<PAGE>
 
                       SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549

                                  Form 10-KSB

(Mark One)
[X]    ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
          OF 1934
For the fiscal year ended December 31, 1998

[_]    TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
          ACT OF 1934 [No Fee Required]
For the transition period from...........to...............

                          Commission File Number 0-22042

                        MILLENNIUM SPORTS MANAGEMENT, INC.
                  (Name of small business issuer in its charter)


New Jersey                                                      22-3127024
(State or other jurisdiction of                           (I.R.S. Employer
incorporation or organization)                      Identification Number)

                                   Ross' Corner
                      U.S. Highway 206 and County Route 565
                            Augusta, New Jersey 07822
                     (Address of principal executive offices)

Issuer's telephone number: (973) 383-7644

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

Securities registered pursuant to Section 12(g) of the Exchange Act:
     Common Stock, no par value

     Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or 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 there is no disclosure of delinquent filers pursuant to Item 405
of Regulation S-B not contained in this form, and no disclosure will be
contained, to the best of registrant's 
<PAGE>
 
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-KSB or any amendment to the 
Form 10-KSB. [_]

     The issuer's revenues for its most recent fiscal year were $648,112.

     The aggregate market value of the voting stock held by non-affiliates
computed by reference to the price at which the stock was sold, or the average
bid and asked prices of such stock, as of March 10, 1999, was $722,639.


                        (ISSUERS INVOLVED IN BANKRUPTCY
                     PROCEEDING DURING THE PAST FIVE YEARS)

Check whether the issuer has filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.  Yes.....No......

                   (APPLICABLE ONLY TO CORPORATE REGISTRANTS)
The number of shares outstanding of the issuer's common stock, no par value, as
of March 10, 1999 was 724,809.

                   Documents Incorporated by Reference: None
<PAGE>
 
                                     PART I


     Unless otherwise indicated, all descriptions of and references to the
Company's common stock, and all share and per share information, contained in
this report have been adjusted to give effect to a 1-for-10 reverse stock split
effected by the Company as of the close of business on January 4, 1999.

     From June 1, 1994 to April 13, 1995, the Company operated as a debtor-in-
possession under Chapter 11 of the United States Bankruptcy Code, as more fully
described in this report.

ITEM 1.  DESCRIPTION OF BUSINESS

The Company

     Millennium Sports Management, Inc., formerly known as Skylands Park
Management, Inc. (the "Company"), was incorporated in the State of New Jersey in
August 1991.  The Company has developed a regional sports entertainment and
recreation center in Sussex County, New Jersey, known as the Skylands Park
Sports and Recreation Center (the "Complex").  Sussex County is located in the
heart of New Jersey's "Skylands" region (comprised of the counties of Sussex,
Warren, Passaic, Morris and Hunterdon), approximately 50 miles northwest of New
York City.  The Complex has been designed with a view to addressing both the
entertainment interests and the sports and other recreational needs of the
region's diverse population (including interest in spectator sports, and the
need for equipment and practice facilities for participatory sports and
activities), including tourists who visit the region regularly.  The Company
also seeks to take advantage of the related market for sporting goods, sports
apparel and sports collectibles.

     The centerpiece of the Complex is Skylands Park, which is a 4,300 seat
professional baseball stadium ("Skylands Park"), and is, among other things, the
home of the New Jersey Cardinals (the "Team"), a Class "A" Minor League
affiliate of the St. Louis Cardinals Major League baseball franchise of the
National League.  The Company has a minority ownership interest in Minor League
Heroes, L.P. ("Heroes"), the limited partnership that owns the Team.  The Team
is a member of the New York-Penn League.  Skylands Park was placed in operation
in April 1994, and the Team has played all of its home games at Skylands Park
during the 1994 through 1998 Minor League baseball seasons.

     During the 1998 calendar year, in addition to the Team's 37 regular season
home games, a total of 28 other baseball game dates were held at Skylands Park,
including 8 home games of the New Jersey Diamonds, a team owned and operated by
the Ladies Professional Baseball ("LPB") league.  However, in July 1998, LPB
announced that it was canceling all further league games for the balance of
1998, including the remaining 20 New Jersey Diamonds home games, and it now
appears unlikely that LPB will resume operations or fulfill the balance of its
lease obligations running through the year 2000.  In addition to baseball games,
a total of five other events were held at Skylands Park during the 1998 calendar
year, consisting of two professional wrestling events and three paid photo
shoots.

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     The remainder of the Complex follows a courtyard village design theme, and
includes a recreation facility containing batting cages, pitching tunnels, a
soft-play area, sports video parlor, half-court basketball, children's party
room and sports collectibles store; a wholesale and retail sporting goods
outlet; and an exhibit hall.  On game days during the first part of the 1998
baseball season, the Company attempted to utilize the exhibit hall as a sports
lounge; however, this operation was not profitable and was discontinued.  The
Company is currently considering other potential uses of the exhibit hall, and
although the Company is currently negotiating a long-term lease agreement for
the exhibit hall, the Company has not entered into any definitive commitments or
agreements regarding any such alternate uses.

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

     In March 1998, the Company entered into agreements with affiliates of Golf
Stadiums, Inc., William F. Rasmussen and Glenn J. Rasmussen, in implementation
of such parties' October 1997 letter of intent, with respect to the development,
through a joint venture corporation known as Stadium Capital, Inc. ("Stadium
Capital"), of a "Stadium Golf" resort destination (including two 18-hole golf
courses) in Naples, Florida.  The Company invested $150,000 in cash for capital,
$25,000 in expense reimbursements, and Class D Warrants for 100,000 shares of
common stock of the Company, in respect of a 50% interest in the joint venture.
In September 1998, the Company determined that the prospects for the golf
facility had become remote, and therefore determined to write off its investment
in the joint venture.

     The Company anticipates receiving approximately $42,000 per year in rent
from the Team, and parking revenues from the Team's home games, which management
does not believe will constitute a significant portion of the Company's
revenues.  The Company expects to generate additional revenues from, among other
things, the rental of skyboxes and advertising signs in Skylands Park, rental,
parking fees and other revenues from other baseball games, the rental of
Skylands Park for other sports and entertainment events, the operation of the
retail, recreation and other related facilities in the Complex, and the
Company's ownership interest in Heroes.  For the 1998 baseball season, the
Company rented and received payment for six skyboxes for the 1998 Team season
for an aggregate annual rental of $56,640.  In addition, the Company is entitled
to 20% of all revenues from advertising sign rental commitments at Skylands
Park.  The Company's 20% share of such revenues in 1998 was approximately
$75,000.

     The Company filed a voluntary petition for reorganization with the United
States Bankruptcy Court for the District of New Jersey (the "Court") on June 1,
1994.  The Company made such filing with a view to fostering a more orderly
payment and resolution of the Company's obligations.  On April 13, 1995, with
the requisite approval of the Company's creditors, the Court approved and
confirmed the Company's proposed plan of reorganization (the "Plan"), and the
Company has since paid substantially all of its pre-petition obligations at
their original amounts, and has obtained releases of all liens on its assets and
properties.  See "Item 6 - Management's Discussion and Analysis or Plan of
Operations - Plan of Reorganization."

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Skylands Park

     The first and most significant of the businesses of the Company is the
operation of Skylands Park, which includes clubhouses, concession stations and
press accommodations as well as 10 private "skybox" suites.  Each suite contains
indoor and outdoor seats overlooking the field and offers other amenities,
including private food and beverage service.  These suites are available for
leasing primarily on an annual basis.

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

     The Company has also entered into a lease agreement with the Newark Bears
(the "Bears"), a member of the independent professional Atlantic League,
pursuant to which the Bears will play their first 24 home games in the 1999
baseball season at Skylands Park, pending the completion of their permanent home
stadium in or around Newark, New Jersey.  Base rent under this lease is at the
rate of $3,000 per game, and the Company will be entitled to retain 100% of all
alcoholic beverage concession receipts.

     The Company is also party to a lease agreement with LPB for the use of
Skylands Park in the 1998, 1999 and 2000 baseball seasons; however, LPB
suspended operations early in the 1998 baseball season, and it now appears
unlikely that LPB will resume operations or fulfill the balance of its lease
obligations running through the year 2000.  The Company also expects to continue
to lease Skylands Park for college, high school and other amateur baseball
games.

Minor League Baseball at Skylands Park

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

     The Minor Leagues are organized as the National Association of Professional
Baseball Leagues and currently consist of four levels of playing ability.  These
levels, in descending order, are Class AAA, Class AA, Class A and Rookie.  Each
level has various organized leagues based upon geographic area.  The New York-
Penn League concluded its 58th year of operation in 1998, and is the longest
continuously operating Class "A" professional baseball league in North America.
Currently, the League has 14 franchises, all of which are affiliated with a
Major League baseball franchise.

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

     During the 1994 Minor League season, the Team held 38 regular-season and
four playoff home games at Skylands Park.  During each of the 1995 through 1998
Minor League seasons, the Team held 38 regular season home games at Skylands
Park.  Average attendance for each of 

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these games exceeded 4,000 paid admissions. All ticket receipts from Team home
games played at Skylands Park are revenues belonging to the Team.

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

Other Events at Skylands Park

     Based on its experience in the 1994 through 1998 seasons, the Company
believes that baseball at Skylands Park will not be limited to the professional
ranks.  College games, both regular and post-season tournament play, as well as
high school and other amateur leagues, have used and continue to seek to use the
Skylands Park facilities.  In the 1994 calendar year, a total of 53 college,
high school and other amateur baseball games were held at Skylands Park, and for
the 1995, 1996 and 1997 calendar years, a total of 98, 61 and 91, respectively,
amateur baseball games were played at Skylands Park.  In the 1998 calendar year,
a total of 28 non-team baseball game dates were held at Skylands Park, including
8 home games of the New Jersey Diamonds.  Notwithstanding the uncertainty as to
whether or when LPB and the New Jersey Diamonds will resume operations, the
Company expects an increase in the number of non-Team games at Skylands Park in
1999, due in substantial part to the addition of Bears home games during the
first part of the 1999 baseball season.

     In addition to baseball games, the Company leases Skylands Park and other
portions of the Complex for other events.  In the 1998 calendar year, such
events included two professional wrestling events and three paid photo shoots.
These events have produced revenue for the Company in the form of concession
sales, facility rental fees or ticket sales, parking fees, corporate sponsorship
of events, and value enhancement of fence signs and corporate skyboxes; however,
cash revenues from these events were not always sufficient to cover the
Company's cash expenses.  The profitability of Skylands Park will be largely
dependent upon receiving adequate revenues from these ancillary events.

     The Complex also includes a 6,300 square foot exhibit hall, which houses
baseball and other sports exhibits of local, regional, and national interest.
On game days during the first part of the 1998 baseball season, the Company
attempted to utilize the exhibit hall as a sports lounge; however, this
operation was not profitable and was discontinued.  The Company is currently
considering other potential uses of the exhibit hall, and although the Company
is currently negotiating a long-term lease agreement for the exhibit hall, the
Company has not entered into any definitive commitments or agreements regarding
any such alternate uses.

Land Acquisition

     The Complex is located on a tract of land owned by the Company, consisting
of approximately 28.5 acres located in Frankford Township, New Jersey at the
intersection of U.S. Highway 206 and Sussex County Route 565.  The land was
acquired by the Company at a cost of approximately $1,202,000, although the
Company has subsequently written down the depreciated carrying value of the land
and related buildings and improvements to a lesser amount.  See "Item 6 - Plan
of Operations and Management's Discussion and Analysis of Financial Condition
and Results of Operations - Asset Impairment."

                                       4
<PAGE>
 
Construction of the Complex and Government Regulations

     Baseball facilities to be used by Minor League teams must meet certain
standards established by Major League Baseball and the National Association of
Professional Baseball Leagues.  Skylands Park has been designed to meet or
exceed all such required standards for Class "A" teams.  Gould Evans Associates,
the architectural consultant for Major League Baseball, has issued its approval
of the stadium design on behalf of Major League Baseball.

     As part of the construction of Skylands Park, the Company was required,
under applicable environmental regulations, to construct and install a
wastewater treatment system.  The cost of this system was approximately
$700,000, and the Company expends approximately $62,000 per year in connection
with the operation, inspection and testing of the system.  Other than such
wastewater treatment system, the Company was not and is not required to incur
any material costs and expenses in order to comply with federal, state or local
environmental laws and regulations relating to its current operations.

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

The Barn

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

Skylands Sporting Goods

     Since May 1993, the Company has operated Skylands Sporting Goods as both a
retail seller and wholesale distributor of a broad range of sporting goods,
including baseballs, bats and gloves, Team paraphernalia and apparel, and
equipment related to other sports such as basketball, football and hockey.  The
store encompasses approximately 3,000 square feet, of which approximately one-
half is dedicated to the retail business.

     The Company has been authorized by Heroes to sell Team apparel and
merchandise in the Skylands Sporting Goods store; such items are sold for the
account of Heroes, which pays the Company a 20% commission on all such sales
made in the Skylands Sporting Goods store.  

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Skylands Sporting Goods also sells licensed apparel and other merchandise
bearing the logos and symbols of other professional teams; in such cases, the
manufacturer or procurer of the goods is licensed or sublicensed to utilize such
intellectual property rights, and like other sporting goods stores, the Company
purchases such goods from the manufacturer or a distributor, and offers such
goods for sale in its store.

