SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(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
------------------
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
Commission file #: 33-87714
OLYMPIC ENTERTAINMENT GROUP, INC.
----------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 88-0271810
--------------------------- ---------------------
(State or other jurisdiction (IRS Employer
of incorporation) Identification Number)
2550 E. Desert Inn Road, Suite 338, Las Vegas, NV 89121
-------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: (702) 369-2588
Securities registered pursuant to Section 12(b) of the Act:
Common Stock $0.01 Par Value NONE
---------------------------- ---------------------
(Title of Class) (Name of Each Exchange
on Which Registered)
Securities registered pursuant to Section 12(g) of the Act:
NONE
---------------
(Title of Class)
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
----- ----- ----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
At December 31, 1998 there were 2,169,785 shares of common stock outstanding.
The aggregate market value of the common stock held by non-affiliates of the
registrant (i.e., excluding shares held by executive officers, directors and
control persons as defined in rule 405).
Documents incorporated by reference: None.
<PAGE>
PART I
Item 1. Business
---------
(a) General Development of Business
-------------------------------
Olympic Entertainment Group, Inc. (the "Company") is a multimedia educational
company and was incorporated on May 21, 1987 in the State of Nevada. The Company
was originally formed to finance, produce co-produce and distribute motion
pictures and television shows and pursued various opportunities through 1993,
when the Company's management decided to focus upon the development of a cable
television network for the distribution of children's nonviolent television
programming. From 1993 through 1995 the Company developed this concept and in
1995, launched the Children's Cable Network ("CCN"). To date, the Company has
had success in several markets but has experienced marginal or poor results from
the efforts of licensees and has determined it to be in the Company's interest
to seek to recapitalize the Company and to seek other venues of distribution.
(b) Narrative Description of Business
---------------------------------
The Company has created a children's educational division called Children's
Cable Network ("CCN" or the "Network"). Prior to January 1998, the Company
acquired, purchased, and licensed educational programming for the Children's
Cable Network; specializing in nonviolent, educational, informative and special
interest preschool programming, children's classics programs and G-rated
children's motion pictures. The Company's present lack of any revenue and any
cash reserves has resulted in cessation of these activities.
All reference to the Company in the following discussion of the business
activities of the Company includes Children's Cable Network.
Children's Cable Network
CCN provides award-winning, nonviolent, educational, informative and special
interest children's programming for television and in the process of providing
this programming, creates business opportunities for individuals and
syndications looking to get into the cable television broadcasting business.
Federal Legislation
The Federal Communications Act of 1984 requires cable operators to provide
channels for lease to the public in an attempt to enhance the diversity of
program choices available to cable subscribers. Generally, such allocation of
channels is referred to as "leased access." Section 612 of the Communications
Act of 1984 established a federal scheme through channel leasing to assure
access to cable systems by third parties unaffiliated with the cable operator.
Under the amendments to Section 612, cable operators were also permitted to
place programming from a qualified minority or educational programming source on
up to 33 percent of the cable system's designated leased access channels.
Additionally, the Cable Act of 1992 mandated that every cable system with more
than thirty-six channels and less than fifty-five activated channels must
designate 10 percent of their capacity to leased access. Systems with greater
than 55 activated channels must set aside 15 percent of their capacity to leased
access. In addition, the Federal Communications Act of 1984 provides individuals
and groups the opportunity to use the public, educational and government access
channels offered by the cable companies. Systems with fewer than 36 activated
channels are not required to make lease channel capacity available unless
otherwise required to do so by terms of the franchise in effect on December 29,
1994. The Cable Television Act of 1992 renewed government supervision of the
franchised cable television industry which was deregulated by the Cable Act of
1984. Both Acts are amendments to the Communications Act of 1934. The Cable
Television Act of 1992 ("1992 Act") authorized the FCC to implement rate and
<PAGE>
service regulation for certain basic cable television services and to create
regulations that will increase competition to franchised cable operators. On
April 1, 1993, the FCC announced several features of the rules it planned to
implement in connection with the 1992 Act. Most of the announced rules concerned
rate regulation for franchised services as well as a temporary rate freeze and
rollback. In order to promote competition with franchised cable operators, the
FCC announced program access regulations as part of the Act. These provisions
essentially allow competitive cable operators to purchase television programming
at fair prices. Management believes that these provisions of the Act may result
in lower operating costs for the Company, however, there can be no guarantee
that revisions in said regulation will not materially affect the Company.
The cable television industry is subject to both regulatory restrictions
implemented primarily by the Federal Communications Commission, ("FCC") and also
legislation which affects communications/broadcast industries in general.
The Children's Television Act of 1990 established new requirements including
that each broadcasting station must provide programs that serve the educational
and informational needs of young viewers. Accordingly, broadcasters must limit
the amount of advertising aired during children's programming and must provide
programs that meet the educational and informational needs of children.
Cable Affiliates
Prior to January 1, 1998, the Company licensed its programming to Cable
Affiliates who would cablecast this programming on their local cable systems
through the purchase of time on a leased access channel. The Company obtains
Cable Affiliates through business opportunity shows and seminars, direct mail
and business opportunity advertisements in national publications and on the
internet. The Company licensed only one Cable Affiliate in each cable system
market.
Employees
The Company currently has no employees in the corporate office in Las Vegas,
Nevada, having reduced its staff from eighteen employees in order to reduce
costs. The Company is being run by Directors.
Competition
The Company's business is very competitive. The Company is in competition with
many cable companies none of which specialize in nonviolent, educational
programming. Many competitors exist which have greater financial resources
and/or more experience in the delivery of programming than the Company. The
Company competes with all other broadcasters of children's programming. On cable
television competitors include The Family Channel, The Learning Channel, PBS,
Nickelodeon, and The Disney Channel. The Company intends to offer programming
Monday through Friday, 6:00 AM to 12:00 Noon which is potentially more weekly
air time of nonviolent, educational programming than all of the other
competitors.
Programming
The programs consist of nonviolent, educational, informative and special
interest programming which teach positive character development, morality, and
introduction to numbers, letters and music. Each program is approximately 25
minutes in length, which leaves 5 minutes of time for the Cable Affiliate to
sell commercial advertisements, sponsorships, and/or create and produce locally
originated programming.
