SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

(Mark One)

[X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act
of 1934 [Fee Required]
For the fiscal year ended December 31, 1997 or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 [No Fee Required]

For the transition period from _______________ to ________________

Commission File No. 001-13217


                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                  --------------------------------------------
                 (Name of Small Business Issuer in its Charter)


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


20 North Orange Avenue, Suite 101
Orlando, Florida                                                  32801
---------------------------------------                        ----------
(Address of principal executive offices)                       (Zip Code)



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

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

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


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



<PAGE>



Check  whether  the  Registrant  (1) filed all  reports  required to be filed by
Section 13 or 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter  period that the  Registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past
90 days.
                                 Yes  X     No
                                    -----     -----

     As of February 28, 1998,  2,480,000 shares of the Registrant's no par value
Class A Common Stock were outstanding. As of March 27, 1998, the market value of
the  Registrant's  no par value Class A Common Stock,  excluding  shares held by
affiliates,  was $4,400,000 based upon a closing bid price of $4.00 per share of
Class A Common Stock on the NASDAQ SmallCap Market.

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

     The Registrant's revenues for its most recent fiscal year were $2,697,894.

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



                                        2

<PAGE>



                                     PART I

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

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

Introduction

     The Orlando  Predators  Entertainment,  Inc. (the  "Company") was formed in
March 1997 to acquire, own and operate the Orlando Predators (the "Predators" or
the "team"),  a professional  Arena  Football team of the Arena Football  League
(the  "AFL" or the  "League").  The AFL is a  nonprofit  membership  corporation
organized to govern the Arena  Football  teams which  comprise the League and to
sell team memberships ("Memberships") in major United States markets.

     The  Company  derives  substantially  all of its  revenue  from  the  Arena
Football  operations of the Predators.  This revenue is primarily generated from
(i)  the  sale of  tickets  to the  Predators'  home  games,  (ii)  the  sale of
advertising  and  promotions to Predator  sponsors,  (iii) the sale of local and
regional  broadcast  rights to Predators'  games,  (iv) the Predators'  share of
contracts  with national  broadcast  organizations  and expansion team fees paid
through the AFL, and (v) the sale of merchandise carrying the Predators' logos.

     In December  1997 the Company sold 550,000  Units of its  securities at $10
per  Unit in a  public  offering  (the  "IPO")  underwritten  by  First  Midwest
Securities,  Inc. and Berry-Shino  Securities,  Inc. (The "Underwriters").  Each
Unit  consisted of two shares of Class A Common Stock  ("Class A Common  Stock")
and one Class A  Redeemable  Common Stock  Purchase  Warrant  ("Warrants").  The
Company also issued to the Underwriters Unit Warrants (the  "Underwriters'  Unit
Warrants")  to  purchase  55,000  Units at $12.00 per Unit.  Gross  proceeds  of
$5,500,000 were realized by the Company through the IPO.

Arena Football and the Arena Football League

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

                                        3

<PAGE>


     In March 1987 the U.S.  Patent  Office issued a U.S.  Patent  ("Patent") to
Gridiron  Enterprises,  Inc. an Illinois corporation  ("Gridiron") for the Arena
Football  Game System and rules of play as well as  trademarks  for the logo and
names associated with Arena Football. In December 1991, the AFL was incorporated
as a non-profit membership  corporation in the state of Delaware.  Also in 1991,
Gridiron entered into an exclusive licensing agreement with the AFL to organize,
operate and market Arena  Football  throughout the United States by selling team
memberships  in major markets  across the United  States.  In March 1998 the AFL
entered  into an  agreement  to purchase  the patent and all rights to the Arena
Football  Game System from  Gridiron for  $4,000,000.  Pursuant to the licensing
agreement, the AFL granted to Gridiron a per team royalty of $20,000 per year in
return for using the game system and rules of play of Arena Football. In January
1991, the AFL sold a Membership to the Predators  which allowed the Predators to
operate and market Arena Football within a seventy-five  mile radius of Orlando,
Florida.  All  names  and  logos  of the  Orlando  Predators  are  owned  by and
registered to Gridiron.

     Four teams were fielded for the League's  inaugural  1987 season.  By 1991,
the League had eight teams and had played  exhibition games in London and Paris.
In 1992 and 1993, the League fielded 12 teams and 10 teams,  respectively,  with
some games  televised on the ESPN cable  network.  During the 1997  season,  the
League  consisted of 14 teams including  expansion teams in New York, New Jersey
and Nashville.  In the 1998 season,  Anaheim was replaced by a Grand Rapids team
and in the 1999 season a Buffalo team will commence play.

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

     Game attendance has risen  consistently  over the AFL's ten seasons of play
with over 1,050,000 in total fan attendance  announced for the 1997 season.  Per
game announced attendance averaged  approximately 10,800 during the 1997 season.
"Announced"  game attendance  represents  attendance  figures provided by League
teams  to the  League  and the  media  and  cannot  be  independently  verified.
Approximately  66% of AFL  viewers  are male and 34% are female with 60% of such
viewers  under the age of 35 and 40% over the age of 35. In terms of  education,
39% have college or graduate degrees,  37% have some college  attendance and 24%
hold high school diplomas.

     The  membership  fee for new teams  joining the AFL has grown from $120,000
for the 1990 season to  $2,200,000  for the 1997  season  with a current  League
asking  price  of  $7,000,000   effective   for  the  1999  season.   There  are
approximately 27 million households with AFL teams in their metropolitan  areas,
up from 11 million  households in 1994. During the 1997 season,  ESPN and ESPN 2
cable networks  broadcasted a total of 19 games including four playoff games and
the Arena Bowl.


                                        4

<PAGE>



     AFL team  salaries  for the 1997 season  ranged from  $300,000 to $500,000.
Players'  salaries  range from  $15,000 to $50,000  per season  together  with a
housing provision which averages  approximately  $400 per month per player.  AFL
players sign  one-year  contracts  with an  additional  one-year  option  season
granted  to the team.  Following  the  contract  year,  if the team and a player
cannot agree on the option  season  salary,  the player must either play for the
original  option year salary or stay out during the option  season,  after which
the player is free to negotiate with any team in the League. There are no player
drafts,  although  expansion  teams are  allowed  to draw from a pool of players
designated by existing AFL teams.

     Each player is provided a $500,000  occupational  health,  accidental death
and disability  insurance policy. Each team is required to pay the first $35,000
of claims for an injured  player up to an  aggregate  of $356,000  for the three
Florida based AFL teams.

Rules of Arena Football

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

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

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

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

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

                                        5

<PAGE>



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

AFL Teams

     For the 1998  season,  the AFL will  consist  of the  following  14  teams,
aligned into two conferences, with two divisions in each conference:

                               American Conference

     Western Division                                     Central Division
     ----------------                                     ----------------
     Anaheim Piranhas                                     Iowa Barnstormers
     Arizona Rattlers                                     Milwaukee Mustangs
     Portland Forest Dragons                              Texas Terror
     San Jose SaberCats
                               National Conference

     Eastern Division                                      Southern Division
     ----------------                                      -----------------
     Albany Firebirds                                      Florida Bobcats
     Grand Rapids Rampage                                  Nashville Kats
     New Jersey Red Dogs                                   Orlando Predators
     New York CityHawks                                    Tampa Bay Storm

Regular Season and Playoffs

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

Gate Receipts, AFL Assessments and Distributions

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


                                        6

<PAGE>



generally  funded by its share of revenue  derived  from the  League's  national
television  contracts,  from  the  sale of AFL  licensed  merchandise  and  from
revenues  generated by the  League's  sale of expansion  team  franchises.  Each
visiting team participating in the playoffs is reimbursed for hotel expenses and
receives a fixed payment of $47,500 for the first playoff round, $58,000 for the
second playoff round and $75,000 for the Arena Bowl.

AFL Licensing

     The AFL operates a League licensing  program on behalf of its teams.  Under
the program,  product  manufacturers  sign  agreements  allowing them to use the
names and logos of all AFL  teams,  the AFL  itself  and  AFL's  special  events
(including  playoffs and the Arena Bowl) in exchange  for royalty and  guarantee
payments. For the years ended December 31, 1997 and 1996, the Company's share of
net revenues from licensing was  negligible and was credited  against the team's
AFL assessment for each such period. The Company's share of net revenue from the
League  (the "Team  Share")  was equal to 1/16 of the AFL's net  revenue for the
1997  season.  The Team Share is equal to the AFL's net  revenue  divided by the
total number of League teams (15 including Buffalo,  which will begin playing in
1999) and one Gridiron Team Share.  League  assessments  are also based upon the
Team Share. Each team is also permitted to license its club identified  products
locally  for sale at its arena,  at team owned and  operated  stores and through
team catalogs.

League Governance

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

     The  AFL is  governed  by a  Board  of  Directors,  which  consists  of one
representative   from  each  team.  Mr.  Youngblood  serves  as  the  Predator's
representative on the AFL Board of Directors. The Board of Directors selects the
AFL  Commissioner,  who  administers  the  daily  affairs  of the AFL  including
interpretation of playing rules and arbitration of conflicts among member teams.
The  Commissioner  also has the power to impose  sanctions,  including fines and
suspensions,   for  violations  of  League  rules.  David  Baker  has  been  the
Commissioner of the AFL since 1996.

Restrictions on Ownership

     The AFL Charter and Bylaws contain  provisions  which may prohibit a person
from  acquiring  the Common Stock and affect the value of the Common  Stock.  In
general, any acquisition of shares of Common Stock which will result in a person
or a group of persons  holding 5% or more of the  Company's  outstanding  Common
Stock  will  require  the prior  approval  of the AFL,  which may be  granted or
withheld in the sole discretion of the AFL. The  prospective  purchaser would be


                                        7

<PAGE>



required to submit an AFL application,  in form prescribed by the AFL, providing
certain information relating to that person's  background.  Upon receipt of such
application,  the  AFL  has  the  right  to  conduct  an  investigation  of  the
prospective purchaser.  In addition, the AFL may condition its approval upon the
execution,  delivery  and  performance  by the  prospective  purchaser  of  such
documents as the Charter or Bylaws shall prescribe.  If a prospective  purchaser
obtains the AFL's consent to acquire a 5% or more interest in the Company,  such
prospective purchaser will be required to acknowledge that the purchaser will be
bound by the applicable provisions of the AFL Charter and Bylaws.

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

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

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

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

Current Operations of the Company

     The  Company  derives  substantially  all of its  revenue  from  the  Arena
Football  operations of the Predators.  This revenue is primarily generated from
(i)  the  sale of  tickets  to the  Predators'  home  games,  (ii)  the  sale of
advertising  and  promotions to Predator  sponsors,  (iii) the sale of local and
regional  broadcast  rights to Predators'  games,  (iv) the Predators'  share of


                                        8

<PAGE>



contracts with national  broadcast  organizations  obtained through the AFL, and
(v) the sale of  merchandise  carrying the  Predators'  logos.  The  information
contained  hereunder and elsewhere in the Prospectus  includes the operations of
the Predators  when the team was owned by the Orlando  Predators,  Ltd.  through
March 1997. In March 1997 the Company was formed to acquire, own and operate the
team.

     In March 1998, the Company  entered into an agreement with the AFL pursuant
to which it agreed to purchase  two Team Shares  (which  would  represent a 2/19
interest  in the  League's  revenue)  for  $6,000,000.  Under  the  terms of the
agreement,  the Company will receive the greater of $480,000 per year or 2/19 of
the  League's  gross  revenue  until  the  Company   receives  an  aggregate  of
$6,000,000.  If the entire $6,000,000 is paid within 12 months,  one of the Team
Shares  will be canceled  and the Company  will  thereupon  receive  1/18 of the
League's gross revenues, without a minimum guarantee.

     Ticket Sales.  The  Predators  played seven home games and seven away games
during  the  1997  AFL  regular  season  together  with  one  home  and one away
pre-season  exhibition  games.  Under the AFL Bylaws,  the Company  receives all
revenue from the sale of tickets to regular season and pre-season home games and
no revenue from the sale of tickets to regular season and pre-season away games.

     The  Predators  play  all home  games at the  Orlando  Arena,  which  holds
approximately  16,000 spectators.  During the last two seasons, the Company sold
an  average of  approximately  6,800  season  tickets  and had an  average  paid
attendance of  approximately  9,500 per game.  Ticket prices for regular  season
home games  during the 1997 season at the Orlando  Arena ranged from $10 to $100
per game with an average paid ticket price of approximately $24.

