SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended Commission file number
June 30, 1996 33-87714
- ---------------------- -----------------------
OLYMPIC ENTERTAINMENT GROUP, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0271810
- ---------------------------- ---------------------
(State of other jurisdiction (IRS Employer
of incorporation) Identification Number)
2001 E. Flamingo Road, Las Vegas, Nevada 89119
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (702) 369-2588
Indicate by check mark whether the registrant (1) has 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.
(1) Yes X No (2) Yes X No
----- ----- -----
As of June 30, 1996 there were 2,812,181 shares of common stock outstanding.
Transitional Small Business Disclosure Format. Yes No X
----- -----
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
=================================
INDEX
Part I. Item 1. Financial Statements Page No.
- ------- ------- -------------------- --------
Balance Sheet - at June 30, 1996 3
Statements of Operations - for the
three months ended June 30, 1996,
and June 30, 1995 5
Statements of Operations - for the
six months ended June 30, 1996,
and June 30, 1995 6
Statements of Cash Flows - for the
six months ended June 30, 1996
and June 30, 1995 7
Notes to Financial Statements 8
Item 2.
-------
Management's Discussion and
Analysis of Financial Condition and Results
of Operations 10
Part II. Other Information
- -------- -----------------
Items 1 through 5 11
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Balance Sheet
June 30, 1996
(unaudited)
Assets
------
Current Assets:
Cash $ 368,982
Prepaid expenses 43,929
----------
Total current assets 412,911
Property and Equipment, net 15,266
Other Assets:
Program library 450,842
Deposits and other assets 13,491
Total assets $ 892,510
==========
See accompanying notes
3
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Balance Sheet
June 30, 1996
(unaudited)
(Continued)
Liabilities and Stockholders' Equity
Current Liabilities:
Notes payable $ 10,000
Accounts payable 5,938
Accrued expenses 64,549
Deferred revenue 644,155
Current portion of long term debt 24,000
Amounts due stockholders 59,298
-----------
Total current liabilities 807,940
Long term debt 54,000
Redeemable preferred stock:
Preferred stock, 10% cumulative
convertible, $.01 par value, 650,000
shares authorized, 106,500 shares
issued and outstanding, liquidating
preference $1 per share 213,000
Stockholders' equity:
Preferred stock, convertible, $.001 par value,
40,000 shares authorized, 32,800 shares issued
and outstanding, liquidating preference
$3 per share (Series C) 65,600
Preferred stock, convertible, $.001 par
value, 98,000 shares authorized, issued
and outstanding liquidating preference
$3 per share (Series D) 196,000
Common stock, $.01 par value,
20,000,000 shares authorized,
2,812,181 shares issued and outstanding 28,122
Paid in capital 3,039,986
Accumulated deficit (3,512,138)
---------
Total stockholders' equity (182,430)
---------
Total liabilities and stockholders' equity $ 892,510
==========
See accompanying notes
4
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Statements of Operations
For the three months ended
June 30, 1996 and 1995
(Unaudited)
1996 1995
----------- -----------
Revenues:
Net sales $ 309,896 $ 121,404
Gain on sale
of securities - 15,862
----------- -----------
Total revenues 309,896 137,266
Amortization of
program costs 32,570 5,497
Selling, general and
administrative expenses 576,745 181,925
Total expenses (609,315) (187,422)
----------- -----------
Loss from operations (299,419) (50,156)
Other income and expense:
Interest expense (250) (983)
----------- -----------
Net loss $ (299,669) $ (51,139)
=========== ===========
Net loss per share: $ (.13) $ (.03)
=========== ===========
Weighted average shares 2,392,514 1,978,500
See accompanying notes
5
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Statements of Operations
For the six months ended
June 30, 1996 and 1995
(Unaudited)
1996 1995
----------- -----------
Revenues:
Net sales $ 596,783 $ 208,513
Gain on sale
of securities - 15,862
----------- -----------
Total revenues 596,783 224,375
Amortization of
program costs 64,402 5,497
Selling, general and
administrative expenses 862,330 399,796
Total expenses (926,732) (405,293)
----------- -----------
Loss from operations (329,949) (180,918)
Other income and expense:
Interest income - 548
Interest expense (11,513) (1,296)
----------- -----------
Net loss $ (341,462) $ (181,664)
=========== ===========
Net loss per share: $ (.16) $ (.09)
=========== ===========
Weighted average shares 2,185,507 1,978,500
See accompanying notes
6
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Statements of Cash Flows
For the six months ended June 30, 1996 and 1995
(Unaudited)
1996 1995
---------- ----------