The Company, through its own research, has located many award-winning children's
series produced since 1950, some of which the Company plans to obtain through
direct acquisition or licensing, provided the Company is able to raise the
capital necessary so to do. The programming for children includes puppet shows,
live action and animated characters, children's classic stories and music that
is designed to teach children in a fun and entertaining way.
<PAGE>
Library
The library of programs, many of which are award-winning, focus on educational
value as well as character and morality development. To date, each series of
programs is aimed at the 1 1/2 to 6 year old audience assisting them in their
preparation for school. The Company owns outright or licenses under long term
leases each of the following programs.
CCN's Library Of Programming
The Shari Show
26 1/2 hour episodes
The Shari Show takes place in the TV station called Bearly Broadcasting
where all of the positions are manned by puppets. Shari Lewis is the
secretary to the station manager, Mr. Bearly. As they put on the full
range of typical shows at Bearly Broadcasting, human interaction and
value judgments are explored and revealed. More than an entertainment
show for children of all ages, The Shari Show stimulates children's
senses of curiosity and humor, which creates involvement... a basic
measurement of the educational process. Shari Lewis and The Shari Show
have won seven (7) Emmys, the Peabody award and numerous other
prestigious awards for excellence. Programming on license.
Bill Cosby's PicturePages
80 1/2 hour episodes
Bill Cosby's PicturePages, winner of a Golden Globe award and Gold
Medalist of the International Film Festival of New York, helps children
develop important skills like following directions, drawing, hand-eye
coordination, clear thinking and numbers. PicturePages is the epitome
of educating children with love and laughter. Bill Cosby's unique
approach, which delights children and adults, is recommended by the
National Education Association. Programming on license.
Dusty's Treehouse
260 1/2 hour episodes
Dusty's Treehouse is a children's show designed for ages 2-6. The show
uses both adult and children mixed with puppets. Winner of eight (8)
Emmys and the coveted George Foster Peabody award, Dusty's Treehouse is
very entertaining, while at the same time teaches children how to cope
when someone was injured, what love is, to look both ways when crossing
the street, never let strangers into the house and other social and
practical skills for dealing with today's world. Owned by the Company.
Achievements In African-American History
10 1/2 hour programs
Achievements in African-American History documents in a ten part
series, the historical achievements of black women and men in the
fields of literature and poetry, cinema, religion, medicine and
science. This series features noted black personalities such as Abbey
Lincoln, Roscoe Lee Browne, Brock Peters and Lou Gossett, Jr., who
document through narration, dramatic scenes and readings, some of the
important historical contributions made by African- Americans. Owned by
the Company.
<PAGE>
The Chuck Jones Collection
6 1/2 hour episodes
The Chuck Jones Collection is comprised of beautifully animated
stories/fairy tales written by such authors as Rudyard Kipling. Chuck
Jones is one of the leading award winning animators of our time. As
creator of such characters as Road Runner, Wile E. Coyote, Pepe Le Pew
and co-creator of Bugs Bunny, Porky Pig and Daffy Duck, this series
portrays the beauty, creativity and quality of its Academy Award
winning creator. Programming on license.
Hot Fudge
75 1/2 hour episodes
Hot Fudge is the recipient of two national honors, the Action for
Children's Television Award for Outstanding Contribution to Mental
Health Programming for children, and the San Francisco State College
Excellence in Broadcasting Award. This nationally recognized program
that combines live action and a delightful cast of puppets with
lessons, music and fun. Join the Hot Fudge Gang as they learn about the
complexities of relationships, friendship, self esteem, feelings, and
cooperation, among many others, through song, live action skits, and
game shows. Each energetic show follows a single theme with engaging
dialogue And lively performances. Owned by the Company.
KidStreet
130 1/2 hour episodes
This highly exciting game show for children is also family oriented.
Three pairs of siblings, the red team, the blue team and the green
team, vie for victory and prizes by guessing how one sibling will
answer a set of questions. Points are awarded for correct answers and
the team with the most points wins the chance to solve the final
puzzle. The show motivates kids to learn problem solving skills and to
better understand their sisters and brothers. Programming on license.
Gigglesnort Hotel
80 1/2 hour episodes
The Gigglesnort Hotel brings kids worthwhile story lines filled with
comedy, action and surprises. The Hotel has a very funny human desk
clerk, B.J., presiding over a crew of puppets such as Hotel guests Mrs.
Plumtree and the old Professor, Hotel Detective W.C. Cornfield, and the
Janitor Dirty Dragon. Through the everyday running of the Hotel,
concepts such as love, hope anger, and trust are presented in ways that
are both thought-provoking and highly entertaining. The Gigglesnort
Hotel garnered two (2) Chicago Emmys and the Iris award for program
excellence from the National Association of Program Executives.
Programming on license.
Coming To Ametrica
2 1/2 hour episodes
Coming To Ametrica is a combination of live action and animation
designed to teach children as well as adults the metric system of
weights and measures. In this series, a spaceship kidnaps Admiral
Gordon and six young people who have been chosen to teach America the
metric system of measurements. While detained aloft in the spaceship
the Admiral and his young crew learn everything there is to know about
the metric system.
The spaceship computer uses lively and entertaining animation to teach
the skeptical Americans about liters, meters, and grams. They learn
that the metric system is used worldwide, and that once understood, it
is easier to use than gallons, yards and pounds. The series is fun,
entertaining and most of all, highly educational. Owned by the Company.
Metric Series
38 15 minute episodes
(approximately 600 minutes of animation)
A series of animation programs designed to teach children, as well as
adults, the metric system of
<PAGE>
weights and measures. The Metric Series features a mild mannered
character named Newton Joule who, when conversion problems arise, turns
into the superhero Metric Man to teach children about liters, meters
and grams. They learn the metric system is used worldwide, and that
once understood, it is easier to use then gallons, yards and pounds.
The series is fun, entertaining and most of all, highly educational.
Scott McGrout Inside Out
1 30 minute special
A highly informative and entertaining film on body awareness. This
beautifully animated story introduces Scott McGrout who takes a
fascinating journey through the human body. This film teaches the child
how important each part of the body is and how each part works together
to keep the body healthy and strong. Owned by the Company.
Kerchoo - What Really Happens When You Catch A Cold
1 10 minute film short
In this imaginative film, Scott McGrout learns about the common cold.
Experiencing cold spells and sneeze quakes, Scott and the viewer watch
the body fight off Elvirus and her vacation companion, Common Cold.