Stadium Golf

     In the first quarter of 1998, the Company began to implement the
transactions contemplated by its October 1997 letter of intent with certain
affiliates of Golf Stadiums, Inc., William F. Rasmussen and Glenn J. Rasmussen.
Pursuant to such transactions, the Company and the Rasmussens' affiliates have
formed Stadium Capital, which has as its purpose the planning, construction,
development and operation of a "Stadium Golf" resort destination (including two
18-hole golf courses and a related "Stadium" facility containing luxury boxes
and/or condominium units, grandstand seating, telecast facilities, professional
golf facilities and dining and locker room amenities) in Naples, Florida.  The
Company invested $150,000 in cash for capital, $25,000 in expense
reimbursements, and Class D Warrants for 100,000 shares of common stock of the
Company, in respect of a 50% interest in the joint venture.  In September 1998,
the Company determined that the prospects for the golf facility had become
remote, and therefore determined to write off its investment in the joint
venture.

Insurance

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

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

Competition

     Located in northwest New Jersey, Sussex County is part of the State's
Skylands region, comprising the counties of Sussex, Warren, Passaic, Morris and
Hunterdon.  According to a 1993 report of the Sussex County Office of Economic
Development and the Sussex County Chamber of Commerce (which report relied in
substantial part on information contained in a 1992 survey by the New Jersey
Department of Travel & Tourism), the Skylands Region generated $1.6 billion in
tourism expenditures in 1991, with Sussex County accounting for more than $125
million.  Approximately 4,200 people in Sussex County are employed in tourism-
related jobs.  Among Sussex County's major tourist attractions are Action Park,
Wild West City, Waterloo Village, 

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and Space Farms. Other recreation facilities, including the Meadowlands sports
facility located in East Rutherford, New Jersey, are also within driving
distance from Sussex County. However, the closest Minor League baseball
franchises are a Class "A" New York-Penn League team located in Hudson Valley,
New York, which is approximately a 55-mile drive from Skylands Park, a Class
"AAA" team located in Scranton, Pennsylvania, which is approximately a 70-mile
drive from Skylands Park, and a Class "AA" team located in Trenton, New Jersey,
which is approximately a 110-mile drive from Skylands Park; and, in addition,
developers in the new independent Atlantic League have announced that they have
built, are building and/or have proposed the construction of minor league-sized
baseball stadiums in Newark, Camden, Somerset and Atlantic City, New Jersey. The
closest Major League baseball franchises are the New York Yankees and the New
York Mets, respectively located in Bronx County and Queens County, New York.

     The Company's revenues have been generated primarily from ticket and
concession sales generated from events scheduled at Skylands Park (other than
Team events), parking fees from events at Skylands Park (including Team games,
but excluding Bears games), a percentage of advertising charges for the rental
of signs and other advertising at Skylands Park, and the Company's recreational
facilities, sporting goods store and other businesses.  Although the Company
believes that Sussex County is a growing market for sports-oriented
entertainment, especially as a result of its growing tourism attractions, there
can be no assurance that the Company will be successful in marketing its
businesses.  In this connection, the Company is competing with established
companies having substantially greater financial resources than those of the
Company, and there can be no assurance that the Company will be able to
successfully compete against such companies for the public's entertainment
expenditures.  The Company's sporting goods business also competes with sporting
goods stores operating in the locality of the Complex, and national mail order
and catalogue businesses.

Employees

     As of March 10, 1999, the Company had a total of seven employees,
consisting of four full-time employees and three part-time employees.  The
Company also hires additional part-time employees in the spring through the fall
season, as required for the operation of Skylands Park in connection with games
and other events.  The Company employs up to a total of 50 such part-time
employees per year, of which up to 18 may be at work at any one time.

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

ITEM 2.  DESCRIPTION OF PROPERTY

The Complex

     The Company's primary property consists of the 28.5 acres (approximate) on
which Skylands Park and the Complex are located.  Such land is located in
Frankford Township, New Jersey at the intersection of U.S. Highway 206 and
Sussex County Route 565.  In addition to the 

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Company's lease with the Team (described below), the Company has also entered
into rental agreements for the use of Skylands Park and/or other portions of the
Complex with colleges, high schools, LPB, the Bears, concert promoters, and a
professional wrestling promoter.

Lease with the Team

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

     The Team is entitled to play its regular season and post-season home games
and hold pre-season training and practice sessions open to the public at
Skylands Park.  The Team is entitled to exclusive use of the home clubhouse and
batting/pitching tunnel on days that Team home games are to be played ("Game
Days").  The Company has the right to schedule other activities at Skylands Park
for such times as will not materially interfere with the Team's scheduled games.

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

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

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

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

Agreement with Ladies Professional Baseball

     In February 1998, the Company entered into a lease agreement with Ladies
Professional Baseball ("LPB"), which owns and operates a professional women's
baseball league.  Pursuant to this lease, LPB agreed that the New Jersey
Diamonds, a league-owned team, would play its regular season home games
(approximately 28 per year) at Skylands Park during the months of July through
September in each of the 1998, 1999 and 2000 baseball seasons.  However, in July
1998, LPB announced that, due to low attendance and projected economic losses,
it was canceling all further league games for the balance of 1998, including the
remaining 20 Diamonds home games.  LPB's public announcement suggested that LPB
was attempting to secure additional financing to enable it to resume operations
in 1999 or thereafter; however, LPB has not responded to communications for
several months, and the Company has no reason to believe that LPB will resume
operations at any time, or that LPB will satisfy the remaining lease payments
(consisting of the second half of payments for 1998 and all of 1999 and 2000).
LPB is currently in default under its lease with the Company, and the Company
has the immediate right 

                                       9
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to terminate such lease and/or bring legal action against LPB for the unpaid
rent and lost concession income and parking revenues for the second half of the
1998 season and the anticipated loss of rentals, concession income and parking
revenues for the 1999 and 2000 baseball seasons (subject to reduction of damages
in the event and to the extent that the Company is able to secure an alternate
tenant to cover the dates on which LPB would have utilized Skylands Park). The
prospects for any collection from LPB are extremely doubtful.

     In the unlikely event that LPB resumes operations, LPB's lease with the
Company provides for a base rent of $1,300 per game, and further provides that
LPB will be responsible for providing game day personnel and security, and the
Company will be responsible for stadium maintenance, traffic control and
parking.  The lease further provides that LPB is entitled to retain all revenues
from admissions to Diamonds games and all revenues from the sale of LPB's
souvenirs, and to receive 30% of all net receipts from sales of food and non-
alcoholic beverage concessions during Diamonds games, and that the Company will
retain 70% of all net food and non-alcoholic beverage concession receipts (after
payments to the Company's concessionaire), 100% of alcoholic beverage concession
receipts, and 100% of parking fees.

Agreement with Newark Bears

     In February 1999, the Company entered into a lease agreement with Newark
Bears, Inc. (the "Bears"), which owns and operates the Newark Bears franchise in
the independent professional Atlantic League.  Pursuant to this lease, the Bears
have agreed to play their first 24 home games in the 1999 baseball season at
Skylands Park, pending the completion of the Bears permanent home stadium in or
around Newark, New Jersey.  Base rent under this lease at the rate of $3,000 per
game and the Company will be entitled to retain 100% of all alcoholic beverage
concession receipts.  The Bears will be entitled to retain all admission
revenues to Bears games, all parking revenues from Bears games, all revenues
from sales of Bears souvenirs, and all net non-alcoholic beverage concession
receipts (after payments to the Company's concessionaire).  The Bears will be
responsible for providing game day personnel and security, and traffic control
personnel, and the Company will be responsible for stadium maintenance and
utilities.

Other Leases

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

                                       10
<PAGE>
 
Investment Policies

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

     The Company's primary assets are the land, buildings and improvements
constituting the Complex, which is located in Frankford Township, New Jersey, at
the intersection of U.S. Highway 206 and Sussex County Route 565.  The Company
operates such property so as to derive revenues therefrom as described above.
The Company owns unencumbered fee simple title to such property.  Through
December 31, 1998, the Company had expended approximately $14,000,000 (before
depreciation) for land acquisition and the planning, development and
construction of the Complex.

ITEM 3.  LEGAL PROCEEDINGS

     On June 1, 1994, the Company filed a voluntary petition for reorganization
under Chapter 11 of the United States Bankruptcy Code.  The petition was filed
in the United States Bankruptcy Court for the District of New Jersey, and the
case was assigned Case No. 94-23761.  On April 13, 1995, with the requisite
approval of the Company's creditors, the Plan was approved and confirmed by the
Court.  The Company has implemented the Plan, and is no longer a debtor-in-
possession.  In February 1999, the Company made the final payment under the Plan
to its pre-petition non-insider creditors.  See " Item 6 - Plan of Operations
and Management's Discussion and Analysis of Financial Condition and Results of
Operations - Plan of Reorganization."

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

                                       11
<PAGE>
 
ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     On November 25, 1998, the Company held its annual meeting of shareholders,
at which time four directors were elected to serve until the 1999 annual
meeting, and the shareholders voted to ratify the appointment of Wiss & Company,
LLP as auditors of the Company for the fiscal ending December 31, 1998.

     The voting with respect to these matters was as follows:

A.   Election of Directors
     ---------------------

        Nominee                     For             Against           Abstain
        -------------------       --------       ------------     -------------

        Barry M. Levine           642,457             652             1,220
        Robert H. Stoffel, Jr.    642,452             650             1,227
        Barry J. Gordon           642,452             650             1,227
        Marc H. Klee              642,452             650             1,227

B.   Ratification of Auditors
     ------------------------

                                    For             Against           Abstain
                                  --------       ------------     -------------

                                  643,111           1,027              191

       In February 1999, Barry J. Gordon and Marc H. Klee resigned as directors
of the Company, and in April 1999, Robert N. Adams was elected by the remaining
directors to fill one of such vacancies in the Company's Board of Directors
(subject to completion of a background check as required by New Jersey alcoholic
beverage control regulations).

                                       12
<PAGE>
 
                                    PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Market Information

       The following represents the range of reported high ask and low bid
quotations for the Company's common stock on a quarterly basis from January 1,
1997 through March 10, 1999, as reported on the SmallCap Market of the National
Association of Securities Dealers Automated Quotation System (NASDAQ).  None of
such quotations have been adjusted to reflect the 1-for-10 reverse stock split
in respect of the common stock, which became effective at the close of business
on January 4, 1999.

       The reverse stock split effected in January 1999 represented an attempt
by the Company to comply with the $1.00 minimum bid price per share requirement
for continued listing of the Company's common stock on NASDAQ; however,
subsequent to the reverse split, the closing bid price of the Company's common
stock occasionally dipped below $1.00 per share, and the aggregate value of the
public float of the Company's common stock remained under the $1,000,000 minimum
requirement for extended periods of time.  As a result of such failures to meet
NASDAQ's listing criteria, effective at the close of business on March 10, 1999,
the Company's common stock was delisted from NASDAQ, and thereafter has been
quoted on the OTC Bulletin Board.


Period                          High            Low
------                          ----            ---
 
1ST Quarter 1997                $1.72           $0.25
2nd Quarter 1997                $2.125          $0.75
3rd Quarter 1997                $2.44           $1.50
4th Quarter 1997                $5.125          $2.03
 
1ST Quarter 1998                $5.56           $2.69
2nd Quarter 1998                $4.09           $1.375
3rd Quarter 1998                $1.93           $0.375
4th Quarter 1998                $0.75           $0.093
 
1st Quarter 1999
  (through March 10, 1999)      $3.00           $0.125

       On March 10, 1999, the closing bid price for the Company's common stock
was $1.00, and the Company had 1,452 stockholders of record as of that date.

                                       13
<PAGE>
 
Recent Sales of Unregistered Securities

       Other than options granted under the Company's 1993 Stock Option Plan and
the Company's Stock Award Plan (see Item 10 below), and 13,839 shares of common
stock of the Company issued pursuant its Plan of Reorganization (the issuance of
which was exempt from registration pursuant to Section 1145 of the United States
Bankruptcy Code), the Company has not issued or sold any unregistered securities
since January 1, 1996.

Dividend Policy

       The Company has not previously paid any dividends on its common stock and
for the foreseeable future intends to continue its policy of retaining any
earnings to finance the operation and development of its business.

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

       The following discussion and analysis should be read in conjunction with
the information set forth in the financial statements and notes thereto included
in this report.

Plan of Operations

       Prior to Skylands Park beginning to host events and generate revenues in
the second quarter of 1994, the Company was a development stage entity that did
not generate any significant operating revenues.  During this period, the
Company's primary activities were limited to planning the construction and
development of Skylands Park and the Complex; obtaining financing for Skylands
Park and the Complex, primarily through the private placement of common stock
and warrants in March 1993, the sale of common stock and Class A Warrants as
part of an initial public offering consummated on October 1, 1993, and short-
term borrowings in March and April 1994; and completing a substantial portion of
Skylands Park and the Complex.  Skylands Park is a 4,300 seat professional
baseball stadium which, among other things, has been and will be leased for
sports and other entertainment events.

       In the second quarter of 1994, the Company received a temporary
certificate of occupancy for Skylands Park (as well as the sporting goods
store/ticket office, the Team clubhouse/administrative offices, and the
maintenance building).  Beginning with the 1994 Minor League baseball season,
the Team, which is a member of the New York-Penn League, has played all of its
home games at Skylands Park.  The Company has a minority ownership interest in
Minor League Heroes, L.P. ("Heroes"), which is the limited partnership that owns
the Team.  During the 1994 calendar year, in addition to the Team's 38 regular
season home games and 4 playoff games, Skylands Park also hosted 53 college and
other amateur baseball games, seven concerts and two professional wrestling
events; however, such events only generated limited amounts of revenues for the
Company, due in part to the fact that certain portions of the Complex were
either incomplete or otherwise non-operational as further described below.

