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,  1998 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 March 22, 1999,  5,130,166  shares of the  Registrant's  no par value
Class A Common Stock were outstanding. As of March 22, 1999, the market value of
the  Registrant's  no par value Class A Common Stock,  excluding  shares held by
affiliates, was $12,837,663 based upon a closing bid price of $4.75 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 $3,559,329.

     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  Company  is in the  sports  entertainment  business  and (i)  owns and
operates the Orlando  Predators (the "Predators" or the "team"),  a professional
arena football team of the Arena Football League (the "AFL" or the "League") and
(ii) owns an additional 10.5% net revenue interest in the League (in addition to
its League  ownership  through the  Predators).  Arena  football is played in an
indoor arena on a padded 50 yard long football  field using eight players on the
field for each  team.  Most of the game  rules are  similar  to college or other
professional  football game rules with certain  exceptions  intended to make the
game faster and more exciting.

Strategy

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

     At the team level, the Company's  strategy is to increase fan attendance at
Predators' home games,  expand the Predators'  advertising and sponsorship base,
and  contract  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. Game winning success  requires
the ongoing  recruitment of superior players.  In order to recruit players,  the
Company  employs a recruiting  team which  includes the Company's head coach and


                                        3

<PAGE>


Director of Player Personnel. In order to increase media exposure to the team in
central Florida, and expand the Company's  sponsorship base, the Company employs
a marketing  representative  who calls upon the media,  corporate  sponsors  and
other central Florida  organizations.  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  website at  www.orlpredators.com.  The Company
also employs ten to 15 part-time  telemarketing  personnel prior to commencement
of the AFL season to assist in ticket sales.

     In a broader sense,  the Company's  strategy also includes  maintaining and
building  community  support  for,  and  recognition  of, the team as an ongoing
valuable entertainment  institution in central Florida and throughout the state.
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  eighth AFL season in 1998,  have played in the
Arena Bowl for the AFL championship on four occasions and won the Arena Bowl XII
championship ending the 1998 season. The Predators hold one of the best all-time
win-loss  records  among  current  and  former AFL teams and have  recorded  the
highest announced average AFL per game attendance in a number of prior seasons.

History

     The AFL is a nonprofit membership corporation organized to govern the arena
football   teams  that  comprise  the  League  and  to  sell  team   memberships
("Memberships") in major United States markets. The AFL's first season commenced
in 1987. Between 1987 and 1999, the League grew from four teams to 15 teams with
teams in Los Angeles  and New  Orleans  expected to begin play in 2000 and 2001,
respectively.  The  membership  fees  for  the  next  team  joining  the AFL has
increased  from $125,000 in 1995 to $5 million for the 2000 season.  Since 1992,
announced  League  attendance  has  grown  from  736,000  to  over  1.1  million
(including  play-off  games).  Game broadcasts  during this period have included
local,  regional,  ESPN, ESPN 2 and ABC coverage.  For the 1999 season, 20 games
are scheduled to be broadcast on national cable television  stations,  including
ABC's live broadcast of Arena Bowl XIII. From 11 million  television  households
in 1994, the AFL reached 27.5 million households in 1998.

     Currently,  the  Company  derives  its  revenue  from  the  arena  football
operations  of the  Predators  and its 10.5% net  revenue  interest  in the AFL.
Revenue  from  football  operations  results  from  the sale of  tickets  to the
Predators'  home  games,  the sale of  advertising  and  promotions  to Predator
sponsors,  the sale of local and regional  broadcast rights to Predators' games,
the sale of merchandise  carrying the Predators'  logos, and concession sales at
Predators' home games.  Revenue from the Company's League ownership results from
the  Company's  share of all  League  revenue,  primarily  consisting  of League
contracts with national media  organizations,  expansion team  Membership  fees,
national corporate sponsorships and League merchandising sales.

     In April, 1998, the NFL amended its by-laws to allow its owners to purchase
additional professional football teams. Subsequently,  in May 1998, the owner of
the New Orleans  Saints became the first NFL owner to also own an Arena Football
team. The AFL New Orleans franchise will play in the 2001 season.


                                        4

<PAGE>


     As  indicated  above,  in  February  1999 the NFL was  granted a three year
option to  purchase  up to 49.9% of the  League.  Should  the NFL  exercise  its
option,  this  shared  ownership  will  improve the AFL's  ability to  negotiate
national media contracts,  to develop new league  corporate  sponsorships and to
sell AFL merchandise.

Arena Football and the Arena Football League

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

     In March 1987 the U.S.  Patent  Office issued a U.S.  Patent  ("Patent") to
Gridiron  Enterprises,  Inc. an Illinois corporation  ("Gridiron") for the Arena
Football  Game System and rules of play as well as  trademarks  for the logo and
names associated with Arena Football. In December 1991, the AFL was incorporated
as a non-profit membership  corporation in the state of Delaware.  Also in 1991,
Gridiron entered into an exclusive licensing agreement with the AFL to organize,
operate and market Arena  Football  throughout the United States by selling team
memberships in major markets  across the United  States.  In August 1998 the AFL
purchased  all patent and other  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 were 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 1998  season,  the
League  consisted of 14 teams including  expansion teams in New York, New Jersey
and  Nashville.  In the 1999 season,  a Buffalo team will commence  play, and in
2000 and 2001 expansion teams in Los Angeles and New Orleans,  respectively, are
expected to 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.


                                        5

<PAGE>



     Game attendance has risen  consistently  over the AFL's ten seasons of play
with over 1.1 million in total fan attendance announced for the 1998 season. Per
game announced attendance averaged  approximately 10,700 during the 1998 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,
47% have college or graduate degrees,  28% have some college  attendance and 12%
hold high school diplomas.

     The  membership  fee for new teams  joining the AFL has grown from $120,000
for the 1990  season to  $5,000,000  for the Los Angeles  franchise  expected to
begin play in the 2000 season.  There are  approximately  27 million  households
with AFL teams in their  metropolitan  areas,  up from 11 million  households in
1994. During the 1998 season, ESPN, ESPN 2 and ABC broadcast a total of 23 games
including four playoff games and the Arena Bowl.

     AFL team  salaries  for the 1998 season  ranged from  $350,000 to $650,000.
Players'  salaries  range from  $8,400 to $60,000  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
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.

                                        6

<PAGE>


     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.

     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 1999  season,  the AFL will  consist  of the  following  15  teams,
aligned into two conferences, with two divisions in each conference:

                               American Conference

         Western Division                        Central Division
         ----------------                        ----------------
         Arizona Rattlers                        Iowa Barnstormers
         Portland Forest Dragons                 Milwaukee Mustangs
         San Jose SaberCats                      Houston ThunderBears
                                                 Grand Rapids Rampage

                               National Conference

         Eastern Division                         Southern Division
         ----------------                         -----------------
         Albany Firebirds                         Florida Bobcats
         New England Sea Wolves                   Nashville Kats
         New Jersey Red Dogs                      Orlando Predators
         Buffalo Destroyers                       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


                                        7

<PAGE>



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  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 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 $45,000 for the first  playoff
round, $45,000 for the second playoff round and $50,000 for the Arena Bowl.

AFL Licensing

     The AFL operates a League licensing  program on behalf of its teams.  Under
the program,  product  manufacturers  sign  agreements  allowing them to use the
names and logos of all AFL  teams,  the AFL  itself  and  AFL's  special  events
(including  playoffs and the Arena Bowl) in exchange  for royalty and  guarantee
payments.  For the year ended  December 31,  1998,  the  Company's  share of net
revenues  from  licensing  was  negligible  and was credited  against the Team's
assessment  for that year.  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 1998
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. The Company purchased two non-voting equity interests in 1998 and
beginning in August 1998 the Team Share was 1/19  together with 2/19 for its two
non-voting equity interests.


                                        8

<PAGE>



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.  Brett L. Bouchy,  the Company's Chief Executive
Officer, 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
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


                                        9

<PAGE>


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 and its 10.5% net revenue  interest in the
League.  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 Company's share of League media contracts,  Membership fees paid
by expansion teams and League  licensing  sales, and (v) the sale of merchandise
carrying the Predators' logos.

     In March 1998, the Company  entered into an agreement with the AFL pursuant
to which it agreed to  purchase  an  additional  revenue  interest in the League
(which  would  represent  two  "Revenue  Interests"  or 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 by August 14,  1999,  one of the Revenue  Interests  will be
canceled  and the  Company  will  thereupon  receive  1/19 of the  League's  net
revenues, without a minimum guarantee.