     The  following  table  sets  forth  certain  information  relating  to  the
Predators'  regular season revenue generated by the sale of tickets for the 1996
and 1997 seasons:

<TABLE>
<CAPTION>


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

<S>               <C>                   <C>                <C>                 <C>
 1997             5,401                 8,523              $24.32              $207,233

 1996             8,245                10,415              $22.46              $233,880


</TABLE>

     The Company believes that the attendance drop of approximately  18% in 1997
was a result of (i) the increased  price of tickets sold in 1997 and (ii) a late
start in promoting season ticket sales as a result of the Company's  acquisition
of the Predators in 1997.


                                        9

<PAGE>



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

     Local and Regional Television,  Cable and Radio Broadcasts. The Company had
a two-year television contract with the Sunshine Network  ("Sunshine") and a one
year radio contract with Paxson  Communications,  Inc.  (WQTM radio)  ("Paxson")
both of which  expired  in the 1997  season.  The  contracts  granted  rights to
broadcast  Predator games on  television,  cable and radio pursuant to which the
Company  received  approximately  $89,000  and  $87,000  for the  1996  and 1997
seasons,  respectively.  The Company has entered into a new three-year  contract
with Sunshine for the 1998, 1999 and 2000 seasons  pursuant to which the Company
will receive  approximately  $70,000 per season. The Company also entered into a
new one-year  contract with Clear Channel,  Inc.  (formerly  Paxon)  pursuant to
which the Company will receive approximately $20,000 in 1998, most of which will
be paid in commercial radio time.

     National  Television.  For the 1997 season, the AFL granted ESPN and ESPN 2
exclusive commercial  over-the-air  television rights to broadcast a total of 14
AFL regular  season  games,  four playoff  games and the Arena Bowl,  within the
United  States.  The  Company  did not  receive  revenue  for  these  television
broadcast rights in 1996 or 1997 as all such revenue was offset by AFL operating
expenses  assessed  against the League's  teams.  The AFL's  national  broadcast
agreement  with  ESPN  and ESPN 2  expired  at the end of the  1997  season.  In
February, the AFL reached a new two year national broadcast agreement with ESPN,
ESPN 2 and ABC  pursuant to which the  networks  will  televise 20 AFL games,  a
majority of which will be live rather than tape delayed  (including  10 games in
prime time), four playoff games and ABC's telecast of the Arena Bowl.

     Sale of Merchandise. The Company generates additional revenue from the sale
of merchandise  carrying the Predator logos (primarily athletic clothing such as
sweatshirts,  T-shirts,  jackets  and  caps)  at the  Orlando  Arena  and at the
Company's  corporate offices in downtown Orlando.  Revenue from the sale of such
merchandise was approximately $60,000 for the 1997 season.






                                       10

<PAGE>



Summary of League Revenue and Expenses

     The following  table  summarizes the Company's share of the revenue derived
from the AFL as well as AFL  assessments  incurred  during the last two  regular
seasons:

                                                               SEASON
                                                    ---------------------------
                                                      1997               1996
                                                      ----               ----

Revenue:
Expansion team franchise fees ..............        $ 181,250         $  17,783
                                                    ---------         ---------

         Total revenue .....................          181,250            17,783
                                                    ---------         ---------

Assessments:
Operating assessment .......................          125,000            25,000
Other costs ................................           99,622            26,379
                                                    ---------         ---------

         Total assessments .................        $ (43,372)        $(133,596)


Strategy

     The  Company's  strategy  is to  increase  revenue  by (i)  increasing  fan
attendance at Predators' home games,  (ii) expanding the Predators'  advertising
and sponsorship  base, and (iii)  contracting with additional local and regional
broadcasters to broadcast Predators' games.

     The Company  believes that fan attendance will increase based upon the game
winning  success (if any) of the  Predators in the AFL and by  increasing  media
exposure of the team in the central  Florida area. In order to recruit  players,
the Company  employs a recruiting  team which  includes the Company's head coach
and Director of Player Personnel.  In order to generate increased media interest
in the team in central Florida,  the Company employs a marketing  representative
who  calls  upon  the  media,  corporate  sponsors  and  other  central  Florida
organizations  in an  attempt  to  increase  team  sponsorship.  This  marketing
representative  also calls directly upon central  Florida  businesses to solicit
advertising  and  sponsorship  funds  on  behalf  of  the  team.  The  Predators
participate  in a number of  charitable  events  during  the year as a part of a
community relations and recognition program and maintain an Internet web site at
www.orlando.digitalcity.com.  The  Company  also  employs  five to 10  part-time
telemarketing  personnel  prior to  commencement  of the AFL season to assist in
ticket sales.

     In a  broader  sense,  the  Company's  strategy  includes  maintaining  and
building  community  support  for,  and  recognition  of, the team as an ongoing
valuable entertainment  institution in central Florida and throughout the state.
The  Company  believes  that the value of the  Predators  as a sports  team will
increase if community  support and recognition  are maintained.  In this regard,
the  Predators  completed  their seventh AFL season and have played in the Arena
Bowl for the AFL championship in three of the prior eleven  championship  games.
The Predators hold the fifth best all-time  win-loss record among 27 current and
former  AFL  teams and  recorded  the  highest  announced  average  AFL per game
attendance for the 1995 and 1996 seasons.

                                       11

<PAGE>




Performance

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


          Season Record   Finish in Division    Playoff Results
          -------------   ------------------    ---------------

  1995          7-5            2nd              Lost in Arena Bowl

  1996          9-5            2nd              Lost in first playoff game

  1997         10-4            1st              Lost in second playoff game


Team Management

     President.  Jack Youngblood,  a 14-year veteran of the NFL, is President of
the  Predators and was  appointed  the  Company's  President in April 1997.  Mr.
Youngblood  directs and  oversees  all aspects of the  Predators'  organization,
including operations, administration, marketing, sponsorship, television, radio,
public relations and ticket sales. Prior to joining the team, from 1993 to 1995,
he was a radio talk show host in the Sacramento  metropolitan  area.  During the
1991 and 1992 AFL  seasons,  he was  director of  marketing  operations  for the
Sacramento Surge ("Surge") of the World League of American  Football and he also
handled color  commentary on Surge radio and television  broadcasts.  His duties
with  Surge  included   directing  front  office   operations  in  the  area  of
sponsorships, ticket sales, corporate sales, advertising and marketing services.
From 1985 to 1991, Mr.  Youngblood was employed by the Los Angeles Rams ("Rams")
of the NFL. He also worked as a color analyst on Rams broadcasts, while handling
player relations, public relations,  community relations and marketing services.
Mr.  Youngblood is considered  one of the best  defensive ends of his era having
played  professional  football  with the Rams from 1971 to 1984.  A first  round
draft pick in 1971,  he played in all 14 games of his rookie  season and by 1973
was a full-time  starter for the Rams. Mr.  Youngblood set a Rams team record by
playing  in 201  consecutive  games and his 151 1/2  sacks  rank as third on the
all-time NFL list behind Deacon Jones and Reggie White. He earned all-NFC honors
six  times,  played in seven Pro  Bowls and was named to the  Sporting  News NFC
all-star team six times.  He was twice the NFC's  defensive  player of the year.
Mr. Youngblood was an all-American defensive end for the University of Florida.

     Coaches.  Jay Gruden, age 30, was retained by the Company as the Predators'
head coach in August  1997.  Coach Gruden  replaced  Perry Moss who had been the
team's head coach for the previous seven seasons. Coach Gruden quarterbacked the
Tampa Bay Storm for six seasons from 1991 to 1996. During his tenure, he set AFL
records for career pass completions (1,182),  passing yards (15,514) and passing
touchdowns  (280).  He led Tampa Bay to Arena  Bowl  championships  four  times,
including  back-to-back titles in 1995 and 1996. A two-time All-Arena selection,
Coach Gruden also was the League's Most Valuable Player in 1992.

                                       12

<PAGE>


     Coach Gruden was hired in 1996 to become  offensive  coordinator of the AFL
expansion  Nashville  Kats.  Nashville won an expansion team record 10 games and
qualified  for the AFL  playoffs.  Coach  Gruden was  credited  with  developing
Nashville's quarterback,  Andy Kelly, into one of the League's top quarterbacks.
Kelly finished the season with an  AFL-leading  82 touchdown  passes and was the
League's  fifth rated  quarterback.  Under Coach Gruden,  the Nashville  offense
finished  third in the AFL in scoring at 52.9  points per game and was fourth in
total  offense  at 285.2  yards  per  game.  Coach  Gruden's  offenses  produced
victories in the 1997 season over eventual league champion Arizona (56-49),  two
wins over the Predators  (45-36 in Orlando and 74-55 at Nashville) and wins over
two other playoff teams.

     A Tampa  native,  Coach Gruden began his  professional  career with the NFL
Arizona  Cardinals in 1989. He moved to the World League of American Football in
1990, where he played for the Sacramento Surge and the Barcelona Dragons, before
signing with the Tampa Bay in 1991.

     In his final season as  quarterback  for Tampa Bay in 1996, he completed 70
touchdown  passes,  while setting career highs for attempts  (447),  completions
(275)  and  yards  (3,626).   In  six  post-season   campaigns  as  Tampa  Bay's
quarterback,  Coach Gruden delivered four championship  titles and led Tampa Bay
to an overall record of 12-2. He completed 253 of 425 post-season  passes (60%),
for 4,410 yards and 52  touchdowns.  Coach  Gruden was Arena Bowl Most  Valuable
Player in 1993.  As Tampa Bay's  quarterback,  he compiled an overall  record of
68-17 (.800) - the best six-year winning percentage in AFL history.

     At the  University of Louisville  under Head Coach Howard  Schnellenberger,
Coach Gruden set school  passing  marks in a number of  categories  and won Most
Valuable  Player honors in both 1987 and 1988.  Following his senior season,  he
accepted  invitations  to both  the  East-West  Shrine  Game  and the  Blue-Gray
all-star games.

     Coach  Gruden's  staff  includes  five other  assistant  coaches  including
offensive  and  defensive  coaches,  a  director  of  player  personnel  and  an
administrative coach.




                                       13

<PAGE>
<TABLE>
<CAPTION>



Players

     In  general,  the rules of the AFL permit  each team to  maintain an active
roster of 24 players during the regular  season.  The following table sets forth
certain information concerning the Predators' roster for the 1998 season.


No            Name                        Position(1)       Ht.      Wt.     Birthdate        Years
--            ----                        -----------       ---      ---     ---------        in AFL
                                                                                              ------

<S>           <C>                           <C>             <C>      <C>     <C>             <C>
  1           David Pool                    WR/DB           5-9      182     12/20/66        Rookie
  2           Jeff Parker                   WR/DB           5-10     183     07/26/69        4th Season
  4           John Clark*                   FB/LB           6-3      250     08/16/68        4th Season
  5           Chris Barber                  DS              6-1      190     01/15/64        6th Season
  9           Scott Semptimphelter          QB              6-1      215     05/15/72        Rookie
  12          Franco Grilla                 Kicker          5-11     180     07/21/70        2nd Season
  17          Pat O'Hara                    QB              6-4      212     09/27/68        3rd Season
  21          Bruce LaSane                  WR/LB           6-4      225     08/30/66        6th Season
  **          Marcus Harris                 WR/LB           6-3      215     10/11/74        Rookie
  23          Corris Ervin                  DS              5-11     185     08/30/66        2nd Season
  28          Curtis Cotton                 DS              6-1      210     10/15/69        Rookie
  **          Kevin Gaines                  DS              6-1      190     08/07/71        Rookie
  **          Damon Mason                   DS              5-9      175     03/21/74        Rookie
  **          Kirk Pointer                  DS              5-11     178     02/13/74        Rookie
  **          Rick Hamilton                 FB/LB           6-2      241     04/19/70        Rookie
  34          Jerry Odom                    FB/LB           5-10     220     11/07/68        6th Season
  44          Paul McGowan                  FB/LB           6-0      220     01/13/66        5th Season
  **          Fred Coger                    FB/LB           6-3      247     02/09/70        2nd Season
  **          Jeff Cothran                  FB/LB           6-1      249     06/28/71        Rookie
  65          Eric Drakes                   OL/DL           6-5      265     01/24/69        6th Season
  69          Ray Forsythe                  OL/DL           6-3      310     02/13/72        Rookie
  78          Webbie Burnett                OL/DL           6-3      285     11/07/67        6th Season
  **          Sam Hernandez                 OL/DL           6-3      250     11/18/68        6th Season
  **          Reggie Lee                    OL/DL           6-2      280     12/21/67        Rookie
  **          Howard Smothers               OL/DL           6-3      280     11/16/73        Rookie
  80          Maclin "Mac" Cody             OS              5-7      170     08/07/72        Rookie
  15          Ty Law                        OS              6-1      180     11/27/71        3rd Season
  **          Dedric Smith                  OS              5-8      159     09/16/71        Rookie
  82          Barry Wagner                  WR/DB           6-3      215     11/24/67        6th Season


                                                   14

<PAGE>




  **          Kevin Knox                    WR/DB           6-2      199     01/30/71        Rookie
  87          Victor Hall                   OL/DL           6-2      265     12/04/68        4th Season
  93          Kelvin Ingram                 OL/DL           6-2      285     10/25/70        Rookie
  96          Skip McClendon                OL/DL           6-7      300     04/19/64        3rd Season
  98          Jeff Faulkner                 OL/DL           6-4      300     04/04/64        2nd Season

-----------

*    Injured Reserve

**   Number not yet assigned

(1)  WR-Wide Receiver; DB-Defensive Back; FB-Fullback; LB-Lineback; DS-Defensive
     Specialist;  OS-Offensive  Specialist;  QB-Quarterback;  OL-Offensive Line;
     DL-Defensive Line


</TABLE>

     Player  salaries  range from $15,000 to $50,000 per season  together with a
housing provision which averages  approximately  $400 per month per player.  AFL
players sign  one-year  contracts  with an  additional  one-year  option  season
granted to the team.  Following  the contract  year, if a team and player cannot
agree on the option season salary,  the player must either play for the original
option year salary or stay out during the option season,  after which he is free
to negotiate with any team in the League.  There are no player drafts,  although
expansion  teams are allowed to draw from a pool of players  designated  by each
AFL team.