                                       14
<PAGE>
 
       The remaining portions of the Complex follow a courtyard village design
theme, and include a recreation facility containing batting cages, a sports
video parlor, mini-gym, children's party room and sports collectibles store; a
wholesale and retail sporting goods outlet; and an exhibit hall.

       From June 1, 1994 to April 13, 1995, the Company operated as a debtor-in-
possession under Chapter 11 of the United States Bankruptcy Code.  On April 13,
1995, the Court approved the Company's plan of reorganization (the "Plan"), and
the Company has paid substantially all of its pre-petition liabilities at their
original principal amounts.  See "-Plan of Reorganization" below.

       The construction of Skylands Park and the Complex was suspended from June
1, 1994 through December 31, 1994.  The Company obtained the Court's permission
and sufficient financing (primarily through the issuance and exercise of Class B
Warrants) to enable the Company to resume construction and development work on
Skylands Park and the Complex during the first quarter of 1995.  Substantially
all of such facilities are completed and in operation, and the Company has
obtained a certificate of occupancy for such facilities.

       For the 1995 calendar year, in addition to the Team's 38 regular season
home games, Skylands Park hosted a total of 98 amateur baseball games.  Other
events (including concerts, antique and craft fairs, sports card shows, and art
and traveling exhibits) were held at the Company's facilities for a total of 24
calendar dates in 1995.  For the 1996 season, the Company held a total of 61
college and high school baseball games at Skylands Park; in the 1997 season, the
Company held a total of 91 college and high school baseball games  at Skylands
Park; and in the 1998 season, a total of 28 non-Team baseball game dates were
held at Skylands Park.  The 1998 baseball events included 8 New Jersey Diamonds
home games, and although it appears unlikely that LPB and the Diamonds will
resume operations in 1999, the Company expects to host additional non-Team
baseball games at Skylands Park in 1999 through the Bears and other tenants.

       The Company currently operates, in the Complex, a Skylands Sporting Goods
store, which sells, year-round both at retail and at wholesale, a broad range of
sporting goods relating to baseball and other sports, and Team paraphernalia and
apparel.  The Company also operates the Barn, a year-round recreational facility
in the Complex, which contains batting cages, a pitching tunnel, a sports video
parlor, half-court basketball and children's party room, and a subleased space
in which a third party sells sports collectibles for his own account.

       In March 1998, the Company acquired a 50% stock interest in Stadium
Capital, a start-up joint venture established by the Company and certain
affiliates of Golf Stadiums, Inc., William F. Rasmussen and Glenn J. Rasmussen.
Stadium Capital was formed for the purpose of designing, developing and
operating a "Stadium Golf" resort destination in Naples, Florida.  In September
1998, the Company determined that the prospects for the golf facility had become
remote, and therefore determined to write down its investment in the joint
venture.

       The Company anticipates receiving approximately $42,000 per year in rent
from the Team, and parking revenues from the Team's home games, which management
does not believe will constitute a significant portion of the Company's
revenues.  The Company expects to generate additional revenues from, among other
things, the rental of skyboxes and advertising 

                                       15
<PAGE>
 
signs in Skylands Park, rental, parking fees and other revenues from other
baseball games, the rental of Skylands Park for other sports and entertainment
events, the operation of the retail, recreation and other related facilities in
the Complex, and the Company's ownership interest in Heroes. As of March 10,
1999, the Company had received 1999 season commitments for four skyboxes for an
aggregate annual rental of $29,950 (of which the Team is entitled to retain
$9,576), which the Company expects to receive prior to the commencement of the
Cardinals' season in June 1999. In addition, the Company is entitled to 20% of
all revenues from advertising sign rental commitments at Skylands Park, and the
Company's 20% share of such revenues in 1998 was approximately $75,000.

       Although the Company does not expect to receive significant rental income
from the Team, the Company does expect that it will continue to derive income
and cash distributions through its minority ownership interests in Heroes (see
"-Purchase of Interest in Heroes" below).  Accordingly, the revenues generated
by the Team through paid admissions and its ancillary operations will indirectly
benefit the Company.  A portion of the Company's cash flow in each year of
operations has been received in the form of a distribution from Heroes in
respect of the Company's share of the net income of Heroes.

Sources and Uses of Resources and Comparative Annual Results for the Years Ended
December 31, 1998 and 1997

       Effective December 31, 1998, the Company wrote down the carrying value of
its fixed assets from $12,444,942 to $900,000, as more particularly described in
the next section titled "Asset Impairment."  Because of the relative magnitude
and non-recurring nature of this write-down, the following comparison of year-
to-year results does not include or give effect to such write-down, thereby
yielding a clearer comparison of operating results from year to year.

       During the year ended December 31, 1998, the Company's revenues were
approximately $648,000, consisting of approximately $347,000 of stadium rentals,
admissions and parking fees, approximately $214,000 of retail and concession
sales, and approximately $87,000 of advertising and subscription revenues.
Revenues in 1997 were approximately $657,000, and the decrease in revenues from
1997 to 1998 is primarily attributable to a 13% decrease in retail and
concession sales and a 20% decrease in advertising and subscription revenues,
offset in substantial part by a 15% increase in stadium rentals and admissions.

       From 1997 to 1998, total operating expenses (excluding the amount of the
fixed asset write-down in 1998) increased from approximately $1,518,000 in 1997
to approximately $2,332,000 in 1998.  Excluding the effects of the one-time non-
cash charge to earnings described in the next paragraph, operating expenses
increased by approximately 5% from 1997 to 1998, attributable primarily to an
11% increase in selling, general and administrative expenses and a 17% increase
in costs of stadium operations, offset in part by a 33% decrease in costs of
retail and concession sales.  Management intends to focus further efforts in
1999 to reducing the Company's selling, general and administrative expenses,
which constitute the single largest category of the Company's ongoing expenses.

       In addition to normal operating expenses and the $11,545,000 write-down
of fixed assets, the Company incurred a one-time non-cash charge to earnings of
$734,375 (recorded as a compensation expense) in 1998, representing the
difference between the exercise price and the 

                                       16
<PAGE>
 
fair market value per share on the date of grant for the full award of 25,000
shares of common stock for which options were granted under the Stock Award
Plan. Also in 1998, the Company took a $175,000 charge as a write-off of
investment in the Stadium Capital joint venture, although this charge is
recorded as a non-operating expense.

       Excluding the $11,545,000 write-down of fixed assets in 1998, the Company
incurred a net loss of approximately $1,758,000 in 1998, as compared to a net
loss of approximately $825,000 in 1997.  The increased loss is attributable
primarily to the compensation expense (non-cash) and investment write-off
described in the preceding paragraph.  Excluding those non-recurring items, net
loss was approximately the same from year to year.  Loss per share went from
$3.75 per share in 1997 to $2.65 per share in 1998; however, there were
approximately three times as many weighted average common shares outstanding in
1998 as compared to 1997.

       In 1998, management of the Company undertook a close analysis of the
Company's expenses, with a view to eliminating unnecessary or duplicative
expenses while maintaining the Complex in good condition.  Management believes
that it has implemented all expense reductions that are prudent and reasonably
possible, and that efforts to improve the Company's business are now best
focused on increasing gross revenues through the development of additional
sources of revenues, preferably during the winter months or on a year-round
basis.  Although management is exploring additional business activities, the
Company has not entered into any agreements or commitments with respect to any
such matters.  Certain of such proposed business activities could require the
Company to obtain additional financing, and there can be no assurance that the
Company would be able to obtain any such financing.

       Regardless of whether the Company undertakes any new business activities,
the Company will need to obtain substantial additional financing in 1999.  While
management continues to investigate various financing alternatives, the Company
does not have any commitments with respect to any additional financing, and
there can be no assurance that the Company will be successful in obtaining
additional financing.

       Due to the Company's consistent history of operating losses, the
likelihood of continuing losses in the future, and the Company's need for
additional financing to cover such potential losses and pay its liabilities when
due, the opinion of the Company's independent auditors, included in the audited
financial statements at Item 7 below, includes a "going concern" qualification,
indicating that the foregoing factors raise substantial doubt about the
Company's ability to continue as a going concern.

Asset Impairment

       In accordance with generally accepted accounting principles, due to the
Company having operated at a loss since its emergence from Chapter 11 of the
United States Bankruptcy Code in 1995, management of the Company reviews the
Company's property and equipment to determine its recoverability through future
or profitable operations.  In years prior to 1998, management believed that
profitability could be achieved through, among other things, purchases of
additional interests in Heroes, leases with additional teams and leagues,
granting of "naming rights" for Skylands Park and/or leases of the stadium name,
reductions in administrative costs, leasing of the exhibit hall and other
portions of the Complex for other uses, development of additional year-round
uses of the Complex, and leasing a portion of the Company's parking 

                                       17
<PAGE>
 
facilities and water treatment equipment to adjacent landowners following their
development of adjacent properties.

       One of management's attempts to reduce costs is an appeal of its real
estate tax assessment.  In connection with tax appeal litigation in the New
Jersey Tax Court scheduled in April 1999, the Company engaged an appraiser to
present the Company's belief that its existing tax assessment is excessive.  The
appraiser determined that (a) the cost to replace the buildings and
improvements, and the value of the land, as of October 1, 1996 (the valuation
date being used by the appraiser), would be approximately $9,661,000, (b)
because of the Company's continuing losses, fair market value could not be
determined by capitalization of the Company's earnings, and (c) comparable sales
of comparable properties could not be identified by the appraiser.  Under these
circumstances, the appraiser estimated the fair value of the land, buildings and
improvements at $900,000, by capitalizing estimated "stabilized net operating
income" of properties similar to the Company's land and stadium.

       In view of the continuing doubt regarding the Company's ability to
achieve substantial improvements and operating results necessary to fully
recover their cost, management decided that a write-down of the carrying value
of the Company's fixed assets to $900,000 would be appropriate as of December
31, 1998.  Accordingly, a write-down of $11,544,942 was made as of December 31,
1998.

Plan of Reorganization

       Although the Company has completed all payments required under the Plan
(other than pre-petition insider claims), an understanding of the Plan is
relevant to an understanding of the Company's operations and financial
circumstances during the periods covered by the financial statements included in
this report.

       Pursuant to the Plan, the Company's various pre-petition liabilities, and
the administrative expenses relating to the reorganization, were divided into
several classifications, which have been treated in substantially the following
manner.

       First, all previously unpaid administrative claims relating to the
reorganization proceedings, and all priority claims (other than tax claims,
which are payable over six years or as may otherwise be agreed by the Company
and the subject tax authorities), were paid at the time of or shortly after the
confirmation of the Plan.  The total of such claims was approximately $400,000.

       In April 1995, the Company repaid in full a $200,000 loan which was
secured by substantially all of the Company's assets (other than its equity
interest in the Team).  Total payments in respect of this loan, including all
unpaid accrued interest, were approximately $233,000.

       Also in April 1995, the Company paid to Strescon, a mechanic's lienholder
in respect of pre-petition liabilities, the sum of approximately $115,000.  (The
balance of Strescon's claim was categorized as a general unsecured claim, and
was paid on a ratable basis with the other unsecured pre-petition liabilities.)

                                       18
<PAGE>
 
       Also in April 1995, the Company paid $1,600,000 in respect of its pre-
petition unsecured liabilities (including payment in full of de minimis claims,
and subject to the Company's reservation of rights to contest a limited number
of unsecured claims), leaving a balance due in respect of such claims of
$2,608,153, which has been paid pursuant to a promissory note of the Company
(the "Creditors' Note").  The Company made payments on the Creditors' Note
primarily out of net equity proceeds received by the Company.  The Creditors'
Note was secured by substantially all of the assets of the Company, and while
the Creditors' Note was outstanding, the Company was required to report to and
operate under the review of the independent accountants retained by the official
committee of the unsecured creditors of the Company.

       Claims held by insiders (consisting primarily of past directors and
executive officers of the Company and certain of their affiliates) in respect of
pre-petition obligations (including but not limited to pre-petition loans made
to the Company), in the aggregate amount of approximately $339,609, may be paid
from time to time after payment in full of the Creditors' Note, as the cash flow
of the Company may permit; or, at the option of each insider, may be paid at any
time or from time to time in shares of common stock of the Company valued at the
then-current market price of such common stock.  Through March 10, 1999, an
aggregate of approximately $251,000 of such insiders' claims had been paid
through the issuance of an aggregate of 13,839 shares of common stock of the
Company.

       Equity interests, including interests of shareholders and warrantholders,
were not altered or impaired under the terms of the Plan.  However, pursuant to
the Plan, the Company was not permitted to pay any dividends on its common stock
until all required payments under the Plan were made.

       Pursuant to the Plan, through March 10, 1999, the Company had paid
approximately $5,013,000 of its pre-petition liabilities (which were in the
aggregate allowed amount of approximately $5,100,000) at their original
principal amounts, leaving due approximately $89,000 of insider claims (payable
primarily to former officers and directors) which may be paid in cash or, at
each claimant's option, in shares of common stock valued at their market price
as of the date that the claimant elects to be paid in such manner.