     Ticket Sales.  The  Predators  played seven home games and seven away games
during  the  1998  AFL  regular  season  together  with  one  home  and one away
pre-season  exhibition  game.  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.   In  the  1998  season,  the  Company  sold
approximately  7,000  season  tickets  and had an  average  paid  attendance  of
approximately 8,600 per game. Ticket prices for regular season home games during

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<PAGE>



the 1998  season at the Orlando  Arena  ranged from $10 to $100 per game with an
average paid ticket price of  approximately  $22.15.  The Company expects ticket
sales to  improve  as a result of its Arena  Bowl  championship  in 1998 and the
institution of telemarketing techniques for ticket sales.

     The  following  table  sets  forth  certain  information  relating  to  the
Predators'  regular season revenue generated by the sale of tickets for the 1997
and 1998 seasons:

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

1998            7,055             8,661             $22.15           $191,805

1997            5,401             8,521             $22.63           $192,822


     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 (a large,  four sided  electronic
sign 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.  In March 1998,
the Company  entered into a  three-year  television  contract  with the Sunshine
Network for the 1998, 1999 and 2000 seasons providing for the Company to receive
approximately $70,000 per season. The Company also entered into a one-year radio
contract  with  Clear  Channel,  Inc.  providing  for  the  Company  to  receive
approximately $20,000 in 1998. Most of the proceeds from the two media contracts
are paid in the form of  bartered  commercial  television  and  radio  time made
available to the Company.

     National Television.  In February 1998, the AFL reached a two-year national
broadcast  agreement  with ESPN,  ESPN 2 and ABC  providing  for the networks to
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.


                                       11

<PAGE>



     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 $90,000 for the 1998 season.

     Telemarketing. In addition to using telemarketing techniques to improve the
Predators'  ticket  sales,  the  Company  has  signed  an  agreement  to use its
telemarketing  personnel to sell tickets and merchandise for the Tampa Bay Storm
of the AFL.  During  1998,  the Company  also earned  $130,600 in  telemarketing
revenue  from  Sunwest  P.E.O.  Inc., a related  party.  The Company  intends to
further  develop its  telemarketing  techniques in order to offer  telemarketing
ticket services for other collegiate and professional sports teams.

Summary of League Revenue and Expense

     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           1998
                                                         ----           ----
         Revenue:
         Expansion team membership fees                $181,250      $ 639,916
                  
         Assessments:
         Operating assessment                           125,000       120,0000
                  Other costs                            99,622          --
                                                       --------       --------
                     Total assessments                  224,622        120,000
                                                       --------       --------
         Net revenue (assessments)                     $(43,372)     $ 519,916
                                                       ========      =========



                                       12

<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
1998              9-5                 2nd                 Won Arena Bowl
                                                            Championship




Coaches

     Jay Gruden,  age 32, 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.

     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 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


                                       13

<PAGE>


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.

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.
<TABLE>
<CAPTION>

No         Name            Position(1)        Ht.    Wt.       Birthdate       Years in AFL
--         ----            -----------        ---    ---       ---------       ------------
<S>    <C>                  <C>              <C>     <C>       <C>              <C>               
 3     David Cool             K              5-11    207        05/23/69          Rookie
 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
 7     Kevin Gaines          DS              6-1     190        08/07/71          Rookie
 8     Chad Johnson          QB              6-3     210        03/19/74          Rookie
 9     Connell Maynor        QB/WR           6-0     180        01/21/69          5th Season
15     Ty Law                OS              6-1     180        11/27/71          3rd 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
23     Corris Ervin          DS              5-11    185        08/30/66          2nd Season
26     Bret Cooper           WR/DB           6-0     190        12/18/70          5th Season
28     Damon Mason           DS              5-9     175        03/21/74          Rookie
33     Tommy Dorsey          FB/LB           6-3     235        03/05/79          Rookie
42     Rick Hamilton         FB/LB           6-2     241        04/19/70          Rookie
46     Bill Hall             FB/LB           6-1     238        12/05/70          Rookie
65     Eric Drakes           OL/DL           6-5     265        01/24/69          6th Season
78     Webbie Burnett        OL/DL           6-3     285        11/07/67          6th Season
82     Barry Wagner          WR/DB           6-3     215        11/24/67          6th Season
83     James Crockett        DS              5-10    190        11/26/74          Rookie
84     Robert Gordon         OS              5-10    185        06/07/68          Rookie
87     Victor Hall           OL/DL           6-2     265        12/04/68          4th Season


                                  14

<PAGE>


90      Reggie Lee            OL/DL           6-2     280        12/21/67          Rookie
93      Kelvin Ingram         OL/DL           6-2     285        10/25/70          Rookie
97      Howard Smothers       OL/DL           6-3     280        11/16/73          Rookie
98      Matt Storm            OL/DL           6-3     320        09/02/72          Rookie
99      Connell Spain         OL/DL           6-2     285        06/09/74          Rookie
</TABLE>


(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

     Player  salaries  range from $8,400 to $60,000 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  have  played  in the  Orlando  Arena,  which  has a seating
capacity of approximately  16,000, since 1991. In March 1998, the Company signed
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 as
its previous  lease,  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 upon
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.
Under the terms of the Predators'  previous  lease,  which expired at the end of
the 1997 season,  the Predators  paid a rental that 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.

Competition

     The  Predators  compete  for  sports   entertainment   dollars  with  other
professional  sports teams and with college  athletics and other  sports-related
entertainment.  During  portions of the AFL season,  the Predators  compete with
professional  basketball  (NBA  and  WNBA)  in the  city  of  Orlando  and  with
professional  hockey  and  professional  baseball  in the state of  Florida.  In
addition,  the colleges and universities in central  Florida,  as well as public
and  private  secondary  schools,  offer  a full  schedule  of  athletic  events
throughout the year.  The Predators also compete for attendance and  advertising
revenue with a wide range of other  entertainment  and  recreational  activities
available  in  central  Florida.  On a broader  scale,  AFL teams  compete  with
football  teams fielded by high schools and colleges,  the  Professional  Indoor
Football League (a fledgling  indoor style football  league  established in 1997
with teams  operating in eight markets),  the NFL, the Canadian  Football League
and NFL Europe.

                                       15

<PAGE>




Employees

     In addition to its active  football  players,  the  Company  employs  eight
football  personnel and 24 non-football  personnel.  During the AFL season,  the
Company also uses volunteer  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.

Proposed Hockey Acquisition

     In March 1999 the Company  entered into a  non-binding  letter of intent to
purchase a majority  interest  in two minor  league  hockey  teams for an as yet
undetermined amount of cash and the Company's Class A Common Stock. A definitive
agreement  has not yet been  completed  and  would  be  subject  to a number  of
significant contingencies.

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

     The Company  leases its  executive  offices in Orlando,  Florida 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.  In April 1999, the Company
will move its  corporate  office and  telemarketing  facility to 400 West Church
Street in Orlando,  Florida  pursuant to a two year lease  covering  4800 square
feet for $900 per month.  The  Company  has agreed to  contribute  approximately
$40,000 in leasehold improvements.

     The  Predators  have  played  in the  Orlando  Arena,  which  has a seating
capacity of approximately  16,000, since 1991. In March 1998, the Company signed
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 as
its previous  lease,  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 upon
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.
Under the terms of the Predators'  previous  lease,  which expired at the end of
the 1997 season,  the Predators  paid a rental that 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.

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

     In December 1998, Jack Youngblood,  the Company's former  President,  filed
suit against the Company in the Circuit Court of the Ninth  Judicial  Circuit in
and for Orange County,  Florida  captioned  Youngblood vs. The Orlando Predators
Entertainment,  Inc., et al. (Case No.  C98-10027- 35). Mr.  Youngblood  alleges
that the Company  breached  its  employment  agreement  with Mr.  Youngblood  by
terminating his employment for job abandonment and by issuing  defamatory press

                                       16

<PAGE>



releases.  The Company believes Mr. Youngblood's claims are without merit and is
vigorously defending the action.

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

         Not applicable.


                                       17

<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 RANGE OF CLASS A COMMON STOCK

     
                                                               Closing Price
                                                               -------------
By Quarter Ended:                                           High           Low
----------------
March 31, 1999 (through March 22, 1999) ................   $5.375         $4.50
December 31, 1998 ......................................   $3.38          $3.25
September 30, 1998 .....................................   $3.88          $3.38
June 30, 1998 ..........................................   $5.25          $3.63
March 31, 1998 .........................................   $4.25          $2.94
December 31, 1997 ......................................   $4.25          $3.12

     As of March  10,  1999,  the  Company  had  approximately  900  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 5,130,166  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


                                       18

<PAGE>



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 validly issued, fully paid and
nonassessable.  The holders of the Class B Common  Stock are entitled to convert
each share of Class B Common Stock into one share of Class A Common Stock.

Redeemable Warrants

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

                                       19
<PAGE>
                                     
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
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.