Orlando Arena

     The Predators  play in the Orlando Arena,  which has a seating  capacity of
approximately  16,000.  Under the terms of the Predators'  previous lease, which
expired at the end of the 1997 season, the Predators paid a rental which was the
higher of $7,500 per game or 8.5% of ticket sales for such game, up to a maximum
of $15,000 per game. The team did not share in any other arena revenue,  such as
parking fees or  concession  sales.  The Company has  negotiated a new five-year
lease (with an additional five-year option) with the Orlando Arena commencing in
the 1998 season at  approximately  the same rental per game,  but which provides
the Company with an approximately  20% share of revenue  generated from food and
beverage  concessions  in exchange  for the Company  reducing  ticket  prices by
approximately  10% to 20%  depending  on seat  location.  The Company  will also
receive a rebate  against  rent of $3 per  person (up to  $10,000)  for games in
which  attendance  exceeds 9,000  persons.  The loss of use of the Orlando Arena
would substantially and adversely affect the operations of the Predators and the
Company.

Competition

     The Predators compete for sports entertainment  dollars not only with other
professional   sports   teams  but  also  with  college   athletics   and  other
sports-related  entertainment.  During  parts of the AFL season,  the  Predators
compete in the city of Orlando with professional  basketball and in the state of

                                       15

<PAGE>



Florida with professional  hockey and professional  baseball.  In addition,  the
colleges  and  universities  in central  Florida,  as well as public and private
secondary schools, offer a full schedule of athletic events throughout the year.
The Predators also compete for attendance  and  advertising  revenue with a wide
range of other  entertainment and recreational  activities  available in central
Florida.  On a broader  scale,  AFL teams compete with football teams fielded by
high schools and colleges,  the NFL, the Canadian  Football League and the World
Football League.

Employees

     In addition to its 24 active  players,  the Company  employs eight football
personnel,  nine non-football  personnel and five to 10 part-time  telemarketing
personnel. During the AFL season, the Company also uses part-time employees from
time to time.  None of the  Company's  employees,  including  its  players,  are
covered by collective bargaining agreements. The Company considers its relations
with its employees to be good.


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


     The  Company  leases  its  executive  offices  from  First  Union Bank on a
month-to-month  basis. The rental rate, valued at $4,167 per month, is satisfied
through a trade-out with First Union Bank for Predator  season tickets and other
advertising considerations.

     Under the terms of the  Predators'  previous  Orlando  Arena  lease,  which
expired during the 1997 season, the Predators paid a rental which was the higher
of $7,500  per game or 8.5% of ticket  sales for such  game,  up to a maximum of
$15,000  per game.  The team did not share in any other  arena  revenue  such as
parking fees or  concession  sales.  The Company has  negotiated a new five year
lease (with an additional five-year option) with the Orlando Arena commencing in
the 1998 season at approximately the same per game rental but which provides the
Company  with an  approximately  20% share of  revenue  generated  from food and
beverage  concessions  in exchange  for the Company  reducing  ticket  prices by
approximately  10% to 20%  depending  on seat  location.  The Company  will also
receive a rebate  against  rent of $3 per  person (up to  $10,000)  for games in
which  attendance  exceeds 9,000  persons.  The loss of use of the Orlando Arena
would substantially and adversely affect the operations of the Predators and the
Company.

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

     Not applicable.

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

     Not applicable.


                                       16

<PAGE>




                                     PART II

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

     The Company's Class A Common Stock commenced trading on the NASDAQ SmallCap
Market under the symbol "PRED" on December 11, 1997.  The  following  table sets
forth for the quarters indicated the range of high and low closing prices of the
Company's Class A Common Stock as reported by NASDAQ but does not include retail
markup, markdown or commissions.

                                                                Price
                                                       -----------------------
By Quarter Ended:                                      High               Low

March 31, 1998 (through March 27, 1998)...............$4.25              $2.94
December 31, 1997    .................................$4.25              $3.12

     As of March  27,  1998,  the  Company  had  approximately  350  record  and
beneficial stockholders.

Class A and Class B Common Stock

     The Company is authorized to issue 15,000,000 shares of no par value Common
Stock ("Common  Stock"),  of which 2,480,000  shares of Class A Common Stock are
outstanding as of the date of this Report.  In addition,  the Company has issued
1,000  shares  of no par  value  Class B Common  Stock to The  Monolith  Limited
Partnership  (925 shares) and Alan N.  Gagleard (75 shares),  the  Company's two
principal  shareholders.  The Class A Common  Stock and Class B Common Stock are
identical  in all  respects  except  that each share of Class A Common  Stock is
entitled  to one vote and each  share  of Class B Common  Stock is  entitled  to
10,000  votes.  The Class B Common Stock was issued to satisfy  certain  control
requirements  of the AFL. See "Arena  Football-Restrictions  on  Ownership"  and
"Item  12." Upon  issuance,  shares of Common  Stock are not  subject to further
assessment or call. Subject to the prior rights of any series of preferred stock
which may be issued by the  Company in the future,  holders of Common  Stock are
entitled to receive  ratably such dividends that may be declared by the Board of
Directors  out of funds  legally  available  therefor,  and, in the event of the
liquidation,  dissolution  or winding up of the  Company,  are entitled to share
ratably in all assets remaining after payment of liabilities.  Holders of Common
Stock have no preemptive rights or rights to convert their Common Stock into any
other  securities.  The outstanding  Common Stock is, and the Common Stock to be
outstanding upon completion of the Offering will be, validly issued,  fully paid
and  nonassessable.  The  holders of the Class B Common  Stock are  entitled  to
convert  each  share of Class B Common  Stock  into one  share of Class A Common
Stock.




                                       17

<PAGE>



Redeemable Warrants

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

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

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

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

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

     The Warrants are also listed on the NASDAQ SmallCap Market.

Preferred Stock

     The Company is authorized to issue 1,500,000  shares of preferred stock, no
par value (the "Preferred  Stock").  The Preferred Stock may,  without action by
the  stockholders of the Company,  be issued by the Board of Directors from time


                                       18

<PAGE>



to time in one or more  series  for such  consideration  and with such  relative
rights, privileges and preferences as the Board may determine.  Accordingly, the
Board has the power to fix the dividend rate and to establish the provisions, if
any,  relating to voting  rights,  redemption  rate,  sinking fund,  liquidation
preferences  and conversion  rights for any series of Preferred  Stock issued in
the future.

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

Transfer Agent and Warrant Agent

     The Company has appointed Corporate Stock Transfer,  Inc., 370 17th Street,
Suite 2350, Denver, Colorado 80202, as its transfer agent and warrant agent.

Dividends

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

Limitation on Liability

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




                                       19

<PAGE>



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

Introduction

     The Orlando  Predators  Entertainment,  Inc. (the  "Company") was formed in
March 1997 to acquire, own and operate the Orlando Predators (the "Predators" or
the "team"),  a professional  Arena  Football team of the Arena Football  League
(the "AFL" or the  "League").  The AFL is a nonprofit  corporation  organized to
govern the Arena Football teams which comprise the League.

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

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

     Prospective  investors should read the following information in conjunction
with the Company's  audited financial  statements and should carefully  consider
such  information as well as other  information  contained in this Report before
making an investment in the Company's  securities.  Information contained herein
contains  "forward-looking  statements"  which can be  identified  by the use of
forward-looking  terminology such as "believes,"  "expects,"  "may," "should" or
"anticipates" or the negative thereof or other variations  thereon or comparable
terminology,  or by discussions of strategy.  No assurance can be given that the
future results covered by the forward-looking  statements will be achieved. Many
factors (including intense  competition,  possible need for additional  capital,
the Company's  business  concentration,  risks associated with the Orlando Arena
lease,  dependence  on key  personnel,  competitive  success  of the  Predators,
possible  increase  in  players'  salaries,  risk of  players'  injuries,  risks
associated with AFL membership and  uncertainties  regarding game attendance and
broadcast contracts) could also cause actual results to vary materially from the
future results covered in such forward-looking statements.




                                       20

<PAGE>



Results of Operations

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

The Company  recognizes  game revenue and expenses over the course of the season
(April through  August).  Therefore,  revenue and operating  expenses other than
selling,  general and  administrative  expenses of the Company are comparable to
the predecessor  company (Orlando  Predators,  a division of Orlando  Predators,
Ltd.)

     Revenues.  Revenue for the period ended  December  31, 1997 was  $2,697,894
which  represented a decrease of $191,489 or 6.6% as compared to revenue for the
year ended  December 31, 1996 of  $2,889,383.  The decrease for the period ended
December  31, 1997 was  directly  attributable  to a decrease in ticket sales of
$328,462 as well as  sponsorship  and  miscellaneous  revenue of  $171,812.  The
decrease in ticket sales and  sponsorship  revenue  resulted  from a decrease in
season ticket sales efforts prior to the beginning of the 1997 season.  The team
was sold in March  1997 to the  Company,  and the  former  owners did not market
season tickets and  sponsorship  sales as they had done in prior years.  For the
1998 season, the Company began marketing efforts in September 1997. The decrease
in ticket and sponsorship  revenue were offset by increases in League revenue of
$163,467 and playoff revenue of $145,318.

     Operating Expenses.  Operating expenses of $1,906,870 decreased $286,887 or
13.1% as compared to the prior year of  $2,193,757.  The decreases were a result
of decreases in player  related  costs  including  payroll,  medical and housing
costs.  These  decreases  were  offset  by  increased  expenses  related  to  an
additional home playoff game of approximately $159,000.

     Selling  and  Promotional  Expenses.  Selling and  promotional  expenses of
$408,281  decreased  7.9% or $35,124 as compared to the prior year primarily due
to the decreased preseason marketing efforts, but were offset with the increased
advertising  costs  associated  with the one  additional  home  playoff  game as
compared to the prior year.

     League Assessments. League assessments of $224,622 increased $73,243 or 48%
as  compared  to the  prior  year  of  $151,379.  League  assessments  increased
primarily due to costs associated with legal  settlements with former teams. The
AFL is comprised  of a number of teams who share in all the League  expenses and
some  League  revenues.  Assessments  are based upon the team's  share of League
operating expenses and other League expenses such as legal settlements.

     General and Administrative Expenses. General and administrative expenses of
$871,206  increased $245,569 or 39.3% as compared to the prior year of $625,637.
This increase can be attributed to an increase in payroll costs and professional
fees.

     Interest  Expense.  Interest  expense  during the period ended December 31,
1997 was $104,083.  The interest  expense was related to the debt assumed in the
purchase  of  the  Company  and  additional  advances  for  operations  made  by
stockholders of the Company. This debt was paid using proceeds of the IPO.

                                       21

<PAGE>


     Amortization and  Depreciation.  Amortization  and  depreciation  increased
$45,061 as  compared  to the prior year due to the  increase  in the cost of the
assets acquired by the Company in February 1997.

Liquidity and Capital Resources

     Historically,  the Company  financed net operating  losses  primarily  with
loans from the team's former managing general partner.

     Through  December  10,  1997,  the  Company  had  issued  an  aggregate  of
$2,342,970  of promissory  notes  (together  with  interest  thereon) to its two
stockholders all of which were repaid from proceeds of the IPO.

