreseeable future. We plan to retain
earnings, if any, to finance the development and expansion of our business.

Substantially all of our shares of common stock are freely tradeable.

All of our Class A common stock is freely tradeable. Sales of substantial
amounts of Class A common stock, or the perception that such sales could occur,
could adversely affect prevailing market prices of the Class A common stock.

Investors hold options and warrants to acquire a large number of our shares.

A total of 3,000,000 shares of Class A Common Stock have been reserved for
issuance upon the exercise of options granted or which may be granted under our
1997 Employee Stock Option Plan. Additionally, there are outstanding options to
acquire 1,831,578 shares of Class A Common Stock at exercise prices ranging from
$1.50 to $3.00 per share. In addition, there are outstanding (1) warrants to
purchase 550,000 shares of Class A Common Stock at an exercise price of $7.50
per share issued in connection with our 1997 initial public offering and
exercisable at any time until December 10, 2002, (2) unit warrants to purchase
110,000 shares of Class A Common Stock and 55,000 warrants exercisable at $7.50
each, all at an exercise price of $12.00 per unit warrant, (3) warrants to
purchase 160,000 shares of Class A Common Stock at $4.50 per share at any time
until December 31, 2002, and (4) other warrants to purchase up to 450,000 shares
at prices ranging from $2.50 to $5.00 per share. During the terms of these
options and warrants, the holders will have the opportunity to profit from an
increase in the market price of the Class A Common Stock. The existence of these
options and warrants may adversely affect the terms on which we can obtain
additional financing, and the holders of such options and warrants can be
expected to exercise the options and warrants at a time when we, in all
likelihood, would be able to obtain additional capital by offering shares of our
capital stock on terms more favorable to us than those provided by the exercise
of such options and warrants.

There are limitations on the liability of our directors and officers.

Our Bylaws substantially limit the liability of our directors and officers
to us and our stockholders for breach of fiduciary or other duties to us.

If we do not continue to be listed on the Nasdaq SmallCap Market, our stock will
become harder to purchase and sell.

Our Class A Common Stock is currently listed on the Nasdaq SmallCap Market.
In order to continue to be included on the Nasdaq SmallCap Market, a company
must maintain (1) at least two market makers, (2) 300 holders of its common
stock, (3) a minimum bid price of $1.00 per share of common stock, (4) net
tangible assets of $2 million (unless a company had net income of $500,000 in
two of the last three years or a market capitalization of $35 million), (5)
500,000 shares in the public float and (6) a market value of the public float of
$1 million. We are currently in compliance with all of the Nasdaq SmallCap
Market's listing requirements. However, our failure to meet these maintenance
criteria in the future may result in the discontinuance of our securities on the
Nasdaq SmallCap Market. As a result, an investor may find it more difficult to
purchase, sell or to obtain accurate quotations as to the market value of our
securities.

We can give no assurance as to our future results.

Prospective purchasers of our securities should carefully consider the
information contained in this Report before purchasing our securities.
Information contained in this Report contains "forward-looking statements,"
which can be identified by the use of forward-looking terminology such as
"believes," "expects," "may," "should" or "anticipates" or the negative thereof
or other variations thereon or comparable terminology, or by discussions of
strategy. As a result of many factors, including those discussed herein under
"Risk Factors," no assurance can be given that the future results discussed by
the forward-looking statements will be achieved.

ITEM 2. DESCRIPTION OF PROPERTY
-------------------------------

OPE leases corporate and team offices at 4901 Vineland, Suite 150, in
Orlando, Florida, pursuant to a five-year lease covering approximately 4,500
square feet for $9,420 per month, expiring January 2006. We also lease 1,000
square feet for our offices in Peoria for which we pay $550 per month.

The Predators have played in the TD Waterhouse Center, 600 West Amelia
Street, Orlando, Florida 32801,which has a seating capacity of approximately
16,000, since 1991. In March 1998, OPE signed a five-year lease (with an
additional five-year option) with the TD Waterhouse Center commencing in the
1998 season at approximately the same per game rental (approximately $15,000 per
game) as its previous lease, but which provides OPE with an approximately 20%
share of revenue generated from food and beverage concessions in exchange for
OPE reducing ticket prices by approximately 10% to 20%, depending upon seat
location. OPE also receives a rebate against rent of $3 per person (up to
$10,000) for games in which attendance exceeds 9,000 persons.

ITEM 3. LEGAL PROCEEDINGS
-------------------------

In February 2000, the Arena Football League (AFL) and all of its member
teams, including OPE, were joined as defendants in a civil action brought by
several AFL players (captioned James Guidry, et. al. vs. Arena Football League
L.L.C. et. al., United States District Court, District of New Jersey, Case
Number 00-533-HAA) in which plaintiffs sought damages for violation of federal
antitrust law, specifically Sections 1 and 2 of the Sherman Antitrust Act. The
complaint sought damages against the defendants in an amount to be determined
and trebled, plaintiffs' cost of litigation and further relief, as the court
deemed proper and equitable. On January 25, 2001, the League settled the
litigation by entering into a collective bargaining agreement with the NFLPA,
which is the players' bargaining representative. In addition, the League agreed
to pay monetary damages of approximately $6.2 million as a part of the
settlement. The Company's obligation is estimated to be $270,000 and has been
accrued for as of September 30, 2001.

In August 2000 Game Tough filed a civil complaint against the Company
seeking damages of approximately $400,000. The plaintiff alleges that the
Company did not honor an advertising agreement with it to display the
Plaintiff's name on the Predators' jersies during the Arena Bowl. A ruling in
favor of the Company was made in December 2001.

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

Not applicable.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
----------------------------------------------------------------

OPE's Class A Common Stock and Common Stock Purchase Warrants commenced
trading on the NASDAQ SmallCap Market under the symbols "PRED" and "PREDW",
respectively, in December 1997. The following table sets forth for the quarters
indicated the range of high and low closing prices of OPE's Class A Common Stock
and Warrants as reported by NASDAQ but does not include retail markup, markdown
or commissions. On September 30, 2001, the closing price of OPE's Common Stock
was $3.04 per share.

Common Stock Warrants
By Quarter Ended: High Low High Low
----------------- ---- --- ---- ---

Calendar 2000

December 31, 2000 $2.13 $1.19 $.59 $.12
September 30, 2000 $2.90 $1.50 $.68 $.40
June 30, 2000 $2.25 $1.25 $.75 $.37
March 31, 2000 $3.12 $1.75 $.95 $.31

Calendar 2001

September 30, 2001 $3.55 $2.15 $.51 $.19
June 30, 2001 $3.10 $1.63 $.37 $.10
March 31, 2001 $3.75 $1.44 $.87 $.03

The above quotations were reported by the Nasdaq SmallCap Market and
reflect inter-dealer prices, without retail mark-up, mark-down or commission and
may not necessarily represent actual transactions. As of September 30, 2001, OPE
had approximately 900 record and beneficial stockholders.

Class A and Class B Common Stock

OPE is authorized to issue 15,000,000 shares of no par value Common Stock
(Common Stock), of which 6,720,710 shares of Class A Common Stock are
outstanding as of September 30, 2001. In addition, OPE has issued 1,000 shares
of no par value Class B Common Stock. The Class A Common Stock and Class B
Common Stock are identical in all respects except that each share of Class A
Common Stock is entitled to one vote and each share of Class B Common Stock is
entitled to 10,000 votes. The Class B Common Stock was issued to satisfy certain
control requirements of the AFL. See Arena Football-Restrictions on Ownership
and Item 12. Upon issuance, shares of Class A and Class B Common Stock are not
subject to further assessment or call. Subject to the prior rights of any series
of preferred stock which may be issued by OPE in the future, holders of Class A
and Class B Common Stock are entitled to receive ratably such dividends that may
be declared by the Board of Directors out of funds legally available therefore,
and, in the event of the liquidation, dissolution or winding up of OPE, are
entitled to share ratably in all assets remaining after payment of liabilities.
Holders of Class A and Class B Common Stock have no preemptive rights or rights
to convert their Class A and Class B Common Stock into any other securities. The
outstanding Class A and Class B Common Stock is validly issued, fully paid and
nonassessable. The holders of the Class B Common Stock are entitled to convert
each share of Class B Common Stock into one share of Class A Common Stock.

Redeemable Warrants

Each Warrant represents the right to purchase one share of Class A Common
Stock at an initial exercise price of $7.50 per share until December 10, 2002.
The exercise price and the number of shares issuable upon exercise of the
Warrants are subject to adjustment in certain events, including the issuance of
Class A Common Stock as a dividend on shares of Class A Common Stock,
subdivisions or combinations of the Class A Common Stock or similar events. The
Warrants do not contain provisions protecting against dilution resulting from
the sale of additional shares of Class A Common Stock for less than the exercise
price of the Warrants or the current market price of OPE's securities.

Warrants may be redeemed in whole or in part, at the option of OPE, upon 30
days' notice, at a redemption price equal to $.01 per Warrant if the closing
price of OPE's Class A Common Stock on NASDAQ is at least $7.50 per share for 20
consecutive trading days, ending not earlier than five days before the Warrants
are called for redemption.

Holders of Warrants may exercise their Warrants for the purchase of shares
of Class A Common Stock only if a current prospectus relating to such shares is
then in effect and only if such shares are qualified for sale, or deemed to be
exempt from qualification, under applicable state securities laws. OPE will use
its best efforts to maintain a current prospectus relating to such shares of
Class A Common Stock at all times when the market price of the Class A Common
Stock exceeds the exercise price of the Warrants until the expiration date of
the Warrants, although there can be no assurance that OPE will be able to do so.

The shares of Class A Common Stock issuable upon exercise of the Warrants
will be, when issued in accordance with the Warrants, fully paid and
non-assessable. The holders of the Warrants have no rights as stockholders until
they exercise their Warrants.

For the life of the Warrants, the holders thereof are given the opportunity
to profit from a rise in the market for OPE's Class A Common Stock, with a
resulting dilution in the interest of all other stockholders. So long as the
Warrants are outstanding, the terms on which we could obtain additional capital
may be adversely affected. The holders of the Warrants might be expected to
exercise them at a time when OPE would, in all likelihood, be able to obtain any
needed capital by a new offering of securities on terms more favorable than
those provided by the Warrants.

Preferred Stock

OPE is authorized to issue 1,500,000 shares of preferred stock, no par
value (the Preferred Stock). The Preferred Stock may, without action by the
stockholders of OPE, be issued by the Board of Directors from time to time in
one or more series for such consideration and with such relative rights,
privileges and preferences as the Board may determine. Accordingly, the Board
has the power to fix the dividend rate and to establish the provisions, if any,
relating to voting rights, redemption rate, sinking fund, liquidation
preferences and conversion rights for any series of Preferred Stock issued in
the future.

It is not possible to state the actual effect of any other authorization of
Preferred Stock upon the rights of holders of Common Stock until the Board
determines the specific rights of the holders of any other series of Preferred
Stock. The Board's authority to issue Preferred Stock also provides a convenient
vehicle in connection with possible acquisitions and other corporate purposes,
but could have the effect of making it more difficult for a third party to
acquire a majority of the outstanding voting stock. Accordingly, the issuance of
Preferred Stock may be used as an anti-takeover device without further action on
the part of the stockholders of OPE, and may adversely affect the holders of the
common stock. OPE has not issued any Preferred Stock.