                                       20

<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 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  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  "forwarding-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 heron 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 for the
future results covered in such forward-looking statements.

Results of Operations

Year Ended December 31, 1998 Compared to Period Ended December 31, 1997

     Revenues.  Revenues for the period ended December 31, 1998 were  $3,559,329
which  represented  a  increase  of  861,435  or 32% as  compared  to revenue of
$2,697,894 for the period ended December 31, 1997.

     Season  ticket  prices for the 1998 season  decreased by an average of 10%.
However,  the  number  of  season  ticket  holders  increased  by  1,889,  which
represented an increase in season ticket holders of over 38% for the year.

     The Company operated under the first year of a new lease agreement with the
Orlando Arena that allowed the Company to participate in concession  revenue for
the first time. For the year ended  December,  31, 1998,  the Company  generated
$122,866 in  concession  revenue for the nine home games played  compared to the
prior period when no concession revenue was generated.


     Playoff  game revenue was  $225,762,  an increase of $40,444 or 22% for the
year ended December 31, 1998 compared to $185,318 for the period ended December,
31,  1997.  Playoff game  revenue  sharing  increased by $50,000 due to the team
playing an extra game and winning the Arena Bowl XII championship.

                                       21

<PAGE>


     Sponsorship  revenue was $681,075 for the year ended  December 31, 1998, an
increase of $46,829 or 7% compared to $634,246 for the period ended December 31,
1997.

     League  revenues  were  $639,916 for the year ended  December 31, 1998,  an
increase of $458,666 or 253% compared to $181,250 for the period ended  December
31, 1997 due to the two, non-voting equity interests in the AFL that the Company
purchased in August 1998.  The  expansion Los Angeles team paid the League a fee
of $5,000,000 in November, 1998.

     Telemarketing  revenue is a new segment  for the  Company  this year and it
generated  revenue of  $130,600  for the period  ended  December  31,  1998.  It
produces  commissions  based on the  number of sales made  through  an  employee
leasing company,  which is owned by a related party. The Company anticipates the
expansion of this division in the future and will continue to use it to generate
sales of season tickets.

     Operating Expenses.  Operating expenses of $1,829,158 increased $135,229 or
8% as compared to the prior period of $1,693,929. The increase was due primarily
to the increase in medical costs related to post season surgeries.

     Playoff Expenses.  Playoff expenses of $357,121 for the year ended December
31, 1998  increased  by  $127,618  compared  to  $229,503  for the period  ended
December 31, 1997. This was due to the additional championship away game. In the
prior year,  the Company had two playoff  games  compared to three games for the
current year.

     Selling  and  Promotional  Expenses.  Selling and  promotional  expenses of
$527,182  for the year ended  December  31,  1998  increased  $140,825 or 36% as
compared for the period ended December 31, 1997 primarily due to (i) an increase
in an advertising  campaign of print and radio,  and (ii) increased  commissions
paid to Orlando Predator season ticket telemarketers.

     League  Assessments.  League  assessments  of  $120,000  for the year ended
December  31, 1998  decreased  $104,622 or (47%) as compared to $224,622 for the
period ended December 31, 1997.  This decrease is due to a reduction in expenses
associated  with legal  settlements and legal bills with former teams as well as
other claims.  The AFL is comprised of a number of teams who share in all league
expenses and  revenues.  League  assessments  are based upon the team's share of
league operating expenses and other league expenses such as legal settlements.

     General and Administrative Expenses. General and administrative expenses of
$1,457,172  for the year ended  December  31,  1998  increased  $585,966  or 67%
compared to $871,206 for the period ended  December 31, 1997.  This increase can
be attributed  to increased  payroll costs of $235,894 due to an increase in the
number of  employees.  It can also be  attributed  to the shorter  prior period.
Other increases  included office operations costs of $82,301,  printing expenses
of $70,619,  offering costs from a discontinued offering of $57,046, bridge loan
fees of $95,000 and legal costs of $36,568.

     Telemarketing  Expense.  Due  to the  addition  of  the  new  telemarketing
services segment, the Company incurred expenses in the amount of $220,107. These
costs were associated with operating this segment.

                                       22

<PAGE>


     Interest  Expense.  Interest  expense  was  $29,162  for the  period  ended
December  31, 1998  compared to $2,520 for the period  ended  December 31, 1997.
Related party interest  expense was $34,256 for the year ended December 31, 1998
compared to $104,083  for the period  ended  December  31,  1997.  The  interest
expense and the related party  interest  expense  during the twelve months ended
December,  1998 were related to bridge loans of  $2,000,000,  which were used in
the initial down payment for $3,500,000 used to secure the two equity  interests
in the AFL. The interest  expense  during the period ended December 31, 1997 was
related to the debt  assumed  in the  purchase  of the  Company  and  additional
advances for operations made by stockholders of the Company.

     Interest  Income.  Interest income for the year ended December 31, 1998 was
$207,640  compared  to $12,601  for the period  ended  December  31,  1997.  The
increase can be  attributed  to the proceeds  received  from the initial  public
offering and the interest related to the receivable recorded from the League.

Period 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.)

     Revenue.  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 decreases in  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 was offset by increases in
League revenue of $163,467 and playoff revenue of $145,318.

     The Company  expects that revenue will increase during the 1998 season as a
result of (i) increased  ticket sales for the 1998 season and (ii) the Company's
new lease with the Orlando Arena which  provides the Company with a 20% share of
concession  revenue at Predators' home games and a rebate against rent of $3 per
person (up to $10,000)  for games in which  attendance  exceeds  9,000  persons.
However,  a portion of this  revenue  will be offset by  slightly  lower  ticket
prices. See "Business - Properties."

     Operating  Expenses.  Operating expenses  (including playoff expenses) were
$1,923,432,  a  decrease  of  $270,325  or 12.3% as  compared  to the prior year
operating  expenses 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 of approximately $159,000 related to
an additional home playoff game.

     Selling and Promotional  Expenses.  Selling and  promotional  expenses were
$386,357,  a  decrease  of 12.8%,  or  $57,048,  as  compared  to the prior year
primarily due to the decreased preseason marketing efforts.

     League  Assessments.  League  assessments  were  $224,622,  an  increase of
$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.


                                       23

<PAGE>



     General and Administrative  Expenses.  General and administrative  expenses
were $871,206,  an increase of $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.

     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 has financed net operating losses primarily with
loans from the  team's  former  managing  general  partners  and the sale of its
securities.

     During April 1998, the Company completed an offering of 40 units, with each
unit consisting of one $450,000 promissory note bearing interest at 7% per annum
and 4,000  warrants to purchase  the  Company's  Class A Common  Stock  expiring
December 31, 2001. The notes were due on the earlier of December 31, 2001 or the
closing  date of a public  offering in excess of  $5,000,000.  A  commission  of
$95,000 was paid in  connection  with the  transaction.  Of the  $2,000,000  (40
units) promissory notes, $1,050,000 (21 units) were sold to current stockholders
or directors,  including $850,000 (17 units) to Monolith.  Notes of $755,000 and
accrued  interest of $5,573 were  converted to 304,229  shares of the  Company's
Class A Common Stock in the August 31, 1998  private  placement.  The  remaining
notes payable and accrued interest of $1,295,774 were paid on September 1, 1998.

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

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

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

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

     On November 5, 1998, the Company  received a payment from the League in the
amount of $672,791. This payment represented the principle payment of $9,546 and
interest of $150,454,  as well as, a distribution  from the League in the amount
of $512,791.

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

                                       24

<PAGE>


Year 2000 Issue

     Many  computer   systems  and  other   equipment  with  embedded  chips  or
microprocessors may not be able to appropriately  interpret dates after December
31, 1999 because such systems use only two digits to indicate a year in the date
field rather than four digits.  If not  corrected,  many  computers and computer
applications could fail or create  miscalculations,  causing  disruptions to the
Company's operations. In addition, the failure of customer and supplier computer
systems could result in  interruption of sales and deliveries of key supplies or
utilities.  Because  of the  complexity  of the issues and the number of parties
involved,  the Company  cannot  reasonably  predict with certainty the nature or
likelihood of such impacts.

     Using  internal  staff and  outside  consultants,  the  Company is actively
addressing this situation and anticipates that it will not experience a material
adverse impact to its operations,  liquidity or financial  condition  related to
systems under its control. The Company is addressing the Year 2000 issue in four
overlapping  phases:  (i) identification and assessment of all critical software
systems and equipment requiring  modification or replacement prior to 2000; (ii)
assessment of critical business  relationships  requiring  modification prior to
2000; (iii) corrective action and testing of critical systems;  (iv) development
of contingency and business continuation plans to mitigate any disruption to the
Company's operations arising from the Year 2000 issue.