     The  reduction  of  indebtedness  using  proceeds of the IPO  improved  the
Company's  liquidity  by  reducing  indebtedness  required  to be  repaid in the
future.  The Company believes that cash flows from operations along with the net
proceeds  of the IPO will be  sufficient  to satisfy the  Company's  anticipated
working capital requirements for at least the next 12 months.






ITEM 7. FINANCIAL STATEMENTS
----------------------------



                                       22


<PAGE>

                                      INDEX
                                      -----

                                                                     Page
                                                                     ----

THE ORLANDO PREDATORS ENTERTAINMENT, INC.
     Independent Auditors' Report                                    F-2
     Financial Statements:
         Balance Sheet                                               F-3
         Statement of Operations                                     F-4
         Statement of Changes in Stockholders' Equity                F-5
         Statement of Cash Flows                                     F-6
     Notes to Financial Statements                                   F-7

ORLANDO PREDATORS, a Division of Orlando Predators, Ltd.
     Independent Auditors' Report                                    F-19
     Financial Statements:
         Balance Sheet                                               F-20
         Statement of Operations                                     F-21
         Statement of Changes in Division Equity (Deficit)           F-22
         Statement of Cash Flows                                     F-23
     Notes to Financial Statements                                   F-24







<PAGE>


                          INDEPENDENT AUDITORS' REPORT




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


We  have  audited  the  accompanying  balance  sheet  of The  Orlando  Predators
Entertainment,  Inc. as of December  31,  1997,  and the related  statements  of
operations,  changes in  stockholders'  equity and cash flows from  February 14,
1997  (inception)  to December  31, 1997.  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 audit.

We conducted our audit 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 audit provides 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  The  Orlando  Predators
Entertainment,  Inc. as of December  31, 1997 and the results of its  operations
and its cash flows for the period ended  December 31, 1997, in  conformity  with
generally accepted accounting principles.




                                               AJ. ROBBINS, P.C.
                                               CERTIFIED PUBLIC ACCOUNTANTS
                                                  AND CONSULTANTS

Denver, Colorado
January 21, 1998
Except for Note 10 as to
  which the date is March 17, 1998




                                      F-2

<PAGE>


                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                                  BALANCE SHEET
                                DECEMBER 31, 1997
                                -----------------


                                     ASSETS

CURRENT ASSETS:
     Cash                                                           $ 2,255,678
     Inventory                                                           14,659
     Receivable from employees                                           51,717
     Prepaid expenses                                                    94,134
                                                                    -----------

                  Total Current Assets                                2,416,188

PROPERTY AND EQUIPMENT, at cost, net                                    262,397

MEMBERSHIP COST, net                                                  1,944,259

OTHER INTANGIBLES, net                                                   55,159

RESTRICTED INVESTMENT                                                   100,000

OTHER ASSETS                                                                908
                                                                    -----------

                                                                    $ 4,778,911
                                                                    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable and accrued expenses                          $   167,355
     Accounts payable, related parties                                   80,108
     Accrued interest, stockholders                                      99,083
     Deferred revenue                                                   457,643
                                                                    -----------

                  Total Current Liabilities                             804,189

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
     Preferred stock, 1,500,000 shares authorized;  none
         issued or outstanding                                             --
     Class A Common stock, 15,000,000 shares authorized;
         2,480,000 issued and outstanding                             4,861,707
     Class B Common Stock, 1,000 shares authorized,
         1,000 issued and outstanding                                     5,000
     Accumulated (deficit)                                             (891,985)
                                                                    -----------

                  Total Stockholders' Equity                          3,974,722
                                                                    -----------

                                                                    $ 4,778,911
                                                                    ===========


                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      F-3
<PAGE>


                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                             STATEMENT OF OPERATIONS
                 FOR THE PERIOD FEBRUARY 14 TO DECEMBER 31, 1997
                 -----------------------------------------------


REVENUES:
     Ticket revenues                                                $ 1,542,577
     Play-off game ticket revenues                                      140,318
     Play-off game revenue sharing                                       45,000
     Local television and radio broadcast rights                         87,632
     Advertising and promotions                                         644,529
     Advertising and promotions, related party                           50,000
     League revenue                                                     181,250
     Other                                                                6,588
                                                                    -----------

              Total Revenues                                          2,697,894
                                                                    -----------

COSTS AND EXPENSES:
     Operations                                                       1,901,508
     Operations, related party                                            5,362
     Selling and promotional expenses                                   408,281
     League assessments                                                 224,622
     General and administrative                                         871,206
     Amortization                                                        52,496
     Depreciation                                                        32,402
                                                                    -----------

              Total Costs and Expenses                                3,495,877
                                                                    -----------

OPERATING (LOSS)                                                       (797,983)
                                                                    -----------

OTHER INCOME (EXPENSE):
     Interest expense                                                    (2,520)
     Interest expense, related party                                   (104,083)
     Interest income                                                     12,601
                                                                    -----------

              Net Other Income (Expense)                                (94,002)
                                                                    -----------

NET (LOSS)                                                          $  (891,985)
                                                                    ===========

NET (LOSS) PER SHARE                                                $      (.61)
                                                                    ===========

Weighted Average Number of Common Shares Outstanding                  1,463,796
                                                                    ===========

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                       F-4


<PAGE>
<TABLE>
<CAPTION>

                                            ORLANDO PREDATORS ENTERTAINMENT, INC.
                                        STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                           FOR THE PERIOD ENDED DECEMBER 31, 1997
                                           --------------------------------------


                                     Class A Common Stock             Class B Common Stock
                                  --------------------------        ------------------------      Accumulated
                                   Shares            Amount          Shares          Amount        (Deficit)          Total
                                   ------            ------          ------          ------        ---------          -----

<S>                               <C>            <C>               <C>             <C>             <C>              <C>
Class A Common Stock
   issued in exchange
   for ownership of
   the Predators                  1,276,500      $   438,087             --       $      --       $      --        $   438,087

Class A Common Stock
   issued for cash                  103,500           49,709                                                            49,709

Class B Common Stock
   issued for
   conversion of
   accrued interest
   payable                                                              1,000           5,000                            5,000

Class A Common Stock
   issued net of
   offering costs of
   $ 1,126,089                    1,100,000        4,373,911                                                         4,373,911

Net (loss)                                                                                           (891,985)        (891,985)
                                -----------      -----------      -----------     -----------     -----------      -----------
Balances,
   December 31, 1997              2,480,000      $ 4,861,707            1,000           5,000     $  (891,985)     $ 3,974,722
                                ===========      ===========      ===========     ===========     ===========      ===========









                                       SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                                            F-5


</TABLE>

<PAGE>





                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                             STATEMENT OF CASH FLOWS
                 FOR THE PERIOD FEBRUARY 14 TO DECEMBER 31, 1997
                 -----------------------------------------------


CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
     Net (loss)                                                     $  (891,985)
     Adjustments to reconcile net (loss) to net cash
from operating activities:
         Depreciation and amortization                                   84,898
     Changes in assets and liabilities:
         Accounts receivable                                            688,956
         Employee receivables                                           (46,256)
         Inventory                                                        5,326
         Prepaid expenses                                                (1,693)
         Other assets                                                      (908)
         Accounts payable and accrued expenses                          300,985
         Deferred revenue                                              (830,544)
                                                                    -----------

                   Net Cash (Used) by Operating Activities             (691,221)
                                                                    -----------

CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
     Purchase of equipment                                              (27,130)
     Investment in certificate of deposit                              (100,000)
     Payments for contract purchase                                     (62,054)
                                                                    -----------

                   Net Cash (Used) by Investing Activities             (189,184)
                                                                    -----------

CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
     Loans from stockholders                                          1,080,000
     Payments of loans from stockholders                             (2,317,828)
     Proceeds from issuance of Class A Common Stock                   5,500,000
     Payment of offering costs                                       (1,126,089)
                                                                    -----------

                   Net Cash Provided by Financing Activities          3,136,083
                                                                    -----------

INCREASE IN CASH                                                      2,255,678

CASH, beginning of period                                                  --
                                                                    -----------
CASH, end of period                                                 $ 2,255,678
                                                                    ===========

Supplementary information:
See Note 7

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                       F-6


<PAGE>


                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                -----------------



NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Activity
--------
The Orlando Predators Entertainment,  Inc. (the Company) was formed on March 27,
1997, to acquire,  own and operate the Orlando Predators,  a Division of Orlando
Predators,  Ltd.  (Predators).  The Predators are a professional  Arena Football
team and a member of the Arena  Football  League (AFL).  The AFL  membership was
purchased by Monolith Limited Partnership (Monolith) as an agent for the Company
on February  13,  1997 from the  Orlando  Predators,  Ltd..  During  March 1997,
Monolith organized the Company and transferred ownership of the Predators to the
Company in exchange for 1,276,500 shares of the Company's common stock.  Audited
financial  statements for Orlando  Predators,  a division of Orlando  Predators,
Ltd., the predecessor  owner,  for the period prior to  acquisition,  January 1,
1997  through  February  13,  1997,  are  not  presented  since  no  substantial
activities took place during that period.

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

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

Property and Equipment
----------------------
Property and equipment is recorded at cost.  Depreciation expense is provided on
a  straight-line   basis  using  the  estimated  useful  lives  of  5-10  years.
Maintenance  and  repairs are  charged to expense as  incurred.  When assets are
retired or otherwise  disposed  of, the property  accounts are relieved of costs
and  accumulated  depreciation  and any  resulting  gain or loss is  credited or
charged to  operations.  Depreciation  expense for the period ended December 31,
1997 was $32,402.

Restricted Investment
---------------------
Restricted  investment  consists of an interest  bearing  certificate of deposit
with a  financial  institution,  which  also  provides a letter of credit to the
Company.  The  certificate  of deposit was a condition of awarding the letter of
credit.


                                      F-7

<PAGE>



                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                -----------------


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Membership Cost
---------------
The AFL membership is recorded at cost of $1,989,860 and is being amortized on a
straight-line  basis over 40 years.  Amortization  expense for the period  ended
December 31, 1997 was $45,601.

The Company continually evaluates whether events and circumstances have occurred
that indicate that the remaining  estimated  useful life of the membership  cost
may  warrant  revision  or that the  remaining  balance  of the asset may not be
recoverable.  If factors indicate that the membership cost may be impaired,  the
Company  uses an estimate of the  remaining  value of the  membership  rights in
measuring whether the asset is recoverable. Unrecoverable amounts are charged to
operations  in the  applicable  period  as  required  under  the  provisions  of
Financial  Accounting  Standards  No.  121  "Accounting  for the  Impairment  of
Long-Lived Assets". No such charge has been required.

Other Intangible Assets
-----------------------
The  remainder of the new head coach's  contract and other costs from his former
employer were purchased for $62,054 and are being  amortized on a  straight-line
basis over the term of his  contract  with the  Company,  3 years.  Amortization
expense for the period ended December 31, 1997 was $6,895.

Football Operations
-------------------
Revenues,  principally  ticket sales and television and radio  broadcasting fees
are recorded as revenues at the time the related game is played.  The Company is
entitled  to keep all gate  receipts  from home  games but does not share in the
gate receipts from away games.  Team  expenses  (principally  player and coaches
salaries,  fringe benefits,  insurance, game expenses, arena rentals and travel)
are recorded as expenses on the same basis. Accordingly, income and expenses not
earned or incurred  are recorded as deferred  revenues and prepaid  expenses and
are   amortized   ratably  as  regular   season   games  are  played.   General,
administrative,  selling and  promotional  expenses are charged to operations as
incurred.

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


                                      F-8

<PAGE>


                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                -----------------


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

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

Deferred tax assets arise primarily from the net operating loss and amortization
of the  membership  cost  which is not  deductible  for tax  purposes  until the
membership is sold.  Deferred tax liabilities  result when  depreciation for tax
purposes exceeds  depreciation for book purposes.  The net deferred tax asset at
December 31, 1997 was not  significant.  A valuation  allowance equal to the net
deferred tax asset has been  recorded  since it is more likely than not that the
tax asset will not be realized. (See Note 9).

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

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

Fair Value of Financial Instruments
-----------------------------------
The carrying value of accounts receivable, accounts payable and accrued expenses
approximate fair value because of the short maturity of these items.


                                      F-9

<PAGE>


                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                -----------------


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Earnings Per Common Share
-------------------------
Statement of Financial  Accounting  Standards No. 128,  Earnings Per Share (SFAS
No. 128) was issued in February 1997 (effective for financial  statements issued
for periods  ending after  December 15, 1997).  This  Statement  simplifies  the
standards for computing  earnings per share (EPS) previously found in Accounting
Principles  Board  Opinion  No.  15,  Earnings  Per  Share,  and makes them more
comparable  to   international   EPS  standards.   SFAS  No.  128  replaces  the
presentation of primary EPS with a presentation  of basic EPS. In addition,  the
Statement requires dual presentation of basic and diluted EPS on the face of the
income statement for all entities with complex capital structures and requires a
reconciliation  of the numerator and denominator of the basic EPS computation to
the numerator and denominator of the diluted EPS computation.