Transfer Agent and Warrant Agent

Corporate Stock Transfer, Inc., 3200 Cherry Creek Drive, Suite 430, Denver,
Colorado 80209, is OPE's transfer agent and warrant agent.

Dividends

OPE has not paid dividends on its Class A and Class B Common Stock since
inception and does not plan to pay dividends in the foreseeable future.
Earnings, if any, will be retained to finance growth.

Limitation on Liability

OPE's bylaws provide that a director shall not be personally liable to OPE
or its stockholders for any action taken or any failure to act to the full
extent permitted by the Florida Business Corporation Act. The effect of this
provision in the bylaws is to eliminate the rights of OPE and its stockholders,
through stockholders' derivative suits on behalf of OPE, to recover monetary
damages from a director for breach of the fiduciary duty of care as a director
including breaches resulting from negligent or grossly negligent behavior. This
provision does not limit or eliminate the rights of OPE or any stockholder to
seek non-monetary relief such as an injunction or rescission in the event of a
breach of a director's duty of care or to seek monetary damages for (i) a
violation of criminal law, (ii) unlawful payment of dividends or other
distribution under Florida law, (iii) a transaction in which a director derived
an improper personal benefit, (iv) willful misconduct, or (v) reckless,
malicious or wanton acts.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
-----------------------------------------------------------------

Introduction

The Company is in the sports and entertainment business and (i) owns and
operates the Orlando Predators (the "Predators"), a professional arena football
team of the Arena Football League (the "AFL" or the "League"), (ii) owns an
additional 8% revenue interest in the League (in addition to its 4% League
ownership through the Predators) and (iii) owns and operates the Peoria Pirates
("Pirates"), a minor league professional arena football team of the
arenafootball2 League ("af2"). Arena football is played in an indoor arena on a
padded 50-yard long football field using eight players on the field for each
team. Most of the game rules are similar to college or other professional
football game rules with certain exceptions intended to make the game faster and
more exciting.

The Company's strategy is to participate through the operation of the
Predators and Pirates and through its league ownership in what the Company
believes will be continued significant growth of the AFL which in turn is
expected to result in increased revenue to the Company generated from (i)
national (League) and regional (team) broadcast contracts, (ii) national league
sponsorship contracts, (iii) the sale of additional League Membership fees, and
(iv) increased fan attendance at AFL and af2 games including Predators' and
Pirates' games, together with appreciation in the value of the Predators as an
AFL team and the Pirates as an af2 team. The trend toward ongoing League growth
was recently evidenced by a February 1999 announcement by the National Football
League ("NFL") that it had obtained an option to purchase up to 49.9% of the
League.

At the team levels, the Company's strategy is to increase fan attendance at
Predators' and Pirates' home games, expand the Predators' and Pirates'
advertising and sponsorship base, and contract with additional local and
regional broadcasters to broadcast Predators' and Pirates' games.

The Company currently derives substantially all of its revenue from the
arena football operations of the Predators and Pirates. This revenue is
primarily generated from (i) the sale of tickets to the Predators' and Pirates'
home games, (ii) the sale of advertising and promotions to Predator and Pirate
sponsors, (iii) the sale of local and regional broadcast rights to Predators'
games, (iv) the Predators' share of League contracts with national broadcast
organizations and expansion team fees paid through the AFL, (v) the sale of
merchandise carrying the Predators' and Pirates' logos and (vi) concession sales
at Predators' home games. A large portion of the Company's annual revenue is
determinable at the commencement of each football season based on season ticket
sales and contracts with broadcast organizations and team sponsors.

The operations of the team are year-round; however, the majority of
revenues and expenses are recognized during the AFL and af2 playing seasons,
from March through August of each year. The teams begin to receive deposits in
late August for season tickets during the upcoming season. From August through
April, the teams sell season tickets and collect revenue from all such sales.
Selling, advertising and promotions also take place from August through April,
although these revenues are not realized until after the season begins. Single
game tickets and partial advertising sponsorships are also sold during the
season, primarily from April to July. Additional revenues and expenses are
recognized in August from playoff games, if any.

In August 1998, the Company purchased an additional two equity interests in
the Arena Football League for $6,000,000 ("Nth Agreement"). The $6 million will
be repaid to the Company by distributions from the League related to these two
equity interests or "Nths." The League currently owes the Company $1.2 million
in note payments.

In May 1999, the Company entered into a non-binding letter of intent to
acquire United Sports Ventures, Inc. ("USV"). USV wholly or partially owns and
operates the Quad City Mallards, the Rockford Ice Hogs and the Missouri River
Otters of the United Hockey League and the Mobile Bay Bears (AA) professional
baseball club. The Company terminated the letter of intent with USV in June
2000, but retained the Company's senior management to oversee the operations of
OPE in a management agreement.

In mid-February 2000, the AFL announced it was going to cancel the 2000
season due to its ongoing labor dispute with the players. In late February 2000,
the AFL was notified by the Arena Football League Players' Organizing Committee
that they received authorization cards from an overwhelming majority of AFL
players to act as the exclusive collective bargaining representative for all AFL
players. Subsequently, the 2000 season was re-opened and negotiations began on
an interim collective bargaining agreement.

In April 2000, the Company settled a dispute with the League regarding the
payment terms of the Nth Agreement. As a result the Company will receive a
guaranteed amount of $480,000 per year and all additional monies received from
the League will go to the repayment of the remaining approximate $1.2 million
owed to the Company. Subsequently, the Company will continue to receive their
pro rata share of League revenues. When the entire debt is repaid to the
Company, only then will the Company begin to recognize the additional 2 Nths'
distributions as revenue.

Except for the historical information contained herein, certain matters set
forth in this report are forward-looking statements within the meaning of the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995. These forward-looking statements are subject to risks and uncertainties
that may cause actual results to differ materially. These risks are detailed
from time to time in the Company's periodic reports filed with the Securities
and Exchange Commission. These forward-looking statements speak only as of the
date hereof. The Company disclaims any intent or obligation to update these
forward-looking statements.

Results of Operations

For the Year Ended September 30, 2001 Compared To The Nine-Month Period Ended
September 30, 2000

Revenues

The Company recognizes game revenues and expenses over the course of the
season (March through August).

Revenues for the year ended September 30, 2001 were $4,550,245, which
represented an increase of $680,379 or 18% as compared to revenues for the
period ended September 30, 2000 of $3,869,866. The increase for the year ended
September 30, 2001 was directly attributable to an increase in ticket revenue of
$609,591. Ticket revenues improved due to the addition of the Peoria Pirates,
with ticket revenues of $577,647, and an increase of $31,944 in ticket sales for
the Orlando Predators team. Ticket sales are recognized when the games are
played. The Orlando Predators team played the same number of home games in the
year as last period. The Company also had a $493,047 improvement in advertising
and promotions revenue due to the addition of the af2 franchise and an increase
of $187,191 at the Predator team level. The improvement at the Predator team
level was a direct result of a full selling season that was hindered in the
previous season by a labor dispute. The lease agreement with the Orlando Arena
(TD Waterhouse) generated $120,326 in concession income for the eight home games
played in this year, consistent with the prior period. League revenues dropped
$92,717 due to a decrease in AFL expansion revenues.

The telemarketing division also generated revenue of $14,317 for the year
ended September 30, 2001 compared to $10,057 for the period ended September 30,
2000. The division produced revenue from selling season tickets for the Mobile

Bay Bears (AA) professional baseball club. The Company anticipates the expansion
of this division in the future with sales for additional teams in the AFL,
arenafootball2 and other minor league hockey and baseball teams.

Operating Expenses

Operating expenses of $2,984,100 increased $923,197 or 45% for the year
ended September 30, 2001 as compared to $2,060,903 for the period ended
September 30, 2000. The primary reason for added costs is the addition of the
af2 franchise in Peoria, IL and an increase in player costs of $359,092 due to
the collective bargaining agreement. These costs are associated with the
operations of the football teams in Orlando and Peoria.

Selling and Promotional Expenses

Selling and promotional expenses of $1,637,907 represent an increase of
$816,223 or 99% for the year ended September 30, 2001 compared to $821,684 for
the period ended September 30, 2000. This was due to the added selling costs of
$182,798 associated with the Peoria Pirates. There were also added costs for
producing the Orlando Predator games on TV of $130,000 and increases of $123,559
in advertising and $195,461 for sales salaries and commissions.

League Assessments

League assessments of $419,000 increased $136,584 or 48% for the year ended
September 30, 2001 as compared to $282,416 for the period ended September 30,
2000 due to legal settlements of $299,000 in 2001 compared to $160,000 in 2000.

The League is comprised of numerous teams who share in all league revenue
and expenses. League assessments are based upon the team's share of league
operating expenses and other league expenses such as legal settlements.

General and Administrative Expenses

General and administrative expenses of $1,702,096 increased $426,515 or 33%
for the year ended September 30, 2001 compared to $1,275,581 for the period
ended September 30, 2000. This increase can be primarily attributed to $169,173
of expenses for running the Peoria Pirates administrative office and a full year
of expenses compared to nine months.

Loss on Write Down of Assets

During the year ended September 30, 2001, the Company wrote off certain
assets not received in the IFL asset purchase, in the amount of $107,671.

Playoffs

The Orlando Predators played one home playoff game in 2001 and played three
home playoff games in 2000. Playoff revenues for the year ended September 30,
2001 were $117,994 as compared to $653,902 for the period ended September 30,
2000 a decrease of $535,908.

Playoff expenses for the year ended September 30, 2001 were $149,675 as
compared to $786,862 for the period ended September 30, 2000.

Other Income/Expense

Interest income during the year ended September 30, 2001 was $344,553 as
compared to $333,552 for the period ended September 30, 2000. The interest
income related to the Arena Football League is due to the Nth Purchase Agreement
and decreased for the year compared to nine months as a result of the AFL paying
the note balance.

Interest expense during the year ended September 30, 2001 was $149,985 as
compared to $14,419 for the period ended September 30, 2000 due to increased
borrowings.

The Company incurred loan fees to collateralize the loan from HSBC for the
IFL purchase. The fees were paid in stock valued at market value, in the amount
of $707,381, to two directors of the Company and a majority stockholder who used
personal assets to secure this loan.

Period Ended September 30, 2000 Compared To The Year Ended December 31, 1999

Revenues

OPE recognizes game revenues and expenses over the course of the season
(March through August).

Revenues for the period ended September 30, 2000 were $3,869,866, which
represented a decrease of $1,236,103 or 24% as compared to revenues for the
period ended December 31, 1999 of $5,105,969. The decrease for the period ended
September 30, 2000 was directly attributable to a decrease in League revenues of
$1,551,278. League revenues dropped significantly for two reasons. First, the
labor dispute early in the year greatly hindered AFL expansion revenues.
Secondly, the change in accounting due to the Nth dispute with the League
prohibited approximately $514,000 in not being recorded as revenue, but as a
reduction in League debt to OPE. Additionally, the Predators had reduced
advertising and promotions revenue due that the labor dispute was in the team's
prime sponsorship selling season. The team played the same number of home games
in the period as last year. Ticket sales are recognized when the games are
played. The lease agreement with the Orlando Arena generated $118,709 in
concession income for the eight home games played in this period, consistent
with the prior year.

The telemarketing division also generated revenue of $10,057 for the period
ended September 30, 2000 compared to $90,798 for the year ended December 31,
1999. The division produced revenue from selling season tickets for the Mobile
Bay Bears (AA) professional baseball club. OPE anticipates the expansion of this
division in the future to other teams in the AFL, arenafootball2 (the AFL's
minor league system began play in the 2000 season) and other minor league hockey
and baseball teams.

