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
March 31, 1997 33-87714
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OLYMPIC ENTERTAINMENT GROUP, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0271810
- ---------------------------- ---------------------------
(State of other jurisdiction (IRS Employer Identification
of incorporation) Number)
2755 E. Desert Inn Rd., Suite 200 Las Vegas, Nevada 89121
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (702) 369-2588
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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 March 31, 1997 there were 2,938,681 shares of common stock outstanding.
Transitional Small Business Disclosure Format. Yes No X
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
===================================
INDEX
Page No.
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Part I. Item 1. Financial Statements
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Balance Sheet - at March 31, 1997 3-4
Statements of Operations - for the three months ended
March 31, 1997 and March 31, 1996 5
Statements of Cash Flows - for the three months ended
March 31, 1997 and March 31, 1996 6
Notes to Financial Statements 7-8
Item 2.
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Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Part II. Other Information
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Items 1 through 5 10
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Balance Sheet
March 31, 1997
(unaudited)
Assets
------
Current assets:
Cash $ 354,617
Accounts receivable 318,000
Prepaid expenses 12,004
----------
Total current assets 684,621
Property and equipment, net 136,050
Other assets:
Program library 850,056
Deposits and other assets 29,164
----------
Total other assets 879,220
----------
Total assets $1,699,891
==========
See accompanying notes.
3
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Balance Sheet
March 31, 1997
(unaudited)
(continued)
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Notes payable $ 10,000
Accounts payable-trade 81,184
Accrued expenses 60,876
Current portion of long term debt 19,865
Amounts due stockholders and related parties 239,192
-----------
Total current liabilities 411,117
Long term debt 36,273
Redeemable preferred stock:
Preferred stock, 10% cumulative convertible,
$.01 par value, 650,000 shares authorized,
101,500 shares issued and outstanding,
liquidating preference $1 per share 203,000
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, 2,938,681 shares issued
and outstanding 29,387
Paid in capital 3,305,838
Accumulated deficit (2,547,324)
-----------
Total stockholders' equity 1,049,501
-----------
Total liabilities and stockholders' equity $ 1,699,891
===========
See accompanying notes.
4
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OLYMPIC ENTERTAINMENT GROUP, INC.
Statements of Operations
For the three months ended
March 31, 1997 and 1996
(unaudited)
1997 1996
----------- -----------
Revenues:
Net sales $ 935,845 $ 286,966
----------- -----------
Total revenues 935,845 286,966
Amortization of program costs 3,842 31,832
Selling, general and administrative expenses 660,931 285,634
----------- -----------
Total expenses 664,773 (317,466)
----------- -----------
Income (loss) from operations 271,072 (30,500)
Other income and expenses:
Other income 2,000 --
Interest expense (5,575) (11,263)
----------- -----------
(3,575) (11,263)
----------- -----------
Net income (loss) $ 267,497 $ (41,763)
=========== ===========
Net income (loss) per share $ .09 $ (.02)
=========== ===========
Weighted average shares $ 2,938,681 $ 1,978,500
=========== ===========
See accompanying notes.
5
<PAGE>
<TABLE>
<CAPTION>
OLYMPIC ENTERTAINMENT GROUP, INC.
Statements of Cash Flows
For the three months ended
March 31, 1997 and 1996
(unaudited)
1997 1996
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<S> <C> <C>
Operating activities $ 289,403 $ (78,046)
Investing activities:
Investment in film library (108,397) (23,652)
Purchase of property & equipment (39,193) (523)
--------- ---------
Net cash provided by (used in) investing activities (147,590) (24,175)
Financing activities:
Proceeds from sale of common stock -- --
Repayment of notes payable and long term debt (4,819) --
(Increase) decrease in related party payables 42,540 --
--------- ---------
Net cash provided by financing activities 37,721 --
--------- ---------
Net increase (decrease) in cash and cash equivalents 179,534 (102,221)
Beginning cash 175,083 118,641
--------- ---------
Ending cash $ 354,617 $ 16,420
========= =========
</TABLE>
See accompanying notes.
6
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Notes to Financial Statements
March 31, 1997
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNT 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.