Stock-Based Compensation
------------------------
In October 1995, the Financial  Accounting  Standards Board issued  Statement of
Financial Accounting Standards No. 123 "Accounting for Stock-Based Compensation"
(SFAS  No.123).  Under the  provisions  of SFAS No.  123,  companies  can either
measure  the  compensation  cost of equity  instruments  issued  under  employee
compensation plans using a fair value based method, or can continue to recognize
compensation  cost using the intrinsic  value method under the provisions of APB
No.  25.  However,  if the  provisions  of APB No.  25 are  continued,  proforma
disclosures  of net  income  or loss  and  earnings  or loss per  share  must be
presented  in the  financial  statements  as if the fair  value  method had been
applied. The Corporation  recognizes  compensation costs under the provisions of
APB No. 25 and will provide the expanded disclosure required by SFAS No. 123.

Recently Issued Accounting Pronouncements
-----------------------------------------
In 1997, the FASB issued Statements No. 130, "Reporting  Comprehensive  Income",
and  No.  131,   "Disclosures  about  Segments  of  an  Enterprise  and  Related
Information",  effective for fiscal years beginning after December 15, 1997. The
adoption by the Company of these  Statements  in January 1998 is not expected to
have a material impact on the Company's financial statements.

Year 2000 Issues
----------------
Many  existing  computer  programs use only two digits to identify a year in the
date field,  with the result  that data  referring  to year 2000 and  subsequent
years may be  misinterpreted  by these  programs.  If  present  in the  computer
applications  of the Company or its suppliers  and customers and not  corrected,
this problem could cause computer  applications  to fail or to create  erroneous
results and could cause a disruption in operations and have a short-term adverse
effect on the  Company's  business and results of  operations.  The Company will
evaluate its principal  computer  system to determine if they are  substantially
Year 2000 compliant.


                                      F-10

<PAGE>


                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                -----------------


NOTE 2 - ACQUISITION OF PREDATORS

The Predators were purchased by Monolith  Limited  Partnership  (Monolith) as an
agent for the Company on February  13,  1997 from the  Orlando  Predators,  Ltd.
During March 1997 Monolith  organized the Company and  transferred  ownership of
the Predators to the Company in exchange for  1,276,500  shares of the Company's
common stock.

On February 13, 1997 Monolith  acquired  substantially all of the assets and the
business  of the  Orlando  Predators,  a  Division  of Orlando  Predators,  Ltd.
(Predators).  The assets consist  primarily of the Orlando Arena Football League
(AFL) membership, game and office equipment. The purchase price for the team was
$2,325,000  comprised of $1,875,000 in cash, $180,000 note which was paid in May
1997,  assumption of $45,000 in  commissions  payable,  and $225,000 of Monolith
Limited Partnership interests (agent for the Company).

The purchase price for the Predators has been allocated as follows:

AFL Membership                                                      $ 1,989,860
Game equipment and system                                               225,721
Office equipment                                                         41,948
Prepaid expenses                                                         67,471
                                                                    -----------

         Total Purchase Price                                         2,325,000

Monolith units                                                         (225,000)
Note payable                                                           (180,000)
Commissions payable                                                     (45,000)
                                                                    -----------

Cash paid at closing                                                $ 1,875,000
                                                                    ===========



                                      F-11

<PAGE>


                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                -----------------


NOTE 3 - ARENA FOOTBALL LEAGUE

The AFL is a non-profit corporation, which governs the rules and conduct of each
member team.  Each member owns an equal  percentage  of the AFL and appoints one
board  member.  A budget for AFL expenses is approved  annually by the board and
expenses are shared equally. Revenues from expansion membership fees are divided
equally between all members and a corporation  owned by the inventor  (Gridiron)
of the Arena Football Game.  Revenues and assessments are recognized when billed
by the league.  Special assessments for membership repurchases are recognized in
the same periods as membership  expansion  fees that replace them. The Company's
share of the 1998 season budget is as follows:

Revenue:
     Expansion membership fees                                        $    --
                                                                      ---------

Assessments:
     Operating assessment                                               120,000
     Other costs                                                         15,000

                                                                       (135,000)

Net Assessment                                                        $(135,000)
                                                                      =========

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

A $1,500,000  judgement  has been  entered  against the AFL. The AFL has filed a
motion to  appeal  and set  aside  the  judgement.  No date has been set for the
motion to set aside and legal counsel is unable to estimate the future  outcome.
The AFL is also a  defendant  to a claim for alleged  damages for  approximately
$2,000,000. The AFL is vigorously defending this action. The AFL is also a party
to a number of other  lawsuits  arising in the course of business  estimated  by
management  to be for  amounts  less than  $10,000,000.  In the  opinion  of the
Company's  management,  the resolution of those matters will not have a material
adverse effect on the AFL's results of operations or financial position.

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

License Agreement
-----------------
The AFL has licensed the right to operate the Arena Football  League and the use
of the Arena  Football  League logo,  trademark  and the patented  game known as
Arena  Football from Gridiron,  owner of the logo,  trademark and patented game.
The Company is  required  to pay an annual  royalty to Gridiron in the amount of
$20,000 as its share of license fees due to Gridiron.


                                      F-12

<PAGE>

                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                -----------------


NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

                                                                    December 31,
                                                                       1997
                                                                    -----------

Office equipment                                                     $  68,478
Game equipment and system                                              226,321
                                                                     ---------
                                                                       294,799
Less accumulated depreciation                                          (32,402)

                                                                     $ 262,397
                                                                     =========

NOTE 5 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses consists of the following:

                                                                    December 31,
                                                                       1997
                                                                    -----------


Accounts payable                                                     $ 151,740
Accrued salaries and payroll                                            15,615
                                                                     ---------

                                                                     $ 167,355
                                                                     =========

NOTE 6 - COMMITMENTS AND CONTINGENCIES

Local Media Contracts
---------------------
The Company had radio and television  broadcasting  contracts with a local radio
station and a local cable sports network.  The contracts required the Company to
provide  certain  services,  goods,  and game tickets in exchange for commercial
time,  promotional  events and the right to broadcast the games.  The Company is
negotiating new local media contracts.

Employment Agreements
---------------------
The  Company  has  employment  agreements  with  players,  the  head  coach  and
executives of the Predators.  Certain of these contracts  provide for guaranteed
payments which, must be paid even if the employee is injured or terminated.  The
player  contracts are for a term of one year with a one year renewal option.  If
the team does not  re-sign the player at the end of the  contract,  he is waived
and free to sign with another team. However,  the team has the option of signing
the player first.  If the player  refuses to re-sign,  he must "sit out" for one
year before playing for another team.


                                      F-13

<PAGE>

                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                -----------------


NOTE 6 - COMMITMENTS AND CONTINGENCIES (Continued)

The President has a 42 month  agreement  with annual  compensation  ranging from
$60,000 to $80,000,  commission on sponsorship  revenue  ranging from 10% to 7%,
tickets to home games and options to  purchase  34,500  shares of the  Company's
Class A Common Stock with an exercise price of $2.00 through July 2007.

The Director of Player  Personnel  and Assistant  Coach has a 3 year  employment
agreement  with annual  compensation  ranging from $40,000 to $44,000,  a $6,000
signing bonus, playoff  participation  incentives and options to purchase 10,000
shares of the Company's Class A Common Stock with an exercise price of $2.00 per
share.

The Headcoach has a 3 year employment agreement with annual compensation ranging
from  $70,000  to  $80,000,  playoff  participation  incentives  and  options to
purchase  15,000 shares of the  Company's  Class A Common Stock with an exercise
price of $2.00 per share. The Company has an option to renew the contract for an
additional 3 years.

The Vice-President of Sales and Marketing has a 3 year employment agreement with
annual  compensation  of $45,000,  10%  commissions  on increases in sponsorship
revenues over the prior year sponsorship  revenues,  1% of renewal season ticket
sales and 20% of new season ticket sales,  less commissions paid to direct sales
staff.

Lease Obligations
-----------------
The  Company  leases  the  Orlando  Centroplex  arena for all home games and the
Citrus Bowl as a practice  field from the City of Orlando.  Lease  payments  are
based  upon the  greater of a  percentage  of gross  ticket  sales or $7,500 per
regular season home game. The lease was assigned from the previous owners of the
team.  The  lease  expired  at the  end of  the  1997  season.  The  Company  is
negotiating for renewal of the lease, under new terms.

In  addition,  office  space is  received  as  trade  for a  sponsorship  from a
financial  institution.  The total value of the office  space is $50,000 and the
lease is renewed annually.

Future minimum lease payments for the year ended December 31, 1998 are $-0-.

Self Insurance
--------------
The  Company is insured for medical and  disability  coverage  for the  players.
Under the terms of the policy,  the Company is required to pay the first $35,000
of medical costs for each player. An insurance policy provides  reimbursement up
to $465,000 for each player or $1,000,000 in aggregate.

Letter of Credit
----------------
The Company has entered into an agreement  with a financial  institution  for an
irrevocable  stand by letter of credit in the amount of $100,000.  The letter of
credit is required by the AFL and is available to draw upon,  if  necessary,  by
the AFL after the AFL Board of  Directors  has  given  approval.  The  letter of
credit is secured by a $100,000 certificate of deposit.


                                      F-14

<PAGE>

                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                -----------------


NOTE 7 - SUPPLEMENTAL CASH FLOW INFORMATION

In connection with the acquisition of the Predators,  the Company executed notes
payable to Monolith  for  $1,295,000,  issued  1,380,000  shares of common stock
valued at $487,796 and assumed  liabilities  of  $1,431,285  in exchange for the
following assets:


Accounts receivable                                                   $  688,956
Stock subscriptions receivable                                            49,709
Employee receivables                                                       5,461
Inventory                                                                 19,985
Prepaid expenses                                                          92,441
Property and equipment                                                   267,669
Membership cost                                                        1,989,860
                                                                      ----------

                                                                      $3,114,081
                                                                      ==========

In addition to the above noncash transactions,  during the period ended December
31, 1997, the Company  exchanged  notes payable to  stockholders of $212,828 and
the receivable for the stock subscription  agreement of $49,709, for the payment
of the note  payable  and accrued  interest to the former  owners of the team of
$92,537 and the Company reduced the note payable,  stockholders by $170,000. The
Company  issued  1,000  shares of Class B common stock in exchange for $5,000 in
accrued interest payable to  stockholders.  The notes payable were  subsequently
paid from the  proceeds  of the  Company's  initial  public  offering of Class A
common stock.


                                      F-15

<PAGE>

                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                -----------------


NOTE 8 - COMMON STOCK

Stock Split
-----------
In June 1997, the Board of Directors  approved a 1,380 for 1 forward stock split
of its Class A Common Stock.  All financial  information  and per share data has
been restated to reflect this event.

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

                                                         Outstanding Options
                                                       -----------------------
                                        Reserved                     Price Per
                                         Shares         Shares         Share
                                         ------         ------         -----

Initial reserved shares                  150,000          --         $   --
Granted                                  138,000       138,000           2.00
                                         -------       -------       --------

Balance, December 31, 1997                12,000       138,000       $   2.00
                                         =======       =======       ========

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

The Company  did not change its method of  accounting  with  respect to employee
stock  options;  the Company  continues to account for these under the intrinsic
value  method.  Had the Company  adopted the fair value  method with  respect to
options issued to employees as well, an additional  charge to income of $134,000
would have been required in 1997; proforma net loss would have been ($1,025,985)
and loss per share would have been $(.70).

In November 1997, the Company  issued  1,380,000  shares of Class A Common Stock
and 1,000 shares of Class B Common Stock in exchange for the 1,380,000 shares of
outstanding common stock and $5,000 in accrued interest.

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

                                      F-16

<PAGE>

                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                -----------------


NOTE 8 - COMMON STOCK (Continued)

In December 1997 the Company issued  1,100,000 shares of Class A Common Stock in
conjunction with the completion of its initial public offering of Class A Common
Stock for $4,373,911, net of offering costs of $1,126,089.

