-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LHJCZTsV/vw7j1KJkRnpcadw0dgXbjLmTdIw9d1pOYVlg+QPN9+W5ATZlTfKYT+W kgbn28ICVBmuJD+yJVkJ6g== 0001000096-00-000319.txt : 20000417 0001000096-00-000319.hdr.sgml : 20000417 ACCESSION NUMBER: 0001000096-00-000319 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000414 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OLYMPIC ENTERTAINMENT GROUP INC /NV/ CENTRAL INDEX KEY: 0000934646 STANDARD INDUSTRIAL CLASSIFICATION: TELEVISION BROADCASTING STATIONS [4833] IRS NUMBER: 880271810 STATE OF INCORPORATION: NV FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-26442 FILM NUMBER: 600866 BUSINESS ADDRESS: STREET 1: 2755 E DESERT INN RD STREET 2: SUITE 200 CITY: LAS VEGAS STATE: NV ZIP: 89121-3620 BUSINESS PHONE: 7023692588 MAIL ADDRESS: STREET 1: 2755 E DESERT INN RD STREET 2: SUITE 200 CITY: LAS VEGAS STATE: NV ZIP: 89121-3620 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the year ended December 31, 1999 ( ) 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) 2949 E. Desert Inn Road, Suite 1, Las Vegas, NV 89121 - ----------------------------------------------- ----- (Address of principal executive offices) (Zip Code) Registrant's telephone number: (702) 734-1714 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: Common Stock $0.01 Par Value NONE ---------------------------- ---- (Title of Class) (Name of Each Exchange on Which Registered) 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, 1999 there were 3,297,785 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. 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 overall and has determined it to be in the Company's interest to seek to recapitalize the Company. (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. Since 1998, the Company has sought to recapitalize or find a financial partner. All reference to the Company in the following discussion of the business activities of the Company include Children's Cable Network. Children's Cable Network In the past, CCN provided award-winning, nonviolent, educational, informative and special interest children's programming for television and in the process of providing this programming, created 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 se rvice 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 the communications and broadcast industries. 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 obtained 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. The Company has no cash available to continue this effort. 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 competed with all other broadcasters of children's programming. On cable television, competitors included The Family Channel, The Learning Channel, PBS, Nickelodeon and The Disney Channel. Programming The Company's programs consisted of nonviolent, educational, informative and special interest videotapes and films which taught positive character development and morality in addition to introductions to numbers, letters and music. Each program was approximately 25 minutes in length, which left five minutes of time for the Cable Affiliate to sell commercial advertisements, sponsorships, and/or create and produce locally originated programming. Overall, the Affiliates did not meet with enough success to support the continued operation of CCN. The Company, through its own research, had located many award-winning children's series produced since 1950, some of which the Company planned to obtain through direct acquisition or licensing, providing that the Company was able to raise the capital necessary so to do. The Company was unsuccessful in those efforts. The programming for children included puppet shows, live action and animated characters, children's classic stories and music that was designed to teach children in a fun and entertaining way. Library The Company still owns many programs outright and has multi-year licenses to others. To date, each series of programs is aimed at the 11/2- 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. Olympic Entertainment Group, Inc. 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. 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 gameshow 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. 