       The foregoing description of the Plan is merely a summary of certain
material provisions thereof, and is qualified in its entirety by the specific
provisions of the Plan.  A copy of the Plan was filed by the Company as an
exhibit to its report on Form 10-KSB for the year ended December 31, 1994.

Liquidity and Capital Resources

       The Company's primary sources of liquidity since its inception have been
the sale of shares of common stock to and short-term borrowings from certain
shareholders, which were used during the period from inception through March
1993; the net proceeds of approximately $739,000 from a private placement of
common stock and warrants, which were used during the period from March 1993
through September 1993; the net proceeds of approximately $5,815,000 from an
initial public offering of common stock and Class A Warrants, which were used
during the last quarter of 1993 and the first quarter of 1994; short-term
borrowings from certain officers, former shareholders and other related and
unrelated parties during March, April and May 1994, 

                                       19
<PAGE>
 
which were used during the first and the beginning of the second quarter of
1994; net proceeds of approximately $6,830,000 from the exercise of Class A
Warrants and Class B Warrants, which were received and used during the fourth
quarter of 1994 and in 1995; net proceeds of $1,500,000 from a private placement
of common stock in August 1995 (all of which net proceeds were utilized to make
a partial prepayment of the Creditors' Note); and net proceeds of approximately
$2,965,000 from the issuance and exercise of Class A Warrants, Class D Warrants,
underwriter's warrants and stock options in 1997 and 1998. As of December 31,
1998, all unexercised Class A Warrants expired, and the Company had ceased any
further offering of Class D Warrants.

       Substantially all of such capital resources have been utilized for the
planning, construction and development of the Complex, for working capital for
the Company's operations (including funding shortfalls in the Company's cash
flow from operations), for the payment of administrative expenses relating to
the Company's reorganization proceedings, and for a $150,000 capital
contribution to Stadium Capital.  As of December 31, 1998, the Company had
capitalized costs of approximately $14,000,000 (before depreciation and write-
down) for the purchase of land and the development and construction of Skylands
Park and the Complex.  In the fourth quarter of 1998, the Company wrote off its
investment in Stadium Capital, and on December 31, 1998, the Company reduced the
depreciated carrying value of its fixed assets from approximately $12,445,000 to
$900,000.

     Although the Company derived revenues from operations in 1994 through 1998
(including operation of limited facilities in 1994, and the entire Complex in
1995 through 1998), those revenues were not sufficient to cover operating
expenses or produce a positive cash flow.  As a result, the Company incurred
significant net losses during such years.  Revenues from the rental of Skylands
Park to its primary tenant have not been and will not be significant.  Instead,
management expects that the Company will generate revenues from skybox rentals,
advertising signs and parking fees for Team games, from the rental of Skylands
Park for other sports and entertainment events, and from ancillary activities
and the operation of  related facilities in the Complex.  Management is also
focused on identifying other sources of revenues (particularly in the winter
months or on a year-round basis).  However, the Company has not identified or
entered into any commitments for any such additional businesses; furthermore,
certain of such other business activities could require the Company to obtain
additional financing, and there can be no assurance that the Company would be
able to obtain any such financing.  If the Company is unable to generate
additional revenues from its existing facilities or develop or acquire
additional businesses for operations in the winter months, additional losses may
also be expected in 1999 and thereafter.

     Through December 31, 1998, the Company incurred accumulated losses of
approximately $18,296,000, including reorganization expenses attributable to its
bankruptcy proceedings of approximately $637,000, a non-recurring non-cash
compensation expense of $734,375, a $175,000 write-off of the investment in
Stadium Capital, and a $11,545,000 write-off of fixed assets.  Furthermore,
although the Company has been able to pay substantially all of its pre-petition
liabilities in the original amounts thereof and in accordance with the Plan, the
funds utilized to make such payments have been derived primarily from the net
proceeds of equity financings, and not out of cash flow from operations.
Accordingly, management believes that it 

                                       20
<PAGE>
 
is imperative for the Company to more fully utilize its existing facilities,
and/or to develop or acquire supplemental businesses.

       As of December 31, 1998, the Company had cash totaling approximately
$222,000 (exclusive of approximately $85,000 set aside and subsequently applied
to make the final payment under the Creditors' Note).  Management believes that
the Company is in need of additional liquid resources to enable the Company to
sustain operations beyond 1999, and there can be no assurance that the Company
will be able to obtain such additional liquid resources.

       The Company's history of operating losses, the likelihood of ongoing
operating losses, and the need to raise additional financing to sustain ongoing
operations and pay the Company's liabilities as they mature, has caused the
Company's independent auditors to include a "going concern" qualification in
their opinion on the Company's financial statements as of December 31, 1998 and
for the year then ended, as included in Item 7 below.  If the Company is unable
to raise additional financing, the Company may be required to sell certain
assets (such as its interest in the Team) to raise required cash, or may be
required to again seek the protection of the Bankruptcy Court.   Although
management continues to explore various financing alternatives, the Company does
not have any commitments with respect to any additional financing.

Purchase of Interest in Heroes

       In 1994, the Company purchased limited partnership interests in Heroes,
the limited partnership that owns the Team.

       As of December 31, 1998, the Company owned a 16.82% limited partnership
interest in Heroes.  The cost of the Company's limited partnership interests was
$284,375 paid in cash, including $14,875 paid to persons who were then directors
and executive officers of the Company.

       The Company is using the equity method to account for its investment in
Heroes.  The operations of Heroes are highly seasonal because the Team does not
play any games during the first and last quarters of the year.

       Historically, the Company's share of the net income of Heroes has been
$85,000 or more in each year, and the Company has received cash distributions
from Heroes in amounts ranging from $35,000 to $100,000 in each year.  The
Company's cash distributions from Heroes with respect to the 1998 year totaled
$94,847, which amount was received in 1999.

Seasonality

       The Company's cash flow from operations is significantly greater in each
spring, summer and fall than in the winter months when Skylands Park is not
rented for outdoor events, and the Company relies upon income generated by its
other businesses.  In the event that the Company is unable to generate
sufficient cash flow from operations during the seasons of full operations, the
Company may be required to utilize other cash reserves (if any) or seek
additional financing to meet operating expenses, and there can be no assurance
that there will be any other cash reserves or that additional financing will be
available or, if available, on reasonable terms.

                                       21
<PAGE>
 
Year 2000 Compliance

       The Company is not itself dependent to any significant extent on computer
or other embedded information systems, nor, to the Company's knowledge, are any
of its customers dependent on computer or other embedded information systems in
such customers' dealings with the Company.  Thus, the Company will not be
required to incur any material costs or expenses in order to adapt, modify or
upgrade its systems to be Year 2000 compliant.  The Company discussed with its
key vendors the status of their Year 2000 readiness in the first quarter of
1999, and the Company received assurances from substantially all of such vendors
that their computer-based systems will continue, without material interruption
or malfunction, to process data entries made on and after January 1, 2000 and
with respect to dates on and after January 1, 2000.  The costs of this
investigation were not material.

New Accounting Pronouncements

       Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
requires that certain long-lived assets be reviewed for possible impairment and
written down to fair value, if appropriate.  The Company adopted this new
pronouncement in 1996, and effective as of December 31, 1998, by application of
this accounting pronouncement, the Company wrote down the depreciated carrying
value of its fixed assets from approximately $12,445,000 to $900,000.  See "-
Asset Impairment" above.

       Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," requires companies to measure employee stock
compensation plans based on the fair value method of accounting.  However, the
statement allows the alternative of continued use of Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," with pro forma
disclosure of net income and earnings per share determined as if the fair value
based method had been applied in measuring compensation cost.  

       In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards 128, "Earnings Per Share" ("SFAS
128"), which is effective for financial statements for both interim and annual
periods ending after December 31, 1997.  The Company adopted SFAS 128 in the
fourth quarter of 1997.  SFAS 128 replaces the presentation of primary and fully
diluted earnings per share with basic and diluted earnings per share.  Basic
earnings per share is calculated based on the weighted average number of common
shares outstanding during the period and excludes all dilution.  Diluted
earnings per share is calculated by using the weighted average number of common
shares outstanding, while also giving effect to all dilutive potential common
shares that were outstanding during the period.

       Statement of Financial Accounting Standards No. 131 (SFAS 131),
"Disclosure about Segments of an Enterprise and Related Information," was issued
in July 1997, and is effective for periods beginning after December 15, 1997.
SFAS 131 introduces a new model for segment reporting, called the "management
approach."  The management approach is based on the way the chief operating
decision maker organizes segments based on product and services, geography,
legal structure, management structure or any manner in which management
desegregates a company.  The management approach replaces the notion of industry
and 

                                       22
<PAGE>
 
geographic segments in current Financial Accounting Standards Board standards.
The Company has adopted SFAS 131 in its 1998 financial statements and the impact
of adoption did not have a material effect on the Company's financial
statements.

                                       23
<PAGE>
 
ITEM 7.  FINANCIAL STATEMENTS




                                                        PAGE
 
 
Independent Auditors' Report                             F-2
 
Financial Statements:
 
  Balance Sheets at December 31, 1998                    F-3
 
  Statement of Operations for the Years
    Ended December 31, 1998 and 1997                     F-4
 
  Statements of Changes in Stockholders' Equity
    for the Years Ended December 31, 1998 and 1997       F-5
 
  Statements of Cash Flows for the Years Ended
    December 31, 1998 and 1997                           F-6
 
  Notes to Financial Statements                      F-7 to F-18
 

                                      F-1
<PAGE>
 
                          INDEPENDENT AUDITORS' REPORT



                                        
To the Board of Directors and Stockholders of
Millennium Sports Management, Inc.

We have audited the balance sheet of Millennium Sports Management, Inc. as of
December 31, 1998 and the related statements of operations, changes in
stockholders' equity and cash flows for each of the two years in the period then
ended.  These financial statements are the responsibility of the Company's
management.  Our responsibility is to express an opinion on these financial
statements based on our audits.

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

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Millennium Sports Management,
Inc. at December 31, 1998, and the results of its operations and its cash flows
for each of the two years in the period ended December 31, 1998 in conformity
with generally accepted accounting principles.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern.  As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
that raise substantial doubt about its ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1.  The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.



                                             WISS & COMPANY, LLP

Woodbridge, New Jersey
February 12, 1999, except as to Note 2 for
  which the date is March 4, 1999

                                      F-2
<PAGE>
 
                      MILLENNIUM SPORTS MANAGEMENT, INC.

                                 BALANCE SHEET
                               DECEMBER 31, 1998


<TABLE> 
<CAPTION> 
                                    ASSETS

<S>                                                              <C>                  <C> 
PROPERTY AND EQUIPMENT                                           $     900,000
                                                                     
CASH                                                                   221,975
INVENTORIES                                                             71,335
INVESTMENT IN LIMITED PARTNERSHIP, AT EQUITY                           466,759
OTHER ASSETS                                                           118,048
                                                                     ---------
                                                                                           $ 1,778,117
                                                                                           ===========
                                                            
                     LIABILITIES AND STOCKHOLDERS' EQUITY   
                                                            
LIABILITIES:                                                
    Amounts due insiders, pursuant to Chapter 11 proceedings     $     88,513
    Accounts payable                                                  262,293
    Accrued interest                                                   63,542
    Accrued compensation - officers and directors                     170,775
                                                                      -------
           Total Liabilities                                                               $   585,123

STOCKHOLDERS' EQUITY:
  Preferred stock, no par value; 500,000 shares
    authorized, none issued                                              -
  Common stock, no par value, stated value $.10
    per share; 20,000,000 shares authorized and
    718,809 shares issued                                             71,980
  Additional paid-in capital                                      19,416,652
  Accumulated deficit                                            (18,295,638)
                                                                 ------------
           Total Stockholders' Equity                                                        1,192,994
                                                                                         -------------
                                                                                           $ 1,778,117
                                                                                         =============

</TABLE> 

See accompanying notes to financial statements.

                                      F-3
<PAGE>
 
                      MILLENNIUM SPORTS MANAGEMENT, INC.

                           STATEMENTS OF OPERATIONS


<TABLE> 
<CAPTION> 

                                                                    Year Ended December 31,
                                                           --------------------------------------     
                                                                1998                     1997         
                                                           -------------              -----------     
<S>                                                     <C>                     <C>                   
 REVENUES:                                                                                            
   Stadium rentals and admissions                             $ 346,876               $ 301,293       
   Retail and concession sales                                  213,723                 245,644       
   Advertising and subscription revenues                         87,513                 109,617       
                                                             -------------          -------------     
           Totals                                               648,112                 656,554       
                                                             -------------          -------------        
                                                                                                      
 COSTS OF SALES AND SERVICES:                                                                         
   Costs of stadium operations                                  246,492                 210,178       
   Costs of retail and concession sales                         104,006                 154,689       
   Selling, general and administrative expenses                 867,623                 783,923       
   Stock compensation award to officers and                                                           
      directors                                                 734,375                       -       
   Impairment of long-lived assets                           11,544,942                       -       
   Depreciation and amortization                                379,079                 368,829       
                                                             -------------          -------------     
                                                             13,876,517               1,517,619       
                                                             -------------          -------------     
                                                                                                      
 LOSS FROM OPERATIONS                                       (13,228,405)               (861,065)      
                                                             -------------          -------------      
                                                                                                      
 OTHER INCOME ( EXPENSE ):                                                                            
     Equity in income of limited partnership                     88,698                  93,985       
     Write-down of investment in joint venture                 (175,000)                      -       
     Interest (net)                                              11,670                  (58,140)     
                                                             -------------          -------------     
                                                                                                      
                                                                (74,632)                35,845        
                                                             -------------          -------------     
                                                                                                      
 NET LOSS                                                 $ (13,303,037)             $ (825,220)      
                                                            ==============          =============     
                                                                                                      
 WEIGHTED AVERAGE COMMON                                                                              
   SHARES OUTSTANDING                                         662,780                 220,304         
                                                            ==============          =============     
                                                                                                      
 BASIC AND DILUTED LOSS PER COMMON SHARE                      $ (20.07)                $ (3.75)       
                                                            ==============          =============     

</TABLE> 

                                      F-4
<PAGE>
 
                       MILLENNIUM SPORTS MANAGEMENT, INC.