Owned by the Company.
Rod Rocket
135 5 minute episodes (675 minutes of animation)
The exciting adventures of two astronauts in outer space in wonderful
animation. Owned by the Company.
Item 2. Properties
----------
The Company presently leases no space and during the report period terminated
its leases in Burbank, California, and subsequently in Las Vegas, Nevada.
Item 3. Legal Proceedings
-----------------
The Company is a party to the following litigation:
Capital Funding & Financial Group, Inc., et al, v. Olympic Entertainment Group,
Inc., et al, Civil Action No. 96- CV-1930, in the District Court, City and
County of Denver, Colorado: Although the Company is one of the Plaintiffs in
this case, in which it sought to recover $100,000 from the Defendants, on the
Defendant's counterclaim, a default judgement, due to extraordinary
circumstances, was entered against the Plaintiff for $1,000,000. The Company
expects that the default judgement will be set aside and that it will recover
the $100,000 sought in its complaint.
Lee Van Dyke, et al, v. Children's Cable Network, Olympic Entertainment Group,
Inc., et al, Case No. BC 189116 in the Superior Court of the State of California
for the County of Los Angeles: This case was filed as a class action but, with
several months having passed, it has never been certified as such. It is the
Company's position that this case is without merit and will ultimately be
dismissed or the Company will prevail on the merits. However, Defendants Pacific
Health Management Inc. d/b/a Carousel Media Marketing and James Alex have filed
a cross-complaint for indemnity, apportionment of fault, and contribution, which
the Company also believes has no merit.
Desert Inn Office Center II Limited Partnership, et al, v. Olympic Entertainment
Group, Inc., et al, Case No. A394431 in the District Court of Clark County,
Nevada: This is a civil action brought by the Company's former landlord
resulting from breach of an unexpired lease. While the landlord sought extensive
<PAGE>
damages for major tenant improvements, back rent of some $88,000, and future
rent for the balance of the term of the lease, the premises previously occupied
by the Company have been relet to a new tenant, so that, under the rule that a
landlord must mitigate his damages, the Company's liability has been
substantially reduced. Accordingly, the Company expects that this case will be
settled.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
No matters were submitted to a vote of security holders during the fourth
quarter ended December 31, 1998.
PART II
Item 5. Market for Registrant's Common Equity & Related Stockholder Matters
-------------------------------------------------------------------
(a) Market Information
------------------
(1) (i) None
(ii) Not applicable
(iii) Fiscal Year End Fiscal Year End
December 31, 1997 December 31, 1998
High Bid Low Bid High Bid Low Bid
------------------ -----------------------
First Quarter $1.12 $0.56 $ .05 $ .01
Second Quarter $1.12 $0.53 $ .05 $ .01
Third Quarter $0.81 $0.40 $ .05 $ .01
Fourth Quarter $1.12 $0.43 $ .05 $ .01
(iv) Not applicable
(v) Not applicable
(2) (a) Not applicable
(b) Holders
-------
(1) Title of Class Number of Record Holders
-------------- ------------------------
Common Stock, Approximately 138
$0.01 Par Value
(2) Not applicable
(c) Dividends
---------
(1) There have never been any dividends declared by the Registrant.
(2) Registrant's losses do not currently indicate the ability to
pay cash dividends.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
--------- ---------- ---------- --------- ----------
Income statement data:
<S> <C> <C> <C> <C> <C>
Revenues $ 5,950 $1,736,491 $2,518,253 $ 358,932 $ --
Income (loss)
from Operations (681,380) (402,646) 378,090 (545,396) (2,170,003)
Net interest expense (1,622) (28,680) (23,234) (33,605) (36,546)
<PAGE>
Income (loss)
before income taxes (817,742) (431,326) 355,856 (579,001) (2,176,549)
Income taxes -- -- -- -- --
Net income (loss) $ (817,742) $ (431,326) $ 355,856 $ (579,001) $(2,176,549)
=========== =========== =========== =========== ===========
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
Per share data:
Primary:
Net income (loss) $ (.31) $ (.16) $ .14 $ (.30) $ (1.92)
=========== =========== =========== =========== ===========
Weighted average shares
outstanding 2,626,390 2,626,390 2,626,390 1,915,038 1,132,125
Fully diluted:
Net income (loss) $ (.31) $ (.16) $ .12 $ (.30) $ (1.92)
=========== =========== =========== =========== ===========
Weighted average shares
outstanding 2,626,390 2,626,390 2,922,390 1,915,038 1,132,125
Balance sheet data:
Working capital
(deficiency) $(1,096,649) $ (404,694) $ 162,296 $ (872,167) $ 10,305
Total assets 836,141 1,093,232 1,368,723 545,152 260,354
Long-term debt -- 16,623 -- -- --
Redeemable preferred
stock 203,000 203,000 203,000 213,000 213,000
Total stockholders' equity
(deficiency) (266,817) 350,676 782,004 (492,441) 86,560
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
The Company has continued to experience severe cash flow problems occasioned by
(I) no revenue from license renewal fees or new Broadcast Affiliates licenses;
(ii) the failure of the Optimist Group licensing program initiated in January
1998, and terminated by mutual consent on April 1, 1998; and (iii) the failure
of the TSR program to produce significant new revenue from its cause marketing
initiatives. Since January 1998, the Company has sought to reduce overhead and
expenditures by (I) eliminating all paid personnel; (ii) ceasing to pay salaries
to corporate officers; and (iii) terminating its leasehold office space at 2755
East Desert Inn Road, Suite 200, Las Vegas, Nevada 89121.
In order to generate revenue, the Company has retained a firm to license its
library of children's programming to non-competitive venues of broadcast.
Additionally, the Company is seeking a strategic financial partner to provide
the necessary capital so that CCN can be delivered to homes via direct broadcast
satellite (Primestar and Direct TV are examples of DBS). Revenue from this
method of delivery can be substantial and would be derived from potential
national advertisers or fees based on the number of subscribers serviced. Should
the Company be unsuccessful in the next 120 days in either of the foregoing, it
would seek to reorganize its debt and to sell its programming in an orderly
proceeding under the protection of the Bankruptcy Court.
<PAGE>
Results of Operations
The following table sets forth, for the fiscal years ended December 31, 1998,
1997, and 1996 certain items from the Company's Statement of Operations.