     The Company is in the process of implementing a plan to obtain  information
from its external service providers,  significant  suppliers and customers,  and
financial  institutions to confirm their plans and readiness to become Year 2000
compliant, in order to better understand and evaluate how their Year 2000 issues
may affect the Company's operations.  The Company currently is not in a position
to assess this aspect of the Year 2000 issue; however, the Company plans to take
the necessary steps to provide itself with reasonable assurance that its service
providers,  suppliers,  customers  and  financial  institutions  are  Year  2000
compliant. This phase is 50% complete to date.

     The  Company is  developing  contingency  plans to  identify  and  mitigate
potential problems and disruptions to the Company's  operations arising from the
Year 2000 issue.  This phase is expected to be completed by May, 1999. The total
cost to  achieve  Year  2000  compliance  is  currently  estimated  at  $39,000.
Approximately $34,000 has been spent to date on a new networked computer system.

     While the Company  believes that its own internal  assessment  and planning
efforts with respect to its external service providers, suppliers, customers and
financial  institutions  are and will be  adequate  to  address  its  Year  2000
concerns,  there can be no assurance  that these  efforts will be  successful or
will not have a material adverse effect on the Company's operations.


                                       25

<PAGE>




ITEM 7.  FINANCIAL STATEMENTS











                                       26
<PAGE>
  

                                      INDEX
                                      -----

                                                                        Page
                                                                        ----

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



                                      F-1



<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,  1998,  and the related  statements  of
operations,  changes  in  stockholders'  equity and cash flows for the year then
ended and for the period  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 audits.

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

In our opinion,  the financial  statements referred to above, present fairly, in
all  material  respects,   the  financial  position  of  The  Orlando  Predators
Entertainment,  Inc. as of December  31, 1998 and the results of its  operations
and its cash flows for the year then ended and for the period  February 14, 1997
(inception)  to  December  31,  1997,  in  conformity  with  generally  accepted
accounting principles.




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

Denver, Colorado
March 17, 1999


                                      F-2
<PAGE>


                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                                  BALANCE SHEET
                                DECEMBER 31, 1998
                                =================
                 
                                     ASSETS

CURRENT ASSETS:
     Cash                                                             $  117,188
     Accounts receivable, sponsorships                                   220,311
     Accounts receivable, related party                                  106,734
     AFL receivable, current portion                                      33,398
     Inventory                                                            20,585
     Receivable from employees                                            45,135
     Prepaid expenses                                                    256,561
                                                                      ----------

                  Total Current Assets                                   799,912


PROPERTY AND EQUIPMENT, at cost, net                                     243,997


EQUITY INVESTMENT IN AFL                                               4,032,650



AFL RECEIVABLE, net of current portion                                 1,923,027


MEMBERSHIP COST, net                                                   1,894,512


OTHER INTANGIBLES, net                                                    34,474


RESTRICTED INVESTMENT                                                    100,000

OTHER ASSETS                                                               2,544
                                                                      ----------

                                                                      $9,031,116
                                                                      ==========


           SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS 

                                      F-3


<PAGE>


                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                            BALANCE SHEET (Continued)
                                DECEMBER 31, 1998
                                ==================


                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable and accrued expenses                          $   268,221
     Accounts payable and accrued expenses,
      related parties                                                    25,661
     Accrued interest, related party                                      6,671
     Deferred revenue                                                   643,672
                                                                    -----------

                  Total Current Liabilities                             944,225
                                                                    -----------

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;              9,867,150
         5,050,000 issued and outstanding
     Class B Common Stock, 1,000 shares authorized,                       5,000
         1,000 issued and outstanding
     Additional paid-in capital                                          77,940
     Accumulated (deficit)                                           (1,863,199)
                                                                    -----------

                  Total Stockholders' Equity                          8,086,891
                                                                    -----------

                                                                    $ 9,031,116
                                                                    ===========

                 SEE ACCOMPANYING NOTS TO FINANCIAL STATEMENTS

                                      F-4

<PAGE>
<TABLE>
<CAPTION>

                                THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                                       STATEMENTS OF OPERATIONS
                              FOR THE YEAR ENDED DECEMBER 31, 1998 AND
                             FOR THE PERIOD FEBRUARY 14 TO DECEMBER 31, 1997
                             ===============================================

                                                                        1998                     1997
                                                                    -----------              -----------
<S>                                                                 <C>                      <C>   
REVENUES:
     Ticket revenues                                                $ 1,534,440              $ 1,542,577
     Concession income                                                  122,866                     --
     Play-off game ticket revenues                                      130,762                  140,318
     Play-off game revenue sharing                                       95,000                   45,000
     Local television and radio broadcast rights                         76,752                   87,632
     Advertising and promotions                                         669,267                  644,529
     Advertising and promotions, related party                          100,000                   50,000
     League revenue                                                     639,916                  181,250
     Telemarketing income, related party                                130,600                     --
     Other                                                               59,726                    6,588
                                                                    -----------              -----------

              Total Revenues                                          3,559,329                2,697,894
                                                                    -----------              -----------

COSTS AND EXPENSES:
     Operations                                                       1,829,158                1,693,929
     Operations, related party                                           11,197                    5,362
     Playoff expenses                                                   357,121                  229,503
     Selling and promotional expenses                                   527,182                  386,357
     League assessments                                                 120,000                  224,622
     General and administrative                                       1,457,172                  871,206
     Telemarketing expenses                                             220,107                     --
     Amortization                                                        70,432                   52,496
     Depreciation                                                        43,610                   32,402
                                                                    -----------              -----------

              Total Costs and Expenses                                4,635,979                3,495,877
                                                                    -----------              -----------

OPERATING (LOSS)                                                     (1,076,650)                (797,983)
                                                                    -----------              -----------

OTHER INCOME (EXPENSE):
     Interest expense                                                   (29,162)                  (2,520)
     Interest expense, related party                                    (34,256)                (104,083)
     Interest income                                                     57,186                   12,601
     Interest income, AFL                                               150,454                     --
     Loss from equity investment in AFL                                 (38,786)                    --
                                                                    -----------              -----------

              Net Other Income (Expense)                                105,436                  (94,002)
                                                                    -----------              -----------

NET (LOSS)                                                          $  (971,214)             $  (891,985)
                                                                    ===========              ===========

NET (LOSS) PER SHARE                                                $      (.29)             $      (.61)
                                                                    ===========              ===========

Weighted Average Number of Common Shares Outstanding                  3,374,836                1,463,796
                                                                    ===========              ===========

                              SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                                   F-5
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                                               
                                               ORLANDO PREDATORS ENTERTAINMENT, INC.
                                           STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
                                             FOR THE YEAR ENDED DECEMBER 31, 1998 AND
                                             FOR THE PERIOD ENDED DECEMBER 31, 1997
 
                                                                                                                  
                                      Class A Common Stock         Class B Common Stock   Additional
                                     -----------------------       --------------------     Paid-In     Accumulated
                                       Shares        Amount        Shares      Amount       Capital     (Deficit)          Total
                                     ---------   -----------       ------    ---------     ---------    ----------         -----

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

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

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

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

Net (loss)                                --            --            --            --           --        (891,985)      (891,985)
                                     ---------   -----------   -----------   -----------   ----------   -----------    -----------

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

Class A  Common Stock issued in      2,570,000     5,005,443          --            --           --            --        5,005,443
   private placements, net of
   offering costs of $794,556

Stock options issued to consultants       --            --            --            --         77,940          --           77,940

Net (loss)                                --            --            --            --           --        (971,214)      (971,214)
                                     ---------   -----------   -----------   -----------   ----------   -----------    -----------

Balances,                            5,050,000   $ 9,867,150         1,000   $     5,000   $ 77,940     $(1,863,199)   $ 8,086,891
   December 31, 1998                 =========  ============      ========   ===========   ========     ===========    ===========


                                             SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                                                  F-6
</TABLE>

<PAGE>
<TABLE>
<CAPTION>
                                                                              
                                             THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                                                      STATEMENT OF CASH FLOWS
                                             FOR THE YEAR ENDED DECEMBER 31, 1998 AND
                                          FOR THE PERIOD FEBRUARY 14 TO DECEMBER 31, 1997
                                          ===============================================
   