                  STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE> 
<CAPTION> 

                                                                    Common Stock          
                                                             ------------------------     Additional
                                                             Number                         Paid-in        
                                                             of Shares       Amount         Capital        
-----------------------------------------------------------------------    ----------     ---------------  
<S>                                                        <C>            <C>            <C> 
 BALANCES, JANUARY 1, 1997                                      121,489       $12,149       $ 15,675,975   
                                                                                                           
 YEAR ENDED DECEMBER 31, 1997:                                                                             
                                                                                                           
   Issuance of common stock upon exercise of warrrants:                                                    
           Class A warrants                                      27,972         2,797            235,588   
           Class D warrants                                     272,500        27,250          1,304,171   
   Issuance of common stock for                                                                            
       services rendered by an officer                              150            15                360   
   Issuance of common stock upon                                                                           
       conversion of debt                                         9,000           900             44,100   
   Issuance of Class D Warrants                                       -             -            300,922   
   Exercise of options under Stock Option Plan                    4,250           425             12,844   
   Net loss                                                           -             -                  -   
                                                                      -             -                  -  
                                                                                                           
 BALANCES, DECEMBER 31, 1997                                    435,361        43,536         17,573,960   
                                                                                                           
 YEAR ENDED DECEMBER 31, 1998:                                                                             
                                                                                                           
   Issuance of common stock upon exercise of:                                                              
           Underwriter warrants                                 150,000        15,000            135,000   
           Class A warrants                                      11,584         1,158            114,686   
           Class D warrants                                      92,500         9,250            453,250   
   Issuance of common stock upon conversion of                                                             
      debt                                                       14,839         1,484            276,112   
 Stock compensation to officers and directors                         -             -            734,375   
 Common stock issued to officers and directors                   15,525         1,552             37,255   
 Issuance of Class D Warrants                                         -             -             80,464   
 Issuance of Class A Warrants                                         -             -             11,550   
   Net loss                                                           -             -                  -   
                                                                      -             -                  -
                                                                                                           
 BALANCES, DECEMBER 31, 1998                                    719,809       $71,980       $ 19,416,652    
                                                               ========      ========      =============   

<CAPTION> 

                                                           
                                                           
                                                                 Accumulated
                                                                  Deficit            Total
                                                              ---------------    --------------
<S>                                                          <C>                <C> 
 BALANCES, JANUARY 1, 1997                                       $ (4,167,381)     $ 11,520,743
                                                           
 YEAR ENDED DECEMBER 31, 1997:                             
                                                           
   Issuance of common stock upon exercise of warrrants:    
           Class A warrants                                                             238,385
           Class D warrants                                                           1,331,421
   Issuance of common stock for                            
       services rendered by an officer                                                      375
   Issuance of common stock upon                           
       conversion of debt                                                                45,000
   Issuance of Class D Warrants                                                         300,922
   Exercise of options under Stock Option Plan                                           13,269
   Net loss                                                          (825,220)         (825,220)
                                                                     ---------         ---------
                                                           
 BALANCES, DECEMBER 31, 1997                                       (4,992,601)       12,624,895
                                                           
 YEAR ENDED DECEMBER 31, 1998:                             
                                                           
   Issuance of common stock upon exercise of:              
           Underwriter warrants                                             -           150,000
           Class A warrants                                                 -           115,844
           Class D warrants                                                 -           462,500
   Issuance of common stock upon conversion of             
      debt                                                                  -           277,596
 Stock compensation to officers and directors                                           734,375
 Common stock issued to officers and directors                              -            38,807
 Issuance of Class D Warrants                                               -            80,464
 Issuance of Class A Warrants                                               -            11,550
   Net loss                                                       (13,303,037)      (13,303,037)
                                                                  ------------      ------------
                                                           
 BALANCES, DECEMBER 31, 1998                                    $ (18,295,638)     $ 1,192,994
                                                                ==============     ===========
</TABLE> 


See accompanying notes to financial statements.

                                      F-5
<PAGE>
 
                       MILLENNIUM SPORTS MANAGEMENT, INC.

                            STATEMENTS OF CASH FLOWS

<TABLE> 
<CAPTION> 
                                                                                       Year Ended December 31,
                                                                                   ---------------------------------
                                                                                       1998               1997
                                                                                   --------------     --------------
<S>                                                                             <C>                 <C> 
 OPERATING ACTIVITIES:
     Net loss                                                                      $ (13,303,037)      $ (825,220)
     Adjustments to reconcile net loss to net cash
       provided by operating activities:
         Depreciation and amortization                                                   379,079          368,829
         Loss in impairment of long-lived assets                                      11,544,942                -
         Stock compensation awarded to officers and directors                            734,375
         Equity in income of limited partnership                                         (88,698)         (93,985)
         Write down of investment in joint venture                                       175,000
         Common stock issued for services rendered                                          -                 375
         Changes in operating assets and liabilities:
             Inventories                                                                  13,835           39,007
             Other assets                                                                (20,368)         (40,945)
             Accounts payable and accrued expenses                                      (133,572)        (299,089)
                                                                                   --------------     --------------
Net cash flows from operating activities                                                (698,444)        (851,028)
                                                                                   --------------     --------------
 INVESTING ACTIVITIES:
     Investment in joint venture                                                        (134,000)               -
     Purchases of property and improvements                                              (15,535)         (41,616)
     Distribution from limited partnership                                                98,994           30,469
                                                                                   --------------     --------------
                 Net cash flows from investing activities                                (50,541)         (11,147)
                                                                                   --------------     --------------
FINANCING ACTIVITIES:
    Repayments of creditors' notes payable and amounts
       due insiders                                                                       (3,500)        (940,627)
    Proceeds from issuance of common stock
       and warrants, net of costs                                                        767,151                -
    Proceeds from issuance of warrants                                                    92,014        1,909,497
                                                                                   --------------     --------------
                  Net cash flows from financing activities                               855,665          968,870
                                                                                   --------------     --------------
NET CHANGE IN CASH                                                                       106,680          106,695
CASH, BEGINNING OF YEAR                                                                  115,295            8,600
                                                                                   --------------     --------------
CASH, END OF YEAR                                                                        221,975        $ 115,295
                                                                                   ==============     ==============

SUPPLEMENTAL CASH FLOW INFORMATION:
     Interest paid                                                                 $        -          $  151,002
                                                                                   ==============     ==============
     Income taxes paid                                                             $        -          $     -
                                                                                   ==============     ==============
 NON-CASH FINANCING ACTIVITIES:
     Issuance of common stock and warrants upon
       conversion of outstanding debt                                              $     277,596       $  45,000
                                                                                   ==============     ==============
</TABLE> 


See accompanying notes to financial statements.

                                      F-6
<PAGE>
 
                      MILLENNIUM SPORTS MANAGEMENT, INC.

                         NOTES TO FINANCIAL STATEMENTS



Note 1 - Basis of Presentation:

         The accompanying financial statements of Millennium Sports Management,
         Inc. (the "Company") have been presented on the basis that it is a
         going concern, which contemplates the realization of assets and the
         satisfaction of liabilities in the normal course of business.  The
         Company reported net losses of approximately $13,303,000, including a
         write-down for impairment of assets (see below) and $18,296,000 for the
         years ended December 31, 1998 and 1997, respectively.  In addition, the
         Company had an accumulated deficit of approximately $6,731,000 at
         December 31, 1998. Revenues from operations in 1998 and 1997 were not
         sufficient to cover operating expenses or produce a positive cash flow
         from operations.  Additional losses are expected in 1998.  The Company
         will require additional working capital to cover anticipated losses and
         sustain operations in 1999, and will also be required to pay the
         remaining accrued interest balance of the pre-petition liabilities in
         1999 (See Note 2).  Accordingly, the Company will need to obtain
         additional financing.  Although management continues to explore various
         financing alternatives, the Company does not have any commitments with
         respect to any additional financing, and there can be no assurance that
         the Company will be successful in obtaining additional financing.

         During 1998, management undertook a close analysis of the Company's
         expenses, with a view to eliminating unnecessary or duplicative
         expenses.  Management believes that it has implemented all expense
         reductions that are reasonably possible.  Management continues to focus
         on increasing gross revenues through the development of additional
         sources of revenues, preferably during the winter months or on a year-
         round basis.  Although management is exploring additional business
         activities, the Company has not entered into any agreements or
         commitments with respect to any such matters.  Certain of such proposed
         business activities could require the Company to obtain additional
         financing, and there can be no assurance that the Company would be able
         to obtain any such financing.

         Reference should be made to "Management's Discussion and Analysis of
         Financial Condition and Results of Operations" included elsewhere
         herein for additional information.

         Annual Review for Impairment of Long-lived Assets - In accordance with
         generally accepted accounting principles, management reviews its
         property and equipment to determine its recoverability through future
         profitable operations due to the Company operating at a loss since it
         emerged from Chapter 11 of the Bankruptcy Code in 1995.  In prior
         years, management believed that profitability could be achieved
         through, among other things, leases with additional teams and leagues,
         lease of the stadium name, reduction in administrative costs, leasing
         the museum and store facilities for other uses, development of the
         property into a year round facility and leasing a portion of the
         parking facilities and water treatment equipment to adjacent land
         owners upon construction of a strip mall.

         One of management's attempts to reduce costs is an appeal of its real
         estate tax assessment.  In connection with tax appeal litigation in the
         New Jersey Tax Court 

                                      F-7
<PAGE>
 
                      MILLENNIUM SPORTS MANAGEMENT, INC.

                         NOTES TO FINANCIAL STATEMENTS



         scheduled in April 1999, the Company engaged an appraiser to present
         its belief that the assessment is excessive. The appraiser estimated,
         in a report dated January 20, 1999, that (1) the cost to replace the
         building and the value of the land as of October 1, 1996 (the valuation
         date being used by the appraiser) was $9,661,000, (2) because of the
         continuing losses of the Company, fair market value could not be
         determined by capitalization of the Company's earnings and (3)
         comparable sales could not be identified by the appraiser. In the
         circumstances, the appraiser estimated fair value at $900,000 by
         capitalizing estimated "stabilized net operating income" of property
         similar to the Company's stadium and land.

         In view of the continuing doubt about the Company's ability to achieve
         substantial improvements in operating results necessary to fully
         recover their cost, management decided that a writedown of the stadium
         and land to $900,000 would be appropriate as of December 31, 1998;
         accordingly, a writedown of $11,544,942 was made in the fourth quarter
         of 1998.


Note 2 - Organization, Proceedings Under Chapter 11 And Subsequent Operations:

         Organization and development - The Company operates a regional sports
         entertainment and recreation center in Sussex County, New Jersey, known
         as the Skylands Park Sports and Recreation Center (the "Complex"). The
         Complex includes a professional baseball stadium ("Skylands Park") used
         for sports and other entertainment events, and other adjacent
         recreational and commercial facilities (the "Related Facilities") that
         include, among other things, a sports apparel and collectibles store, a
         wholesale and retail sporting goods outlet, batting cages and a video
         parlor.

         The Company did not have sufficient financing to pay its contractors
         and other vendors and, as a result, filed a voluntary petition for
         reorganization under Chapter 11 of the United States Bankruptcy Code in
         the United States Bankruptcy Court (the "Court") for the District of
         New Jersey on June 1, 1994 (the "Petition Date"). The Company operated
         as a debtor-in-possession subject to the jurisdiction of the Court from
         the Petition Date through April 13, 1995, the date its plan of
         reorganization (the "Plan") was confirmed.

         Since inception, the Company generated only limited amounts of revenues
         from the events held at Skylands Park and the operation of the Related
         Facilities and, as a result, the Company has incurred significant net
         losses. Revenues from the rental of Skylands Park to its primary tenant
         have not and will not be significant.  The Company generates additional
         revenues from the rental of skyboxes and advertising, signs in the
         Skylands Park, parking fees and other revenues from other baseball
         games, the rental of Skylands Park for other sports and entertainment
         events, the operation of the retail, recreation and other related
         facilities in the Complex, and the Company's ownership in Heroes.
         Accordingly, the Company's ability to generate significant additional
         revenues will be dependent upon, among other things, its ability to
         generate future attendance at events and the success of its other
         commercial operations.

                                      F-8
<PAGE>
 
                      MILLENNIUM SPORTS MANAGEMENT, INC.

                         NOTES TO FINANCIAL STATEMENTS


         Confirmation of Plan of Reorganization - The Company's Plan was
         confirmed by its creditors and the Court on April 13, 1995 (the
         "Confirmation Date"). Since the Confirmation Date, the Company has paid
         unsecured pre-petition liabilities pursuant to the terms of a secured
         promissory note (the "Creditors' Note").  The Creditors' Note bore
         interest on the unpaid principal balance at the prime rate plus 3%.
         The final payment under the Creditors' Note was paid on March 4, 1999.
         The Creditors' Note was secured by substantially all of the assets of
         the Company.

