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
September 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)
2755 E. Desert Inn Road, Suite 200 Las Vegas, Nevada 89121
- -------------------------------------------------------------------------------
(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 September 30, 1996 there were 2,862,181 shares of common stock
outstanding.
Transitional Small Business Disclosure Format. Yes No X
----- -----
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
=================================
INDEX
Page No.
--------
Part I. Item 1. Financial Statements
- ------- ------- --------------------
Balance Sheet - at September 30, 1996 3
Statements of Operations - for the
three months ended September 30, 1996,
and September 30, 1995 5
Statements of Operations - for the
nine months ended September 30, 1996,
and September 30, 1995 6
Statements of Cash Flows - for the
nine months ended September 30, 1996
and September 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 12
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Balance Sheet
September 30, 1996
(unaudited)
Assets
------
Current Assets:
Cash $ 231,057
Prepaid expenses 40,740
----------
Total current assets 271,797
Property and Equipment, net 73,693
Other Assets:
Program library 487,250
Deposits and other assets 18,898
----------
Total assets $ 851,638
==========
See accompanying notes
3
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Balance Sheet
September 30, 1996
(unaudited)
(Continued)
Liabilities and Stockholders' Equity
------------------------------------
Current Liabilities:
Notes payable $ 10,000
Accounts payable 3,304
Accrued expenses 64,549
Deferred revenue 739,605
Current portion of long term debt 24,000
Amounts due stockholders 4,298
-----------
Total current liabilities 845,756
Long term debt 48,000
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,
2,862,181 shares issued and outstanding 28,622
Paid in capital 3,088,803
Accumulated deficit (3,634,143)
-----------
Total stockholders' equity (255,118)
-----------
Total liabilities and stockholders' equity $ 851,638
===========
See accompanying notes
4
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Statements of Operations
For the three months ended
September 30, 1996 and 1995
(Unaudited)
1996 1995
----------- -----------
Revenues:
Net sales 305,829 $ 159,768
----------- -----------
Total revenues 305,829 159,768
Amortization of
program costs 41,133 5,885
Selling, general and
administrative expenses 387,826 170,103
Total expenses (428,959) (175,988)
----------- -----------
Loss from operations (123,130) (16,220)
Other income and expense:
Interest expense (5,575) (913)
----------- -----------
Net loss $ (128,705) $ (17,133)
=========== ===========
Net loss per share: $ (.05) $ (.01)
=========== ===========
Weighted average shares 2,849,138 1,978,500
=========== ===========
See accompanying notes
5
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Statements of Operations
For the nine months ended
September 30, 1996 and 1995
(Unaudited)
1996 1995
----------- -----------
Revenues:
Net sales $ 902,611 $ 368,282
Gain on sale
of securities - 15,862
----------- -----------
Total revenues 902,611 384,144
Amortization of
program costs 105,535 13,573
Selling, general and
administrative expenses 1,243,454 567,707
Total expenses (1,348,989) (581,280)
----------- -----------
Loss from operations (446,378) (197,136)
Other income and expense:
Interest income - 548
Interest expense (17,088) (2,209)
----------- -----------
Net loss $ (463,466) $ (198,797)
=========== ===========
Net loss per share: $ (.19) $ (.09)
=========== ===========
Weighted average shares 2,417,154 1,978,500
See accompanying notes
6
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Statements of Cash Flows
For the nine months ended September 30, 1996 and 1995
(Unaudited)
1996 1995
---------- ----------
Operating activities: $ (487,058) $ 82,680
Investing activities:
Investment in film library (149,599) (262,119)
Sale of investments - 66,477
Purchase of property &
equipment (63,714) (5,774)
---------- ---------
Net cash provided by (used
in) investing activities (213,313) (201,416)
Financing activities:
Proceeds from sale of
common stock 913,787 -
(Increase) decrease in
deferred offering costs - (8,486)
Repayment of notes payable
and long term debt (16,000) -
Increase (decrease) in
related party payables (75,000) 9,600
Net cash provided by
financing activities 822,787 1,114
---------- ----------
Net increase (decrease) in cash
and cash equivalents 112,416 (117,622)
Beginning cash 118,641 117,622
---------- ----------
Ending cash $ 231,057 $ -
========== ==========
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
September 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
September 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 3rd quarter, the Company had seven
affiliates on the air including the territories of Denver, Beverly
Hills/Hollywood, Orange County, CA, San Fernando Valley, Tampa,
Greeley, CO, and Simi Valley, CA in addition to the Company operated
territories of Las Vegas, NV and Burbank/Glendale, CA. The Company is
scheduled to go on the air in seven additional territories in the
fourth quarter including new Cable System Affiliates in San Jose,
Oakland, San Francisco, Sacramento, Anaheim, San Diego and Carlsbad.
The Company's affiliates on the air are currently bringing the
Company's product to 1,768,000 cable subscribers with an additional
1,987,000 subscribers to be added to the Company's total available
viewing audience when the above listed affiliates go on the air. By the
end of the fourth quarter the Company is projected to have affiliates
on the air serving approximately 3,756,000 cable subscribers.
COMPARISON OF CURRENT QUARTER TO PRIOR YEAR
Revenues are up 92% versus the same quarter in 1995 due to the
fact that the Company is now better established and has more broadcast
affiliates. In addition, the Company is now able to charge a higher
license fee to Company affiliates than in the previous year. The fees
charged during 1995 ranged from $10,000 to $40,100 per affiliate
whereas in 1996 affiliate licenses are selling for as much as $100,000
in the large cable markets.
Selling, general and administrative expenses are up 127%
because of the increased activity generated by the additional sales.
Program costs amortization was up 600% in the quarter due to the fact
that revenues were not significant in 1995. Interest expense is up in
1996 due to the accrual of dividends on the redeemable preferred stock.
10
<PAGE>
COMPARISON OF CURRENT YEAR TO DATE VERSUS PRIOR YEAR TO DATE
Revenues are up 145% for the nine month period ended September
30, versus the prior year due to the factors mentioned above. Selling,
general and administrative expenses are up 120% due the factors
mentioned above as well as the settlement and related costs of the
Herklotz litigation. The settlement and related costs totalled
approximately $140,000 representing approximately 21% of the increase
in operating expenses. Program cost amortization was up significantly
due to the significant increase in affiliate license revenues.
11
<PAGE>
PART II Other Information.
------------------
Item 1. Legal Proceedings.
- ------- ------------------
The Company is currently the plaintiff in three lawsuits with
telemarketing Companies who breached their contracts with the Company.
The Company is pursuing these suits vigorously and believes that the
Olympic Entertainment Group 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
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: Steve Henson
---------------------------------
Steve Henson, CFO
Date: October 22, 1996
12
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 231,057
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 271,797
<PP&E> 85,661
<DEPRECIATION> 11,968
<TOTAL-ASSETS> 851,638
<CURRENT-LIABILITIES> 845,756
<BONDS> 0
0
474,600
<COMMON> 0
<OTHER-SE> (516,718)
<TOTAL-LIABILITY-AND-EQUITY> 851,638
<SALES> 0
<TOTAL-REVENUES> 305,829
<CGS> 0
<TOTAL-COSTS> 41,133
<OTHER-EXPENSES> 387,826
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,575
<INCOME-PRETAX> 0
<INCOME-TAX> (128,705)
<INCOME-CONTINUING> (128,705)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (128,705)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