                                                                                  1998                  1997
                                                                             -----------            ------------
<S>                                                                           <C>                  <C>   
CASH FLOWS FROM (TO) OPERATING ACTIVITIES:
     Net (loss)                                                              $  (971,214)           $  (891,985)
     Adjustments to reconcile net (loss) to net cash
       from operating activities:
         Depreciation and amortization                                           114,042                 84,898
         Loss from equity interest in AFL                                         38,787                   --
         Stock options issued to consultants                                      77,940                   --
     Changes in assets and liabilities:
         Accounts receivable, sponsorships                                      (220,311)               688,956
         Employee receivables                                                      6,582                (46,256)
         Inventory                                                                (5,926)                 5,326
         Prepaid expenses                                                       (162,427)                (1,693)
         Accounts receivable, related party                                     (106,734)                  --
         Other assets                                                             (1,636)                  (908)
         Accounts payable                                                        (29,062)               109,182
         Accrued expenses                                                        129,928                 15,612
         Accounts payable, related party                                         (54,447)                80,108
         Accrued expenses, related party                                         (86,839)               104,083
         Due to AFL                                                                 --                   (8,000)
         Deferred revenue                                                        186,029               (830,544)
                                                                             -----------            -----------

                Net Cash (Used) by Operating Activities                       (1,085,288)              (691,221)
                                                                             -----------            -----------

CASH FLOWS FROM (TO) INVESTING ACTIVITIES:
     Purchase of equipment                                                       (25,758)               (27,130)
     Sale of equipment                                                               548                   --
     Investment in AFL                                                        (4,071,437)                  --
     Issuance of AFL receivable                                               (1,965,971)                  --
     Collections on AFL receivable                                                 9,546                   --
     Investment in certificate of deposit                                           --                 (100,000)
     Payments for contract purchase                                                 --                  (62,054)
                                                                             -----------            -----------

                Net Cash (Used) by Investing Activities                       (6,053,072)              (189,184)
                                                                             -----------            -----------

CASH FLOWS FROM (TO) FINANCING ACTIVITIES:
     Proceeds from loans from stockholders                                       316,000              1,080,000
     Proceeds from issuance of notes payable to related parties                1,050,000                   --
     Repayments of loans from stockholders                                      (316,000)            (2,317,828)
     Repayment of notes payable                                                 (200,000)                  --
     Proceeds from issuance of notes payable                                     950,000                   --
     Proceeds from issuance of Class A Common Stock                            5,039,426              5,500,000
     Repayment of notes payable to related parties                            (1,045,000)                  --
     Payment of offering costs                                                  (794,556)            (1,126,089)
                                                                             -----------            -----------

               Net Cash Provided by Financing Activities                       4,999,870              3,136,083
                                                                             -----------            -----------

INCREASE (DECREASE)  IN CASH                                                  (2,138,490)             2,255,678

CASH, beginning of period                                                      2,255,678                   --
                                                                             -----------            -----------

CASH, end of period                                                          $   117,188            $ 2,255,678
                                                                             ===========            ===========

CASH PAID FOR INTEREST                                                       $   149,857            $      --
                                                                             ===========            ===========

Supplementary information:
See Note 6

                                        SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS

                                                             F-7
</TABLE>


<PAGE>


                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================
   

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 or  League).  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.

Management's Plan
-----------------
The  Company  had a net loss of  $892,000  in 1997 and  $971,000  in 1998 and an
accumulated  deficit of $1,863,000 as of December 31, 1998. Current  liabilities
exceed current assets by $145,000 as of December 31, 1998.

The  majority  stockholder  of the Company,  Monolith, has agreed that they will
continue to use their best efforts to  financially  support the Company with any
cash flow deficiencies they may have in their calendar year end 1999.

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 periods ended December 31,
1998 and December 31, 1997 was $43,610 and $32,402, respectively.

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-8
<PAGE>



                    THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================
   

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 periods ended
December 31, 1998 and December 31, 1997 was $49,747 and $45,601, respectively.

Impairment of Long Lived Assets
-------------------------------
The Company  evaluates its long lived assets by measuring the carrying amount of
the assets against the estimated  undiscounted future cash flows associated with
them. At the time such evaluations  indicate the future  undiscounted cash flows
of certain long lived assets are not  sufficient to cover the carrying  value of
such assets,  the assets are adjusted to their fair values. No adjustment to the
carrying value of the assets have been made.

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  periods  ended  December  31,  1998 and  December  31, 1997 was
$20,685 and $6,895, respectively.

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.

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.

Investment in AFL
-----------------
The Company  accounts for its two non-voting  equity  interests in the AFL using
the equity method.

                                      F-9
<PAGE>

                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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

Deferred tax assets arise primarily from the net operating loss 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, 1998 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, AFL note receivable, accounts payable
and accrued  expenses  approximate  fair value because of the short  maturity of
these items.

Earnings Per Common Share
-------------------------
The Company  computes  earnings per common share in accordance with Statement of
Financial  Accounting Standards No. 128, Earnings Per Share (SFAS No. 128). This
Statement  simplifies  the  standards  for  computing  earnings  per share (EPS)
previously  found in Accounting  Principles  Board Opinion No. 15,  Earnings Per
Share, and makes them more comparable to international  EPS standards.  SFAS No.
128 replaces the  presentation  of primary EPS with a presentation of basic EPS.
In addition,  the Statement  requires dual presentation of basic and diluted EPS
on the face of the  income  statement  for all  entities  with  complex  capital
structures and requires a reconciliation of the numerator and denominator of the
basic EPS  computation  to the  numerator  and  denominator  of the  diluted EPS
computation. Diluted EPS is not presented since the computation is antidilutive.

                                      F-10
<PAGE>

                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Stock-Based Compensation
------------------------
The  Company  accounts  for stock  based  compensation  in  accordance  with the
Financial Accounting Standards Board Statement of Financial Accounting Standards
No. 123  "Accounting  for  Stock-Based  Compensation"  (SFAS No.123).  Under the
provisions of SFAS No. 123,  companies can either measure the compensation  cost
of equity  instruments  issued under  employee  compensation  plans using a fair
value based  method,  or can continue to recognize  compensation  cost using the
intrinsic  value  method under the  provisions  of APB No. 25.  However,  if the
provisions of APB No. 25 are  continued,  proforma  disclosures of net income or
loss  and  earnings  or loss  per  share  must  be  presented  in the  financial
statements as if the fair value method had been applied.  The Company recognizes
compensation  costs  under the  provisions  of APB No. 25 and 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"  and No.  132,  "Employers  Disclosure  about  Pensions  and  Other
Postretirement  Benefits",  effective for fiscal years  beginning after December
15,  1997.  The Company has  disclosed  its  operating  segments in Note 11. The
adoption  by the  Company  of  Statements  No.  130 and 132 did not  impact  the
Company's financial statement.

Year 2000 Issues
----------------
Many computer systems and other equipment with embedded chips or microprocessors
may not be able to appropriately interpret dates after December 31, 1999 because
such  systems  use only two digits to  indicate a year in the date field  rather
than four digits.  If not corrected,  many  computers and computer  applications
could  fail or create  miscalculations,  causing  disruptions  to the  Company's
operations.  In addition,  the failure of customer and supplier computer systems
could  result  in  interruption  of sales  and  deliveries  of key  supplies  or
utilities.  Because  of the  complexity  of the issues and the number of parties
involved,  the Company  cannot  reasonably  predict with certainty the nature or
likelihood of such impacts.

Using internal staff and outside consultants, the Company is actively addressing
this situation and  anticipates  that it will not experience a material  adverse
impact to its operations,  liquidity or financial  condition  related to systems
under its  control.  The  Company  is  addressing  the Year  2000  issue in four
overlapping  phases:  (i) identification and assessment of all critical software
systems and equipment requiring  modification or replacement prior to 2000; (ii)
assessment of critical business  relationships  requiring  modification prior to
2000; (iii) corrective action and testing of critical systems;  (iv) development
of contingency and business continuation plans to mitigate any disruption to the
Company's operations arising from the Year 2000 issue.

                                      F-11
<PAGE>


                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

The Company is in the process of implementing a plan to obtain  information from
its  external  service  providers,  significant  suppliers  and  customers,  and
financial  institutions to confirm their plans and readiness to become Year 2000
compliant, in order to better understand and evaluate how their Year 2000 issues
may affect the Company's operations.  The Company currently is not in a position
to assess this aspect of the Year 2000 issue; however, the Company plans to take
the necessary steps to provide itself with reasonable assurance that its service
providers,  suppliers,  customers  and  financial  institutions  are  Year  2000
compliant. This phase is 50% complete to date.

The Company is developing  contingency plans to identify and mitigate  potential
problems and disruptions to the Company's  operations arising from the year 2000
issue.  This phase is expected to be completed by May,  1999.  The total cost to
achieve Year 2000 compliance is currently estimated at $39,000.
Approximately $34,000 has been spent to date on a new networked computer system.

While the Company believes that its own internal assessment and planning efforts
with  respect  to its  external  service  providers,  suppliers,  customers  and
financial  institutions  are and will be  adequate  to  address  its  Year  2000
concerns,  there can be no assurance  that these  efforts will be  successful or
will not have a material adverse effect on the Company's operations.