<TABLE>
<CAPTION>
1998 1997 1996
------------------ ------------------ -----------------
<S> <C> <C> <C>
Revenues $ 5,950 $ 1,736,491 $ 2,518,253
Expenses 687,330 2,139,137 2,140,163
Income(loss) from Operations ( 681,380) ( 402,646) 378,090
Other income (expense) ( 136,362) ( 28,680) ( 22,234)
Income before taxes ( 817,742) ( 431,326) 355,856
Provision for income taxes -- -- --
Net income (loss) $( 817,742) $( 431,326) $ 355,856
================== ================= =================
Earnings per Share
Primary:
Weighted Average
Common Shares Outstanding 2,626,390 2,626,390 2,626,390
================== ================== =================
Income (Loss) per Common
Share $( .31) $( .16) $ .14
================== ================== =================
Fully Diluted:
Earnings per share
Weighted Average
Common Shares Outstanding 2,626,390 2,626,390 2,626,390
================== ================== =================
Income (Loss) per Common
Share $( .31) $( .16) $ .12
================== ================== =================
</TABLE>
Comparison of 1998 to 1997
The Company's activities during 1998 consisted of closing down operations and
trying to sell the Company. Cable affiliates had not renewed their licensing
rights and new cable affiliates had not been sold. The selling, general and
administrative expenses were down since the operations ceased.
Comparison of 1997 to 1996
The company's activities during 1997 and 1996 consisted of developing the
Company's products, licensing cable affiliates and negotiating acquisitions of
rights to various children's television programs. Revenues were down thirty-one
percent (31%) in 1997 versus 1996 due to the fact that cable affiliates did not
renew their license agreements when all specified conditions have been made.
During 1997 and 1996, the bulk of the Company's sales were attributed to the
sale of network license agreements. The selling and general and administrative
expenses were almost the same from $2,140,163 in 1996 to $2,139,137 in 1997.
Capital Resources & Sources of Liquidity
During 1998, the Company's working capital decreased to a deficiency of
$1,096,649 compared to $(404,694) at December 31, 1997, primarily due to the
operations ceasing.
During 1997, the Company's working capital decreased to a deficiency of $404,694
compared to $162,296 at December 31, 1996. This was primarily due to the
significant decrease in affiliate sales in the fourth quarter.
<PAGE>
The Company's primary cash requirements were for operating expenses, primarily
labor and general and administrative expenses, and for the acquisition of rights
to additional television series. The Company's primary source of cash was from
revenues which accounted for approximately 93% of all cash brought in to the
Company. The Company did obtain $125,000 in financing during the year.
Related Party Transactions
All deferred compensation to Officers and Directors was forgiven during 1997.
Major customers
The Company made sales in excess of 10% of total revenues in 1997 to major
customers as follows:
Customer: Sales/% of total
- --------------------------------------------------------------------------------
Carousel Media Marketing $1,750,000 99%
Employment Contract
During 1998, Mr. Orsatti and the Company mutually agreed to terminate all
deferred compensation features and a five -year compensation agreement entered
into on January 15, 1997. Mr. Orsatti retains executive options to purchase
400,000 shares of common stock at an exercise price of 80% of the fair value of
the stock at the grant date.
Item 8. Financial Statements
---------------------
The following financial statements are filed with this report as pages F-1
through F-__ following the signature page
Reference
---------
Report of independent public accountants F-1
Balance sheets F-2
Statements of operations F-4
Statements of stockholders' equity F-5
Statements of cash flows F-7
Notes to financial statements F-9
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
- --------------------------------------------------------------------------------
There were no changes or disagreements with accountants on accounting and
financial disclosures.
PART III
Item 10. Directors and Executive Officers of the Registrant
- ------------------------------------------------------------
The following table sets forth the name, age, and position held of each director
and officer of Olympic Entertainment Group, Inc.:
<PAGE>
Name Age Position
- ---- --- --------
Dominic Orsatti 67 Chief Executive Officer and Chairman of
the Board of Directors
John Holt Smith 58 Secretary and Director
Bonnie Houldsworth 45 Treasurer and Chief Financial Officer
- ---------------
Officers and Directors
Pursuant to the Bylaws, each Director shall serve until the annual meeting of
the stockholders, or until his or her successor is elected and qualified. It is
the intent of the Company to support the election of a majority of "outside"
directors at such meeting. The Company's basic philosophy mandates the inclusion
of directors who will be representative of management, employees and the
minority shareholders of the Company. Directors may only be removed for "cause".
The term of office of each officer of the Company is at the pleasure of the
Company's Board.
<PAGE>
BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS
Dominic Orsatti, Chairman of the Board, Chief Executive Officer and Founder, was
formerly President of Orsatti Productions, Inc., a leading producer of
educational films. Among Orsatti Productions credits were an NBC Children's
Television Special, "All About Me", a musical television special, "Get Down",
hosted by Milton Berle, more than 100 educational films and two educational
children's record albums. Mr. Orsatti is the recipient of more than 18 major
industry awards, including four gold and three silver medal awards by the New
York International Film Festival and two Golden Babe awards awarded at the
Chicagoland Film Festival. Mr. Orsatti co-wrote and was executive producer of
the first place Telly award-winning "Coming To Ametrica" in 1993. He is also a
member of the Writer's Guild of America.
John Holt Smith, Corporate Secretary and Director, is a senior partner of Smith
& Associates and was formerly a partner in the Fort Worth, Texas firm of
McDonald, Sanders, Ginsburg, Phillips, Maddox & Newkirk. As a partner, he served
as Vice President of the United States Trust Company of New York and in that
capacity opened the Beverly Hills, California office of the company. Mr. Smith
subsequently returned to the practice of law to ultimately head the securities
department of the Los Angeles firm of Bushkin, Gaims, Gaines & Jonas. In that
capacity, Mr. Smith represented clients including Johnny Carson, Kareem
Abdul-Jabbar, Diane Keaton, Joan Rivers, Bill Cosby, David Letterman, Neil Simon
and many NBC personalities. Mr. Smith is currently engaged in the private
practice of law representing broker-dealers, individuals and entities raising
capital as well as preparing private placements and subsequent public offerings.
Mr. Smith is a two-time graduate of Vanderbilt University (B.A. 1963, LL.B.
1966) and a member of the State Bars in Texas and California.