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 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. Feature Length Movies Fifteen movies with Tarzan, Abbott and Costello, Danny Kaye and Shirley Temple, among others. Item 2. Properties The Company presently leases no space and during the prior report period terminated its leases in Burbank, California, and subsequently in Las Vegas, Nevada. Item 3. Legal Proceedings The Company is currently involved in the following legal matters: The Company is a Defendant in Civil Action 96 CV 1930, Capital Funding & Financial Group, Inc., et al. vs. Olympic Entertainment Group, Inc. In this case, Plaintiff seeks refund of approximately $120,000 paid to the Company as licensing fees in 1996. The Company intends to defend itself and pursue its claims for licensing fees owed in excess of $100,000 and for damages caused by Capital Funding through tortuous interference with various contracts. A default judgment in excess of $1,000,000 was entered against the Company on November 2, 1998 under allegedly improper circumstances. The judgment was stayed and a motion to set aside the default judgment is pending. The Company is a Defendant in Lee Van Dyke, Judy Lynn Kloepfer and William G. Chandler vs. Olympic Entertainment Group, Inc., et al., which was filed in Superior Court of Los Angeles County, Case No. BC189116, seeking class action status and alleging various allegations of violation of California securities laws, breach of contract and violation of the California Business and Professions Code. The Company is also named as an adverse party in a cross-complaint filed in the same case by Pacific Health Management, Inc. d/b/a Carousel Media Marketing and James Alex. The Company intends to vigorously defend itself and deny that it ever offered or sold any securities nor did it participate in the sale of securities. The Company further intends to assert its rights to indemnity from the other defendants which were licensed broadcast rights by the Company. The Company is a defendant in Case No. A394431 in the District Court of Clark County, Nevada, entitled Desert Inn Office III, Limited Partnership, et al. vs. Olympic Entertainment Group, Inc., et al. The alleged total for rent and "build out" charges are $229,765.43 according to the lawsuit. The Company intends to defend itself against most - if not all - of the rent and "build out" charges. The Company, Dominic Orsatti and John Holt Smith are defendants in Case No. A405069 in Dept. No. XVII in the in the District Court of Clark County, Nevada, entitled AcquiCorp, Inc., a Nevada Corporation, and Gregory A. McAndrews vs. Olympic Entertainment Group, Inc., a revoked Nevada corporation, and Dominic Orsatti and John Holt Smith, Individually, and as trustee of Olympic Entertainment Group, Inc., a revoked Nevada corporation. The Complaint alleged, among other things, that Orsatti and Smith allowed Olympic to become a revoked corporation, did not honor a signed agreement and signed voting trust agreement to sell their stock to AcquiCorp, Inc. and resign as directors so that AcquiCorp, Inc. could proceed with finding a suitable financial partner to avoid bankruptcy for Olympic Entertainment Group, Inc. The suit also seeks to restrain Orsatti and Smith from performing any actions which might destroy shareholder value for Olympic Entertainment Group, Inc. Item 4. Submission of Matters to a Vote of Security Holders By unanamous concent the Board approved the waiver of notice to vote shares held in trust to elect new officers and directors. New officers and directors received more than 50% of the vote of the shares outstanding. PART II Item 5. Market for Registrant's Common Equity & Related Stockholder Matters (a) Market Information (1) (i) None (ii) Not applicable (iii)First Quarter First Quarter March 31, 1999 March 31, 1998 High Bid Low Bid High Bid Low Bid $0.01 $0.01 $0.51 $0.25 Second Quarter Second Quarter June 30, 1999 June 30, 1999 High Bid Low Bid High Bid Low Bid $0.03 $0.01 $0.44 $0.13 Third Quarter Third Quarter September 30, 1999 September 30, 1999 High Bid Low Bid High Bid Low Bid $0.03 $0.02 $0.24 $0.06 Fourth Quarter Fourth Quarter December 31, 1999 December 31, 1998 High Bid Low Bid High Bid Low Bid $0.05 $0.01 $0.06 $0.01 (iv) Not applicable (v) Not applicable (2) (a) Not applicable (b) Holders (1) Title of Class Number of Record Holders Common Stock, Approximately 300 $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 Twelve Months Ending December 31, 1999 1998 ---- ---- Income statement data: Revenues $-0- $2,800 Income (loss) from operations ($146,758) ($1,619,584) Net Interest Expense ($ 37,013) ($ 35,185) Income (Loss) before income taxes ($183,771) ($1,770,890) Income tax $-0- $-0- Net income (loss) ($183,771) ($160,000) December 31, 1999 1998 ---- ---- Per share data: Primary: Weighted average shares outstanding 3,002,785 2,973,080 Net income (loss) ($ 0.06) ($ 0.60) Balance sheet data: Working capital (deficiency) $-0- $ -0- Total assets $ -0- $ 101,325 Long-term debt 36,787 22,164 Total liabilities