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.

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).

                                      F-12
<PAGE>


                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================


NOTE 2 - ACQUISITION OF PREDATORS (Continued)

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
                                                                    ===========

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,  the Company's two additional,  non-voting  equity
interests  (see  Note 10) and the two  equity  interests  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 Arena Football League's  strategic  development plan calls for the formation
of an AFL minor league system ("AF2")  beginning in the year 2000. The Company's
share of the 1999 season budget is as follows:

Revenue:
     "AFL" Expansion membership fees                                  $    --
     "AF2" Expansion membership fees                                     11,053
                                                                      ---------
                                                                         11,053
Assessments:
     Operating assessment                                              (120,000)
     Other assessments                                                   (9,000)

Net Assessment                                                        $(117,947)
                                                                      =========

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

                                      F-13

<PAGE>

                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================


NOTE 3 - ARENA FOOTBALL LEAGUE (Continued)

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
$800,000.  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.  In the opinion
of the  Company's  management,  the  resolution of those matters will not have a
material  adverse  effect on the AFL's  results  of  operations,  cash  flows or
financial position.

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

NOTE 4 - PROPERTY AND EQUIPMENT

Property and equipment consists of the following:

                                                                   December 31,
                                                                      1998
                                                                   -----------

Office equipment                                                    $  76,650
Game equipment and system                                             243,207
                                                                    ---------
                                                                      319,857
Less accumulated depreciation                                         (75,860)
                                                                    ---------

                                                                    $ 243,997
                                                                    =========
NOTE 5 - COMMITMENTS AND CONTINGENCIES

Local Media Contracts
---------------------
In March 1998, the Company entered into a three-year television contract for the
1998,  1999 and 2000  seasons,  which  requires  the Company to provide  certain
services,  goods and game  tickets  in  exchange  for  approximately  $80,000 of
commercial  time,  promotional  events and the right to broadcast the games. The
Company also entered into a one-year  radio  contract with under similar  terms.
The Company is currently negotiating a new radio contract.

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-14

<PAGE>


                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================


NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)

The former President had 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.
During December 1998, the former President was dismissed.

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 had 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  agreement  was  amended  effective  January  1, 1999,
providing  for an increase in salary  ranging  from  $90,000 to $115,000  and an
extension  of the  term  of the  agreement  for an  additional  2  years  at the
Company's  option.  He was also granted options to purchase 30,000 shares of the
Company's  Class A Common  Stock  with an  exercise  price of $3.19  for  15,000
shares, and $3.25 for 15,000 shares.

The Vice-President of Sales and Marketing had 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. The agreement was subsequently  cancelled when the employee  resigned and
accepted  the  position  of  Vice-President  of  Business  Development.  The new
agreement  is for one year and calls for annual  compensation  of  $45,000,  20%
commission on all new season ticket sales by the employee, 30% of gross revenues
from Company sanctioned seminars and 6 season tickets.

The Chief  Financial  Officer of the Company has a 1 year  employment  agreement
with annual compensation of $50,000 and options to purchase 50,000 shares of the
Company's Class A Common Stock with an exercise price of $3.19 per share.

Lease Obligations
-----------------
In  March  1998,  the  Company  signed a  five-year  lease  (with an  additional
five-year  option)  with the Orlando  Centroplex  arena  commencing  in the 1998
season.  The agreement  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  upon  seat
location.  The  Company  will also  receive a credit to be  applied  to the game
rental of $3 per person (up to $10,000)  for games in which  attendance  exceeds
9,000 persons.


                                      F-15
<PAGE>


                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================


NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)

During  September 1998, the Company entered into an 8 month lease agreement with
the City of Orlando for office space for the telemarketing division at a rate of
$2,828 per month.  As of December 31, 1998,  minimum  future rent payments under
the lease were $11,312.

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

The Company was given notice in January 1999,  that the  corporate  office space
received as trade for a sponsorship from a financial institution would no longer
be available as of March 31, 1999. The Company has entered into a two year lease
agreement at a rate of $900 per month.

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

                                                Corporate          Orlando
                                                  Office          Centroplex
                                               --------------    --------------
1999                                           $        8,100    $       60,000
2000                                                   10,800            60,000
2001                                                    2,700            60,000
2002                                                    -                60,000
                                               --------------    --------------

                                               $       21,600    $      240,000
                                               ==============    ==============


Rent expense for the periods  ended  December 31, 1998 and December 31, 1997 was
$163,752 and $170,941, respectively.

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.

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

The  Company  believes  that  these  claims  are  without  merit and  intends to
vigorously defend the action.


                                      F-16

<PAGE>

                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================


NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)

Put Options
-----------
In August 1998,  Monolith  entered into an agreement  with a stockholder  of the
Company,  who purchased  1,000,000 shares of the Company's Class A voting Common
Stock for $2,000,000. The agreement requires Monolith to purchase 600,000 shares
of  the  Company's  Class  A  voting  Common  Stock  from  the  stockholder  for
$4,000,000, at the stockholder's option, through May 9, 1999. The stockholder is
also a partner in Monolith.  Generally accepted  accounting  principles requires
the  Company's  sale  of  stock  to be  accounted  for as a  borrowing,  and any
difference between the sale proceeds and the option price be accrued as interest
expense, if it is probable that the option will be exercised. The option has not
yet been exercised,  and the Company believes, based upon written representation
received from the  stockholder,  that it is not probable that the option will be
exercised.

NOTE 6 - SUPPLEMENTAL CASH FLOW INFORMATION

For the Period Ended December 31, 1997
--------------------------------------
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 a note payable to 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.

For the Year Ended December 31, 1998
------------------------------------
On August 31, 1998 the Company  converted notes of $755,000 and accrued interest
of $5,573 to 304,229 shares of the Company's Class A Common Stock.

                                      F-17

<PAGE>


                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================


NOTE 7 - COMMON STOCK

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

                                      Option         Outstanding Options
                                      Shares                    Price Per
                                     Available      Shares        Share
                                     ---------      ------        -----

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

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

Additional reserved shares            350,000        -               -
Granted                               295,000       295,000       3.19-4.75
Cancelled                              23,667       (23,667)           2.00
                                     --------    ----------    ------------

Balance, December 31, 1998             90,667       409,333    $  2.00-4.75
                                     ========    ==========    ============


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).  An  additional  charge to income of
$340,990  would have been  required in 1998;  proforma  net loss would have been
($1,312,204) and loss per share would have been ($.39).

The Company granted stock options to two  consultants and recognized  $77,940 of
stock based compensation, during the year ended December 31, 1998.


                                      F-18
<PAGE>


                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================

NOTE 7 - COMMON STOCK (Continued)

In 1998, the Company  granted stock options to purchase  250,000 shares at $2.50
per  share  expiring  October  26,  2002  to  the  Vice  President  of  Business
Development. These options were not granted under the Stock Option Plan.

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

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.

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

The Company completed the following private placements during 1998:
 
                                   Gross          Offering             Net
                  Shares         Proceeds           Costs            Proceeds
                  ------         --------           -----            --------

August 11        1,250,000     $  2,500,000     $       -          $  2,500,000
August 31        1,200,000        3,000,000            749,557        2,250,443
October 13         100,000          250,000             37,500          212,500
December 11         20,000           50,000              7,500           42,500
                ----------     ------------     --------------     ------------

                 2,570,000     $  5,800,000     $      794,557     $  5,005,443
                ==========     ============     ==============     ============

                                      F-19

<PAGE>


                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================


NOTE 8 - NOTES PAYABLE - BRIDGE LOANS

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

NOTE 9 - INCOME TAXES

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

Total deferred tax assets                                             $ 698,016
Less valuation allowance                                               (698,016)
                                                                      ---------

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                                             $ (10,872)
   Membership cost                                                       35,851
   Accrued interest-stockholders                                          2,508
   Net operating loss carryforward                                      670,529
Less valuation allowance                                               (698,016)
                                                                      ---------

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

                                      F-20
<PAGE>

                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================


NOTE 9 - INCOME TAXES (Continued)

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

                                                        1998             1997
                                                     ---------        ---------
Temporary differences:
   Depreciation expense                              $   8,099        $   2,773
   Amortization expense                                (18,705)         (17,146)
   Interest-stockholders                                34,747          (37,255)
   Net operating loss carryforward                    (386,771)        (283,759)
Less valuation allowance                               362,630          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):

                                                       1998             1997
                                                     ---------        ---------
Benefit at statutory rates                           $(330,213)       $(303,275)
Other                                                  (19,527)         (20,693)
State tax effect                                       (12,890)         (11,419)
Increase in valuation allowance                        362,630          335,387
                                                     ---------        ---------

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

No provision for income taxes has been  recorded for the periods ended  December
31, 1998 and December 31, 1997, as the Company has incurred  losses during these
periods.  Net  operating  loss  carryovers  of  approximately  $1,028,646  as of
December  31, 1998 and $754,677 as of December 31, 1997 expire in 2016 and 2012,
respectively.  The Company is providing a full valuation allowance in connection
with the deferred  tax assets  because  there is no assurance of future  taxable
income.