Bonnie Houldsworth, Treasurer and Chief Executive Officer, started her public
accounting career at Laventhol & Horwath. Ms. Houldsworth has been a founding
principal in a Las Vegas public accounting firm since 1987, Houldsworth, Russo &
Company, which is a full service accounting firm in which she specializes in
accounting and auditing for highly regulated industries such as banks, mortgage
companies and gaming companies. Ms. Houldsworth obtained a Bachelor of Science
in Accounting in June 1984 from the University of Nevada, Las Vegas, and became
a licensed Certified Public Accountant in Nevada and California.
Item 11. Executive Compensation
- -------------------------------
The table below sets forth the payroll and consulting compensation for fiscal
1998 for the executive officers and directors of the Company.
Name of Individual Capacities in Which Served Compensation
- --------------------------------------------------------------------------------
Dominic Orsatti Chairman and Chief Executive Officer $ 0
John Holt Smith Secretary and Director *$ 0
Bonnie Houldsworth Treasurer and Chief Financial Officer **$ 0
- ---------------
* Represents moneys paid to law firms in which Mr. Smith is a principal.
** Represents moneys paid to Houldsworth, Russo & Company, a firm in which Ms.
Houldsworth is a principal and an accountant.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -----------------------------------------------------------------------
As of December 31, 1998, there were 2,824,552 Common Shares outstanding. The
following tabulates holdings of Common Shares of the Company by each person who,
subject to the above, are holders of record or are known by Management to own
beneficially more than 5.0% of the Common Shares and, in addition, by all
directors and officers of the Company individually and as a group.
<PAGE>
<TABLE>
<CAPTION>
Table I - Common Stock
Name and Address Number of Shares of Percentage
of Beneficial Owner Common Stock Owned(1) of Ownership
- ------------------- --------------------- ------------
<S> <C> <C>
Dominic Orsatti(2) 800,000 28.32 Percent
2550 E. Desert Inn Road #338
Las Vegas, Nevada 89121
Nevada Entertainment Partners, Ltd.(2) 800,000 28.32 Percent
2550 E. Desert Inn Road #338
Las Vegas, Nevada 89121
John Holt Smith 8,000 .0028 Percent
1925 Century Park East #1600
Los Angeles, California 90067
All Directors and Officers as a Group (3) 808,000 28.3228 Percent
</TABLE>
- ---------------
(1) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the voting) and/or sole
or shared investment power (including the power to dispose or direct the
disposition) with respect to a security whether through a contract,
arrangement, understanding, relationship or otherwise. Unless otherwise
indicated, each person indicated above has sole power to vote, or dispose
or direct the disposition of all shares beneficially owned, subject to
applicable community property laws.
(2) Includes Nevada Entertainment Partners, Ltd., and Dominic Orsatti, the
managing general partner thereof, who together constitute a "group," as
that term is defined in Section 13D of the Securities Exchange Act of 1934,
as amended.
The following tabulates holding of Series "C" Preferred Shares of the Company
owned beneficially by all directors and officers of the Company individually and
as a group.
Table 2 - Series "C" Preferred Shares
-------------------------------------
Number of Series "C" Percent of
Name and Address Preferred Shares(1) Class
- ---------------- ------------------- -----
Dominic Orsatti(2) 12,000 36.58%
2550 East Desert Inn Road, Suite 338
Las Vegas, Nevada 89121
Nevada Entertainment Partners Ltd.(2) 12,000 36.58%
2550 East Desert Inn Road, Suite 338
Las Vegas, Nevada 89121
John Holt Smith 8,000 24.39%
1925 Century Park East #1600
Los Angeles, California 90067
All Directors & Officers
as a group (3) 20,000 60.97%
- --------------
(1) Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended, beneficial ownership of a security consists of sole or shared
voting power (including the power to vote or direct the voting) and/or sole
or shared investment power (including the power to dispose or direct the
disposition) with respect to a security whether through a contract,
arrangement, understanding, relationship or otherwise. Unless otherwise
indicated, each person indicated above has sole power to vote, or dispose
or direct the disposition of all shares beneficially owned, subject to
applicable community property laws.
<PAGE>
(2) Includes Nevada Entertainment Partners, Ltd. and Dominic Orsatti, the
managing general partner thereof, who together constitute a "group," as
that term is defined in Section 13D of the Securities Exchange Act of 1934,
as amended.
Table 3 - Series "D" Preferred Shares
-------------------------------------
Number of Series "D" Percent of
Name and Address Preferred Shares(1) Class
- ---------------- ------------------- -----
Dominic Orsatti(2) 98,000 100%
2755 East Desert Inn Road, Suite 200
Las Vegas, Nevada 89121
Nevada Entertainment Partners Ltd.(2) 98,000 100%
2755 East Desert Inn Road, Suite 200
Las Vegas, Nevada 89121
All Directors & Officers
as a group (3) 98,000 100%
PART IV
Item 14. Exhibits, Financial Statements, and Reports on Form 8-K
- ----------------------------------------------------------------
(a) Financial Statements
--------------------
Reference
---------
Report of independent public accountants F-1
Balance sheets F-2
Statements of operations F-4
Statements of stockholders' equity F-5
Statements of cash flows F-7
Notes to financial statements F-9
(b) Reports on form 8-K
-------------------
None
(c) Exhibits
--------
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized this 14th day of April,
1999:
Olympic Entertainment Group, Inc.
By: /s/ Dominic Orsatti Date: 4/14/99
-------------------------------------
Dominic Orsatti, Chairman and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following person on behalf of the Registrant and in the
capacity and on the date indicated.
NAME & POSITION DATE
- --------------- ----
/s/ Dominic Orsatti 4/14/99
- ----------------------------------------- -------
Dominic Orsatti,
Chairman & Chief Executive Officer
/s/ John Holt Smith 4/14/99
- ----------------------------------------- -------
John Holt Smith
Corporate Secretary & Director
/s/ Bonnie Houldsworth 4/14/99
- ----------------------------------------- -------
Bonnie Houldsworth
Treasurer and Chief Financial Officer
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Balance Sheet
December 31, 1998
(unaudited)
Assets
------
Current assets:
Cash and cash equivalents $ 31
Accounts receivable - trade 4,680
Accounts receivable - other 1,598
--------
Total current assets 6,309
--------
Other assets:
Film library 817,557
Deposits and other assets 12,275
--------
829,832
--------
Total assets $836,141
========
See accompanying notes.