Operating activities: $ (499,023) $(157,757)
Investing activities:
Investment in film library (113,191) -
Sale of investments - 66,477
Purchase of property &
equipment (3,068) (5,774)
---------- ---------
Net cash provided by (used
in) investing activities (116,259) (60,703)
Financing activities:
Proceeds from sale of
common stock 864,470 -
(Increase) decrease in
deferred offering costs - (5,196)
Net cash provided by (used in)
financing activities 864,470 (5,196)
---------- ---------
Net increase (decrease) in cash
and cash equivalents 249,188 (102,251)
Beginning cash 118,641 117,622
---------- ---------
Ending cash $ 367,829 $ 15,371
========== =========
Supplemental information:
Non-cash financing activities:
Conversion of Series A
preferred stock to common $ 325,000 -
Note payable issued for
services 78,000 -
See accompanying notes
7
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Notes to Financial Statements
June 30, 1996
1. Summary of significant accounting policies
------------------------------------------
Basis of presentation
---------------------
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and Item 310 of Regulation SB. They do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring adjustments) considered necessary
for a fair presentation have been included. The results of operations for the
periods presented are not necessarily indicative of the results to be expected
for the full year.
License fees and related costs
------------------------------
The Company recognizes license fee income and amortizes the related direct
costs, such as sales commissions, and affiliate tape stock, over the period of
the related licenses which in all of the Company's existing license agreements
is one year.
Net loss per share
------------------
The net loss per share is computed by dividing the net loss for the period
by the weighted average number of common shares outstanding for the period.
Common stock equivalents are excluded from the computation as their effect would
be anti-dilutive.
Program costs
-------------
Program costs, rights fees, and other costs associated with the production
and acquisition of the Company's entertainment product are amortized, based upon
the individual program forecast method in accordance with Statement of Financial
Accounting Standard #53. This method amortizes such costs in the same ratio that
current revenues bear to total estimated gross revenues. Estimated revenues are
management's best estimate of a product's overall financial performance. Such
amortization commences when the product is first placed into distribution.
8
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Notes to Financial Statements
June 30, 1996
2. Stockholders' equity
--------------------
During December, 1994 the Company filed a registration statement on Form
S-1 with the Securities and Exchange Commission to register the following:
a) 325,000 common shares to be issued upon the conversion of the 7%
convertible preferred stock;
b) 106,500 common shares underlying the conversion privilege of the 106,500
shares of 10% convertible preferred stock currently outstanding;
c) 423,386 common shares currently held by certain shareholders of the
Company; and
d) 4,000,000 common stock purchase warrants and the underlying common stock to
be distributed to the shareholders of the Company as of August 31, 1994.
The 4,000,000 common stock purchase warrants are exercisable into one
common share at a purchase price of $2 per share for a period of 18 months from
issue and shall be redeemable by the Company at $.01 per warrant.
3. Notes payable and long-term debt
--------------------------------
During 1991, the Company borrowed $250,000 from an individual with interest
payable at 10% per annum due during September, 1992. On September 30, 1992 this
note along with $38,500 in accrued interest were converted into a convertible
debenture bearing interest at 10% per annum due on December 31, 1993. The holder
of the debenture had the right to convert the debenture into common stock of the
Company at the rate of one share of common stock for each one dollar due on the
debenture. During March, 1994, the holder of the debenture agreed to convert the
debenture and $36,500 of interest into 32,500 shares of the Company's 7%
convertible preferred stock. In addition, during 1993, this individual advanced
the Company an additional $10,000 bearing interest at 10% and due on demand. In
settlement of pending litigation, during May of 1996, the $10,000 was repaid,
$32,500 in cash dividends were paid on the preferred stock, and the stock was
converted into 325,000 shares of the Company's common stock. In addition, the
Company agreed to compensate the holder of these shares for past services to the
Company totalling $80,000, payable in forty monthly installments of $2,000 with
no interest.