         Claims of "insiders" (generally, the directors and executive officers
         of the Company and certain of their affiliates) of approximately
         $339,000 as of the Confirmation Date (including accrued salaries and
         loans and advances made to the Company) may be paid from time to time
         after payment in full of the Creditors' Note, as the cash flow of the
         Company may permit; however, each insider has the option to elect to be
         paid in shares of common stock of the Company valued at the then
         current market price of such common stock as reported on "NASDAQ."
         Through December 31, 1998, approximately $250,000 has been paid on the
         claims of insiders, principally through the issuance of common stock.

         Equity interests, including interests of stockholders and warrant
         holders, were not altered or impaired under the terms of the Plan.
         However, the terms of the Plan prohibit the Company from paying
         dividends until all payments required under the Plan have been made.

         Pursuant to Statement of Position 90-7, the Company did not adopt
         "fresh-start" reporting (and, as a result, revalue all of its assets
         and liabilities) since the holders of the Company's existing voting
         stock immediately prior to confirmation held the same relative voting
         interests after confirmation.  In addition, since the Company will be
         paying all of its pre-petition liabilities at their original principal
         amounts, the Company did not recognize any material gain or loss as a
         result of the confirmation of the Plan.

Note 3 - Summary of Significant Accounting Policies:

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

         Revenue Recognition - The Company recognizes revenues from facility
         rentals and stadium admissions upon official completion of such events,
         advertising on a pro-rata basis over the minor league baseball season,
         and retail sales at the time the customer takes possession of the
         merchandise.

         Financial Instruments - Financial instruments include cash, other
         assets, accounts payable, accrued interest and amounts due to insiders.
         The following methods were used in determining the fair value of the
         financial instruments:


                                      F-9
<PAGE>
 
                      MILLENNIUM SPORTS MANAGEMENT, INC.

                         NOTES TO FINANCIAL STATEMENTS


          Cash, other assets, accounts payable and accrued interest - Due to the
          short-term maturity of these instruments; carrying value approximates
          fair value.

          Due to insiders  - Although it is impractical to determine the current
          fair value of this liability or its current interest rate because of
          the lack of an identifiable market for financial instruments with
          similar characteristics, management considers this liability to
          approximate its fair value due to the short-term nature of the
          obligation.

         Property and Equipment - Property and equipment are recorded at the
         fair value (see Note 1).  Property and equipment will be depreciated
         using straight line and accelerated methods over the remaining
         estimated useful lives of the assets.  The estimated useful lives used
         in computing depreciation are: buildings and improvements - 20 years,
         and equipment - 5 to 10 years.

         Inventories - Inventories principally consist of merchandise for
         resale, which is stated at the lower of cost (first-in, first-out
         method) or market.

                                     F-10
<PAGE>
 
                      MILLENNIUM SPORTS MANAGEMENT, INC.

                         NOTES TO FINANCIAL STATEMENTS



         Investment in Limited Partnership - The Company accounts for its 16.82%
         interest in Minor League Heroes, L.P. ("Heroes"), the limited
         partnership that leases Skyland Park, pursuant to the equity method.
         Under this method, the proportionate interest in the net income or loss
         of the limited partnership is reflected in the Company's results of
         operations.  The Company's investment is reduced by any distributions
         from the limited partnership.

         Income Taxes  - Deferred tax assets and liabilities are computed
         annually for temporary differences between the financial statement and
         tax bases of assets and liabilities that will result in taxable or
         deductible amounts in the future based on enacted tax laws and rates
         applicable to the periods in which the temporary differences are
         expected to affect taxable income.  Valuation allowances are
         established when necessary to reduce deferred tax assets to the amount
         expected to be realized.

         Concentration of Credit Risk - The Company maintains cash in bank
         accounts. Such bank accounts are insured by the Federal Deposit
         Insurance Corporation up to $100,000 per institution.  Uninsured
         balances, including outstanding checks, totaled approximately $136,000
         at December 31, 1998.

         Net Income (Loss) Per Common Share - In February 1997, the Financial
         Accounting Standards Board issued Statement of Financial Accounting
         Standards 128, Earnings Per Share ("SFAS 128") which is effective for
         financial statements for both interim and annual periods ending after
         December 31, 1997.  The Company adopted SFAS 128 in the fourth quarter
         of 1997.  SFAS 128 replaces the presentation of primary and fully
         diluted earnings per share with basic and diluted earnings per share.
         Basic earnings per share is calculated based on the weighted average
         number of common shares outstanding during the period and excludes all
         dilution.  Diluted earnings per share is calculated by using the
         weighted average number of common shares outstanding, while also giving
         effect to all dilutive potential common shares that were outstanding
         during the period.  Such dilutive potential common shares have been
         excluded since the effect would be anti-dilutive, due to net losses for
         all periods presented.

         Reclassification - Certain amounts previously reported have been
         reclassified to conform to current year presentation.



                                     F-11
<PAGE>
 
                      MILLENNIUM SPORTS MANAGEMENT, INC.

                         NOTES TO FINANCIAL STATEMENTS


Note 4 - Property and Equipment:

         Property and equipment at December 31, 1998 consists of the following:

           Land, buildings and improvements            $882,000
           Equipment                                     18,000
                                                       --------
                                                        900,000
                                                       ========


Note 5 - Investment in Limited Partnership:

         The Company's statement of operations includes income of $88,698 (1998)
         and $93,985 (1997) attributable to the Company's equity in Heroes' net
         income.  The carrying value of the investment was reduced by
         distributions received by the Company of $98,994 in 1998 and $30,469 in
         1997.

         Summary balance sheet and operating data for Heroes as of December 31,
         1998 and 1997 and for the years then ended follows:

                                                1998           1997
                                            -------------  -------------
            Balance sheet data:
              Current assets                  $1,213,000      $1,450,000
              Noncurrent assets                  782,000         805,000
                                            -------------  -------------
                                              $1,995,000      $2,255,000
                                            =============  =============
 
              Current liabilities             $  275,000      $  474,000
              Partners' capital                1,720,000       1,781,000
                                            -------------  -------------
                                              $1,995,000      $2,255,000
                                            =============  =============
            Operating data:
              Gross receipts                  $1,877,000      $1,844,000
                                            =============  =============
              Net income                      $  527,000      $  558,000
                                            =============  =============

Note 6 - Stockholders' Equity:

         Stock Option Plan -   The Board of Directors of the Company adopted the
         1993 Stock Option Plan (the "Stock Option Plan") in April 1993, which
         became effective in August 1993. The Stock Option Plan provides for
         grants of options to key employees (including officers), non-employee
         directors and consultants to purchase up to 5,357 shares of common
         stock which are intended to qualify either as incentive stock options
         ("ISOs") within the meaning of Section 422 of the Internal Revenue
         Code, as amended, or as options which are not intended to meet the
         requirements of such section.


                                     F-12
<PAGE>
 
                      MILLENNIUM SPORTS MANAGEMENT, INC.

                         NOTES TO FINANCIAL STATEMENTS


         The exercise price of all options granted under the Stock Option Plan
         must be at least equal to the fair market value of the Company's common
         stock on the date of grant (at least 110% of the fair market value in
         the case of an ISO granted to a holder of 10% or more of the Company's
         outstanding common shares).  The maximum exercise period for which
         options may be granted is ten years from the date of grant (five years
         in the case of an ISO granted to a holder of 10% or more of the
         Company's outstanding common shares).

         Through December 31, 1998, 4,950 options had been granted under the
         Stock Option Plan, of which 4,250 options were exercised and 500 lapsed
         in 1997.  The remaining 200 outstanding options provide for an exercise
         price of $14.375 per share, are currently exercisable and expire on
         November 1, 2005.  No options were granted in 1998 under the Stock
         Option Plan.

         Shares Reserved for Issuance of Common Stock - Shares of common stock
         reserved for issuance by the Company as of December 31, 1998 upon
         exercise of options and warrants were as follows:

                Class D Warrants                 101,200
                Stock option plan                  1,107
                                                 -------
                    Total                        102,307
                                                 =======


         The number of shares issuable has been adjusted to reflect the
         Company's 1-for-10 reverse stock split in 1999.

         Reverse Stock Split - Effective at the close of business on January 4,
         1999, the Company effectuated a one-for-ten reverse stock split, which
         has been retroactively reflected in the accompanying financial
         statements.

         Stock Award Plan - In December 1996, and subsequently amended in
         December 1997, the Board of Directors adopted a stock award plan (the
         "Stock Award Plan") pursuant to which, subject to the achievement of
         certain targets, the Board of Directors was given the authority to
         grant, to such members of the Board, executive officers, key employees
         and consultants to the Company as may be determined by the Board, the
         right to purchase up to an aggregate of 100,000 shares of common stock
         of the Company at a nominal price for a limited period of time.  Up to
         25,000 shares of common stock may be awarded from time to time if and
         after the Company receives gross proceeds of $2,000,000 on or before
         December 31, 1997 from issuances of equity securities of the Company,
         and up to an additional 25,000 shares of common stock may be awarded
         from time to time if and after the Company receives additional gross
         proceeds (over and above the first $2,000,000) of $2,200,000 or more,
         on or before December 31, 1998, from issuances of equity securities of
         the Company.  Up to an additional 25,000 shares of common stock may be
         awarded from time to time if and after the Company achieves a positive
         cash flows from operations for any two consecutive fiscal quarters, and
         up to an additional 25,000 shares of common stock may be awarded time
         to time if and after the Company achieves an operating profit for any
         two consecutive fiscal quarters.


                                     F-13
<PAGE>
 
                      MILLENNIUM SPORTS MANAGEMENT, INC.

                         NOTES TO FINANCIAL STATEMENTS


         The Company received gross proceeds in excess of $2,000,000 from
         issuances of equity securities between the date of the adoption of the
         Stock Award Plan and December 31, 1997, thereby permitting the award of
         up to 25,000 shares of common stock of the Company under the first
         threshold stated above.  In April 1998, pursuant to the Stock Award
         Plan, the Company granted the right to purchase a total of 25,000
         shares of stock at $2.50 per share to members of the Company's Board of
         Directors.  During the three months ended June 30, 1998, a charge of
         $734,375 was recorded for the difference between the exercise price and
         the price per share as reported on the NASDAQ SmallCap Market on the
         date of grant, April 29, 1998.  Through December 31, 1998, 15,525 of
         the options had been exercised before the remaining options expired.
         The Stock Award Plan was subsequently terminated.

Note 7 - Related Party Transactions:

         Lease of Skylands Park to the Team - The Company entered into a long-
         term lease (the "Stadium Lease") for the use of Skylands Park with
         Heroes, the owner of the Team, which is a Class "A" minor league
         affiliate of the St. Louis Cardinals and a member of the New York-Penn
         League (the "League").  Under the terms of the Stadium Lease, the
         Company is required to make available to Heroes a minor league baseball
         stadium for the Team's home games.  The Stadium Lease commenced June 1,
         1994 and expires September 30, 2008.  Under the Stadium Lease, Heroes
         is obligated to pay rent of $1,100 per game scheduled to be played at
         Skylands Park subject to adjustment under certain circumstances.
         Pursuant to this lease, the Company derived rental income of
         approximately $41,000 in 1998 and $42,000 in 1997.  Such rent is
         subject to a 10% increase effective at the beginning of each of the
         2001 and 2005 minor league baseball seasons.  Heroes will retain all
         admission revenues from Team games (except certain revenues from
         skyboxes that will be retained by the Company) and the net concession
         revenues generated on the dates of Team games.  The Company will
         operate and retain all revenues derived from parking facilities.
         Revenues received from sign rentals and advertising in Skylands Park
         are divided 80% to Heroes and 20% to the Company.  Heroes will be
         required to pay for, among other things, game staff personnel (such as
         ushers), security and medical personnel, and the cost of utilities pro-
         rated according to use.

         Heroes may terminate the Stadium Lease after the minor league baseball
         seasons of 2003, 2004, 2005, 2006 and 2007 during the period from
         October 1 through November 30 if the average paid attendance for the
         immediately preceding baseball season was less than 900 people per game
         and the Team did not realize an operating profit in its previous fiscal
         year.  The Stadium Lease will automatically terminate, and Heroes will
         be required to pay specified damages to the Company, if the League is
         disbanded and under certain other circumstances.  Heroes may
         voluntarily cancel the Stadium Lease by paying a lump sum equal to 75%
         of the remaining outstanding rent (based upon an assumed $35,000, rent
         per year).

         The amount due from Heroes for the Team's share of utilities, and
         signage, netted with Team merchandise sold in the Company's sporting
         goods store approximated $46,000 at December 31, 1998 and is included
         in other assets.

                                     F-14
<PAGE>
 
                      MILLENNIUM SPORTS MANAGEMENT, INC.

                         NOTES TO FINANCIAL STATEMENTS


Note 8 - Income Taxes:

         Deferred income taxes reflect the net effects of temporary differences
         between the amounts of assets and liabilities for financial reporting
         purposes and the amounts used for income tax purposes.  The temporary
         differences arise principally from net operating loss carryforwards,
         write-down of property and equipment and certain accruals and result in
         a deferred tax asset of approximately $1,484,000 at December 31, 1998
         and $1,192,000 at December 31, 1997.