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Balance Sheet
December 31, 1998
(unaudited)
(continued)
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Notes payable $ 234,596
Accounts payable-trade 446,440
Accrued expenses 166,236
Amounts due related party 255,686
-----------
Total current liabilities 1,102,958
-----------
Redeemable preferred stock:
Preferred stock, 10% cumulative convertible,
$.01 par value, 650,000 shares
authorized, 101,500 and 106,500shares
issued and outstanding, in 1996 and 1995
liquidating preference
$1 per share 203,000
Preferred stock, convertible, $.01 par value
5,000,000 total shares authorized, 65,600
Preferred stock, convertible, 40,000 shares
authorized, 32,800 shares issued and
outstanding, $10 per share liquidating
preference (Series C)
Preferred stock, convertible, 98,000 shares
authorized, issued and outstanding
$3 par share liquidating preference (Series D) 196,000
Common stock, $.01 par value, 20,000,000
shares authorized, 2,824,552 shares issued
and outstanding 28,246
Paid in capital 3,306,979
Accumulated deficit (4,066,642)
-----------
(266,817)
-----------
Total liabilities and stockholders' equity $ 836,141
===========
See accompanying notes.
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Statements of Operation
For the years ended December 31, 1998 and 1997
(unaudited)
1998 1997
----------- -----------
Revenue $ 5,950 $ 1,736,491
Costs and expenses:
General and administrative 687,330 2,139,137
General and administrative - related
parties 0 0
----------- -----------
Total expenses 687,330 2,139,137
----------- -----------
Income (loss) from operations (681,380) (402,646)
Other income and (expenses):
Interest expense (1,622) (28,680)
Loss on sale of assets (134,740) 0
----------- -----------
(136,362) (28,680)
----------- -----------
Net loss before income taxes (817,742) (431,326)
----------- -----------
Net (loss) $ (817,742) $ (431,326)
=========== ===========
Net (loss) per share $ (.31) $ (0.16)
=========== ===========
Weighted average shares 2,626,390 2,626,390
=========== ===========
See accompanying notes.
<PAGE>
<TABLE>
<CAPTION>
OLYMPIC ENTERTAINMENT GROUP, INC.
Statement of Stockholders' Equity
For the years ended December 31, 1998 and 1997
(unaudited)
Additional
Common Preferred Paid - In Accumulated
Shares Amount Shares Amount Capital Deficit Total
--------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 31, 1996 2,938,681 $ 29,387 $ 138,800 $ 261,600 $ 3,305,838 $(2,814,823) $ 782,002
Cancellation of shares
at par value (114,129) (1,141) -- -- 1,141 -- --
Net (loss) for the year -- -- -- -- -- (431,326) 431,326
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance December 31, 1997 2,824,552 28,246 130,800 261,600 3,306,979 (3,246,149) 350,676
Prior period adjustment -- -- -- -- -- (2,751) (2,751)
Net loss for the year -- -- -- -- -- (817,742) (817,742)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance December 31, 1998 2,824,552 $ 28,246 130,800 $ 261,600 $ 3,306,979 $(4,066,642) (469,817)
=========== =========== =========== =========== =========== =========== ===========
</TABLE>
See accompanying notes
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Statements of Cash Flows
For the years ended December 31, 1998 and 1997
(unaudited)
1998 1997
--------- ---------
Net (loss) $(817,742) $(431,326)
Adjustments to reconcile net income
(loss) to net cash:
Depreciation 4,337 20,197
Amortization of film costs -- 128,355
Sale of assets 126,208 --
Film masters rights charged off -- 74,876
(Increase) decrease in accounts receivable 9,257 304,465
(Increase) decrease in prepaid expenses -- 12,145
(Increase) in other assets 1,500 248
Increase (decrease) in accrued expenses 82,618 34,725
Increase (decrease) in accounts payable 235,463 95,230
Increase in accounts payable - related party 255,686 (76,956)
--------- ---------
Total adjustments 715,069 593,285
--------- ---------
Net cash provided by (used in)
operating activities (102,673) (81,400)
Cash flows from investing activities:
(Increase) in film library -- (275,287)
Purchase of property and equipment -- (61,887)
--------- ---------
Net cash provided by (used in)
Investing activities -- (337,174)
Cash flows from financing activities:
Common stock sold for cash -- 923,787
Advances to stockholder 87,200 (87,200)
Proceeds from notes payable -- 125,000
Repayment of long-term debt -- (22,164)
========= ---------
Net cash provided by (used in)
financing activities 87,200 15,636
Net decrease in cash and cash equivalents (15,473) (159,579)
Beginning cash 15,504 175,083
--------- ---------
Ending cash $ 31 $ 15,504
========= =========
See accompanying notes.
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Notes to Financial Statements
December 31, 1998
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES
Organization
-------------
The Company was incorporated on May 21, 1987, in the State of Nevada, and
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"
("CCNII"), which is comprised of individuals or entities, known as
Broadcast Affiliates, who license the Company's programs to air in the
various cable markets throughout the United States. The Company commenced
the sale of broadcast licenses to such affiliates during 1995.
Estimates
---------
Timely preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect certain reported amounts and disclosures, some of
which may require revision in future periods.
Fixed assets
------------
Property and equipment are carried at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the assets.
When assets are retired or otherwise disposed of, the cost and the related
accumulated depreciation are removed from the accounts, and any resulting
gain or loss is recognized in operations for the period. The cost of
repairs and maintenance is charged to operations as incurred and
significant renewals or betterments are capitalized.
The Company depreciates its office equipment utilizing the straight line
method over a period of five years. The Company has recorded $4,337 and
$20,197 of depreciation expense for the years ended December 31, 1998 and
1997, respectively.
Film Library
------------
The Company amortizes the costs of its film library over the estimated
economic life of the film using the film forecast method in accordance with
SFAS #53. The amortization periods begin at the time the films are
available for showing by the Company's Broadcast Affiliates. When the
Company concludes that any such costs will not benefit future periods said
costs are charged to operations for the period. During the year ended
December 31, 1997, the Company made adjustments to reduce the carrying
value of its film library of $74,876.
Amortization charged to operations during 1997 aggregated $128,355. (See
Note 6).
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Notes to Financial Statements
December 31, 1998
(continued)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
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.
Cash and cash equivalents
-------------------------
Cash and cash equivalents consist of cash and other highly liquid debt
instruments with a maturity of less than three months.