NOTE 10 - PURCHASE OF EQUITY INTERESTS IN THE AFL

In August 1998 the Company  acquired two,  non-voting,  equity  interests in the
Arena Football League,  Inc. (AFL) for $6,000,000 plus acquisition  costs.  Each
similar  equity  interest  entitles the Company to share equally with each other
member in AFL revenues.  The AFL guarantees to pay the Company at least $480,000
per year until the Company  receives an aggregate of $6,000,000  through  League
distribution.  If the  Company  receives  $6,000,000  within  one year  from the
closing  of the  purchase,  one  equity  interest  returns to the League and one
equity interest  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 equity interests.


                                      F-21
<PAGE>


                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================

NOTE 10 - PURCHASE OF EQUITY INTERESTS IN THE AFL (Continued)

The  $6,000,000  was paid as  follows:  $3,500,000  was paid  with the  executed
contract and $2,500,000 was paid on August 14, 1998.

The  purchase of the rights for the two,  non-voting,  equity  interests  in the
League has been recorded as an investment  accounted for under the equity method
of  accounting  at  $4,071,437,  and  an  unsecured,   receivable  recorded  for
$1,965,971  from the League,  with  imputed  interest of 23% and  principal  due
annually on August 14 of each year. The minimum payment is $480,000 annually.

During the year ended  December 31, 1998 the Company's  recorded a loss from its
equity  interest in the AFL of $38,786 based upon its equity share of the AFL of
approximately  10.5% and received  $9,546 in principal  payments and $150,454 in
interest income.

NOTE 11 - OPERATING SEGMENTS

The Company organizes its business units into two reportable segments:  football
operations and telemarketing  services. The football operations segment operates
the AFL team  and the  telemarketing  services  segment  provides  telemarketing
services to a related party and other sports franchises.

The segment's accounting policies are the same as those described in the summary
of significant accounting policies included in Note 1.

The Company's  reportable  business  segments are strategic  business units that
offer different products and services. The segments are managed together because
they utilize  similar  resources  within the Company.  There were no  reportable
segments  during the period ended  December 31, 1997.  All assets of the Company
relate to the football operations segment.
<TABLE>
<CAPTION>

                                    Net              Operating                          Identifiable        Capital
                                 Revenues              Loss           Depreciation         Assets         Expenditures
                                 --------          ------------       ------------      ------------      ------------
<S>                              <C>               <C>               <C>                 <C>              <C>   
December 31, 1998:
     Football operations        $ 3,428,729        $  (987,143)       $    43,610       $ 8,892,569       $    25,758
     Telemarketing services         130,600            (89,507)              --             138,547              --
                                -----------        -----------        -----------       -----------       -----------

                                $ 3,559,329        $(1,076,650)       $    43,610       $ 9,031,116       $    25,758
                                ===========        ===========        ===========       ===========       ===========
</TABLE>


                                      F-22


<PAGE>


                   THE ORLANDO PREDATORS ENTERTAINMENT, INC.
                         NOTES TO FINANCIAL STATEMENTS
                         =============================


NOTE 12 - SUBSEQUENT EVENTS

Sale of Common Stock
--------------------
In February 1999,  the Company  completed  private  placements of 65,000 Class A
common shares for $145,000, with commissions of 15%.

Employment Agreements
---------------------
On January 26, 1999, the Company  entered into a 35 month  employment  agreement
with its new President and Chief  Executive  Officer.  The agreement among other
things, provides for an annual salary of $50,000 and options to purchase 950,000
shares of the  Company's  Class A common  stock at $4.4375  per  share.  The new
President and Chief Executive Office was previously employed by the Company as a
business  strategist,  under an employment  agreement  which granted  options to
purchase  115,000  shares  of the  Company's  Class A common  stock at $4.75 per
share. Upon the execution of the new employment  agreement 47,920 of the options
issued under the previous agreement were cancelled.

On February 26, 1999, the Company entered into a 18 month  employment  agreement
with its now  Vice-President  of Sales and  Marketing.  The agreement  calls for
annual salary of $50,000 and commissions of 7% of sponsorship  income from $1 to
$750,000 and commissions of 10% of all sponsorship income greater than $750,000.

Letter of Intent to Purchase Hockey Teams
-----------------------------------------
On March 2,  1999,  the  Company  executed  a  non-binding  letter  of intent to
purchase  all  outstanding   capital  stock  of  Holdings   C.A.T.,  a  Virginia
corporation,  and the majority equity interest in the professional  minor league
ice hockey teams known as the  "Seawolves"  and the "Bombers"  of the East Coast
Hockey League (ECHL).  

Telemarketing Agreement
-----------------------
On March 5, 1999, the Company  entered into a  telemarketing  agreement with the
Tampa Bay Storm  ("Storm"),  an Arena  Football team, to sell season tickets and
Storm merchandise.



                                      F-23
<PAGE>




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

         None.



                                       27

<PAGE>



                                    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:
<TABLE>
<CAPTION>
                                                                                       Officer/Director
        Name                           Age               Position                          Since
        ----                           ---               --------                          -----
<S>                                    <C>    <C>                                          <C>
William G. Meris ...................   32     Chairman of the Board of Director             1997

Brett L. Bouchy ....................   30     Chief Executive Officer, President            1999
                                              and Director

Jeffrey L. Bouchy(1) ...............   33     Secretary, Treasurer, Chief                   1999
                                              Financial Officer and Director

Mark M. Novell .....................   41     Vice President-Sales and                      1998
                                              Marketing

Scott L. Armstrong .................   37     Director                                      1998

Thomas F. Winters, Jr.,  M.D. ......   46     Director                                      1997

John W. Frasco (1)(2) ..............   59     Vice President of Business                    1999
                                              Development and Director

J. Richard Corley (1)(2) ...........   61     Director                                      1999
                                                                                                   
Richard C. Whelan (2) ..............   34     Director                                      1999
</TABLE>

----------
(1)      Member of Audit Committee.

(2)      Member of Compensation Committee.

     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.

                                       28

<PAGE>



     Brett L.  Bouchy and  Jeffrey L.  Bouchy  are  brothers.  In 1998 and 1999,
Messrs.  Youngblood and Gagleard resigned as Directors and Messrs.  Narushka and
Flynn  resigned as executive  officers.  Mr.  Youngblood  was  terminated  as an
executive officer in December, 1998.

     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.  Mr. Meris devotes such time as is
necessary to the affairs of the Company.

     Brett L. Bouchy was appointed the Chief Executive  Officer and President in
January,  1999 and was employed by Meris  Financial,  Inc.,  an affiliate of The
Monolith Limited  Partnership from 1996 to December,  1998. From 1992 to 1995 he
was a  registered  representative  and  Chairman  of the Board of  Directors  of
Franklin-Lord  Inc., a Phoenix,  Arizona-based  stock brokerage firm. Mr. Bouchy
was fined,  censored and suspended for five days from selling  securities by the
NASD  and  his  securities  license  was  canceled  by the  Arizona  Corporation
Commission.  Mr. Bouchy intends to apply for reinstatement of his license in the
near future.

                                       29

<PAGE>



     Jeffrey L. Bouchy earned a Bachelor of Science  degree in  Accounting  from
Arizona State  University and a Master's  degree in Sports  Management from West
Virginia University. While completing his graduate studies at WVU, he worked for
the Assistant Athletic Director of Finance and Administration. From 1992 to 1993
he was involved in arena  management as an employee of the  Charlotte  Coliseum,
home of the NBA's Charlotte  Hornets.  From 1990 to 1991 Mr. Bouchy was employed
by the Phoenix  Roadrunners of the  International  Hockey  League,  assisting in
public relations and game  operations.  From 1994 to 1995 he was employed by Fun
Tees,  Inc., a t-shirt  manufacturer.  From 1995 to 1998 he was Chief  Financial
Officer of Gum Tech International, Inc., a Nasdaq National Market company.

     Mark  M.  Novell  was  employed  by the  Company  from  1992  to 1994 as an
assistant coach.  From 1994 to 1998 he was a vacation resort agent for Fairfield
Communities  and  Vistana  Inc.  In 1997 he rejoined  the  Company,  first as an
assistant  coach  and then in  December  1998 as Vice  President  of  Sales  and
Marketing.