Operating Expenses

Operating expenses of $2,026,141 increased $52,727 or 3% for the period
ended September 30, 2000 as compared to $1,973,414 for the year ended December
31, 1999. These costs are associated with the operations of the Predators'
football team. Player costs were approximately $1,235,609 for the 2000 season.

Selling and Promotional Expenses

Selling and promotional expenses of $841,618 decreased $148,192 or 15% for
the period ended September 30, 2000 compared to $989,810 for the year ended
December 31, 1999. This was due to a significant decrease in corporate
sponsorship commissions related to lower corporate sponsorship revenues as a
result of the player dispute that caused the 2000 season to be canceled.

League Assessments

League assessments of $282,416 decreased $301,393 or 52% for the period
ended September 30, 2000 as compared to $583,809 for the year ended December 31,
1999. The League is comprised of numerous teams who share in all league revenue
and expenses. League assessments are based upon the team's share of league
operating expenses and other league expenses such as legal settlements.

General and Administrative Expenses

General and administrative expenses of $1,290,406 increased $128,874 or 11%
for the period ended September 30, 2000 compared to $1,161,532 for the year
ended December 31, 1999. This increase can be primarily attributed to management
fees to USV, increased management salaries, investor relations expenses, a bad
debt write-off and stock option compensation expenses. General and
administrative expenses would have been approximately another $200,000 higher if
it were not for a shortened fiscal year.

Loss from Disposal of Equipment

During the period ended September 30, 2000, OPE wrote off certain assets no
longer of value for approximately $137,000. OPE believes that it will sell its
old playing field for approximately $10,000.

Playoffs

The Orlando Predators played three home playoff games in 2000 and played
three road playoff games in 1999. Playoff revenues for the period ended
September 30, 2000 were $653,902 as compared to $176,970 for the year ended
December 31, 1999. Home teams retain all revenues for playoff games. Road teams
receive $45,000 for rounds one and two, and $50,000 for the Arena Bowl.

Playoff expenses for the period ended September 30, 2000 were $786,862 as
compared to $259,485 for the year ended December 31, 1999.

Other Income/Expense

Interest income during the period ended September 30, 2000 was $333,552 as
compared to $458,774 for the year ended December 31, 1999. The interest income
related to the Arena Football League is due to the Nth Purchase Agreement.

Interest expense during the period ended September 30, 2000 was $14,419 as
compared to $12,172 for the year ended December 31, 1999.

In June 2000, OPE terminated its letter of intent to acquire United Sports
Ventures, Inc. OPE wrote off $180,367 related to this failed acquisition.

Liquidity and Capital Resources

Historically, the Company has financed net operating losses primarily with
expansion and note receivable and interest payments from the AFL, the sale of
its securities and related party loans.

During April 1998, the Company completed an offering of 40 units, with each
unit consisting of one $50,000 promissory note bearing interest at 7% per annum
and 4,000 warrants to purchase the Company's Class A Common Stock expiring
December 31, 2001. The notes were due on the earlier of December 31, 2001 or the
closing date of a public offering in excess of $5,000,000. A commission of
$95,000 was paid in connection with the transaction. Of the $2,000,000 (40
units) promissory notes, $1,050,000 (21 units) was sold to current stockholders
or directors, including $850,000 (17 units) to Monolith. Notes of $755,000 and
accrued interest of $5,573 were converted to 304,229 shares of the Company's
Class A Common Stock in the August 31, 1998 private placement. The remaining
notes payable and accrued interest of $1,295,774 were paid on September 1, 1998.

On August 11, 1998, the Company completed a private placement of 1,250,000
shares of its Class A Common Stock for $2,500,000 ($2.00 per share) with no
offering costs. These proceeds were used to complete the purchase of the equity
interests in the Arena Football League.

On August 31, 1998, the Company completed a private placement of 1,200,000
shares of its Class A Common Stock for $3,000,000 ($2.50 per share) and paid
offering costs of $749,557. Proceeds from this private placement were used to
pay off the outstanding bridge loans and interest. The remaining proceeds were
used for working capital needs.

In October 1998, the Company completed another private placement offering.
It consisted of one investor totaling $250,000 ($2.50 per share), with
commissions of 15% or $37,500 paid for 100,000 shares of Class A Common Stock.
These proceeds were used to fund current operations.

On November 5, 1998, the Company received a payment from the League in the
amount of $672,791. This payment represented expansion revenue related to the
Los Angeles Avengers expansion team that began play in 2000.

In January and February 1999, the Company completed another private
placement offering. It consisted of three investors totaling $145,000
($2.50-$3.00 per share), with commissions of 15% or $21,750 paid for 75,000
shares of Class A common stock. These proceeds were used to fund current
operations.

On September 26, 1999, the Company received a payment from the League in
the amount of $547,858. This represented expansion revenue related to the
Chicago Rush expansion team that began play in 2001.

In June 1999, the Monolith Limited Partnership, ("Monolith"), a major
stockholder of the Company, loaned the Company $350,000, due in September 2002
with interest at 8% annually. The note was repaid in July 1999.

In July 1999, the Company issued a convertible note payable to a
stockholder of the Company for $250,000, convertible at $4.50 per share, due in
September 2001 with interest at 10% annually. The Company granted warrants to
purchase 25,000 shares of the Company's Class A common stock at $4.50 per share,
which expire in July 2004 in conjunction with the issuance of the note payable.
In October 1999, the company repaid $125,000 of the convertible note and 12,500
of the warrants were canceled. In June 2000, the company repaid the remaining
$125,000 of the convertible note and the remaining 12,500 of the warrants were
canceled.

In October and November 1999, the Company received payments from the League
in the amount of $682,488. This represented expansion revenue related to the
Carolina Cobras membership that began play in 2000.

In November 1999, the Company completed another private placement offering.
It consisted of one investor totaling $100,000 ($2.00 per share), with
commissions of 10% or $10,000 paid for 50,000 shares of Class A common stock.
These proceeds were used to fund current operations.

From January 2000 through September 2000, the Company received net payments
from the League in the amount of $186,743. This represented expansion revenue
related to the Detroit Fury, Dallas, New Orleans and Washington, DC expansion
teams that will begin play in 2001, 2002, 2002 and 2003, respectively. The
Company also received approximately $1.4 million for principle and interest
payments related to its note receivable from the League.

From October 2000 to September 2001, the Company received net payments from
the League in the amount of $164,167. This represented expansion revenue related
to the Dallas and Long Island expansion teams that will begin play in 2002 and
2001, respectively and the New Jersey team which was sold to a new owner. The
Company also received approximately $654,000 for principle and interest payments
related to its note receivable from the League.

In October 2000, the Company entered into an agreement with IFL Acquisition
Co., LLC (IFLA), a wholly owned subsidiary of af2 Enterprises, LLC (af2). The
Company acquired the rights to three af2 memberships, all of the tangible assets
of the Indoor Football League (which were acquired by IFLA under a separate
agreement), the first $1,000,000 in expansion revenues received by af2 for
memberships in former Indoor Football League markets. In addition, to the extent
that af2 licenses intellectual property acquired from the Indoor Football League
to third parties within 24 months of the date of the agreement the Company will
receive a fee of $10,000. In exchange for the assets and rights acquired, the
Company paid $1,100,000 cash less a credit of $25,000 for a territory release
payment and a credit of $226,165 for cash received prior to the sale to IFLA,
issued 214,286 shares of Redeemable Class A Common Stock valued at $750,000 and
a promissory note for $1,750,000 bearing interest at 6% per year, payable in
three annual installments of $583,333 on October 18, 2000. The Company's two
equity interests in the League collateralize the note. The common stock is
redeemable at $3.50 per share at the option of the stockholder for a period of
six months beginning on April 18, 2002. The Company also paid $25,000 to the
owner of the Milwaukee AFL membership and a $50,000 fee for the first af2 team
acquired and will be required to pay $5,000 for each additional af2 team to af2.

In January through September of 2001, the Company completed private
placements for the sale of 1,132,044 shares of the Company's Class A Common
Stock for net proceeds of $1,532,446.

The Company believes that cash flows from operations, along with
distributions related to the purchase of two equity interests in the AFL will
enhance the Company's future cash flows and satisfy the Company's anticipated
working capital requirements for at least the next 12 months. This will be
accomplished by the requirement that the AFL make a minimum principal and
interest payment to the Company in the amount of $480,000 annually in August.

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
--------------------------------------------------------------------------------
WITH SECTION 16(a) OF THE EXCHANGE ACT
--------------------------------------

Information concerning each of OPE's executive officers and directors is
set forth below:

Officer/Director
Name Age Position Since
---- --- -------- -----

Eric A. Margeneau (1) 60 Chairman of the Board 2000
of Directors, Chief
Executive Officer

David Berryman 51 President and 2001
Chief Operating Officer

John Pearce 34 Secretary, Treasurer and 2001
Chief Financial Officer

Jeffrey L. Bouchy (2) 36 Director 1998

Lyle Reigel (1)(2) 61 Director 2001

Kenneth Levy (2) 54 Director 2001

Michael A. Tatoian (1) 40 Director 2001

James Ross 40 Director 2001

(1) Member of Compensation Committee.
(2) Member of Audit Committee.

Directors are elected at OPE's annual meeting of shareholders and serve a
term of one year or until their successors are elected and qualified. Officers
are appointed by the Board of Directors and serve at the discretion of the Board
of Directors, subject to the bylaws of OPE. Messrs. Corley and Frasco resigned
as directors in March 2001.

The Audit Committee reviews the engagement and independence of OPE's
independent accountants, the audit and non-audit fees of the independent
accountants and the adequacy of OPE's internal accounting controls. The
Compensation Committee considers the compensation and incentive arrangements of
OPE's executive officers.

The principal occupation of each director and executive officer of OPE, for
at least the past five years, is as follows:

Eric A. Margenau was appointed Chief Executive Officer and President of OPE
in January 2000 and was President until November 2001. He has been President of
United Sports Ventures ("USV") since June 1996. In January 2000 USV entered into
a management agreement with OPE (which was modified in July 2000) under which it
provides the services of Dr. Margenau and USV's staff management to manage the
operations of OPE for $3,000 per month. In connection with the agreement, OPE
also issued to USV options to purchase up to 150,000 shares of OPE's Class A
Common Stock for $2.50 per share. Dr. Margenau has been involved in the
ownership and operation of minor league sports teams since 1986. In that time he
has owned, operated and/or managed

seven minor league baseball franchises and four minor league hockey franchises.
From 1983 to 1988, he was the executive director of the Center for Sports
Psychology. As a sports psychologist, he has been a consultant to several Major
League Baseball teams.

David Berryman was the President and Chief Executive Officer of Arkansas
Sports Entertainment, which owns the Arkansas River Blades East Coast Hockey
League franchise and the Arkansas Twisters arenafootball2 franchise, from 1998
until he joined OPE in November 2001. After a 20-year career in professional
tennis as a player, coach and promoter, he served as Director of Off Ice
Officials for the South Carolina Stingrays from 1993 to 1995 and was General
Manager of the Louisiana IceGators from 1995 to 1998. He earned a Bachelor's
degree in Business Administration from Memphis State University.