         A valuation allowance is provided when it is more likely than not that
         some portion of the deferred tax asset will not be realized.  The
         Company has determined, based on the Company's recurring net losses
         from operations and lack of a continuing substantial revenue stream,
         that a full valuation allowance is appropriate at December 31, 1998 and
         1997.



                                     F-15
<PAGE>
 
                      MILLENNIUM SPORTS MANAGEMENT, INC.

                         NOTES TO FINANCIAL STATEMENTS



         A reconciliation of the provision (benefit) for income taxes computed
         at the federal statutory rate of 34% and the effective tax rate of
         income (loss) before income taxes is as follows:

<TABLE>
<CAPTION>
                                                                              Year Ended
                                                                             December 31,
                                                             --------------------------------------------
                                                                      1998                   1997
                                                             ----------------------  --------------------
<S>                                                          <C>                     <C>
          Computed tax benefit on net loss
          at federal statutory rate                                    $(4,523,000)            $(281,000)
          State income tax, net of federal income tax
           effect                                                         (798,000)              (49,000)
 
          Writedown of property and equipment
                                                                         4,618,000                     -
          Effect of deductions not allowed in prior years
                                                                           (58,000)                    -
          Tax effect of net operating losses not currently
           usable                                            ---------------------   -------------------
                                                                           761,000               330,000
                                                                       -----------             ---------
          Provision (benefit) for income taxes               $         -             $         -
                                                             =====================   ===================
</TABLE>


         The significant components of the Company's deferred tax assets as of
         December 31, 1998 are summarized below:

<TABLE>
<S>                                                                         <C>
          Net operating loss tax carryforwards                                           $ 1,745,000
          Net book value of assets written down                                            4,717,000
          Accrued expenses                                                                    96,000
                                                                                         -----------
                                                                                           6,558,000
          Valuation allowance                                                             (6,558,000)
                                                                                         -----------
                                                                                         $      -
                                                                                         ===========
</TABLE>


          The Company has available at December 31, 1998 net operating loss
          carryforwards totaling approximately $5,435,000 that may be applied
          against future federal taxable income.  The loss carryforwards will
          expire through 2018.  Certain losses are subject to limitation by the
          provisions of Section 382 of the Internal Revenue Code due to a more
          than 50% change in ownership, which occurred through the sale of
          common stock.


                                     F-16
<PAGE>
 
                      MILLENNIUM SPORTS MANAGEMENT, INC.

                         NOTES TO FINANCIAL STATEMENTS



Note 9 - Subsequent Event:

         Newark Bears  - In February 1999, the Company entered into a lease
         agreement, commencing in May 1999 and expiring in June 1999, with the
         Newark Bears, Inc. ("Bears") a professional baseball team, which is a
         member of the Independent Atlantic League.  Pursuant to the agreement,
         the Bears will play approximately 24 of its regular 1999 season home
         games at Skylands Park during the months of May and June 1999.  The
         Bears will pay rent of approximately $72,000.  The Company will also
         retain the net proceeds of all alcohol beverage concessions.



                                     F-17
<PAGE>
 
ITEM 8.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

       None.






                                      24
<PAGE>
 
                                    PART III

ITEM 9.  DIRECTORS, EXECUTIVE OFFICERS

Directors and Executive Officers

       The executive officers and directors of the Company are as follows:


   Name                             Age                 Position

Barry M. Levine                     55          President, Chief Executive
                                                Officer, and Director

Robert H. Stoffel, Jr.              59          Vice President, Chief
                                                Financial Officer, Chief
                                                Accounting Officer, and
                                                Director

Robert N. Adams                     48          Director*

____________________
*  Election as director is subject to completion of a background check as
   required under New Jersey alcoholic beverage control regulations.

       All directors are elected at the annual meeting of shareholders and hold
office until the next annual meeting and until their successors have been
elected and qualified.  Officers are elected by and hold office at the
discretion of the Board of Directors.

       The following sets forth summary biographical information as to the
business experience of each executive officer and director of the Company.

       Barry M. Levine was elected a Director and the President and Chief
Executive Officer of the Company in October 1996.  From March to October 1996,
Mr. Levine was unemployed.  From December 1991 through March 1996, Mr. Levine
held various offices (including, at varying times, President, Chief Executive
Officer, Executive Vice President, Chief Financial and Administrative Officer,
Vice President-Finance and Administration, and Treasurer) in, and from April
1994 through March 1996 was a Director of, Sports Heroes, Inc. ("SHI"), a
publicly traded company which was engaged primarily in the business of acquiring
and marketing sports memorabilia and related collectible items.  Mr. Levine
resigned from SHI in March 1996, and subsequently, in May 1996, SHI filed a
voluntary petition for reorganization under Chapter 11 of the United States
Bankruptcy Code; and in October 1996, such case was converted to a proceeding
under Chapter 7 of the United States Bankruptcy Code.  Prior to his employment
with SHI, Mr. Levine was Chief Financial Officer of Pharmos Corporation (a New
York-based pharmaceutical company), and from 1984 to 1991 he was Chief Financial
Officer of Cardio Fitness Corporation.  Mr. Levine is also a certified public
accountant, and spent sixteen years with a certified public accounting firm,
where he was a partner.

                                      25
<PAGE>
 
       Robert H. Stoffel, Jr. has been Vice President, Chief Financial Officer
and Chief Accounting Officer of the Company since January 1993, and a Director
of the Company from May 1995 to June 1995 and from February 1996 to the date of
this report.  Mr. Stoffel has been an independent financial consultant from 1990
to the present, serving several contract research organizations in the
pharmaceutical field.  Specifically, Mr. Stoffel has been working in the areas
of acquisitions and accounting systems.  From 1987 to 1990, he was Vice
President and Chief Controller for the New York Yankees, reporting directly to
its Managing General Partner and Principal Owner George Steinbrenner.  Mr.
Stoffel has over 30 years of professional experience in the area of finance.

     Robert N. Adams was elected to the Company's Board of Directors in April
1999, and his election is subject to the completion of a background check as
required under New Jersey alcoholic beverage control regulations.  For the past
18 years, Mr. Adams has been the owner, operator and President of Bob's
Collectables and Bob's Hot Corner, retail sellers of sports memorabilia and
collectibles.  Since 1993, Bob's Hot Corner has operated in space leased from 
the Company.

ITEM 10.  EXECUTIVE COMPENSATION

       The Company did not pay any cash compensation to its executive officers
in 1991 or 1992.  Although compensation for services was paid to certain
executive officers in 1992 through the issuance of certain shares of common
stock, and cash compensation was paid in 1993 and thereafter, no executive
officer or other employee received total compensation in excess of $100,000 in
any of 1991, 1992, 1993, 1994, 1995 or 1996.

       The following table shows all compensation of any and all types paid or
accrued in the Company's three most recent full fiscal years for services
rendered in all capacities by the Company's Chief Executive Officer.  Other than
the Company's Chief Executive Officer, no other employee of the Company was paid
or accrued compensation in excess of $100,000 in any fiscal year of the Company.

<TABLE> 
<CAPTION> 
                                                                                           Total          
Name and Principal                                                                         Compensation   
 Position                        Year          Salary               Options/SAR's (#)        Paid or Accrued 
--------------------------    ----------    ----------------       -------------------      --------------------
<S>                         <C>          <C>                    <C>                     <C> 
Robert A. Hilliard                1996       $ 81,000(2)                 500 (3)           $81,000(1)(2)
Chairman and
Chief Executive Officer
</TABLE> 

                                      26
<PAGE>
 
<TABLE> 
<CAPTION> 
                                                                                           Total          
Name and Principal                                                                         Compensation   
 Position                        Year          Salary               Options/SAR's (#)        Paid or Accrued 
--------------------------    ----------    ----------------       -------------------      --------------------
<S>                         <C>          <C>                    <C>                     <C> 
 
Barry M. Levine                   1996       $ 31,250(4)                  1,500            $31,250(1)(4)
President and
Chief Executive Officer           1997       $125,000                         0            $ 125,000(1)
 
                                  1998       $125,000                     7,000            $ 125,000(1)
</TABLE>

(1)  Does not include benefits or perquisites in an aggregate amount which is
     less than 10% of the total compensation for the subject year.

(2)  Consists of $7,500 paid in cash, and an additional $73,500 accrued.

(3)  Consists of 500 stock options which were repriced in 1996, and have since
     lapsed without exercise.

(4)  Consists of $31,250 accrued following the commencement of Mr. Levine's
     employment on October 1, 1996.


Employment Agreements

       The Company entered into an employment agreement with Mr. Levine in
October 1996, pursuant to which Mr. Levine is to serve as President and Chief
Executive Officer of the Company through December 31, 1999 at an annual salary
of $125,000.

       The Company has also entered into an amended employment agreement with
Mr. Stoffel, pursuant to which Mr. Stoffel is to serve as Vice President and
Chief Financial Officer of the Company through December 31, 1999 at an annual
salary of $78,000.

       Under the terms of their respective agreements, each of Messrs. Levine
and Stoffel is required to devote the majority of his business time to the
affairs of the Company, and is prohibited, for the duration of his employment
agreement, from engaging in any activities which are competitive with the
businesses of the Company.

Director Compensation

       The Company has adopted a policy whereby the Company will pay each non-
employee director $500 per year for serving in such capacity, in addition to
reimbursement of out-of-pocket expenses in connection with attending directors'
meetings.  To the date of this report, although there have been numerous
directors' meetings, no such directors' fees or expenses have been paid or
accrued, and all of such fees in respect of prior meetings have been waived.

Stock Option Plan

       The Company's 1993 Stock Option Plan (the "Stock Option Plan") was
adopted by the Company's Board of Directors on April 14, 1993, was approved by a
majority of the Company's shareholders on July 23, 1993, and became effective on
August 9, 1993.  The Stock Option Plan provides for the granting of options to
key employees (including officers), non-employee 

                                      27
<PAGE>
 
directors and consultants to purchase up to 5,357 shares of common stock of the
Company which are intended to qualify either as incentive stock options
("Incentive Stock Options") within the meaning of Section 422 of the Internal
Revenue Code, as amended, or as options which are not intended to meet the
requirements of such section.

       The Stock Option Plan provides for its administration by an
administrative committee of two directors (the "Committee") which has
discretionary authority, subject to certain restrictions, to determine the
number and type of options to be granted and the individuals to whom, the times
at which and the exercise price for which options will be granted.

       The exercise price of all options granted under the Stock Option Plan
must be at least equal to the fair market value of the underlying shares of
common stock on the date of the grant, or, in the case of Incentive Stock
Options granted to an individual owning more than ten percent of the Company's
outstanding voting shares, at least 110% of the fair market value of such shares
on the date of the grant.  The maximum exercise period for which options may be
granted is ten years from the date of grant (five years in the case of an
Incentive Stock Option granted to an individual owning more than 10% of the
Company's outstanding voting shares).  The aggregate fair market value
(determined at the date of the option grant) of shares of common stock with
respect to which Incentive Stock Options are exercisable for the first time by
the holder of the option during any calendar year may not exceed $100,000.

       No options were awarded under the Stock Option Plan in 1998.

       Through March 10, 1999, an aggregate of 4,250 options granted under the
Stock Option Plan had been exercised (4,000 by executive officers and directors,
all in 1997), and 500 options had lapsed without exercise.  As of March 10,
1999, 200 options remained outstanding under the Stock Option Plan, and 907
options remained available for future issuance under the Stock Option Plan.

     No executive officer or director of the Company held any stock options of
the Company on December 31, 1998.  Except for options exercised pursuant to the
award under the Stock Award Plan (as described below), no executive officer or
director of the Company exercised any stock options during the fiscal year ended
December 31, 1998.

Stock Award Plan

       In December 1996, the Board of Directors adopted a Stock Award Plan
pursuant to which, subject to the achievement of certain targets, the Board of
Directors was given the authority to grant, to such members of the Board,
executive officers, key employees and consultants to the Company as may be
determined by the Board, the right to purchase up to an aggregate of 100,000
shares of common stock of the Company at a nominal price for a limited period of
time.  Up to 25,000 shares of common stock could be awarded from time to time if
and after the Company received gross proceeds of $2,000,000 between the date of
adoption of the Stock Award Plan and December 31, 1997 from issuances of equity
securities of 


                                      28
<PAGE>
 
the Company, and up to an additional 25,000 shares of common stock could be
awarded from time to time if and after the Company received additional gross
proceeds (over and above the first $2,000,000) of $2,200,000 or more, on or
before December 31, 1998, from issuances of equity securities of the Company. Up
to an additional 25,000 shares of common stock could be awarded from time to
time if and after the Company achieved a positive cash flow from operations for
any two consecutive fiscal quarters, and up to an additional 25,000 shares of
common stock could be awarded time to time if and after the Company achieved an
operating profit for any two consecutive fiscal quarters.

       The first threshold for awards under the Stock Award Plan was met, and
accordingly, in April 1998, options for an aggregate of 25,000 shares of common
stock were awarded to members of the Board of Directors.  When such options
expired on October 31,1998, options for an aggregate of 15,524 shares of common
stock had been exercised, and the remaining 9,476 options lapsed without
exercise.  Thereafter, the Board of Directors determined to terminate the Stock
Award Plan.

       The following table sets forth the stock options exercised under the
Stock Award Plan during the fiscal year ended December 31, 1998, and the "value"
(i.e., the amount by which the fair market value of the underlying common stock
exceeded the option exercise price on the dates of exercise) realized upon such
exercises.