Revenue recognition:
The Company recognizes revenue from network license agreements not related
to specific programming over the term of the agreements. Revenue from the
sale of licenses for television program rights is recorded in accordance
with SFAS #53, which provides for recognition of revenue at the beginning
of the license period when specific conditions have been met.
Net income (loss) per share
The net income (loss) per share is computed by dividing the net income
(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.
7
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Notes to Financial Statements
March 31, 1997
(continued)
NOTE 2. NOTES PAYABLE AND LONG-TERM DEBT
Long-term debt consists of an obligation arising from the settlement of a
lawsuit. Monthly payments of $2,000, including interest imputed at 8% per
annum are due for a forty month period beginning June 1, 1996.
Notes payable consists of a short-term loan of $10,000 made in March 1993
from an individual pursuant to a debenture bearing interest at 10% per
annum and originally due on March 30, 1994. The holder of the debenture
has 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
extend the due date on the debenture to March 30, 1995. The note has not
been extended and is considered to be due on demand by the holder.
8
<PAGE>
Item 2. Management's discussion and analysis
General
The Company is a multimedia educational company and was incorporated on May
21, 1987 in the State of Nevada. The Company is in the business of
acquiring, licensing and distributing nonviolent educational,
informational and special interest television programming for children.
The Company's primary operating division is the Children's Cable Network
("CCN"). The Children's Cable Network is comprised of individuals and
syndications known as Cable Affiliates, who license the Company's
programs to air in the various local cable markets throughout the United
States. The Company commenced sale of the program licenses to such
affiliates during 1995.
Atthe end of the first quarter, the Company had licensed nine affiliates
during the quarter which brings the total affiliates to twenty-eight.
During April of 1997, there were two additional affiliates licensed. The
Company's affiliates have a total of over 9 million cable subscribers,
from a total cable universe of 65 million. This represents a 14% share of
the total U.S. cable subscribers, which the Company has accomplished in
less than two years.
Comparison of current quarter to prior year
Revenues are up 326% versus the same quarter in 1996 due to the fact that
the Company is now better established and has more cable affiliates. In
addition, the Company is now able to charge a higher license fee to
Company affiliates than in previous years.
Selling, general and administrative expenses are up 197% because of the
increased activity generated by the additional sales. Program costs
amortization was down 88% in the quarter due to the fact that the
Company's estimate of projected revenue increased in 1996 resulting in
the amortization expense to be decreased. Interest expense is down in
1997 due to the conversion of preferred stock to common stock.
9
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
March 31, 1997
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not presently engaged in any litigation which may have a
material adverse affect on the Company, economically or otherwise. The
Company was a defendant in that case styled John Herklotz vs. Olympic
Entertainment Group, Inc., et al.; Los Angeles Superior Court, Case No.
BC 127498, which case was settled on terms believed by management to be
favorable to the Company.
During May 1995, Mr. Herklotz 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 settled this claim in 1996, whereby the Company agreed to make
cash payments to Mr. Herklotz aggregating $125,000 and granting him an
option to purchase 329,500 shares of its common stock at an exercise
price of $2.00 per share. Mr. Herklotz agreed to convert his 32,500
shares of 7% preferred stock issued to him by the Company into 325,000
shares of the Company's common stock, which was consummated in May 1996.
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
10
<PAGE>
SIGNATURES
Pursuant to the requirement 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)
Date: April 30, 1997 By: /s/ Bonnie Houldsworth
------------------- -------------------------------
Chief Financial Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1997
<CASH> 354,617
<SECURITIES> 0
<RECEIVABLES> 318,000
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 684,621
<PP&E> 156,013
<DEPRECIATION> (19,963)
<TOTAL-ASSETS> 1,699,891
<CURRENT-LIABILITIES> 411,117
<BONDS> 0
203,000
261,600
<COMMON> 29,387
<OTHER-SE> 758,514
<TOTAL-LIABILITY-AND-EQUITY> 1,699,891
<SALES> 935,845
<TOTAL-REVENUES> 935,845
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 664,773
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,575
<INCOME-PRETAX> 267,497
<INCOME-TAX> 0
<INCOME-CONTINUING> 267,497
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 267,497
<EPS-PRIMARY> .09
<EPS-DILUTED> 0
</TABLE>