John Pearce earned a Bachelor of Science degree in Accounting from Arizona
State University. He served as the Company's Controller from August 1999 until
he was appointed interim Chief Financial Officer in late 2001. From 1997 to 1999
he was Controller for First Watch Restaurants in Phoenix, Arizona. From 1995 to
1997 he worked for Docu-Tax, Inc. as a Tax Manager. Mr. Pearce also served in
the U.S. Air Force for 12 years, four years in active duty and eight years in
the U.S. Air Guard.

Jeffrey L. Bouchy earned a Bachelor of Science degree in Accounting from
Arizona State University, a Master's degree in Sports Management from West
Virginia University and joined the Company as its Chief Financial Officer in
1998 to late 2001. He was appointed General Manager and Vice President of
Football Operations for the Orlando Predators in April and October 2000,
respectively. From 1995 to 1998 he was Chief Financial Officer of Gum Tech
International, Inc., a Nasdaq National Market company. From 1994 to 1995 he was
employed by Fun Tees, Inc., a T-shirt manufacturer. From 1992 to 1993 he was
involved in arena management as an employee of the Charlotte Coliseum, home of
the NBA's Charlotte Hornets. From 1990 to 1991 Mr. Bouchy was employed by the
Phoenix Roadrunners of the International Hockey League, assisting in public
relations and game operations.

Lyle Reigel has been the President of U.S. Paper Converters, Inc. (a paper
conversion company) since 1983, the President of Reigel Electric Corp. (a
provider of electric services for commercial construction projects) from 1978 to
2000, and the Vice President of Paget Equipment (a manufacturer of high pressure
vessels) since 1985. He has also owned and managed commercial real estate
properties since 1978.

Kenneth Levy was President of Marshall, Alexander & Marshall, an investment
banking and brokerage firm, from October 1994 to March 1997. From March 1997 to
January 2000, he was Managing Director of Janssen/Meyers Associates, LLP, an
investment banking and brokerage firm. Since January 2000, he has been President
of United Network Marketing Systems, Inc., an Internet based marketing firm.

Michael A. Tatoian has been Chief Operating Officer of United Sports
Ventures, an affiliate, since 1995. He has been actively involved in
professional sports management since 1984 including acting as the General
Manager of two minor league baseball teams between 1988 and 1995.

James Ross has been Vice President of Sales and Marketing for the Miami
Dolphins NFL football team since April 2000. From October 1999 to April 2000, he
was President of AFL Properties (of the Arena Football League). From 1996 until
he joined AFL Properties, he was Vice President of Sales and Marketing for the
Florida Marlins MLB baseball team. He earned a Bachelor of Science degree in
Journalism from the University of Colorado.

ITEM 10. EXECUTIVE COMPENSATION
-------------------------------

None of OPE's executive officers received compensation in excess of
$100,000 for the nine months ended September 30, 2000 or the year ended
September 30, 2001. The following table indicates all compensation received the
by Company's Chief Executive Officer in 2000 and 2001.

Summary Compensation Table

Annual Compensation (1)
-----------------------
(a) (b) (c) (d) (e) (f)
Name and Principal Stock
Position Year Salary($) Bonus($) Options Compensation($)
-------- ---- --------- -------- ------- ---------------

Eric A. Margenau 2000 68,000 -0- 150,000 -0-
Chief Executive Officer(1) 2001 39,000
--------- -------

(1) Paid to United Sports Ventures, Inc., a company controlled by Dr. Margenau.

OPE's directors do not receive compensation for attending Board meetings
but are reimbursed for out-of-pocket expenses incurred in connection therewith.

1997 Employee Stock Option Plan

In April 1997, OPE's stockholders adopted OPE's 1997 Employee Stock Option
Plan (the Plan), which provides for the grant of stock options intended to
qualify as incentive stock options and nonqualified stock options (collectively
stock options) within the meaning of Section 422 of the United States Internal
Revenue Code of 1986 (the Code). Stock options are issuable to any officer,
director, key employee or consultant of OPE.

OPE's Board of Directors has reserved 3,000,000 shares of Class A Common
Stock for issuance under the Plan. The Plan is administered by the full Board of
Directors, which determines which individuals shall receive stock options, the
time period during which the stock options may be exercised, the number of
shares of Class A Common Stock that may be purchased under each stock option and
the stock option price.

The per share exercise price of incentive stock options may not be less
than the fair market value of the Class A Common Stock on the date the option is
granted. The aggregate fair market value (determined as of the date the stock
option is granted) of the Class A Common Stock that any person may purchase
under an incentive stock option in any calendar year pursuant to the exercise of
incentive stock options may not exceed $100,000. No person who owns, directly or
indirectly, at the time of the granting of an incentive stock option, more than
10% of the total combined voting power of all classes of stock of OPE is
eligible to receive incentive stock options under the Plan unless the stock
option price is at least 110% of the fair market value of the Class A Common
Stock subject to the stock option on the date of grant.

No incentive stock options may be transferred by an optionee other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee, the stock option may only be exercisable by the optionee. Stock
options may be exercised only if the stock option holder remains continuously
associated with OPE from the date of grant to the date of exercise. The exercise
date of a stock option granted under the Plan cannot be later than ten years
from the date of grant. Any stock options that expire unexercised or that
terminate upon an optionee's ceasing to be employed by OPE become available once
again for issuance. Shares issued upon exercise of a stock option will rank
equally with other shares then outstanding.

As of the date of this Report, stock options have been granted under the
Plan, 1,831,578 exercisable at prices from $1.50 to $3.00 per share.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
------------------------------------------------------------------------

The following table sets forth certain information with respect to the
ownership of OPE's Class A and Class B Common Stock as of the date of this
Report, by (i) each person who is known by OPE to own of record or beneficially
more than 5% of OPE's Class A and Class B Common Stock, (ii) each of OPE's
directors and (iii) all directors and officers of OPE as a group. Unless
otherwise indicated, the stockholders listed in the table have sole voting and
investment powers with respect to the shares of Class A and Class B Common Stock
and their addresses are in care of OPE. Shareholdings include shares issuable
under stock options exercisable within 60 days from the date of this Report.

Number of Shares Percentage
Name Beneficially Owned Of Class
---- ------------------ --------

Eric A. Margenau (1)(2) 997,341 14.8
Lyle Reigel 150,000 2.2
Kenneth Levy 2,000 ----
Michael A. Tatoian 0 0
James Ross 0 0
Jeffrey L. Bouchy 108,361 1.6
Riverlux Trust REG 759,294 11.3
Bretty L. Bouchy (1)(2) 916,431 13.6
New Era Growth and Venture Fund(3) 925 92.5
Alan Gagleard (4) 75 7.5
All directors and officers as a group
(8 persons) 1,257,702 13.6

(1) Does not include (i) 462.5 shares of Class B Common Stock under contract to
be purchased by Brett L. Bouchy, which shares are subject to a voting trust in
favor of Eric A. Margenau until January 2010 or (ii) 462.5 shares of Class B
Common Stock under contract to be purchased by Dr. Margenau.

(2) Includes stock options held by Mr. Bouchy to purchase 817,068 shares at
$2.50 per share. Any shares purchased by Mr. Bouchy under these options will be
subject to a voting trust in favor of Dr. Margenau until January 2010.

(3) Represents Class B Common Stock under contract for sale to Mr. Bouchy and
Dr. Margenau. See footnotes (1) and (2) above. Each share of Class B Common
Stock votes the equivalent of 10,000 shares of Class A Common Stock.

(4) Represents Class B Common Stock.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
-------------------------------------------------------

In August 1998, in connection with the sale of 1,000,000 shares of OPE's
Class A Common Stock to Riverlux Trust REG at $2.00 per share, The New Era
Growth and Venture Fund ("New Era"), formerly known as the Monolith Limited
Partnership, and a principal stockholder of OPE, agreed at Riverlux's request to
purchase from Riverlux 600,000 of the 1,000,000 shares acquired by Riverlux from
OPE for $6.67 per share on or before May 9, 1999. In turn, Riverlux granted New
Era an option to purchase up to 400,000 shares of Class A Common Stock of OPE
held by Riverlux commencing September 1999 at prices from $7.00 to $13.00 per
share. In June 1999 New Era purchased 275,000 shares from Riverlux for $7.00 per
share and paid Riverlux $350,000 to settle all of its obligations under the
agreement.

In January, 1999, OPE issued to Brett L. Bouchy, its then Chief Executive
Officer, non-qualified options to purchase 950,000 shares of its Class A Common
Stock at $4.44 per share until December 2001. The options were issued in
connection with a three year employment agreement executed by OPE and Mr. Bouchy
and provide that 1/3 of the options vest yearly on the anniversary date of the
employment agreement. Mr. Bouchy terminated his employment agreement with OPE in
January 2000 and exchanged his 950,000 non-qualified options for 817,068 stock
options issued under OPE's 1997 Stock Option Plan exercisable at $2.50 per
share. Any shares issued under the options will be subject to a voting trust in
favor of Eric A. Margenau until January 2010.

In January 1999 OPE borrowed $350,000 from New Era at 8% per annum
interest. The loan was repaid in July 1999.

In January 2000, New Era agreed to assign its 925 shares of Class B Common
Stock to Brett L. Bouchy (462.5 shares) and Eric A. Margenau (462.5 shares). Dr.
Margenau has the right to vote Mr. Bouchy's shares until January 2010. The
agreement has not as yet been completed.

In January 2001 OPE agreed to issue an aggregate of 100,000 shares of its
restricted stock to Jeffrey L. Bouchy and Eric A. Margenau, both of whom were
officers and directors of OPE at the time, and Brett L. Bouchy, a principal
stockholder of OPE. The shares were issued in consideration of Messrs. Bouchy,
Margenau and Bouchy providing collateral to assist OPE in borrowing $1 million
from a commercial bank to satisfy its obligations under the IFL Acq. agreement.
See Strategy. OPE subsequently reduced the loan to $700,000 and agreed to issue
one additional share of common stock to the three individuals for each $10,000
of loan balance on a quarterly basis. Accordingly, OPE issued 70,000 shares in
the second, third and fourth quarters of 2001 and will continue to issue shares
quarterly until the loan is repaid in full.

OPE believes the terms of the above transactions were fair, reasonable and
consistent with terms that could be obtained from nonaffiliated third parties.
All future transactions with affiliates of OPE will be approved by the
disinterested members of our Board of Directors. OPE's securities (other than
stock options under its 1997 Employee Stock Option Plan) may not be issued to
management, promoters or their respective associates or affiliates without
obtaining (i) a fairness opinion from a qualified brokerage firm or appraiser
confirming the fairness of the consideration to be received by OPE for the
issuance of any such securities and (ii) written approval of the securities
issuance by a majority of OPE's disinterested directors.

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------

a. Exhibits:

Exhibit No.
-----------

10.03 Arena Football League Licensing Program Update-November 4, 1996
(1)

10.04 Bylaws of the Arena Football League (1)

10.05 Membership Agreement with the Arena Football League (1)

10.12 Agreement between Arena football League and the Registrant to
acquire the Equity Interests (2)

10.18 Voting Trust Agreement between Messrs. Bouchy and Margenau (3)

10.20 Civil Complaint: Guidry, et. al. vs. Arena Football League LLC
et. al. (4)

10.21 Management Agreement (USV)(4)

10.23 Amended Margenau Agreement with USV (4)

(1) Incorporated by reference to the Registrant's Registration Statement on Form
SB-2, file number 333-31671, declared effective on December 10, 1997.

(2) Incorporated by reference to the Registrant's Registration Statement on Form
SB-2, file number 333-53217, filed on May 21, 1998.