NOTE 9 - INCOME TAXES

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


Total deferred tax assets                                             $ 355,387
Less valuation allowance                                               (335,387)
                                                                      ---------
                                                                           --
Total deferred tax (liabilities)                                           --
                                                                      ---------

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

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

Temporary differences;
   Property and equipment                                             $  (2,773)
   Membership cost                                                       17,146
   Accrued interest-stockholders                                         37,255
   Net operating loss carryforward                                      283,759
Less valuation allowance                                               (335,387)
                                                                      ---------

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

The provision (benefit) for income taxes consists of the following:

Current                                                               $    --
Deferred                                                                   --
                                                                      ---------

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


                                      F-17

<PAGE>

                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1997
                                -----------------


NOTE 9 - INCOME TAXES (Continued)


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

Temporary differences;
   Depreciation expense                                               $   2,773
   Amortization expense                                                 (17,146)
   Interest-stockholders - stockholders                                 (37,255)
   Net operating loss carryforward                                     (283,759)
Less valuation allowance                                                335,387
                                                                      ---------

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

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

Tax expense (benefit) at statutory rates                              $(283,759)
Depreciation expense                                                      2,773
Amortization expense                                                    (17,146)
Interest expense - stockholders                                         (37,255)
Increase in valuation allowance                                         355,387
                                                                      ---------

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

NOTE 10 - SUBSEQUENT EVENT - MARCH 17, 1998

On March 17,  1998,  the  Company  signed a letter of intent to acquire two nths
membership,  non-voting,  equity interest in the Arena Football League, Inc. for
$6,000,000.  Each nth  membership,  equity  interest will entitle the Company to
share equally with each other member in AFL revenues.  The AFL guarantees in the
letter of intent to pay the Company at least $480,000 per year until the Company
receives an aggregate of $6,000,000 through League distribution.  If the Company
receives  $6,000,000  within  one year from the  closing  of the  sale,  one nth
returns  to the  League  and  one nth  remains  with  the  Company  without  any
guaranteed rate of return. Once the Company receives an aggregate of $6,000,000,
the Company will  participate in all League  revenues,  expenses and liabilities
with respect to the two nths membership, equity interest.

The $6,000,000 is payable as follows:  $3,500,000 within two weeks of the letter
of intent and  $2,500,000  within 60 days of the letter of intent.  The  Company
intends to raise bridge and equity financing for the payments.



                                      F-18

<PAGE>






                          INDEPENDENT AUDITORS' REPORT


To the Partners
Orlando Predators, Ltd.
Orlando, Florida


We have  audited the  accompanying  balance  sheet of the Orlando  Predators,  a
Division of Orlando  Predators,  Ltd.  as of  December  31, 1996 and the related
statements of operations,  changes in Division  Equity  (Deficit) and cash flows
for the year  ended  December  31,  1996.  These  financial  statements  are the
responsibility of the Partnership's management. Our responsibility is to express
an opinion on these financial statements based on our audit.

We conducted our audit 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 audit provides 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 the Orlando  Predators,  a
Division of Orlando  Predators,  Ltd. as of December 31, 1996 and the results of
its  operations  and its cash  flows for the year  ended  December  31,  1996 in
conformity with generally accepted accounting principles.




                                                 AJ. ROBBINS, P.C.
                                                 CERTIFIED PUBLIC ACCOUNTANTS
                                                 AND CONSULTANTS


Denver, Colorado
May 30, 1997



                                      F-19

<PAGE>





                                ORLANDO PREDATORS
                                  BALANCE SHEET
                                DECEMBER 31, 1996
                                -----------------


                                     ASSETS

CURRENT ASSETS:
     Cash                                                             $   1,337
     Accounts receivable                                                 15,000
     Inventory                                                           20,000
     Receivable from employees                                            5,456
     Prepaid expenses                                                    39,943
                                                                      ---------

                  Total Current Assets                                   81,736


PROPERTY AND EQUIPMENT, at cost, net                                     96,854


MEMBERSHIP COST, net                                                    320,719
                                                                      ---------

                                                                      $ 499,309
                                                                      =========

                       LIABILITIES AND DIVISION (DEFICIT)

CURRENT LIABILITIES:
     Accounts payable and accrued expenses                            $ 300,289
     Accounts payable, related parties                                   27,621
     Due to League                                                        7,394
     Deferred revenue                                                   397,009
                                                                      ---------

                  Total Current Liabilities                             732,313


COMMITMENTS AND CONTINGENCIES


DIVISION (DEFICIT)                                                     (233,004)
                                                                      ---------

                                                                      $ 499,309
                                                                      =========

                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      F-20



<PAGE>





                                ORLANDO PREDATORS
                             STATEMENT OF OPERATIONS
                      FOR THE YEAR ENDED DECEMBER 31, 1996
                      ------------------------------------


REVENUES:
     Ticket revenues                                                $ 1,871,039
     Play-off game revenue sharing                                       40,000
     Local television and radio broadcast rights                         89,682
     Advertising and promotions                                         792,320
     Advertising and promotions, related parties                         43,899
     League revenue                                                      17,783
     Other                                                               34,660
                                                                    -----------

                  Total Revenues                                      2,889,383
                                                                    ===========


COSTS AND EXPENSES:
     Operations                                                       2,180,734
     Operations, related party                                           13,023
     Selling and promotional expenses                                   443,405
     League assessments                                                 151,379
     General and administrative                                         606,222
     General and administrative, related party                           19,415
     Amortization                                                        10,175
     Depreciation                                                        29,662
                                                                    -----------

                  Total Costs and Expenses                            3,454,015
                                                                    -----------


OPERATING (LOSS)                                                       (564,632)
                                                                    -----------


OTHER INCOME:
     Interest                                                             3,325
     Other                                                                 --
                                                                    -----------

                  Total Other Income                                      3,325
                                                                    -----------


NET (LOSS)                                                          $  (561,307)
                                                                    ===========



                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      F-21



<PAGE>





                                ORLANDO PREDATORS
                STATEMENT OF CHANGES IN DIVISION EQUITY (DEFICIT)
                      FOR THE YEAR ENDED DECEMBER 31, 1996
                      ------------------------------------



Balance, December 31, 1995                                            $(501,911)
Net (loss)                                                             (561,307)
Contributions                                                           835,398
Distributions                                                            (5,184)
                                                                      ---------

Balance, December 31, 1996                                            $(233,004)
                                                                      =========



                                      F-22

<PAGE>


                                ORLANDO PREDATORS
                             STATEMENT OF CASH FLOWS
                      FOR THE YEAR ENDED DECEMBER 31, 1996
                      ------------------------------------



CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
     Net (loss)                                                       $(561,307)
     Adjustments to reconcile net loss to net cash used in
      operating activities:
              Depreciation and amortization                              39,837
              Changes in assets and liabilities:
                  Accounts receivable                                    (8,999)
                  Inventory                                                --
                  Prepaid expenses                                       64,454
                  Due from League                                       (26,395)
                  Other assets                                            2,436
                  Accounts payable and accrued expenses                 (26,500)
                  Deferred revenue                                     (302,458)
                                                                      ---------

                      Net Cash (Used) by Operating Activities          (818,932)
                                                                      ---------


CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
     Purchase of equipment                                              (14,920)
                                                                      ---------


CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
     Contributions to the Division                                      835,398
     Distributions from the Division                                     (5,184)
                                                                      ---------

                      Net Cash Provided From Financing Activities       830,214
                                                                      ---------


(DECREASE) IN CASH                                                       (3,638)


CASH, beginning of period                                                 4,975
                                                                      ---------


CASH, end of period                                                   $   1,337
                                                                      =========


                 SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                      F-23




<PAGE>





                                ORLANDO PREDATORS
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                                -----------------


NOTE 1 - ORGANIZATION

The Orlando Predators, Ltd., a Florida limited partnership,  was formed in April
1991.  The  Orlando  Predators,  a  Division  of  the  Orlando  Predators,  Ltd.
(Predators) is a professional Arena Football team located in Orlando, Florida.

During 1991, the Partners  entered into a License and Membership  Agreement with
the Arena Football League (AFL) for the expansion team in Orlando. (See Note 3).

On January 14, 1997,  Orlando  Predators,  Ltd.  entered into an agreement  with
Monolith  Limited  Partnership  to sell the  membership  for $1,875,000 in cash,
$180,000 note payable and $225,000 of Monolith Limited Partnership interests and
assumption of $45,000 of liabilities.

NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES

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

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

Property and Equipment
----------------------
Property and equipment is recorded at cost.  Depreciation expense is provided on
a  straight-line   basis  using  the  estimated  useful  lives  of  5-10  years.
Maintenance  and  repairs are  charged to expense as  incurred.  When assets are
retired or otherwise  disposed  of, the property  accounts are relieved of costs
and  accumulated  depreciation  and any  resulting  gains or loss is credited or
charged to operations. Depreciation expense for the year ended December 31, 1996
was $29,662.

Membership Cost
---------------
The AFL membership cost of $375,000 is being amortized on a straight-line  basis
over 40 years.  Amortization  expense for the year ended  December  31, 1996 was
$9,425.

Management  continually evaluates whether events and circumstances have occurred
that indicate that the remaining  estimated  useful life of the membership  cost
may  warrant  revision  or that the  remaining  balance  of the asset may not be
recoverable.  If factors  indicate  that the  membership  cost may be  impaired,
management uses an estimate of the remaining  value of the membership  rights in
measuring whether the asset is recoverable. Unrecoverable amounts are charged to
operations  in the  applicable  period  as  required  under  the  provisions  of
Financial  Accounting  Standards  No.  121  "Accounting  for the  Impairment  of
Long-Lived Assets".


                                      F-24

<PAGE>

                                ORLANDO PREDATORS
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                                -----------------


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Football Operations
-------------------
Revenues,  principally  ticket sales and television and radio  broadcasting fees
are recorded as revenues at the time the related game is played.  The  Predators
are entitled to keep all gate  receipts  from home games but do not share in the
gate receipts from away games.  Team expenses  (principally  players and coaches
salaries,  fringe benefits,  insurance, game expenses, arena rentals and travel)
are recorded as expenses on the same basis. Accordingly, income and expenses not
earned or incurred are recorded as deferred revenues and prepaid  expenses,  and
amortized ratably as regular season games are played.  General,  administrative,
selling and promotional expenses are charged to operations as incurred.

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

The Predators sell sponsorships for cash and services. In exchange, the sponsors
receive advertising and various benefits to the Predator games. The value of the
trade  goods and  services  has been  estimated  in the  accompanying  financial
statements. Management believes these estimates reasonably disclose the value of
goods and services received.

Income Taxes
------------
The  Division  is not  subject  to income  taxes.  Accordingly,  no  income  tax
provision  or  benefit  has  been  recognized  in  the  accompanying   financial
statements.

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

The Predators  maintain all cash in deposit accounts,  which at times may exceed
federally  insured  limits.  The Predators  have not  experienced a loss in such
accounts.

Fair Value of Financial Instruments
-----------------------------------
The carrying value of accounts receivable, accounts payable and accrued expenses
approximate fair value because of the short maturity of these items.


<PAGE>


                                ORLANDO PREDATORS
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                                -----------------


NOTE 2 - SIGNIFICANT ACCOUNTING POLICIES (Continued)

Accounting for the Impairment of Long-Lived Assets
--------------------------------------------------
Effective   January  1,  1995  the  Predators  adopted  Statement  of  Financial
Accounting  Standards  No. 121,  "Accounting  for the  Impairment  of Long-Lived
Assets" (SFAS 121). The Statement  requires  impairment  losses to be recognized
for  long-lived  assets used in operations  when  indicators  of impairment  are
present  and the  undiscounted  cash flows are not  sufficient  to  recover  the
assets' carrying amounts. The adoption of SFAS 121 had no material impact on the
Predators financial position.

NOTE 3 - ARENA FOOTBALL LEAGUE

The AFL is a non-profit corporation, which governs the rules and conduct of each
member team.  Each member owns an equal  percentage  of the AFL and appoints one
board  member.  A budget for AFL expenses is approved  annually by the board and
expenses are shared equally. Revenues from expansion membership fees are divided
equally between all members and a corporation  owned by the inventor  (Gridiron)
of the Arena Football Game.  Revenues and assessments are recognized when billed
by the league.  Special assessments for membership repurchases are recognized in
the same periods as membership  expansion  fees that replace them. The Predators
share of the AFL revenues and assessments are as follows at December 31, 1996:

Revenue:
     Expansion membership fees                                        $  17,783
                                                                      ---------

Assessments:
     Operating assessment                                               125,000
     Other costs                                                         26,379
                                                                      ---------

                                                                        151,379
                                                                      ---------

Net Revenue (Assessment)                                              $(133,596)
                                                                      =========

The Predators continue to be contingently liable for their share of AFL expenses
which may exceed AFL revenues.  The Company continues to be contingently  liable
for its share of AFL expenses which may exceed AFL revenues. As of May 30, 1997,
the Predators are contingently  liable for approximately  $90,000 for other team
membership purchases.