9
<PAGE>
Item 2 Management's discussion and analysis
- ------ ------------------------------------
GENERAL
The Company was incorporated on May 21, 1987, in the State of Nevada. The
Company is in the business of acquiring, licensing and distributing non-violent
educational, informational and special interest television programming for
children. The Company does business as the "Children's Cable Network" ("CCN").
The Children's Cable Network is comprised of individuals, known as Cable System
Affiliates, who license the Company's programs to air in the various cable
markets throughout the United States. The Company commenced the sale of program
licenses to such affiliates during 1995.
At the end of the 2nd quarter, the Company had five affiliates up and
running including the territories of Tampa, FL, Greeley, CO, New York City,
Chicago, Fairfax, VA, and Cincinnati in addition to the Company operated
territories of Las Vegas, NV and Burbank, CA. The Company is scheduled to go on
the air in nine additional territories in the near future including new Cable
System Affiliates in San Francisco, South Ventura County, CA, and San Fernando
Valley, CA, Miami, Salt Lake City, Houston, Orange County, CA and the Puget
Sound area.
COMPARISON OF CURRENT QUARTER TO PRIOR YEAR
Revenues are up 146% versus the prior year due to the fact that the Company
is now better established and has more broadcast affiliates than in the previous
year. Expenses are up 211% because of the increased activity generated by the
additional sales, and because of settlement and related costs of the Herklotz
litigation. The settlement and related costs totalled approximately $140,000
representing approximately 36% of the increase in operating expenses. Program
costs amortization was up 490% in the quarter due to the fact that revenues were
not significant in 1995.
10
<PAGE>
PART II Other Information.
------------------
Item 1. Legal Proceedings.
- ------- ------------------
John Herklotz v. Olympic Entertainment Group, Inc., et. al.
Los Angeles Superior Court Case No. BC 127498
During May, 1995 the individual holding the 7% cumulative convertible, $.01
par value preferred stock filed suit against the Company and its officers
seeking recovery of his $325,000 investment plus interest of $32,000 and
additional damages of at least $682,000. The Company is vigorously opposing any
claims made by this individual.
On May 3, 1996, this matter was settled out of court. In connection with
the settlement, the Company delivered a cash payment to Mr. Herklotz
representing $35,000 in interest and $10,000 representing the principal on a
separate note. In addition, the Company agreed to pay Mr. Herklotz for past
services in the amount of $2,000 per month for 40 months commencing in June of
1996. In connection with the settlement, Mr. Herklotz' Series A preferred stock
was converted to 325,000 shares of the Company's common stock.
Other matters
The Company is currently involved in three other lawsuits with
telemarketing Companies who breached their contracts with Company. The Company
is fighting these suits vigorously and believes that the Company will prevail in
these matters.
Item 2. Changes in Securities.
- ------- ----------------------
None
Item 3. Defaults Upon Senior Securities.
- ------- --------------------------------
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders.
- ------- ----------------------------------------------------
Not applicable
Item 5. Other Information.
- ------- ------------------
Not applicable
11
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has fully caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
OLYMPIC ENTERTAINMENT GROUP, INC.
---------------------------------
(Registrant)
By: David W. Henson
---------------
David W. Henson, CFO
Date: July 23, 1996
- -----
12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 368,982
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 412,911
<PP&E> 25,015
<DEPRECIATION> 9,749
<TOTAL-ASSETS> 892,510
<CURRENT-LIABILITIES> 807,940
<BONDS> 0
0
474,600
<COMMON> 0
<OTHER-SE> (444,030)
<TOTAL-LIABILITY-AND-EQUITY> 892,510
<SALES> 0
<TOTAL-REVENUES> 309,896
<CGS> 0
<TOTAL-COSTS> 32,570
<OTHER-EXPENSES> 576,745
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 250
<INCOME-PRETAX> 0
<INCOME-TAX> (299,669)
<INCOME-CONTINUING> (299,669)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (299,669)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