(3) Incorporated by reference to the Registrant's Annual Report on Form 10-KSB
for the year ended September 30, 2000.

(4) Incorporated by reference to the Registrant's previous filings on Forms
10-KSB, 10-QSB and 8-K.

b. Reports on Form 8-K: The Registrant filed two reports on Form 8-K in the
quarters ended September 30, 2000 and December 31, 2000 reporting a change in
the Registrant's fiscal year from December 31 to September 30 and reporting its
agreement with af2.

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly caused this Report to be signed on its behalf by the undersigned,
thereunto duly authorized, in Orlando, Florida, on January 11, 2002.

THE ORLANDO PREDATORS ENTERTAINMENT, INC.

By: /s/ Eric A. Margenau
----------------------------------------
Eric A. Margenau, CEO and
President

Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Report has been signed below by the following persons on the dates
indicated.

Signature Title Date
--------- ----- ----

/s/ Eric A. Margenau Chairman of the Board January 11, 2002
---------------------------------- of Directors, Chief
Eric A. Margenau Executive Officer and
President

/s/ Lyle Reigel Director January 11, 2002
----------------------------------
Lyle Reigel

/s/ James Ross Director January 11, 2002
----------------------------------
James Ross

/s/ Kenneth Levy Director January 11, 2002
-----------------------------------
Kenneth Levy

/s/ Michael A. Tatoian Director January 11, 2002
-----------------------------------
Michael A. Tatoian

Director
-----------------------------------
Jeffrey L. Bouchy

INDEX
-----

Page
----

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
Independent Auditors' Report F-2
Financial Statements:
Consolidated Balance Sheet F-3
Statements of Operations F-5
Statement of Changes in Stockholders' Equity F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8

F-1

AJ. ROBBINS, PC
CERTIFIED PUBLIC ACCOUNTANTS AND CONSULTANTS
3033 EAST 1ST AVENUE
SUITE 201
DENVER, COLORADO 80206

INDEPENDENT AUDITORS' REPORT

To the Board of Directors
The Orlando Predators Entertainment, Inc.
Orlando, Florida

We have audited the accompanying consolidated balance sheet of The Orlando
Predators Entertainment, Inc. as of September 30, 2001, and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows for the year then ended and for the nine months ended September 30, 2000
(unconsolidated). These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with generally accepted auditing standards
in the United States of America. Those standards require that we plan and
perform the audits to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above, present fairly, in
all material respects, the consolidated financial position of The Orlando
Predators Entertainment, Inc. as of September 30, 2001 and the results of its
operations and its cash flows for the year then ended and for the nine months
ended September 30, 2000 (unconsolidated), in conformity with generally accepted
accounting principles in the United States of America.

/s/ AJ. ROBBINS, P.C.
---------------------
AJ. ROBBINS, P.C.
CERTIFIED PUBLIC ACCOUNTANTS
AND CONSULTANTS

Denver, Colorado
November 16, 2001

F-2

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 2001

ASSETS

CURRENT ASSETS:
Cash $ 281,492
Accounts receivable, sponsorships 148,971
AFL receivable, current portion 121,324
Assets available for sale 162,134
Inventory 42,443
Prepaid expenses 249,600
Other current assets 24,922
-----------

Total Current Assets 1,030,886

PROPERTY AND EQUIPMENT, at cost, net 558,918

EQUITY INVESTMENT IN AFL 4,032,650

AFL RECEIVABLE, net of current portion 1,116,171

MEMBERSHIP COST, net 2,282,500

af2 TEAM INVESTMENTS 1,110,026

PURCHASE PRICE IN EXCESS OF ASSETS ACQUIRED 1,556,000

OTHER ASSETS 158,134
-----------

$11,845,285
===========

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-3

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
CONSOLIDATED BALANCE SHEET (Continued)
SEPTEMBER 30, 2001

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 858,872
Note payable - acquisition, current portion 583,333
Note payable - bank 700,000
Note payable - related party 175,000
Deferred revenue 619,643
Accounts payable - related party 36,000
Due to AFL/af2 124,000
------------

Total Current Liabilities 3,096,848

NOTE PAYABLE - ACQUISITION, net of current portion 1,166,667

DUE TO AFL, net of current portion 200,000
------------

4,463,515
------------

COMMITMENTS AND CONTINGENCIES

REDEEMABLE CLASS A COMMON STOCK 750,000

STOCKHOLDERS' EQUITY:
Preferred stock, 1,500,000 shares authorized; none
issued or outstanding --
Class A Common stock, 15,000,000 shares authorized;
6,720,710 issued and outstanding 12,581,457
Class B Common Stock, 1,000 shares authorized,
1,000 issued and outstanding 5,000
Additional paid-in capital 3,102,903
Accumulated (deficit) (9,057,590)
------------

Total Stockholders' Equity 6,631,770
------------

$ 11,845,285
============

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-4

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
STATEMENTS OF OPERATIONS

Consolidated Unconsolidated
For the Year For the Nine
Ended Months Ended
September 30, September 30,
2001 2000
----------- -----------

REVENUES:
Ticket $ 2,228,211 $ 1,618,620
Concession 120,326 118,709
Play-off 117,994 653,902
Advertising and promotions 656,052 431,524
Sponsorship trade revenue 1,197,598 741,888
League 164,167 256,884
Telemarketing 14,317 10,057
Other 51,580 38,282
----------- -----------

Total Revenues 4,550,245 3,869,866
----------- -----------

COSTS AND EXPENSES:
Operations 2,529,974 1,728,015
Playoff expenses 149,675 786,862
Selling and promotional expenses 1,261,081 613,376
Trade expenses 1,146,155 674,537
League assessments 419,000 282,416
General and administrative 1,386,892 1,142,237
Telemarketing expenses 3,064 8,836
Failed acquisition costs -- 180,367
Amortization 74,955 51,099
Depreciation 147,771 77,596
Loss from disposal of equipment 878 137,890
Loss on write down of assets 107,671 --
----------- -----------

Total Costs and Expenses 7,227,116 5,683,231
----------- -----------

OPERATING (LOSS) (2,676,871) (1,813,365)
----------- -----------

OTHER INCOME (EXPENSE):
Interest expense - related party -- (14,419)
Interest expense (149,985) --
Interest income 12,374 4,098
Interest income, AFL 332,179 329,454
Loss on litigation settlement (25,000) --
Gain on sale of assets 11,181 --
License fee revenue 5,000 --
Loan fees (727,381) --
Gain on early retirement of debt -- 18,116
----------- -----------

Net Other Income (Expense) (541,632) 337,249
----------- -----------

NET INCOME (LOSS) $(3,218,503) $(1,476,116)
=========== ===========

NET INCOME (LOSS) PER SHARE, Basic and Diluted $ (.55) $ (.28)
=========== ===========

Weighted Average Number of Common Shares Outstanding, Basic and Diluted 5,865,623 5,198,999
=========== ===========

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-5

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (UNCONSOLIDATED)
AND FOR THE YEAR ENDED SEPTEMBER 30, 2001 (CONSOLIDATED)

Class A Common Stock Class B Common Stock Additional
------------------------- ------------------------- Paid-In Accumulated
Shares Amount Shares Amount Capital (Deficit) Total
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances,
December 31, 1999 5,187,999 $10,126,400 1,000 $ 5,000 $ 2,914,403 $(4,362,971) $ 8,682,832

Class A Common Stock issued for
exercise of stock options 5,000 10,000 -- -- -- -- 10,000

Sale of Class A Common Stock
warrants -- -- -- -- 6,250 -- 6,250

Class A Common Stock options
issued for services -- -- -- -- 176,000 -- 176,000

Net (loss) -- -- -- -- -- (1,476,116) (1,476,116)
----------- ----------- ----------- ----------- ----------- ----------- -----------

Balances,
September 30, 2000 5,192,999 10,136,400 1,000 5,000 3,096,653 (5,839,087) 7,398,966

Sale of Class A Common Stock,
net of offering costs
of $195,819 1,132,044 1,532,446 -- -- -- -- 1,532,446

Class A Common Stock issued
for exercise of stock options 65,000 150,000 -- -- -- -- 150,000

Sale of Class A Common Stock
warrants -- -- -- -- 6,250 -- 6,250

Class A Common Stock issued for
loan fees 330,667 762,611 -- -- -- -- 762,611

Net (loss) -- -- -- -- -- (3,218,503) (3,218,503)
----------- ----------- ----------- ----------- ----------- ----------- -----------

Balances,
September 30, 2001 6,720,710 $12,581,457 1,000 $ 5,000 $ 3,102,903 $(9,057,590) $ 6,631,770
=========== =========== =========== =========== =========== =========== ===========

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-6

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
STATEMENT OF CASH FLOWS

Consolidated Unconsolidated
For the Year For the Nine
Ended Months Ended
September 30, September 30,
2001 2000
----------- -----------
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
Net income (loss) $(3,218,503) $(1,476,116)
Adjustments to reconcile net income (loss) to net cash
from operating activities:
Loss from disposal of equipment 878 137,890
Loss on write down of assets 107,671 --
Loss on failed acquisitions -- 180,367
Depreciation 147,771 77,596
Amortization 74,955 51,099
Bad debt -- 54,417
Stock options issued to consultants -- 176,000
Stock issued for loan fees 762,611 --
Changes in assets and liabilities:
Accounts receivable, sponsorships (31,345) (75,217)
Accrued interest receivable -- 597,056
Employee receivables (800) 20,083
Inventory (27,926) 15,290
Prepaid expenses (67,166) 132,989
Litigation reimbursement 114,000 (114,000)
Other assets (69,151) 54,143
Accounts payable 257,409 106,540
Accrued expenses -- 19,976
Accounts payable, related party (3,000) 39,000
Accrued expenses, related party (10,765) 429
Due to AFL 299,000 (36,000)
Deferred revenue 67,627 (170,622)
----------- -----------
Net Cash Provided (Used) by Operating Activities (1,596,734) (209,080)
----------- -----------

CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
Purchase of equipment (324,828) (162,883)
Acquisition of af2 teams and assets available for sale (2,935,026) --
Proceeds from the sale of assets available for sale 209,195 --
Collection of AFL receivable 321,497 406,979
Payment of deferred acquisition costs -- (4,048)
Acquisition costs utilized 2,984 --
----------- -----------
Net Cash Provided (Used) by Investing Activities (2,726,178) 240,048
----------- -----------

CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
Proceeds from issuance of Class A Common Stock 1,728,265 10,000
Exercise of options 150,000 --
Proceeds from issuance of notes payable to related parties 175,000 250,000
Proceeds from note payable - bank 1,000,000 --
Proceeds from note payable - acquisition 1,750,000 --
Repayments of note payable - bank (300,000) --
Repayment of convertible debt -- (125,000)
Repayment of notes payable to related parties -- (250,000)
Sale of warrants 6,250 6,250
Payment of offering costs (195,819) --
----------- -----------
Net Cash Provided (Used) by Financing Activities 4,313,696 (108,750)
----------- -----------

INCREASE (DECREASE) IN CASH (9,216) (77,782)

CASH, beginning of period 290,708 368,490
----------- -----------

CASH, end of period $ 281,492 $ 290,708
=========== ===========

Supplementary information:
See Note 5

SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

F-7

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Activity
--------

The Orlando Predators Entertainment, Inc. (the "Company" or "Predators") was
formed on March 27, 1997, to acquire, own and operate the Orlando Predators, a
professional Arena Football team and a member of the Arena Football League (AFL
or League).