The  AFL is a  defendant  to a  claim  for  alleged  damages  for  approximately
$2,000,000. The AFL is vigorously defending this action.

The AFL is also a party to a number of lawsuits  arising in the normal course of
business.  In the opinion of the AFL, the  resolution  of those matters will not
have a material  adverse  effect on the AFL's results of operations or financial
position.


                                      F-26

<PAGE>


                                ORLANDO PREDATORS
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                                -----------------


NOTE 3 - ARENA FOOTBALL LEAGUE (Continued)

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

License Agreement
-----------------
The AFL has licensed the right to operate the Arena Football  League and the use
of the Arena  Football  League logo,  trademark  and the patented  game known as
Arena  Football from Gridiron,  owner of the logo,  trademark and patented game.
The Predators are required to pay an annual royalty to Gridiron in the amount of
$20,000 as its share of license fees due to Gridiron.

NOTE 4 - PREPAID EXPENSES

Prepaid expenses consist of the following at December 31, 1996:

AFL assessment                                                          $21,000
Professional fees                                                         8,195
Sales tax                                                                 4,600
Insurance                                                                 2,025
Other                                                                     4,123
                                                                        -------

                                                                        $39,943
                                                                        =======

NOTE 5 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following at December 31, 1996:

Office equipment                                                      $  77,041
Game equipment and system                                               126,887
                                                                      ---------

                                                                        203,928
Less accumulated depreciation                                          (107,074)
                                                                      ---------

                                                                      $  96,854
                                                                      =========

                                      F-27

<PAGE>


                                ORLANDO PREDATORS
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                                -----------------


NOTE 6 - ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses  consists of the following at December 31,
1996:

Accounts payable trade                                                  $252,290
Accrued salary and payroll taxes                                          47,999
                                                                        --------

                                                                        $300,289
                                                                        ========

NOTE 7 - COMMITMENTS AND CONTINGENCIES

Local Media Contracts
---------------------
The Predators  have radio and  television  broadcasting  contracts  with a local
radio  station and a local cable sports  network  which expire at the end of the
1997 season.  The contracts  required the Predators to provide certain services,
goods, and game tickets in exchange for commercial time,  promotional events and
the right to broadcast the games.

Employment Agreements
---------------------
The Predators have employment  agreements  with players,  the head coach and the
vice president of the team.  Certain of these  contracts  provide for guaranteed
payments, which must be paid even if the employee is injured or terminated.  The
player  contracts  are for a term of  one-year.  If the  team  does not sign the
player at the end of the contract he is free to sign with another team. However,
the team has the option of signing the player first. If the player  refuses,  he
must "sit out" for one year before  playing for  another  team.  The coach has a
one-year agreement for $70,000 with bonuses based on the number of winning games
and play-off  participation  and contains a covenant not to compete for a period
of one year after  termination of employment.  The vice president has a two-year
agreement for $60,000,  10% commission on sponsorship  revenue and bonuses based
on play-off participation.

Lease Commitments
-----------------
The Predators are committed  under a lease with the City of Orlando to lease the
Orlando  Centroplex  Arena for all home games and the Citrus  Bowl as a practice
field. Lease payments are based upon the greater of a percentage of gross ticket
sales or $7,500 per regular  season  game.  The lease  expired at the end of the
1997 season.

In  addition,  the office  space is received as trade for a  sponsorship  from a
financial  institution.  The total value of the office  space is $50,000 and the
lease is renewed annually.

Future minimum lease payments for the year ended December 31, 1997 are $-0-.

Self Insurance
--------------
The  Company is insured for medical and  disability  coverage  for the  players.
Under the terms of the policy,  the Company is required to pay the first $35,000
of medical costs for each player. An insurance policy provides  reimbursement up
to $465,000 for each player or $1,000,000 in aggregate.


                                      F-28

<PAGE>


                                ORLANDO PREDATORS
                          NOTES TO FINANCIAL STATEMENTS
                                DECEMBER 31, 1996
                                -----------------


NOTE 7 - COMMITMENTS AND CONTINGENCIES (Continued)

Letter of Credit
----------------
The Predators have entered into an agreement with a financial  institution for a
letter of credit in the amount of $100,000.  The letter of credit is required by
the League and is available to the League to draw upon, if  necessary,  but only
after the AFL Board of Directors  has given  approval.  The letter of credit was
personally guaranteed by the partners of Orlando Predators, Ltd.

NOTE 8 - RELATED PARTY TRANSACTIONS

In addition to transactions with related parties discussed  throughout the notes
to the financial  statements,  the following  related  party  transactions  have
occurred:

Sponsorship Revenue
-------------------
During the year ended December 31, 1996, the Predators  received  revenue in the
form of sponsorships from certain limited partners in the amount of $43,899.

Costs of Sponsorship
--------------------
During the year ended December 31, 1996, the Predators incurred expenses related
to sponsorship  revenue  received from certain limited partners in the amount of
$3,625.

Medical Expenses
----------------
The Predators  incurred medical expenses for treatment of player and/or employee
medical conditions from certain limited partners. During the year ended December
31, 1996 such expenses totaled $9,398.

Legal Expenses
--------------
During the year ended December 31, 1996,  the Predators  incurred legal expenses
from certain limited partners in the amount of $19,415.




                                      F-29


<PAGE>



ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
FINANCIAL DISCLOSURE
--------------------------------------------------------------------------------

     None.








                                       23

<PAGE>
<TABLE>
<CAPTION>



                                    PART III

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

     The name, age and position of each of the Company's  executive officers and
directors are set forth below:


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

<S>                              <C>      <C>                                     <C>
William G. Meris (1)(2)           32      Chairman of the Board of Director        1997

Jack Youngblood (1)(2)            49      President and Director                   1997(3)

Alex S. Narushka                  37      Secretary, Treasurer and Chief           1997(3)
                                          Financial Officer

Robert G. Flynn                   33      Chief Operating Officer                  1997

Edgar J. Allen                    51      Vice President-Sales and                 1997
                                          Marketing

Alan N. Gagleard (1)              45      Director                                 1997

Thomas F. Winters, Jr., M.D. (2)  45      Director                                 1997

----------

(1)  Member of Audit Committee.

(2)  Member of Compensation Committee.

(3)  Although  they are  recently  elected  executive  officers of the  Company,
     Messrs.  Youngblood  and Narushka have held  management  positions with the
     Predators since 1995 and 1994, respectively.

     Directors are elected at the Company's  annual meeting of shareholders  and
serve a term of one year or until their  successors  are elected and  qualified.
Officers are appointed by the Board of Directors and serve at the  discretion of
the Board of Directors, subject to the bylaws of the Company.




                                       24
</TABLE>

<PAGE>



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

     The Company agreed with its IPO Underwriters that, until December 10, 1999,
the  Company  would  allow  an  observer  designated  by  the  Underwriters  and
acceptable to the Company to attend all meetings of the Board of Directors.  The
observer has no voting rights, is reimbursed for out-of-pocket  expense incurred
in  attending  meetings  and is  indemnified  against any claims  arising out of
participation  at the meetings,  including  claims based on liabilities  arising
under the securities laws.

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

     William G. Meris was appointed the  Company's  Chairman in March 1997.  Mr.
Meris  has  served  as  Chairman  of  the  Board  of  Directors  of  Interhealth
Nutritionals,  Inc., a privately-held  nutrition  supplement  manufacturer since
April 1996 and has been a director of SunWest P.E.O. Inc. since January 1998. He
was also a director of Gum Tech International,  Inc., a publicly-held  specialty
chewing gum  manufacturer  from 1997 until February  1998.  Since June 1995, Mr.
Meris has been President of WGM  Corporation,  which acts as the General Partner
of the Monolith Limited Partnership,  a limited partnership which is a principal
stockholder  of the  Company.  From  January  1995 to June  1995,  he was also a
co-manager  of Meris  Financial,  Inc.,  a  private  investment  and  consulting
company.  From  October  1994 until  March  1995,  Mr.  Meris was a co-owner  of
Cyberia,  Inc., a virtual reality  entertainment firm. Mr. Meris was employed by
Prudential  Securities,  Inc., as a retail  stockbroker from 1989 to April 1994.
Subsequently, he worked in the same capacity at Franklin-Lord,  Inc. between May
and August of 1994.  Mr. Meris  earned a Bachelor of Science  degree in Business
Administration from Arizona State University.  During the AFL season, he devotes
approximately  60% of his time to the  affairs  of the  Company  and  during the
remainder  of the year devotes  approximately  25% of his time to the affairs of
the Company.

     Jack Youngblood, a 14-year veteran of the NFL, is in his fourth season with
the Predators. He was appointed Vice President of the Predators in February 1995
and President of the Company in April 1997. Mr. Youngblood  directs and oversees
all   aspects   of   the   Predators'   organization,    including   operations,
administration,  marketing, sponsorship, television, radio, public relations and
ticket sales.  From 1993 until he joined the team in 1995, Mr.  Youngblood was a
radio talk show host in the Sacramento  metropolitan  area.  During the 1991 and
1992 AFL seasons,  he was director of marketing  operations  for the  Sacramento
Surge  ("Surge")  of the World  League of American  Football and he also handled
color commentary on Surge radio and television broadcasts. His duties with Surge
included  directing front office operations in the area of sponsorships,  ticket
sales, corporate sales,  advertising and marketing services.  From 1985 to 1991,
Mr. Youngblood was employed by the Los Angeles Rams ("Rams") of the NFL. He also
worked as a color analyst on Rams broadcasts,  while handling player  relations,


                                       25

<PAGE>



public relations,  community relations and marketing services. Mr. Youngblood is
considered one of the best defensive ends of his era having played  professional
football  with the Rams from 1971 to 1984. A first round draft pick in 1971,  he
played in all 14 games of his rookie season and by 1973 was a full-time  starter
for  the  Rams.  Mr.  Youngblood  set a  Rams  team  record  by  playing  in 201
consecutive  games and his 151 1/2 sacks rank as third on the  all-time NFL list
behind Deacon Jones and Reggie White. He earned all-NFC honors six times, played
in seven  Pro Bowls and was named to the  Sporting  News NFC  all-star  team six
times. He was twice the NFC's defensive  player of the year. Mr.  Youngblood was
an all-American defensive end for the University of Florida.

     Alex S. Narushka  joined the Company as the  Predators'  Assistant  General
Manager in April 1994 and was appointed the Company's  Secretary,  Treasurer and
Chief Financial Officer in April 1997. From 1992 to 1994, he was employed by the
former Managing General Partner of the Predators.  Mr. Narushka was the Director
of Finance for the Orlando  Thunder of the World Football League in 1991 and was
Controller of the Orlando  Renegades of the United States  Football  League from
1984 to 1986.  He  graduated  from Auburn  University  with a degree in Business
Administration.

     Robert G. Flynn joined the Predators in September  1991,  was appointed its
Director of  Operations  in 1995 and the Company's  Chief  Operating  Officer in
April 1997. In these capacities, he oversees all game operations, merchandising,
internship  program,  game system  maintenance,  sponsorships and travel.  He is
Director of the Winter Park YMCA and serves as  chairman  for the Alumni  Sports
Committee of Trinity  Preparatory  School.  Mr. Flynn earned a Masters degree in
Sports Administration from the University of Florida.

     Edgar J.  Allen  joined  the  Company  as its Vice  President  - Sales  and
Marketing in June 1997.  From September 1996 until June 1997, Mr. Allen acted as
an  independent  sports  consultant.  From  1989 to  1996,  he was  Director  of
Sponsorship and Broadcast Sales for the Orlando Magic of the National Basketball
Association  where he was  responsible  for building  sponsorship  and broadcast
sales revenue. From 1974 to 1976, Mr. Allen was general manager of WHLQ-FM radio
station  and  from  1977  to  1980,  was a  regional  executive  for  the  Radio
Advertising  Bureau (the commercial  trade  association of the radio  business).
From  1980 to 1983,  he was  responsible  for sales and  marketing  for  Capital
Broadcasting, a six-radio station holding company based in Mobile, Alabama. From
1983 to 1989, Mr. Allen was self-employed as a broadcast operating consultant.

     Alan N. Gagleard has been a practicing  attorney since 1979 specializing in
tax law,  employee  benefits  related law, pension and profit sharing plans, and
general civil litigation.  He was also licensed as a certified public accountant
in the State of  Michigan  in 1973.  Mr.  Gagleard  was  employed by Coopers and
Lybrand and Price  Waterhouse and Company,  two major national  accounting firms
prior to and during law school.  In 1997, Mr.  Gagleard became the President and
Chief  Executive  Officer  of  Sunwest  P.E.O.  Inc.,  a  professional  employer
organization  based  in  Arizona.  In  1994,  as a result  of  guaranteeing  the
obligations  of a company  engaged in the  restaurant  business and in which Mr.
Gagleard was a principal  stockholder  and director  (although  not an executive
officer or active participant in the operations of the restaurant), Mr. Gagleard
filed a petition in bankruptcy under the U.S.  Bankruptcy Act. He was discharged
in 1994. Mr. Gagleard graduated from the Detroit College of Law in 1979.