Advertising
-----------
Advertising expenses are charged to expense upon first showing. Amounts
charged to expense were $7,840 and $39,937 for the years ended December 31,
1998 and 1997, respectively.
Fair value of financial instruments
-----------------------------------
The Company's short-term financial instruments consist of cash and cash
equivalents, accounts and loans receivable, and accounts payable and
accruals. The carrying amounts of these financial instruments approximates
fair value because of their short-term maturities. Financial instruments
that potentially subject the Company to a concentration of credit risk
consist principally of cash and accounts receivable, trade. During the year
the Company maintained cash deposits at financial institutions in excess of
the $100,000 limit covered by the Federal Deposit Insurance Corporation.
The Company has several major customers, (see Note 9) the loss of any one
of which could have a material negative impact upon the Company.
Stock-based compensation
------------------------
The Company adopted Statement of Financial Accounting Standard No. 123 (FAS
123), Accounting for Stock-Based Compensation beginning with the Company's
first quarter of 1996. Upon adoption of FAS 123, the Company continued to
measure compensation expense for its stock-based employee compensation
plans using the intrinsic value method prescribed by APB No. 25, Accounting
for Stock Issued to Employees, and has provided in Note 2 pro forma
disclosures of the effect on net income and earnings per share as if the
fair value-based method prescribed by FAS 123 had been applied in measuring
compensation expense.
Earnings (loss) per share
-------------------------
InFebruary 1997, the Financial Accounting Standards Board ("FASB") issued
SFAS No.128, "Earnings Per Share." SFAS No. 128 supersedes and simplifies
the existing computational guidelines under Accounting Principles Board
("APB") Opinion No. 15, "Earnings Per Share."
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Notes to Financial Statements
December 31, 1998
(continued)
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Earnings (loss) per share (continued)
-------------------------------------
The statement is effective for financial statements issued for periods
ending after December 15, 1998. Among other changes, SFAS No. 128
eliminates the presentation of primary earnings per share and replaces it
with basic earnings per share for which common stock equivalents are not
considered in the computation. It also revises the computation of diluted
earnings per share. The Company has adopted SFAS No. 128 and there is no
material impact to the Company's earnings per share, financial condition,
or results of operations. The Company's earnings per share have been
restated for all periods presented to be consistent with SFAS No. 128.
The earnings 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 if
their effect would be antidilutive.
Recent Pronouncements
---------------------
SFAS No. 130, "Reporting Comprehensive Income", establishes guidelines for
all items that are to be recognized under accounting standards as
components of comprehensive income to be reported in the financial
statements. The statement is effective for all periods beginning after
December 15, 1998 and reclassification of financial statements of financial
statements for earlier periods will be required for comparative purposes.
To date, the company has not engaged in transactions which would result in
any significant difference between its reported net loss and comprehensive
net loss as defined in the statement.
NOTE 2. STOCKHOLDERS' EQUITY
During the periods covered by these financial statements the Company issued
securities in reliance upon an exemption from registration with the
Securities and Exchanges Commission. Although the Company believes that the
sales did not involve a public offering and that it did comply with the
exemptions from registration, it could be liable for recession of said
sales if such exemption was found not to apply. The Company has not
received a request for rescission of shares nor does it believe that its
probable that its shareholders would pursue rescission nor prevail if such
action were undertaken.
The Company issued 4,000,000 common stock purchase warrants to its
shareholders during August 1994. The warrants were exercisable into one
common share at a purchase price of $2 per share for a period of 18 months
from issue and were redeemable by the company at $.001 per warrant. During
1996, the Company issued 320,500 shares of common stock and received gross
proceeds of $641,000 pursuant to warrants exercised by its shareholders.
The remaining warrants have expired.
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Notes to Financial Statements
December 31, 1998
(continued)
NOTE 2. STOCKHOLDERS' EQUITY (CONTINUED)
During October, 1994 the Company issued 32,500 shares of its 7% preferred
stock in settlement of a note payable for $325,000. These shares were
convertible into 325,000 shares of the Company's common stock at the option
of the holder. The holder exercised his conversion rights during May 1996.
During May 1996, the Company issued 91,500 to a shareholder for services
provided to the Company. The shares were valued at a market price of $2 per
share. Also, during May 1996, the Company sold 218,181 shares of its common
stock pursuant to Regulation S of the US Securities and Exchange Commission
for cash aggregating $282,787, net of expenses of $15,020. Also, during
September 1996, a holder of the Company's redeemable preferred stock
converted 5,000 shares of preferred stock into 5,000 shares of common stock
at a conversion price of $2 per share.
During May 1996, in connection with a lawsuit settlement (see Note 8), the
Company issued common stock purchase warrants for 329,500 shares to an
individual. The warrants are exercisable for a period of eighteen months
from the date of issue at a price of $2 per share. The Company has not
recorded any expense related to the warrants as the estimated fair value of
the warrants is less than the exercise price at the grant date.
During the year ended December 31, 1998, the Company reacquired and
canceled certain of its shares issued for services which had not been
completed. The shares were retired at their par value.
During July 1996, the Company adopted the 1996 Employee Stock Option Plan
for the benefit of certain employees, officers, directors and consultants.
The Company also filed a Registration Statement of form S-8 to register
these shares. The number of common shares reserved under the plan is
800,000. The plan provides that the option price on the grant date shall
not be less than the fair market value on such date. During July 1996 the
Company issued 360,000 options exercisable at $1.40 per share under the
plan which expire after ten years unless exercised. During December 1996,
the Company granted additional options under the plan for 370,000 shares
exercisable at $.60 for a ten year period.
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Notes to Financial Statements
December 31, 1998
(continued)
NOTE 2. STOCKHOLDERS' EQUITY (CONTINUED)
The following is a summary of the transactions in the plan:
Range of Weighted
Shares exercise Average
prices Price
------ -------- ---------
Balance December 31, 1997
and 1998 730,000 $ .05-$60 .32
Options available at
December 31, 1997 and 1998 70,000
As of the date of the financial statements none of the options had been
exercised.
NOTE 3. INCOME TAXES
Deferred income taxes may arise from temporary differences resulting from
income and expense items reported for financial accounting and tax purposes
in different periods. Deferred taxes are classified as current or
non-current, depending on the classification of assets and liabilities to
which they relate. Deferred taxes arising from temporary differences that
are not related to an asset or liability are classified as current or
non-current depending on the periods in which the temporary differences are
expected to reverse.