                                         Shares Acquired         Value
             Name                         on Exercise(1)       Realized
             ----------------------    ------------------    ------------
             Barry M. Levine                 38,807            $102,269
             Robert H. Stoffel, Jr.          38,807            $102,269
             Barry J. Gordon*                38,807            $102,269
             Marc H. Klee*                   38,807            $102,269

             ____________________
             *    Resigned as a director in February 1999.
             (1)  Share amounts in this table are not adjusted to reflect the 1-
                  for-10 reverse stock split which became effective as of the
                  close of business on January 4, 1999.


                                      29
<PAGE>
 
ITEM 11.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

       The following table sets forth, as of March 10, 1999, the number of
shares of the Company's common stock owned by each person (including any "group"
as used in Section 13(d)(3) of the Securities Exchange Act of 1934) known to the
Company to be the beneficial owner of more than five percent of the Company's
common stock, each director of the Company, and all directors and officers of
the Company as a group.

<TABLE>
<CAPTION>
                                                                                    Percentage of
                                                                                     Outstanding 
Name and Address of Owner(1)                Number of Shares(2)                      Common Stock
----------------------------                -------------------                      ------------
<S>                                       <C>                                     <C>
Barry M. Levine                                           1,520                               0.2%
Robert H. Stoffel, Jr.                                      650                               0.1%
Robert N. Adams                                              28                                 *
William F. Rasmussen                                  50,000 (3)                              6.5%
Glenn J. Rasmussen                                    50,000 (4)                              6.5%
All directors and executive                               2,198                               0.3%
 officers as a group (three persons)
</TABLE>

____________________
*    Less than one-tenth of 1%.

(1)  The address for all persons is c/o Millennium Sports Management, Inc.,
     Ross' Corner, U.S. Highway 206 and County Route 565, P.O. Box 117, Augusta,
     New Jersey 07822-0117.

(2)  All shares are directly held unless otherwise stated.

(3)  Consists of 50,000 shares which are subject to currently exercisable
     warrants issuable to William F. Rasmussen's affiliate, TGT of Naples, Inc.,
     which warrants would be exercisable at $6.00 per share.

(4)  Consists of 50,000 shares which are subject to currently exercisable
     warrants issuable to Glenn J. Rasmussen's affiliate, GTG of Naples, Inc.,
     which warrants would be exercisable at $6.00 per share.


ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

       In October 1993, the Company and Robert H. Stoffel, Jr. entered into an
agreement whereby, in lieu of Mr. Stoffel's receiving certain shares of common
stock of the Company (which were originally to be transferred to Mr. Stoffel as
an inducement for entering into employment with the Company), the Company agreed
to pay to Mr. Stoffel a total of $35,000.  Of such $35,000, a total of $25,000
has been paid in cash, and the remaining $10,000 was paid by the issuance to Mr.
Stoffel of an aggregate of 323 shares of common stock.

       In March 1994, the Company borrowed $100,000 and $6,000, respectively,
from Robert A. Hilliard and John C. Ertmann (each of whom was then a director
and executive officer of the Company), which loans bear simple interest at 15%
per annum and matured in November 1994.  


                                      30
<PAGE>
 
Of such amounts, through March 10, 1999, $74,081 had been paid through the
issuance of shares of common stock of the Company to one of such individuals,
and the remaining portion of such obligations is now payable in cash, or at the
option of the subject creditor, in shares of common stock valued at the market
price thereof at the time of such payment election. At the time such loans were
borrowed, the Company was not able to obtain financing from any other persons at
a lower interest rate.

       In April 1994, Barry J. Gordon and Marc H. Klee (formerly directors of
the Company) each loaned the Company the principal amount of $125,000.  Such
loans were included in the Company's pre-petition obligations to unsecured
creditors, and have been repaid ratably through the Company's payment of the
Creditors' Note.

       Also in April 1994, the Company received an advance from Heroes, the
limited partnership that owns the Team, in the aggregate amount of $180,000.
This advance consists of unsecured loans in the aggregate amount of $125,000
(which were non-interest-bearing until their due date on October 31, 1994, and
thereafter have accrued interest at the rate of 2% per month on the first
$60,000 of principal and 1.25% per month on the remaining $65,000 of principal,
until fully paid), and the sum of $55,000 which was designated as a prepayment
of rentals and advertising fees.  Pursuant to the agreements under which the
advance was made, Heroes agreed to reimburse the Company for certain additional
construction costs to be undertaken by the Company, and reserved the right to
satisfy such reimbursement obligations by offset against up to $65,000 of loan
principal and reduction of the $55,000 of rent and advertising prepayments.
However, as a result of the Company's reorganization proceedings, there are
substantial uncertainties relating to Heroes' right to offset its obligations
for current rents, fees and reimbursement obligations against its pre-petition
advances, and thus, in the Company's financial statements, the Company has
continued to reflect the entire $180,000 advance as a loan payable, and includes
rents and advertising fees payable by Heroes (totaling $49,000 for the period
from June 16, 1994, when the Team played its first game at Skylands Park,
through December 31, 1994) in income as and when earned, without regard to
either the pre-petition designation of the $55,000 as being "prepayments," or
any rights of offset described above.

       Also in April 1994, the Company also borrowed $20,000 from Richard A.
Hunsicker (who was then a director of the Company), and in May 1994, the Company
borrowed an additional $15,000 from Mr. Hilliard.  These loans bear simple
interest at 15% per annum and matured in November 1994.  Of such amounts,
through March 10, 1999, $20,000 had been paid through the issuance of shares of
common stock of the Company to Mr. Hunsicker, and the $15,000 owed to Mr.
Hilliard is now payable in cash or, at Mr. Hilliard's option, in shares of
common stock valued at the market price thereof at the time of such payment
election.  At the time such loans were borrowed, the Company was not able to
obtain financing from any other persons at a lower interest rate.

       The proceeds of the foregoing 1994 loans were used for the construction
of the Complex and for working capital.  Other than the loans from Messrs.
Gordon and Klee and the advance from Heroes (which were classified with the
Company's other pre-petition liabilities, and were paid ratably through the
Company's payment of the Creditors' Note), all of the foregoing loans have been
classified separately from the Company's other unsecured pre-petition
liabilities within the framework of the Plan, and the remaining $89,081 balance
thereof as of March 10, 

                                      31
<PAGE>
 
1999 may be repaid in cash or in shares of common stock valued at their market
price as of the time election is made to receive payment in such form.

         As of December 31, 1997, in addition to the aforedescribed $180,000
loan, the Company was indebted to Heroes in respect of other pre-petition
liabilities subject to compromise (consisting primarily of the unremitted
portion of proceeds from season ticket subscriptions collected by the Company on
behalf of Heroes) of $81,606. This amount has been repaid ratably with the
Company's other pre-petition liabilities.

         In April 1997, the Company received a $40,000 loan from Heroes. In
December 1997, Heroes applied $10,000 of the principal of this loan to exercise
20,000 Class D Warrants of the Company, and in March 1998, Heroes applied the
remaining $30,000 principal balance of this loan to exercise 60,000 Class D
Warrants of the Company.

         Since 1993, the Company has leased retail space to Robert N. Adams, who
was elected to the Company's Board of Directors in April 1999 (subject to
completion of a required background check under New Jersey alcoholic beverage
control regulations). The lease was originally entered into at a time when Mr.
Adams was not a director of the Company, and the Company considers the lease,
which is currently on a month-to-month basis, to be on arms'-length terms. See
"Item 2 - Description of Property - Other Leases."

Conflicts of Interest

         Prior to their resignation from the Board in February 1999, two
directors of the Company, Barry J. Gordon and Marc H. Klee, were also executive
officers and equity owners in the limited partnership that owns the Team. In
light of the potential conflicts of interest, the Company adopted policies
whereby all matters relating to the relationship between the Company and the
Team were determined by directors other than Messrs. Gordon and Klee.

         Similarly, the Company has adopted a policy whereby all matters
relating to the lease between the Company and Robert N. Adams are determined by
directors other than Mr. Adams.



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

Number   Description of Exhibit
------   ----------------------

3.1      Amended and Restated Certificate of Incorporation of the Company.  (5)

3.2      Certificate of Amendment of Certificate of Incorporation of the
         Company, regarding a 1-for-1.4 reverse stock split effected in August
         1993. (5)

3.3      Certificate of Amendment of Certificate of Incorporation of the
         Company, regarding an increase in the Company's authorized capital in
         January 1994. (5)

3.4      Certificate of Amendment of Certificate of Incorporation of the
         Company, regarding a 1-for-10 reverse stock split effected in November
         1996. (5)

                                      32
<PAGE>
 
3.5      Certificate of Amendment of Certificate of Incorporation of the
         Company, regarding the name change to "Millennium Sports Management,
         Inc." (5)

3.6      Second Amended By-Laws of the Company.  (5)

3.7      Certificate of Amendment of Certificate of Incorporation of the
         Company, regarding a 1-for-10 reverse stock split effected in January
         1999.

4.1      Specimen Common Stock Certificate. (4)

4.2      Form of Warrant Agreement between the Company and Continental Stock
         Transfer & Trust Company ("Continental"), including form of Class A
         Warrant therein. (1)

4.3      Notification letter to Class A Warrantholders regarding the extension
         of the expiration date of the Class A Warrants, the adjustments arising
         by reason of the issuance of Class D Warrants, and a further voluntary
         reduction of the exercise price under the Class A Warrants. (4)

4.4      Notification letter to Class A Warrant holders regarding the further
         extension of the expiration date of the Class A Warrants.(6)

4.5      Form of Warrant Agreement between the Company and Continental,
         including form of Class D Warrant therein. (5)

10.1     Stock Option Plan.  (5)

10.2     $125,000 Loan Agreement between the Company and Barry Gordon.  (5)

10.3     $125,000 Loan Agreement between the Company and Marc Klee.  (5)

10.4     $100,000 Promissory Note from the Company to Robert A. Hilliard.  (5)

10.5     $140,000 Promissory Note from the Company to Bruce Starr.  (5)

10.6     $6,000 Promissory Note from the Company to John C. Ertmann.  (5)

10.7     Amended Employment Agreement between the Company and Robert H. Stoffel,
         Jr. (5)

10.8     First Amended Plan of Reorganization of the Company.  (2)

10.9     Creditors' Note, issued pursuant to the First Amended Plan of
         Reorganization. (3)

10.10    Employment Agreement dated October 28, 1996 between the Company and
         Barry M. Levine. (5)


                                      33
<PAGE>
 
10.11    Amendment to Employment Agreement between the Company and Robert A.
         Hilliard. (5)

10.12    1996 Stock Award Plan.  (5)

10.13    Amendment No. 1 to 1996 Stock Award Plan.  (7)

10.14    Stadium Lease Agreement between the Company and Ladies League Baseball.
         (8)

10.15    Amendment to Stadium Lease Agreement between the Company and Ladies
         League Baseball. (8)
         
10.16    Stadium Lease Agreement between the Company and Newark Bears, Inc.
         
11.      Computation re:  Per Share Earnings.

27.      Financial Data Schedules.


(1)      Incorporated by reference, filed as an exhibit to Amendment No. 2 to
         the Company's Registration Statement on Form SB-2 filed on August 12,
         1993.

(2)      Incorporated by reference, filed as an exhibit to the Company's report
         on Form 10-KSB filed on April 28, 1995.

(3)      Incorporated by reference, filed as an exhibit to Post-Effective
         Amendment No. 1 to the Company's Registration Statement (SEC File No.
         33-79930) filed on July 14, 1995.

(4)      Incorporated by reference, filed as an exhibit to Amendment No. 1 to
         the Company's Registration Statement on Form SB-2, filed on December
         16, 1996, SEC File No. 333-90.

(5)      Incorporated by reference, filed as an exhibit to the Company's report
         on Form 10-KSB filed on March 31, 1998.

(6)      Incorporated by reference, filed as an exhibit to the Company's report
         on Form 8-K filed on April 29, 1988.
         
(7)      Incorporated by reference, filed as an Exhibit to Post-Effective
         Amendment No. 2 to the Company's Registration Statement (SEC File No.
         333-90), filed on April 30, 1998.

(8)      Incorporated by reference, filed as an Exhibit to Post-Effective
         Amendment No. 3 to the Company's Registration Statement (SEC File No.
         333-90), filed on August 27, 1998.

Reports on Form 8-K

         The  Company  did not file any  reports  on Form 8-K  during the fourth
quarter of 1998.


                                      34
<PAGE>
 
                                   SIGNATURES


         In  accordance  with  Section  13 or 15(d)  of the  Exchange  Act,  the
registrant has caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                               MILLENNIUM SPORTS MANAGEMENT, INC.



                               By:  /s/ Barry M. Levine
                                    -------------------------------------
                                    President and Chief Executive Officer

         In accordance  with the Exchange Act, this report has been signed below
by the following  persons on behalf of the  registrant and in the capacities and
on the dates indicated.

<TABLE> 
<CAPTION> 
SIGNATURE                                TITLE                                                    DATE
<S>                                    <C>                                                      <C> 
/s/ Barry M. Levine                      President, Chief Executive Officer                       April 13, 1999
--------------------------               and Director
Barry M. Levine                          

/s/ Robert H. Stoffel, Jr.               Vice President, Principal Financial                      April 13, 1999
--------------------------               Officer, Principal Accounting Officer and 
Robert H. Stoffel, Jr.                   Director

/s/ Robert N. Adams                      Director                                                 April 13, 1999
--------------------------
Robert N. Adams                          

</TABLE> 


                                      35