     Scott  L.   Armstrong  has  been  the  national   sales  manager  of  Medco
Laboratories,  a marketer of inhalation products and services, since March 1993.
From 1991 to February 1993, he was a surgical sales representative for the IOLAB
division  of  Johnson  &  Johnson,  and  from  1985  to  1991,  he  was a  sales
representative  for  Healthdyne.  He is a director  of  Sunwest  PEO,  Inc.,  an
affiliated  company.  He graduated from Arizona State  University in 1984 with a
Bachelor of Science degree in Business Marketing.

     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.

     John W. Frasco has been the managing partner of Frasco & Caponigro, P.C., a
Bloomfield Hill,  Michigan-based law firm. He founded Sports Management Network,
Inc.  in 1988 and was a  principal  stockholder  of that firm from 1988 to 1998.
Sports Management Network, Inc. is involved in sports sponsorships,  endorsement
and  player  contracts.  Mr.  Frasco  is the  founder  and was from 1980 to 1989


                                       30

<PAGE>


Chairman of Championship Auto Racing Teams,  Inc. (now known as IndyCar),  which
is the  controlling  body of IndyCar  racing.  Mr. Frasco has owned and operated
racing events in Atlanta,  New York,  Miami,  Las Vegas and  Vancouver,  British
Columbia.

     J. Richard  Corley has been the Chief  Executive  Officer and owner of Bowl
New England,  an operator of 18 bowling centers in six northeastern states since
1968.  A graduate of St.  Michaels  College,  Mr.  Corley  served as a pilot and
navigator  in the  United  States  Air  Force  from  1959-1973.  He  served as a
commissioner for Burlington  International Airport from 1982-1998,  spending the
last eight years as that group's Chairman.  Mr. Corley is currently on the Board
of Directors of Howard Bank and is a Trustee Emeritus for Champlain College.

     Richard C.  Whelan  has been an  employee  since June 1995 of The  Monolith
Limited  Partnership,  an  investment  firm and a principal  stockholder  of the
Company,  where he is responsible for investor relations,  assistance in capital
formation and assistance in evaluation of  acquisitions.  From 1992 to June 1995
he was employed by Franklin-Lord,  Inc., a Phoenix-Arizona-based stock brokerage
firm as a registered  representative and Chief Executive Officer. Mr. Whelan was
fined,  censured and suspended for five days from selling securities by the NASD
and was fined,  censored and his securities  license was canceled by the Arizona
Corporation  Commission.  He graduated  from  Arizona  State  University  with a
Bachelor of Science degree.








                                       31

<PAGE>



ITEM 10.  EXECUTIVE COMPENSATION
--------------------------------
<TABLE>
<CAPTION>
                                       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
   Chairman                   1998       28,460           0        15,000                  0
   Jack Youngblood,           1997       60,000      45,000        34,500                  0
   President                  1998       63,250           0             0                  0
</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.  The Company has entered  into  employment  agreements  with Brett L.
Bouchy and  Jeffrey L. Bouchy  providing  for annual  salaries  of $50,000  each
through  January  2002 for Brett L.  Bouchy  and  December  1999 for  Jeffrey L.
Bouchy.  As a part of their employment  agreements,  Brett L. Bouchy was granted
options to purchase  950,000  shares of the  Company's  Class A Common  Stock at
$4.44 per share,  and Jeffrey L. Bouchy was granted  options to purchase  50,000
shares at $3.19 per share.  The Company  granted  certain  stock  options to Mr.
Frasco as a part of his employment. See "Item 12."

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.

     The  Company's  Board of Directors has reserved  500,000  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.

                                       32

<PAGE>


     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,  495,080 stock options have been granted
under the Plan, exercisable at prices ranging from $2.00 to $4.75 per share.



                                       33

<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)                  33,800                     .65%
   Brett L. Bouchy (2)                   67,080                    1.29%
   Jeffrey L. Bouchy (3)                 62,500                     1.2%
   Scott L. Armstrong (4)                87,765                    1.68%
   Thomas F. Winters (5)                  6,000                     .05%
   John W. Frasco (6)                   300,000                    5.52%
   J. Richard Corley                          0                       0%
   Richard C. Whelan(7)                  11,500                     .22%
   Riverlux Trust REG(8)              1,000,000                   16.31%
   The Monolith Limited               1,373,500                   21.12%
   Partnership(1)(8)(9)
   All directors and officers         2,938,645                   48.04%
   as a group (9 persons)

-----------

(1)  The Monolith Limited Partnership ("Monolith") is a privately held, Delaware
     limited  partnership  which owns 1,276,500  shares of the Company's  Common
     Stock.  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.

(2)  Includes  stock  options to purchase  67,080  shares at $4.75 per share and
     950,000 shares at $4.44 per share.

(3)  Includes  stock options to purchase  12,500  shares at an average  exercise
     price of $3.47 per share.


                                       34

<PAGE>



(4)  Includes stock options to purchase  87,765 at an average  exercise price of
     $3.41 per share.

(5)  Includes  stock  options to purchase  6,000  shares at an average  exercise
     price of $2.89 per share.

(6)  Includes stock options to purchase  150,000 shares of the Company's Class A
     Common Stock at $2.50 per share.

(7)  Includes stock options to purchase 7,500 shares.

(8)  Excludes  Monolith's  option to purchase  400,000  shares of the  Company's
     Class A Common Stock from Riverlux  Trust REG and  Riverlux's  right to put
     600,000 shares to Monolith. See "Item 12."

(9)  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
     "Description of Securities."


                                       35

<PAGE>



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.

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


                                       36

<PAGE>


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).

In January,  1999,  the Company issued to Brett L. Bouchy,  its Chief  Executive
Officer, options to purchase 950,000 shares of its Class A Common Stock at $4.44
per share until  December  2001.  The options were issued in  connection  with a
three year  employment  agreement  executed by the  Company  and Mr.  Bouchy and
provide  that 1/3 of the  options  vest  yearly on the  anniversary  date of the
employment agreement.

In August 1998, in connection with the sale of 1,000,000 shares of the Company's
Class A Common Stock to Riverlux Trust REG at $2.00 per share,  Monolith  agreed
at Riverlux's  request to purchase from Riverlux 600,000 of the 1,000,000 shares
acquired  by  Riverlux  from the Company for $6.67 per share on or before May 9,
1999.  In turn,  Riverlux  granted  Monolith an option to purchase up to 400,000
shares  of  Class A Common  Stock of the  Company  held by  Riverlux  commencing
September 1999 at prices from $7.00 to $13.00 per share.

In October 1998 the Company retained John W. Frasco,  a director,  to act as its
Vice President for Business Development for which the Company granted Mr. Frasco
options to purchase  250,000  shares of the  Company's  Class A Common  Stock at
$2.50 per share and agreed to sell to Mr. Frasco 50,000 shares of Class A Common
Stock at $2.00 per share.

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.

                                       37

<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)

10.11      Employment Agreement with Brett L. Bouchy (3)

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

10.13      Form of April 1998 Promissory Note (2)

10.14      Employment Agreement with Mr. Gruden (2)

10.17      Employment Agreement with John W. Frasco




                                       38

<PAGE>



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

(2)      Incorporated by reference to the Registrant's Registration Statement on
         Form SB-2, File No. 333-53217 , filed on May 21, 1998.

(3)      Previously filed.

                                       39

<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, 1999.

                                            THE ORLANDO PREDATORS
                                            ENTERTAINMENT, INC.

                                            By  /s/  Brett L. Bouchy
                                                --------------------------------
                                                 Brett L. Bouchy,
                                                 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, 1999
-------------------------     Directors
William G. Meris            

/s/  Brett L. Bouchy          Chief Executive Officer,          March 30, 1999
-------------------------     President and Director
Brett L. Bouchy               

/s/  Jeffrey L. Bouchy        Secretary, Treasurer, Chief       March 30, 1999
-------------------------     Financial Officer and
Jeffrey L. Bouchy             Director
                              

/s/  Mark M. Novell           Vice-President - Sales and        March 30, 1999
-------------------------     Marketing
Mark M. Novell               

/s/  Scott L. Armstrong       Director                          March 30, 1999
-------------------------
Scott L. Armstrong

/s/  Thomas F. Winters, Jr.   Director                          March 30, 1999
-------------------------
Thomas F. Winters, Jr., M.D.

/s/  John W. Fracso           Vice President of Business        March 30, 1999
-------------------------     Development and Director
John W. Frasco                

/s/  J. Richard Corley        Director                          March 30, 1999
-------------------------
J. Richard Corley

/s/  Richard C. Whelan        Director                          March 30, 1999
-------------------------
Richard C. Whelan