Prior to October 18, 2000, the operations of the Company included only the
operations of Predators. Subsequently, the Company formed Predators as a
separate corporation and assigned the football operations to Predators. In 2000,
the Company formed Peoria Professional Football, Inc. ("Peoria") and acquired
the right to operate an af2 (a minor league system of the AFL) team in Peoria,
Illinois. The accounting policies of Predator and Peoria are identical to the
prior policies of the Company. In addition to the rights to Peoria, the Company
acquired the rights to operate two additional teams in af2 markets formerly
controlled by the Indoor Football League, Inc. ("IFL"), a competing indoor
football league. The Company also acquired assets of the IFL, including indoor
playing fields and office equipment. These assets have been classified as
available for sale. (See Note 13)

Change in Year End
------------------

The Company changed its fiscal year end from December 31 to September 30 for
financial statement purposes. The period ended September 30, 2000, represents a
nine month year. The Company reported for income taxes on a calendar year end
for the year ended December 31, 2000 and will report on its fiscal year
beginning in 2001.

Consolidation
-------------

The consolidated financial statements include the accounts of The Orlando
Predators Entertainment, Inc. and its wholly-owned subsidiaries (the "Company").
All significant intercompany balances and transactions have been eliminated in
consolidation.

Reclassification
----------------

Certain amounts reported in the Company's financial statements for the nine
months ended September 30, 2000 have been reclassified to conform to the current
year presentation.

Cash and Cash Equivalents
-------------------------

Cash and Cash Equivalents consists primarily of cash in banks and highly liquid
investments with original maturities of 90 days or less.

F-8

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Inventory
---------

Inventory consists of team merchandise available for sale. Inventory is stated
at the lower of cost (first-in, first-out) or market.

Property and Equipment
----------------------

Property and equipment is recorded at cost. Depreciation expense is provided on
a straight-line basis using the estimated useful lives of 5-10 years.
Maintenance and repairs are charged to expense as incurred. When assets are
retired or otherwise disposed of, the property accounts are relieved of costs
and accumulated depreciation and any resulting gain or loss is credited or
charged to operations. Depreciation expense for the year ended September 30,
2001 and for the nine months ended September 30, 2000 was $147,771 and $77,596,
respectively.

Restricted Investment
---------------------

Restricted investment included in other assets consists of a $100,000 interest
bearing certificate of deposit with a financial institution, which also provides
a letter of credit to the AFL. The certificate of deposit is a requirement of
the AFL as security for the AFL's letter of credit.

Membership Cost
---------------

The AFL membership was recorded at its cost of $1,989,860 and is being amortized
on a straight-line basis over 40 years. The Peoria af2 membership cost was
recorded at its cost of $550,000 and is being amortized on a straight-line basis
over 20 years. Amortization expense for the year ended September 30, 2001 and
for the nine months ended September 30, 2000 was $74,955 and $37,310,
respectively.

Acquisition Costs
-----------------

The Company had acquisition costs of $180,367 relating to the planned
acquisition of United Sports Ventures, Inc. During 2000, the Company terminated
the acquisition and charged the costs to operations. Acquisition costs are
allocated to the net assets acquired if the acquisition is successful, or are
charged to operations if not successful.

The Company has capitalized certain costs related to the af2 team acquisition.

Advertising Expenses
--------------------

The Company utilizes direct-response advertising, eliciting sales to customers
who can be shown to have responded specifically to the advertising and resulting
in future economic benefits. Expenditures for advertising are capitalized and
then amortized over the course of the playing season.

Impairment of Long Lived Assets
-------------------------------

The Company evaluates its long lived assets by measuring the carrying amount of
the assets against the estimated undiscounted future cash flows associated with
them. At the time such evaluations indicate the future undiscounted cash flows
of certain long lived assets are not sufficient to cover the carrying value of
such assets, the assets are adjusted to their fair values.

F-9

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Other Intangible Assets
-----------------------

The remainder of the former head coach's contract and other costs from his
former employer were purchased for $62,054 and were amortized on a straight-line
basis over the term of his original contract with the Company, 3 years. The
costs were fully amortized at September 30, 2000. Amortization expense for the
nine months ended September 30, 2000 was $13,789.

Revenue Recognition
-------------------

The Company recognizes ticket, concession, play-off and advertising and
promotions revenues as its home preseason, regular season and play-off (if any)
games are played. Generally, beginning in September of each year, the Company
begins selling season tickets and sponsorship packages (advertising and
promotions), which are recorded as deferred revenues until each game is played.
Single game tickets are sold generally from March through August. The Company
recognizes these revenues ratably over the course of the one preseason and seven
regular season home games played. Play-off revenues (if any) are recognized as
the games are played. The Company receives all ticket and advertising and
promotion revenues for home play-off games (if any) and receives play-off
revenue sharing from other teams for away play-off games (if any). The Company
does not share in ticket or other revenues from any preseason or regular season
away games.

The Company's arena lease (Note 4) provides for the Company to share in
approximately 20% of the concession revenues generated at the arena in which it
plays its home games. The arena is managed by the City of Orlando, which
provides the Company with a summary of all concessions sold during the home
games. The Company records the revenues when the home games are played.

The Company recognizes its share of AFL revenues, when amounts are deemed
distributable by the League. The Company receives one share of League revenues
based upon the number of shares outstanding at the time the revenues were earned
by the League. League revenues (if any) generally consist of gross expansion
revenues received by the League, any national sponsorship revenues and any
national television contract revenues. The Company may share in other League
revenues generated. Prior to March 2000, the Company recognized an additional
two shares of League revenues (see Note 1- Investment in AFL).

The Company's telemarketing division recognizes revenues when telemarketing
services have been performed.

Football Operations
-------------------

Team expenses (principally player and coaches salaries, fringe benefits,
insurance, game expenses, arena rentals and travel) are recorded as expenses
ratably over the course of the season. Accordingly, expenses not yet incurred
are recorded as prepaid expenses and are amortized ratably as games are played.
General, administrative, selling, and promotional expenses are charged to
operations as incurred.

F-10

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Use of Estimates
----------------

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.

The Company sells sponsorships for cash, goods and services. In exchange, the
sponsor receives advertising and various benefits to Predator games. The value
of the services has been estimated in the accompanying financial statements.
Management believes these estimates reasonably disclose the value of goods and
services received.

Investment in AFL
-----------------

Prior to March 2000, the Company accounted for its two non-voting equity
interests in the AFL under the terms of the agreement, which called for the
Company to record as expansion revenues (based upon its ownership share in the
League) amounts received from the League for sales of expansion memberships. The
Company did not share in League expenses.

The League disputed the terms of the agreement and in March 2000, the Company
and the League agreed to amend the terms of the agreement. The amended terms of
the agreement state that the Company shall receive its two equity shares of
expansion revenue received by the League but shall record these payments to
reduce the balance of the note receivable due from the League. (See Note 11)

Income Taxes
------------

The Company accounts for income taxes under the asset and liability method.
Under this method, deferred income taxes are recorded to reflect the tax
consequences in future years of temporary differences between the tax basis of
assets and liabilities and their financial statement amounts at the end of each
reporting period. Valuation allowances are established when necessary to reduce
deferred tax assets to the amount expected to be realized. Income tax expense
represents the tax payable for the current period and the change during the
period in deferred tax assets and liabilities. Deferred tax assets and
liabilities have been netted to reflect the tax impact of temporary differences.

Deferred tax assets arise primarily from the net operating loss carryforward and
amortization of the membership cost which is not deductible for tax purposes
until the membership is sold.

Deferred tax liabilities result when depreciation for tax purposes exceeds
depreciation for book purposes. A valuation allowance equal to the net deferred
tax asset has been recorded at September 30, 2001 since management of the
Company has determined that it is more likely than not that the tax asset will
not be realized. (See Note 10).

F-11

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Concentrations of Risk
----------------------

Concentrations of credit risk associated with accounts receivable is limited due
to accounts receivable transactions arising from sponsorship contracts which
have a history of performance. The supply of talented players is limited due to
the competitive nature with other professional football leagues.

The Company maintains all cash in deposit accounts, which at times may exceed
federally insured limits. The Company has not experienced a loss in such
accounts.

Fair Value of Financial Instruments
-----------------------------------

The carrying value of cash, accounts receivable, notes payable, accounts
payable, and accrued expenses approximate fair value because of the short
maturity of these items.

Earnings Per Common Share
-------------------------

The Company computes earnings per common share in accordance with Statement of
Financial Accounting Standards No. 128, Earnings Per Share (SFAS No. 128). This
Statement simplifies the standards for computing earnings per share (EPS)
previously found in Accounting Principles Board Opinion No. 15, Earnings Per
Share, and makes them more comparable to international EPS standards. SFAS No.
128 replaces the presentation of primary EPS with a presentation of basic EPS.
In addition, the Statement requires dual presentation of basic and diluted EPS
on the face of the income statement for all entities with complex capital
structures and requires a reconciliation of the numerator and denominator of the
basic EPS computation to the numerator and denominator of the diluted EPS
computation.

Stock-Based Compensation
------------------------

The Company accounts for stock based compensation in accordance with the
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 123 "Accounting for Stock-Based Compensation" (SFAS No. 123). Under the
provisions of SFAS No. 123, companies can either measure the compensation cost
of equity instruments issued under employee compensation plans using a fair
value based method, or can continue to recognize compensation cost using the
intrinsic value method under the provisions of APB No. 25. However, if the
provisions of APB No. 25 are continued, proforma disclosures of net income or
loss and earnings or loss per share must be presented in the financial
statements as if the fair value method had been applied. The Company recognizes
compensation costs under the provisions of APB No. 25 and provides the expanded
disclosure required by SFAS No. 123. (See Note 6)

F-12

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Recently Issued Accounting Pronouncements
-----------------------------------------

In July 2001, the Financial Accounting Standards Board issued Statements of
Financial Accounting Standards No. 141, "Business Combinations" ("SFAS 141") and
No. 142, "Goodwill and Other Intangible Assets" ("SFAS 142"). SFAS 141 requires
all business combinations initiated after June 30, 2001 to be accounted for
using the purchase method. Under SFAS 142, goodwill and intangible assets with
indefinite lives are no longer amortized but are reviewed annually (or more
frequently if impairment indicators arise) for impairment. Separable intangible
assets that are not deemed to have indefinite lives will continue to be
amortized over their useful lives (but with no maximum life). The amortization
provisions of SFAS 142 apply to goodwill and intangible assets acquired after
June 30, 2001. With respect to goodwill and intangible assets acquired prior to
July 1, 2001, the Company is required to adopt SFAS 142 effective September 30,
2001. The Company is currently evaluating the effect that adoption of the
provisions of SFAS 142 will have on its results of operations and financial
position.

In December 1999, the Securities and Exchange Commission ("SEC") issued Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements" ("SAB
101") which provides guidance related to revenue recognition based on
interpretations and practices followed by the SEC. SAB 101A was released on
March 24, 2000 and deferred the effective date to no later than the second
fiscal quarter beginning after December 15, 1999. In June 2000, the SEC issued
SAB 101B which delays the implementation date of SAB 101 until no later than the
fourth fiscal quarter of fiscal years beginning after December 15, 1999. SAB 101
requires companies to report any changes in revenue recognition as a cumulative
change in accounting principle at the time of implementation in accordance with
Accounting Principles Board Opinion No. 20, "Accounting Changes". Management has
accessed the implementation and determined that there is no significant impact
on the consolidated financial statements of the Company.