and stockholders' equity (deficiency) $ -0- ($1,904,989) Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company has continued to experience 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 a program to produce significant new revenue from 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. Should the Company be unsuccessful in seeking a financial partner, it would seek to reorganize its debt and to sell its programming in an orderly proceeding under the protection of the Bankruptcy Court. Comparison of 1999 to 1998 The Company's activities in the 1999 consisted of attempting to find a financial partner to avoid filing for bankruptcy. In 1998, the Company unsuccessfully attempted to license cable affiliates and was working with Optimists International to set up a network with clubs in cities with attractive demographics. There were no revenues 1999 versus no revenues from a few operating CCN Affiliates in 1998. The Company had formerly recognized revenue from the network license agreements when all specified conditions had been made. Comparison of 1998 to 1997 The Company's activities during 1998 and 1997 developed Company products, licensed cable affiliates and negotiated acquisitions of rights to various children's television programs. Revenues were down in 1998 versus 1997 due to the fact that cable affiliates did not renew their license agreements when all specified conditions had been met. During 1998 and 1997, the bulk of the Company's sales were attributed to the sale of network license agreements. The selling and general and administrative expenses we re almost the same. Capital Resources & Sources of Liquidity During 1999 working capital remained inadequate due to lack of activity. The Company was maintained by an outside consultant, now the President and a Director. In 1998, cash requirements were for operating expenses, primarily labor and general and administrative expenses, and for the acquisition of rights to additional television series licensing. In 1997, the Company's primary source of cash was from licensing agreements that accounted for almost all of the cash brought into the Company. Related Party Transactions All deferred compensation to Officers and Directors has been forgiven since 1997. Major customers The Company had no major customers in the 1999. Carousel Marketing was the Company's major customer in 1998 and 1997. In 1998, Carousel broke off its relationship with the Company. Both are now in litigation over related matters to agreements. 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. Item 8. Financial Statements The following financial statements are filed with this report as pages F-1 through F-2 following the signature page: Reference Balance sheets F-1 Statements of operations F-2 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.: Name Age Position - ---- --- -------- Gregory A. McAndrews 54 President and Chairman Kristi Q Litton 31 Secretary and Director Jerry Engel 69 Director Kelly A. Valceanu 32 Director Raymond Girard, Jr. 27 Director - --------------- 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. Former Directors and Officers Dominic Orsatti and John Holt Smith were removed from office for cause by shareholders on September 29, 1999. BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS Gregory A. McAndrews, President and Chairman of the Board - Mr. McAndrews has been a financial public relations counselor concentrating on small businesses for 27 years. He has represented more than 200 companies as President of Greg McAndrews & Associates and as an affiliate of a New York financial public relations firm. Mr. McAndrews is also President of AcquiCorp, Inc., a small company mergers and acquisition advisor. He is President of the National Association of Financial Wholesalers and a member of several other financial industry associations. He is a frequent contributor to industry publications. Mr. McAndrews received a BA degree in Journalism from the University of Southern California in 1967. Kristi Q Litton, Secretary and Director - Mrs. Litton is Manager of Auctions for Butterfield & Butterfield, an auction house owned by E-bay. She has held various positions with Butterfield & Butterfield since 1995. Prior to that she was an account executive with advertising and public relations firms for five years. She graduated from the University of Southern California in 1990 with a BA and honors in Art History from the University of Southern California. Jerry Engel, Director - Mr. Engel is a private investor and an early prominent investor in Olympic Entertainment Group, Inc. He is a CPA and a former partner, retired, in a leading Nevada