The Company currently has net operating loss carryforwards aggregating
approximately $3,000,000 which expire beginning in 2003. The principal
difference between the Company's book operating losses and income tax
operating losses results from the issuance of and subscriptions for common
stock and preferred stock during 1994 and 1996 for services. The effects of
these differences are expected to be permanent in nature, therefore no
deferred tax asset had been recorded related thereto.
The Company did not provide Federal income taxes for the year ended
December 31, 1997 due to an operating loss.
The Company is unable to predict future taxable income that would enable it
to utilize the deferred tax asset arising from the future value of the net
operating loss and therefore the deferred tax asset of approximately
$680,000 related thereto is fully reserved.
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Notes to Financial Statements
December 31, 1998
(continued)
NOTE 4. RELATED PARTY TRANSACTIONS
During the years ended December 31, 1994 and 1993, certain officers and
shareholders made advances to the Company for working capital purposes.
During 1996 the Company repaid $75,313, the balance payable by the Company
of $3,985 at December 31, 1996 was repaid during 1997. Additionally, the
Company made $87,200 of cash advances to its president during 1997. The
advances will be paid out of future bonuses.
Included in amounts due to stockholders at December 31, 1997 is a balance
due to an entity controlled by one of the Company's directors who is also a
stockholder. The Company received legal services of $108,062 and $185,000
for the years ended December 31, 1997 and 1996, respectively, provided by a
firm associated with one of its directors and had a year end balance due
such firm of $29,696. Additionally, the Company purchased program rights
and production costs from another related entity of $113,625 and $166,511
during the years ended December 31, 1997 and 1996, respectively. During the
year ended December 31, 1997, the Company purchased program rights from an
officer/stockholder in the amount of $18,000.
NOTE 5. NOTES PAYABLE AND LONG-TERM DEBT
Long-term debt consists of an obligation arising from the settlement of a
lawsuit (see Note 8). Monthly payments of $2,000, including interest
imputed at 8% per annum, are due for a 40 month period beginning June 1,
1996. Principal payments due in the years ended December 31, 1998 and 1999
are $22,164 and $16,623, respectively.
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. Also included in notes
payable are a series of four notes aggregating $125,000 which were issued
by the Company in December 1997. The notes are due during September 1998
with interest at 10% per annum payable quarterly. The notes are secured by
an aggregate of 250,000 shares of the Company's common stock controlled by
an officer of the Company. The fair value of the pledged shares is
equivalent to the face amount of the notes at the issue date of the notes.
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Notes to Financial Statements
December 31, 1998
(continued)
NOTE 6. FILM LIBRARY
At December 31, 1998, the Company's film library consisted of the
following:
License costs $ 912,935
Mastering costs 43,235
-----------
956,170
Less accumulated depreciation (138,613)
-----------
$ 817,557
===========
During 1997 the Company incurred costs in connection with the rights to air
certain programing, including film mastering costs, through the medium of
cable television. The costs incurred and amortization are as follows:
1997
-----------
Costs incurred $ 275,287
Amortization 128,355
During 1997, the Company charged off to expense the value of film masters
delivered to network affiliates that have not renewed their license
agreements.
NOTE 7. COMMITMENTS AND CONTINGENCIES
During July, 1996, the Company entered into a lease for office space in Las
Vegas, Nevada for a sixty month period ending August 31, 2001 at a monthly
rental of $10,145, increasing by approximately 3.5% per year throughout the
lease. Rent expense was $138,586 and $143,158 for the years ended December
31, 1998 and 1997.
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Notes to Financial Statements
December 31, 1998
(continued)
NOTE 8. LITIGATION
Herklotz v. Olympic Entertainment Group, Inc., et. Al Los Angeles Superior
Court Case No. BC 127498.
During May, 1995 the individual holding the preferred stock described in
Note 2 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 Herklotz aggregating $125,000 and grant Herklotz an option
to purchase 329,500 shares of its common stock at an exercise price of
$2.00 per share. 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.
NOTE 9. INFORMATION ABOUT MAJOR CUSTOMERS
The Company, whose customers arrange for programming to air on local cable
systems in their respective licensed territories under leased access rules
of the Federal Communication Commission, made sales in excess of 10% of
total revenues for the years ended December 31, 1997 as follows:
Customer Sales Receivable at 12/31
--------- ----- -------------------
1997:
Carousel Media Marketing $ 1,735,000 100% $ --
<PAGE>
OLYMPIC ENTERTAINMENT GROUP, INC.
Notes to Financial Statements
December 31, 1998
(continued)
NOTE 10. BASIS OF PRESENTATION
The accompanying financial statements have been prepared on a "going
concern" basis which contemplates the realization of assets and the
liquidation of liabilities in the ordinary course of business.
The Company has incurred operating losses during the years ended December
31, 1995 and 1994 aggregating $579,001 and $2,176,549, respectively. The
Company had net income for the year ended December 31, 1996 of $355,856,
and a loss from operations of $431,326 for the year ended December 31, 1997
and a loss from operations of $817,742 for the year ended December 31,
1998. There can be no assurance that profitable operations will be attained
due to the Company's reliance on one major customer, which ability to
generate significant revenues from the use of the company's programming has
not been demonstrated.
Profitable operations are dependent upon, among other factors, the
Company's ability to obtain equity or debt financing and the Company's
ability to finance, produce and/or acquire and distribute its educational
films. Management plans to continue to sell additional affiliate licenses
and to renew expiring licenses and to seek additional equity financing.
Additionally, management is exploring plans for a merger of the Company
with another operating entity.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 31
<SECURITIES> 0
<RECEIVABLES> 4,680
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 836,141
<CURRENT-LIABILITIES> 1,102,958
<BONDS> 0
0
464,600
<COMMON> 28,246
<OTHER-SE> 3,306,979
<TOTAL-LIABILITY-AND-EQUITY> 836,141
<SALES> 5,950
<TOTAL-REVENUES> 5,950
<CGS> 0
<TOTAL-COSTS> 687,330
<OTHER-EXPENSES> 134,740
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,622
<INCOME-PRETAX> (817,742)
<INCOME-TAX> 0
<INCOME-CONTINUING> (817,742)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (817,742)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