NOTE 2 - ARENA FOOTBALL LEAGUE

The AFL is a Limited Liability Company, which governs the rules and conduct of
each member team. As of September 30, 2001 there were 22 other team members and
two other non-team members. Each member owns an equal percentage of the AFL and
appoints one board member. A budget for AFL expenses is approved annually by the
board and expenses are shared equally. Revenues from expansion membership fees
are divided equally between all members, the Company's two additional,
non-voting equity interests (see Note 11) and the two equity interests owned by
the inventor (Gridiron) of the Arena Football Game. Revenues are recognized when
distributable by the League. Special assessments for litigation and other costs
are recognized in the same periods as incurred. The Arena Football League formed
an AFL minor league system ("af2") beginning in the year 2000. The Company's
share of the 2002 season budgets for the AFL and af2 is estimated to be
$172,500.

F-13

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 2 - ARENA FOOTBALL LEAGUE (Continued)

The Company continues to be contingently liable for its share of AFL expenses
which may exceed AFL revenues.

The AFL was defendant to claims for alleged damages which were settled and the
Company has recorded an estimated liability of $324,000 for its share of the
settlements of which $200,000 is considered long term. The AFL is also a party
to a number of other lawsuits arising in the course of business. In the opinion
of the Company's management, the resolution of those matters will not have a
material adverse effect on the AFL's results of operations, cash flows or
financial position.

Outcomes and expenses of litigation will be divided equally between all members.
Management believes its share of the outcomes will not have a material adverse
effect on the Company's results of operations, cash flows or financial position.

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

September 30,
2001
--------

Office equipment $166,311
Leasehold improvements 6,358
Game equipment and system 633,875
--------
806,544
Less accumulated depreciation 247,626
--------

$558,918
========

The Company wrote off certain assets with a net book value of approximately
$137,000, due to obsolescence in 2000.

F-14

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 4 - COMMITMENTS AND CONTINGENCIES

A.) Local Media Contracts
-------------------------

In March 1998, the Company entered into a three-year television contract for the
1998, 1999 and 2000 seasons, which required the Company to provide certain
services, goods and game tickets in exchange for approximately $70,000 of
commercial time, promotional events and the right to broadcast the games. The
Company has also entered into renewable one-year radio contracts under similar
terms. The Company is currently negotiating new contracts.

B.) Employment Agreements
-------------------------

The Company has employment agreements with players, the head coach and
executives of the Predators. Certain contracts provide for guaranteed payments
which must be paid even if the employee is injured or terminated. The Company is
obligated to make certain minimum salary payments as follows:

Total
----------
Year Ending September 30
------------------------

2002 $ 307,000
2003 293,000
2004 191,000
2005 34,000
----------

$ 825,000
==========

C.) Collective Bargaining Agreement
-----------------------------------

In September 2000, AFL and The Arena Football League's Player Organizing
Committee ("AFLPOC"), which represents the players of the AFL entered into a
collective bargaining agreement for the 2001-2006 AFL seasons. The terms of the
agreement are from September 1, 2000 to August 31, 2006.

The agreement defines the maximum and minimum benefits and compensation that the
players may be paid during the term of the agreement. Player compensation was
limited to the greater of a maximum cash or barter dollar salary cap for players
of $1,375,000 for the 2001 season. For the 2002 season, the maximum player
compensation increased to 63% of the projected Defined Gross Revenues (DGR) or
$1,643,000 and increases annually up to $2,133,510 for the 2006 season. The
Company does not anticipate that it will reach the maximum player compensation
allowed during the 2002 season. The agreement also calls for year round health
insurance for the players and their families, full pay for inactive players,
short and long term disability insurance, a 401k pension plan and unrestricted
free agency after four years of service in the League.

Minimum salaries per game range from $1,484 in 2002 to $1,927 in 2006. Player
contracts may also include performance bonus pay, for exemplary play on the
field.

F-15

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 4 - COMMITMENTS AND CONTINGENCIES (Continued)

The Company had signed an agreement with one player. The following summarizes
such player salary commitments for each of the upcoming years:

September 30, 2002 $ 95,663
September 30, 2003 106,667
----------

$ 202,330
==========

D.) Lease Obligations
---------------------

In March 1998, the Company signed a five-year lease (with an additional
five-year option) with the Orlando Centroplex arena. The agreement provides the
Company with an approximately 20% share of revenue generated from food and
beverage concessions. The Company will also receive a credit to be applied to
the game rental of $3 per person (up to $10,000) for games in which attendance
exceeds 9,000 persons.

The Company entered into a two year office lease agreement at a rate of $900 per
month which expired in March 2001. In January 2001, the Company signed a
five-year lease (with an additional five-year option) for office space at a base
rent of $8,887 per month, increasing annually to $10,603.

On September 1, 2000, the Company signed a five-year license agreement with SMG,
for use of the Peoria Civic Center. The agreement requires the Company to pay a
fee of $8,500 per game for rent and game day services. The Company receives an
incentive of $.50 per person for games in which attendance exceeds 7,000
attendees.

On May 1, 2001, the Company signed a one-year lease for office space at a rate
of $550 per month. The lease also requires that the Company furnish the landlord
with eight season tickets to Peoria Pirates home football games and two sign
boards for advertising at game events.

The minimum future lease payments under the lease agreements are as follows:

Offices Arenas Total
---------- ---------- ----------

2002 $ 119,000 $ 188,000 $ 307,000
2003 119,000 68,000 187,000
2004 123,000 68,000 191,000
2005 126,000 68,000 194,000
2006 32,000 -- 32,000
---------- ---------- ----------

$ 519,000 $ 392,000 $ 911,000
========== ========== ==========

Rent expense for the year ended September 30, 2001 and for the nine months ended
September 30, 2000 was $283,893 and $145,374, respectively.

F-16

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 4 - COMMITMENTS AND CONTINGENCIES (Continued)

E.) Workers' Compensation
-------------------------

The Predators provide a $250,000 occupational health, accidental death and
disability insurance policy to each player. Each team is required to pay the
first $35,000 of claims for an injured player up to an aggregate of $356,000 for
the two Florida based AFL teams provided through a carrier.

F.) Litigation
--------------

On December 9, 1998, the Company's former President filed a lawsuit against the
Company for breach of employment and defamation in connection with a press
release.

In March 2000, the Company reached a settlement agreement with its former
President to pay the former President $300,000. The Company had previously
accrued approximately $54,000 for amounts it estimated would be payable to the
former President. In December 1999, the Company recorded an additional $246,000
in settlement costs, and in 2000 received insurance reimbursements of $114,000.
In 2001, the terms of the settlement were satisfied and no further obligation is
due.

The Company has entered into settlement negotiations with a former underwriter.
The Company anticipates settling this case for $25,000 and has accrued for this
settlement during the year ended September 30, 2001.

G.) Management Agreement with USV
---------------------------------

On January 28, 2000, the Company entered into an agreement, which was amended on
July 1, 2000, with United Sports Ventures, Inc. (USV) a related party, for
management services for the Company's Orlando Predators sports team and general
management services for operations of the Company. The agreement was for a term
of one year from the date of the amendment, and automatically renews each year,
unless cancelled as provided for under the terms of agreement. Fees for the
management services were $10,000 per month under the original agreement, reduced
to $3,000, per month with the amendment.

In conjunction with the amended agreement, the Company has granted USV an option
to purchase 150,000 shares of the Company's Class A Common Stock, which vests
37,500 shares per quarter, commencing on October 1, 2000 and expiring on
September 30, 2002. The options are exercisable at $2.50 per share and have been
valued at the fair market value of $63,000 using the Black-Scholes model and are
expensed ratably over the initial one year life of the contract. Significant
assumptions used in calculating the fair market value are a 2 year option life,
71% volatility, and 6.13% risk-free interest rate. The Company has expensed
$47,250 and $15,750 during the year ended September 30, 2001 and the period end
September 30, 2000, respectively.

F-17

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 4 - COMMITMENTS AND CONTINGENCIES (Continued)

The agreement was terminated in November 2001. As consideration for the
termination of the agreement, USV has agreed to the cancellation of its option
to purchase 150,000 shares of the Company's Class A Common Stock and it is
anticipated that USV will be granted a new option to purchase 150,000 shares of
the Company's Class A Common Stock for $2.70 per share expiring on November 14,
2005. The options will be valued at their fair market value of $259,000 using
the Black-Scholes model and will be expensed on the date of grant. Significant
assumptions used in calculating the fair market value are a 4 year option life,
86% volatility and 4.0% risk-free interest rate.

H.) Financial Consulting Agreement
----------------------------------

On July 1, 2000, the Company entered into a two year financial consulting and
investment banking agreement for stockholder \ public relations matters. The
agreement provides for fees of $60,000, payable $10,000 at the signing of the
agreement and $2,174 per month thereafter, until the balance is paid. The
Company also granted the consultant an option to purchase 350,000 shares of the
Company's Class A Common Stock, which was valued at the fair market value of
$113,000 using the Black-Scholes model, and is being expensed over the term of
the agreement. Significant assumptions used in calculating the fair market value
are a 2 year option life, 71% volatility and a 6.53% risk-free interest rate.
The options vest 87,500 shares on July 1, 2000 and 17,500 per month thereafter
and are exercisable at fixed prices ranging from $2.50 to $4.50 per share and
expire in 2006. The Company has recorded $50,000 and $63,000 in expense during
the year ended September 30, 2001 and the period ended September 30, 2000,
respectively.

NOTE 5 - SUPPLEMENTAL CASH FLOW INFORMATION

The Company paid $59,161 and $3,654 for interest expense during the year ended
September 30, 2001 and for the nine months ended September 30, 2000,
respectively.

NOTE 6 - COMMON STOCK

Stock Option Plan
-----------------

Effective April 1, 1997, the Company's board of directors adopted the Stock
Option Plan under which 150,000 shares of the Company's Class A Common Stock
were reserved for issuance at prices not less than fair market value on the date
of grant. During 1998, the Plan was amended to provide for 350,000 additional
option shares. During 1999, the Plan was amended to provide for 2,500,000
additional option shares. The board may grant options to key management
employees, officers, directors and consultants.

F-18

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 6 - COMMON STOCK (Continued)

The following table summarizes the activity of options and warrants for the
period from December 31, 1999 to September 30, 2000 and the year ended September
30, 2001:
Weighted
Average
Number of Exercise Exercise
Options Warrants Price Amount
---------- -------- ------- ------------

Outstanding, December 31, 1999 1,765,247 875,000 $ 4.33 $ 11,441,884

Exercised (5,000) -- 2.00 (10,000)
Granted 82,000 -- 1.79 146,425
Expired (149,001) -- 2.40 (360,019)
---------- -------- ------------

Outstanding, September 30, 2000 1,693,246 875,000 4.37 11,218,290

Exercised (30,000) -- 2.50 (75,000)
Granted 719,166 -- 2.30 1,651,207
Expired (783,334) -- 2.47 (1,931,667)
---------- -------- ------------

Outstanding, September 30, 2001 1,599,078 875,000 $ 4.39 $ 10,862,830
========== ======== ------------

Stock-Based Compensation
------------------------

The Company accounts for stock-based compensation under Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS No.
123). The standard requires the Company to adopt the fair value method with
respect to stock-based compensation of consultants and other non-employees.