                                       26

<PAGE>




     Thomas F. Winters,  Jr., M.D. A graduate of Brown  University,  Dr. Winters
received  his medical  degree in 1980 from the  University  of  Connecticut.  He
completed an internship in internal  medicine at the Medical College of Virginia
in Richmond,  Virginia,  a year of general  surgery at St. Francis  Hospital and
Medical Center in Hartford,  Connecticut and an orthopedic  residency was at the
University of Connecticut Health Center in Farmington,  Connecticut. Dr. Winters
completed an A.O.  Fellowship in Trauma in Hanover,  West  Germany,  followed by
Fellowships in Sports Medicine and Adult  Reconstructive  Surgery at the Brigham
and Women's Hospital of Harvard Medical School. At the Harvard Medical School he
served as Assistant  Team  Physician for the  Department of Athletics of Harvard
University.  He has been  involved  with  teaching  at both  Harvard  and now at
Orlando Regional Medical Center.  Dr. Winters currently serves as Team Physician
for the Orlando  Predators;  a designated  consultant for Major League Baseball,
Inc.;  Orthopedic  Consultant for the Kansas City Royals Baseball  Organization,
Orlando  International  Aquatic  Center  and  Brown's  Gymnasium.  He also works
closely with area college and high school athletes. Dr. Winters has concentrated
on adult orthopedics,  specifically,  Sports Medicine and Adult  Reconstruction,
which includes Total Joint Replacement,  since 1986. He has received patents for
the  design of  rotational  components  for  total  knee  replacements,  and for
meniscal cartilage repair following knee injuries.



                                       27

<PAGE>
<TABLE>
<CAPTION>



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

     The Company  was  organized  in March 1997 to acquire,  own and operate the
Predators.  Accordingly, all of the Company's executive officers commenced their
employment  with the  Company in March 1997,  although  Messrs.  Youngblood  and
Narushka previously held non-executive officer positions with Orlando Predators,
Ltd.  ("OPL"),  the  prior  owner of the  Predators  and Mr.  Youngblood  earned
compensation from OPL of approximately  $100,000 for the year ended December 31,
1996. No executive officer (except Mr. Youngblood) is expected to earn in excess
of $100,000 in salary and other  compensation  for the year ending  December 31,
1998.

                                       Summary Compensation Table

                                                                        Annual Compensation (1)
                                                                        -----------------------

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

<S>                            <C>             <C>               <C>            <C>         <C>
  William G. Meris,            1997                 0                 0           5,000       $ 40,000(1)
      Chairman
     Jack Youngblood,          1997            60,000            45,000(2)       34,500            (2)
      President

----------

(1)  Represents housing, automobile and travel allowances provided to Mr. Meris.

(2)  In July 1997, the Company  entered into a three-year  employment  agreement
     with Mr. Youngblood  providing for annual salaries of $60,000,  $65,000 and
     $70,000  over the  ensuing  three-year  period.  Mr.  Youngblood  will also
     receive a commission ranging from 7% to 10% of all "Sponsorship  Income" of
     the  team,  which is  defined  as gross  revenues  generated  in cash or by
     tradeout for any expense that would  constitute an expense on the Company's
     statement of operations.  In 1997, Mr. Youngblood  received a commission of
     $45,000 based upon total Sponsorship Income for the year ended December 31,
     1997 of $450,000.  Under Mr. Youngblood's employment agreement, he was also
     granted  stock  options to  purchase up to 34,500  shares of the  Company's
     Class A Common Stock at $2.00 per share  vesting  over a three-year  period
     and exercisable until July 2007.

</TABLE>


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

1997 Employee Stock Option Plan

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

                                       28

<PAGE>




     The  Company  has  reserved  150,000  shares  of Class A Common  Stock  for
issuance  under  the  Plan.  The  Plan is  administered  by the  full  Board  of
Directors,  which determines which individuals shall receive stock options,  the
time  period  during  which the stock  options may be  exercised,  the number of
shares of Class A Common Stock that may be purchased under each stock option and
the stock option price.

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

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

     As of the date of this  Report,  138,000  stock  options  have been granted
under the Plan,  (including  an  aggregate of 79,500  stock  options  granted to
officers and directors of the Company) exercisable at $2.00 per share.



                                       29

<PAGE>



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

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



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

  William G. Meris(1)                              18,800                .8%

  The Monolith Limited Partnership(1)(4)        1,276,500              51.4%

  Jack Youngblood(2)                               34,500               1.4%

  Alan N. Gagleard(3)(4)                          122,300               4.9%

  Thomas F. Winters, Jr., M.D.                      5,000                .2%

  All directors and officers as a group         1,478,300              57.3%
    (7 persons)(1)(2)(3)

-----------

(1)  The Monolith Limited Partnership ("Monolith") is a privately-held, Delaware
     limited  partnership  which owns 1,276,500  shares of the Company's Class A
     Common Stock as  indicated  above.  The General  Partner of Monolith is WGM
     Corporation,  a Delaware  Corporation ("WGM"), of which William G. Meris is
     the  President  and sole  principal  stockholder.  The amount of securities
     shown held by Mr. Meris  represents  stock  options to purchase up to 5,000
     shares of the  Company's  Class A Common Stock at $2.00 per share under the
     Company's  1997 Stock Option Plan granted to Mr. Meris and stock options to
     purchase 13,800 shares at $2.00 per share assigned to Meris Financial, Inc.
     by Monolith. See "Item 12."


                                       30

<PAGE>



(2)  Includes  stock  options to purchase up to 34,500  shares of the  Company's
     Class A Common Stock at $2.00 per share until July 2007, which have not yet
     vested.

(3)  Includes (i) 103,500 shares of Class A Common Stock,  (ii) stock options to
     purchase an additional  13,800 shares of the Company's Class A Common Stock
     from Monolith at $2.00 per share, and (iii) stock options to purchase up to
     5,000 shares of the Company's Class A Common Stock at $2.00 per share under
     the Company's 1997 Stock Option Plan.

(4)  In addition to the Class A Common  Stock set forth  above,  the Company has
     issued  and  outstanding  1,000  shares of Class B Common  Stock  owned 925
     shares by Monolith (92.5%) and 75 shares by Gagleard (7.5%). See "Item 5."

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

     In February 1997, The Monolith Limited Partnership  ("Monolith")  purchased
92.5% and Alan N. Gagleard  ("Gagleard")  purchased  7.5% of the Predators  from
Orlando Predators,  Ltd. ("OPL"), a non-affiliated  Florida limited  partnership
for a purchase price of $2,325,000 including $1,875,000 in cash, $180,000 in the
form of a  promissory  note  payable  to OPL and the  issuance  of  $225,000  of
Monolith limited partnership interests to OPL. In March 1997, Monolith organized
the Company and  transferred its 92.5% ownership of the Predators to the Company
in exchange for the  issuance by the Company of  1,276,500  shares of its common
stock to Monolith (valued at $.34 per share),  the issuance of a promissory note
bearing interest at 8% per annum payable to Monolith in the amount of $1,295,000
due  the  earlier  of  December  31,  1998  or the  closing  of the  IPO and the
assumption by the Company of the $180,000  promissory note obligation to OPL. At
the same time,  Gagleard  transferred his 7.5% ownership of the Predators to the
Company in exchange for 103,500  shares of its common stock  (valued at $.48 per
share) and the issuance of a  promissory  note payable to Gagleard in the amount
of $105,000  carrying the same terms as the Monolith  promissory  note.  Also in
March 1997, Mr. Meris, the President of WGM Corporation,  the corporate  general
partner of Monolith,  became the  Chairman of the Company and Gagleard  became a
director.

     In June 1997,  the Company  paid the $180,000  promissory  note due OPL and
Monolith repurchased the $225,000 of Monolith limited partnership interests from
OPL for $225,000 in cash.  At the same time,  Monolith  borrowed  $112,500  from
Gagleard, evidenced by a non-interest bearing promissory note due the earlier of
December 31, 1998 or the closing of the IPO. As additional consideration for the
loan,  Monolith  granted  Gagleard  an option to purchase  13,800  shares of the
Company's  common stock owned by Monolith for $2.00 per share. The loan was paid
in full in December 1997.

     Meris  Financial,  Inc.,  an affiliate of William G. Meris,  the  Company's
Chairman,  earned a consulting fee of $5,000 plus  reimbursement of its expenses
for providing  administrative  assistance to the Company in connection  with the
IPO.


                                       31

<PAGE>



     Between March and November  1997  Monolith and Gagleard  loaned the Company
$862,537 and $120,291,  respectively for working capital evidenced by promissory
notes  bearing  interest at 8% per annum due the earlier of December 31, 1998 or
the closing of the IPO. The loans were repaid in full in December 1997.

     In November  1997 the Company  (i) issued  1,276,500  shares of its Class A
Common  Stock and 925 shares of its Class B Common Stock to Monolith in exchange
for  1,276,500  shares of its  then-voting  common  stock and  $4,625 in accrued
interest  payable and (ii) issued 103,500 shares of its Class A Common Stock and
75 shares of its Class B Common Stock to Gagleard in exchange for 103,500 shares
of its then-voting common stock and $375 in accrued interest payable.  The Class
B Common Stock was issued to Monolith and Gagleard at $5.00 per share,  the same
price as the IPO offering price per share.  Prior to the exchange,  Monolith and
Gagleard  owned  all of the  then-voting  common  stock and  continued  to do so
following  the  exchange.  The Class B Common  Stock was issued to  satisfy  the
control  requirements  of the AFL. The AFL Bylaws require League approval before
an AFL  team may  become  publicly  held.  In the  case of the  Company,  League
approval was conditioned  upon the League's  requirement  that voting control of
the Company would remain in the hands of its two existing stockholders (Monolith
and  Gagleard).  The League  requirement  was  satisfied by the Company  through
creation of the Class B Common Stock each share of which votes the equivalent of
10,000  shares of Class A Common  Stock.  See  "Arena  Football-Restrictions  on
Ownership."

     In July 1997  Monolith  granted  options to purchase  90,365  shares of the
Company's  Common Stock owned by Monolith and  exercisable at $2.00 per share to
four persons,  including  Gagleard (13,800  options) and Meris  Financial,  Inc.
(13,800 options).

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



                                       32

<PAGE>



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

     a.   Exhibits:

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

      3.01          Articles of Incorporation of the Registrant(1)

      3.02          Bylaws of the Registrant(1)

     10.01          1997 Employee Stock Option Plan(1)

     10.02          Lease Agreement(1)

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

     10.04          Bylaws of the Arena Football League(1)

     10.05          Membership Agreement with the Arena Football League(1)

     10.06          Form of Standard Player Contract(1)

     10.08          Purchase Agreement for Orlando Predators(1)

     10.09          Exchange Agreement for Orlando Predators' Assets(1)

     10.10          Employment Agreement with Mr. Youngblood(1)

---------

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



                                       33

<PAGE>


                                   SIGNATURES

     In accordance  with Section 13 or 15(d) of the Exchange Act, the Registrant
has duly  caused  this  Report to be signed  on its  behalf by the  undersigned,
thereunto duly authorized, in Orlando, Florida, on March 30, 1998.

                                             THE ORLANDO PREDATORS
                                             ENTERTAINMENT, INC.



                                             By  /s/ Jack Youngblood
                                               ---------------------------------
                                                       Jack Youngblood,
                                                          President

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

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


/s/  William G. Meris             Chairman of the Board of        March 30, 1998
----------------------------      Directors
William G. Meris

/s/  Jack Youngblood              President and Director          March 30, 1998
----------------------------
Jack Youngblood

/s/  Alex S. Narushka             Secretary, Treasurer, Chief     March 30, 1998
----------------------------      Financial Officer (Principal
Alex S. Narushka                  Accounting Officer) and
                                  Director


/s/  Robert G. Flynn              Chief Operating Officer         March 30, 1998
----------------------------
Robert G. Flynn

/s/  Edgar J. Allen               Vice-President - Sales and      March 30, 1998
----------------------------      Marketing
Edgar J. Allen

/s/  Alan N. Gagleard             Director                        March 30, 1998
----------------------------
Alan N. Gagleard

/s/  Thomas F. Winters, Jr.       Director                        March 30, 1998
----------------------------
Thomas F. Winters, Jr., M.D.





                                       34