The Company did not change its method of accounting for employee stock options;
the Company continues to account for these under the intrinsic value method. Had
the Company adopted the fair value method for options issued to employees as
well, an additional charge to income of $179,000 would have been required in
2001; proforma net loss would have been ($3,397,503) and loss per share would
have been ($.58). An additional charge to income of $15,000 would have been
required in 2000; proforma net loss would have been ($1,491,116) and loss per
share would have been ($.29).

F-19

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 6 - COMMON STOCK (Continued)

Issuance of Common Stock
------------------------

The Class A Common Stock and Class B Common Stock are identical in all respects
except that each share of Class A Common Stock is entitled to one vote while
each share of Class B Common Stock is entitled to 10,000 votes. The Class B
Common Stock was issued to satisfy certain control requirements of the AFL.

In connection with the Company's public offering of stock, there are
outstanding: (i) warrants to purchase 550,000 shares of Class A Common Stock at
an exercise price of $7.50 per share at any time until their expiration on
December 10, 2002 (the "Unit Warrants"), (ii) warrants to purchase 110,000
shares of Class A Common Stock and 55,000 Unit Warrants (the "1997 Underwriters'
Unit Warrants') at an exercise price of $12.00 per 1997 Underwriters' Unit
Warrants. There are also warrants to purchase 160,000 shares of Class A Common
Stock at $4.50 per share at any time until December 31, 2002 (the "1998
Warrants").

Warrants
--------

In January 2000, the Company sold a warrant for $6,250 to purchase 50,000 shares
of the Company's Class A Common Stock at an exercise price of $5.00 per share.
The warrant expires in January 2005. In June 2001, the Company sold a warrant
for $6,250 to purchase 50,000 shares of the Company's Class A Common Stock at an
exercise price of $2.875 per share expiring August 2006.

Private Placements
------------------

The Company completed private placements for the sale of 1,132,044 shares of the
Company's Class A Common Stock for net proceeds of $1,532,446 during the year
ended September 30, 2001.

NOTE 7 - CONVERTIBLE DEBT

The Company sold a $250,000 convertible debt in July 1999 which was repaid in
2000. The debt accrued interest at 10% per annum and interest and principal were
due in January 2001. The debt was convertible at a rate of one share of the
Company's Class A common stock for $4.375 each, the fair market value of the
Class A Common Stock on the date the convertible debt was sold. There was no
beneficial conversion feature for this note. The Company granted warrants to
purchase 25,000 shares of the Company's Class A Common stock, exercisable $4.375
per share for a period 3 years from the date of grant. The warrants were valued
at their fair market value of approximately $68,926 using the Black-Scholes
model, and were to be expensed over the term of the agreement. Significant
assumptions used in calculating the fair market value are a 3 year option life,
96% volatility and a 5.7% risk-free interest rate. $125,000 was repaid in
October 1999 and 12,500 warrants were cancelled as a concession for early
payment. The Company recognized the reduction in loan costs by reducing the
value of the warrants to $34,463.

F-20

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 8 - NOTE PAYABLE RELATED PARTY

During July 2000, the Company borrowed $250,000 in the form of a 12% note
payable to an employee/significant stockholder and former officer and director
of the Company, due on January 6, 2001. The Company's two equity interests in
the League collateralized the note. The note was repaid in September 2000.

During June 2001, the Company borrowed $175,000 in the form of a 7% note payable
to an employee/significant stockholder and former officer and director of the
Company, due on October 31, 2001 and was verbally extended. The Company's af2
teams collateralized the note.

NOTE 9 - EARNINGS PER SHARE

For the Year Ended September 30, 2001
-------------------------------------
Per
Income Shares Share
(Numerator) (Denominator) Amount
----------- ------------- ------

Basic EPS
(Loss) available to common
stockholders $(3,218,503) 5,865,623 $(.55)

Effect of Dilutive Securities
Options and warrants -- -- --
----------- ----------- -----

Diluted EPS
Income available to common
stockholders including assumed
conversions $(3,218,503) 5,865,623 $(.55)
=========== =========== =====

As of September 30, 2001 there were 2,574,078 warrants and options outstanding
which were not included in the diluted earnings per share because their effect
was anti-dilutive for the period presented.

F-21

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 9 - EARNINGS PER SHARE (Continued)

For the Nine Months Ended September 30, 2000
--------------------------------------------
Per
Income Shares Share
(Numerator) (Denominator) Amount
----------- ------------- ------

Basic EPS
(Loss) available to common
stockholders $(1,476,116) 5,198,999 $ (.28)

Effect of Dilutive Securities
Options and warrants -- -- --
----------- ----------- -------

Diluted EPS
Income available to common
stockholders including assumed
conversions $(1,476,116) 5,198,999 $ (.28)
=========== =========== =======

As of September 30, 2000 there were 2,618,246 warrants and options outstanding
which were not included in the diluted earnings per share because their effect
was anti-dilutive for the period presented.

NOTE 10 - INCOME TAXES

The components of deferred tax assets and (liabilities) were as follows:

Total deferred tax assets $ 3,540,000
Less valuation allowance (3,540,000)
-----------

Net deferred tax asset $ --
===========

The tax effects of temporary differences that give rise to deferred tax assets
and (liabilities) were as follows:

Temporary differences;
Property and equipment $ (29,000)
Membership cost 96,000
Net operating loss carryforward 3,473,000
Less valuation allowance (3,540,000)
-----------

$ --
===========

F-22

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 10 - INCOME TAXES (Continued)

The components of deferred income tax expense (benefit) were as follows:

2001 2000
----------- -----------
Temporary differences:
Property and equipment $ 24,000 $ (9,000)
Intangible assets (28,000) (14,000)
Interest stockholders 4,000 --
Net operating loss carryforward (1,219,000) (983,000)
Less valuation allowance 1,219,000 1,006,000
----------- -----------

$ -- $ --
=========== ===========

The following is a reconciliation of the amount of income tax expense (benefit)
that would result from applying the statutory income tax rates to pre-tax loss
and the reported amount of income tax expense (benefit):

2001 2000
----------- -----------
Tax expense (benefit) at statutory rates $(1,094,000) $ (502,000)
AFL activity (27,000) (103,000)
Other 18,000 24,000
Increase in valuation allowance 1,103,000 581,000
----------- -----------

$ -- $ --
=========== ===========

No provision for income taxes has been recorded for the periods ended September
30, 2001 and 2000, as the Company has incurred losses during these periods. Net
operating loss carryovers of approximately $9,236,000 as of September 30, 2001
expire beginning in 2016. The Company is providing a full valuation allowance in
connection with the deferred tax assets because there is no assurance that such
amounts will be utilized in the future.

NOTE 11 - PURCHASE OF EQUITY INTERESTS IN THE AFL

In August 1998, the Company acquired two non-voting equity interests in the
Arena Football League, Inc. (AFL) for $6,000,000. Each similar equity interest
entitles the Company to share equally with each other member in AFL revenues.
The AFL guarantees to pay the Company at least $480,000 per year until the
Company receives an aggregate of $6,000,000 through League distribution. Once
the Company receives an aggregate of $6,000,000, the Company will participate in
all League revenues, expenses and liabilities with respect to the two equity
interests.

F-23

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 11 - PURCHASE OF EQUITY INTERESTS IN THE AFL (Continued)

The purchase of the rights for the two non-voting equity interests in the League
has been allocated and recorded as 1) an equity interest in the League and 2) an
unsecured receivable due from the AFL. The investment accounted for under the
equity method of accounting was recorded at an original cost of $4,071,437. The
unsecured, receivable originally recorded for $1,965,971 from the League, with a
total remaining balance as of September 30, 2001, of $1,237,495. The amounts
were computed using an imputed interest rate of 23%. The minimum payment of
$480,000 is due annually on August 14.

NOTE 12 - OPERATING SEGMENTS

The Company organized its business units into two reportable segments: football
operations and telemarketing services. The football operations segment operates
the AFL team and the telemarketing services segment provided telemarketing
services to a related party and other sports franchises. The telemarketing
services segment has had immaterial operations since 2000 and segment reporting
is no longer presented.

NOTE 13 - ACQUISITION OF AF2 TEAMS

On October 18, 2000, the Company entered into an agreement with IFL Acquisition
Co., LLC (IFLA), a wholly owned subsidiary of af2 Enterprises, LLC (af2). The
Company acquired the rights to three af2 memberships, all of the tangible assets
of the Indoor Football League (which were acquired by IFLA under a separate
agreement), and the first $1,000,000 in expansion revenues received by af2 for
memberships in former Indoor Football League markets. In addition, to the extent
that af2 licenses intellectual property acquired from the Indoor Football League
to third parties within 24 months of the date of the agreement, the Company will
receive a fee of $10,000. In exchange for the assets and rights acquired, the
Company paid $1,100,000 cash less a credit of $25,000 for a territory release
payment and a credit of $226,165 for cash received prior to the sale to IFLA,
issued 214,286 shares of redeemable Class A Common Stock valued at $750,000 and
a promissory note for $1,750,000 bearing interest at 6% per year, payable in
three annual installments of $583,333 beginning on October 18, 2001. The
Company's two equity interests in the League collateralize the note. The common
stock is redeemable at $3.50 per share at the option of the stockholder for a
period of six months beginning on April 18, 2002 and has been classified as
redeemable Class A Common Stock. The Company also paid $25,000 to the owner of
the Milwaukee AFL membership, a $50,000 fee for the first af2 team acquired and
$5,000 for each additional af2 team to af2.

F-24

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS

NOTE 13 - ACQUISITION OF AF2 TEAMS (Continued)

The purchase price is allocated as follows:

Three af2 memberships $ 1,500,000
Tangible property 469,000
Amount due from af2 for expansion in former IFL markets 75,000
Purchase price in excess of assets acquired 1,556,000
-----------
3,600,000
Less:
Redeemable Class A Common Stock (750,000)
Note payable (1,750,000)
Credit to buyer for territory release payment (25,000)
Credit to buyer for season ticket prepayments (226,165)
-----------

Cash paid at closing $ 848,835
===========

The Company did not receive all of the tangible property from the IFLA and
therefore has adjusted the value down by $107,671. The Company did not make the
October 18, 2001 payment under the promissory note due to a dispute over
documentation and valuations provided by the Indoor Football League to the
Company. The Company anticipates settling the dispute by March 31, 2002. The
Company can not reasonably estimate the terms of the settlement at this time.

The Company obtained financing of $1,000,000 from a bank, which is payable on
February 28, 2001, bearing interest at 1.75% above the LIBOR rate or 8.47% per
year. The Company paid a facility fee of $20,000 to the bank for the note which
will be amortized over the life of the note. The note is secured by the
Company's rights to $1,000,000 of af2 expansion fees and pledge of $1,300,000 in
securities and cash of the Company's Chief Executive Officer, a director of the
Company and an employee/significant stockholder who is a former officer and
director of the Company. The Company has granted to the collateral holders a
total of 100,000 shares of Class A Common Stock, valued at $156,250, which were
recorded as loan fees, based upon the market value of the Class A Common Stock
on the date the shares were granted. The loan fees were amortized over the term
of the loan. The financing was extended for one year at the same terms with the
principal being reduced to $700,000. An additional 230,667 shares of the
Company's Class A Common Stock were issued to the collateral holders valued at
$606,361. The 230,667 Class A Common Stock has been recorded as loan fees and
are being amortized over one year, the term of the loan. Loan fee expense for
year end September 30, 2001 was $707,381.

F-25