accounting firm. Kelly A. Valceanu, Director - Mrs. Valceanu is currently a candidate for an MBA from Webster University. For the prior four years, she was enlisted in the U.S. Army domestically and overseas with the 18th Airborne Corps as a finance specialist. She was a fashion model in Los Angeles, New York and Paris from high school through enlisting in the Armed Forces with her husband, a Sergeant in the 82nd Airborne. She graduated from New York University in 1989 with a BA in English. Raymond Girard, Jr., Director - Mr. Girard is an Internet consultant and specialist in the organization and maintenance of small publicly held companies. He graduated from the University of Las Vegas with a BA in Business Administration in 1995. He is currently an instructor in astronomy at UNLV and has the honor of being with a team at the University that tracked and named a previously undiscovered asteroid. 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 - ------------------ -------------------------- ------------ Gregory A. McAndrews President and Chairman of the Board $-0- Kristi Q Litton Secretary and Director $-0- Item 12. Security Ownership of Certain Beneficial Owners and Management As of December 31, 1999 there were 3,297,785 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. Table I - Common Stock ---------------------- Name and Address Number of Shares of Percentage of Beneficial Owner Common Stock Owned(1)(2) of Ownership - ------------------- --------------------- ------------ Gregory A. McAndrews, Ind. & President AcquiCorp, Inc. 8144 Bay Harbor Drive Las Vegas, NV 89128 666,500 16.84 Percent All Directors and Officers as a Group 666,500 16.84 Percent - --------------- (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) Share of AcquiCorp, Inc. and Mr. McAndrews are voting shares, but the Board has voted to not issue the shares until, and if, a financial partner is located. The following tabulates holding of Series "B", "C" and "D" Preferred Shares of the Company owned beneficially by all directors and officers of the Company individually and as a group. Table 2 - Series "B" Preferred Shares ------------------------------------- Number of Series "B" Percent of Name and Address Preferred Shares(1) Class - ---------------- ------------------- ----- None None None (1) The Board has voted to ask shareholders to eliminate Series "B" Preferred Shares. The loan holder of "B" shares has agreed to return all of the 10,000 Series "B' Preferred Shares in exchange for compensation to be determined later. Table 3 - Series "C" Preferred Shares ------------------------------------- Number of Series "C" Percent of Name and Address Preferred Shares(1) Class - ---------------- ------------------- ----- None None None (1) The Board has voted to ask shareholders to eliminate Series "C" Preferred Shares. Table 4 - Series "D" Preferred Shares ------------------------------------- Number of Series "D" Percent of Name and Address Preferred Shares(1) Class - ---------------- ------------------- ----- None None None (1) The Board has voted to ask shareholders to eliminate Series "D" Preferred PART IV Item 14. Exhibits, Financial Statements, and Reports on Form 8-K (a) Financial Statements Reference Balance sheets F-2 Statements of operations F-3 (b) Reports on form 8-K None (c) Exhibits None SIGNATURES Olympic Entertainment Group, Inc. By: /s/ Gregory A. McAndrews Date: April 12, 2000 - ---------------------------- -------------------- President NAME & POSITION By: /s/ Gregory A. McAndrews Date: April 12, 2000 - ---------------------------- -------------------- President INDEPENDENT AUDITOR'S REPORT Board of Directors and Shareholders Olympic Entertainment Group, Inc. We have audited the balance sheet of Olympic Entertainment Group, Inc. as of December 31, 1999, and the related statements of operations, changes in stockholders' equity, and cash flows for each of the two years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above, present fairly, in all material respects, the financial position of Olympic Entertainment Group, Inc. as of December 31, 1999, and the related statements of operations, changes in stockholders' equity, and cash flows for each of the two years in the period ended December 31, 1999, in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 10 to the financial statements, the Company has suffered recurring losses from operations, has made significant commitments and relies upon one major customer which raise substantial doubts about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 10. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. James E. Scheifley & Associates, P.C. Certified Public Accountants Denver, Colorado March 30, 2000 F-1 Olympic Entertainment Group, Inc. Balance Sheet As of December 31, 1999 Assets 1999 ----------- Current Assets: $ -- ----------- Total assets $ -- =========== Liabilities and Stockholders' Equity Current Liabilities: Notes payable $ 135,000 Curent portion of long-term debt 36,787 Accounts payable - trade 639,633 Accrued expenses 492,498 ----------- Total current liabilities 1,303,918 Commitments and contingencies (Note 7) Redeemable preferred stock: Preferred stock, 10% cumulative convertible $.01 par value, 650,000 shares authorized, 101,500 shares issued and outstanding in 1999 liquidating preference $1 per share 203,000 Stockholders' equity: Preferred stock, $.01 par value, 5,000,000 total shares authorized: Preferred stock, convertible, 40,000 shares authorized, 32,800 shares issued and outstanding, $10 per share liquidating preference (Series C) 65,600 Preferred stock, convertible, 98,000 shares authorized, issued and outstanding, $3 per share liquidating preference (Series D) 196,000 Common stock, $.01 par value, 20,000,000 shares authorized, 3,002,785 shares issued and outstanding 30,028 Paid in capital 3,394,314 Common stock subscriptions 61,950 Accumulated deficit (5,254,810) ----------- (1,506,918) ----------- Total liabilities and stockholders' equity $ -- =========== The accompanying notes are an integral part of the financial statements. F-2 Olympic Entertainment Group, Inc. Statements of Operations For the Years Ended December 31, 1999 and 1998 1999 1998 ----------- ----------- Revenue $ -- $ 2,800 Costs and expenses: General and administrative 146,758 1,622,384 ----------- ----------- 146,758 1,622,384 Income (loss) from operations (146,758) (1,619,584) Other income and (expense): Interest expense (37,013) (35,185) Loss from disposal of assets -- (134,740) Other income -- 9,619 ----------- ----------- (37,013) (160,306) Net income before income taxes (183,771) (1,779,890) Provision for income taxes -- -- ----------- ----------- Net income (loss) $ (183,771) $(1,779,890) =========== =========== Per share information: Basic and diluted (loss) per share Net income (loss) per share $ (0.06) $ (0.60) =========== =========== Weighted average shares outstanding 3,002,785 2,973,080 =========== =========== The accompanying notes are an integral part of the financial statements. F-3
Olympic Entertainment Group, Inc. Statement of Stockholders' Equity For the Years Ended December 31, 1999 and 1998 Additional Common Common Preferred Paid-In Stock Accumulated Shares Amount Shares Amount Capital Scbscribed Deficit Total ------ ------ ------ ------ ------- ---------- ------- ----- Balance December 31, 1997 2,824,552 $ 28,246 $ 130,800 $ 261,600 $ 3,306,979 $ 45,000 $(3,291,149) 350,677 Shares issued for services 178,233 1,782 87,335 89,117 Common stoc subscribed for services 3,750 3,750 Net (loss) for the year -- -- -- -- -- -- (1,779,890) (1,779,890) ---------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance December 31, 1998 3,002,785 30,028 130,800 261,600 3,394,314 48,750 (5,071,039) (1,336,347) Common stock subscribed for settlement 13,200 13,200 Net (loss) for the year -- -- -- -- -- -- (183,771) (183,771) ---------- ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance December 31, 1999 3,002,785 $ 30,028 130,800 $ 261,600 $ 3,394,314 $ 61,950 $(5,254,810) (1,506,918) ========== =========== =========== =========== =========== =========== =========== =========== The accompanying notes are an integral part of the financial statements. F-4 Olympic Entertainment Group, Inc. Statements of Cash Flows For the Years Ended December 31, 1999 and 1998 1999 1998 ----------- ----------- Operating activities: Net income (loss) $ (183,771) $(1,779,890) Adjustments to reconcile net income (loss) to net cash: Depreciation -- 8,921 Amortization of film costs -- 641,358 Common stock issued for services -- 89,117 Stock subscriptions issued for services 13,200 3,750 Film masters rights charged off 101,323 74,876 Loss on disposition of assets -- 134,740 (Increase) decrease in accounts receivable -- 73,039 (Increase) in other assets -- 13,775 Increase (decrease) in accrued expenses 37,013 354,190 Increase (decrease) in accounts payable 32,204 372,651 Increase in accounts payable - related party -- -- ----------- ----------- Total adjustments 183,740 1,766,417 ----------- ----------- Net cash provided by (used in) operating activities (31) (13,473) Cash flows from financing activities: Repayment of notes payable -- (2,000) ----------- ----------- Net cash provided by (used in) financing activities -- (2,000) Net increase in cash and cash equivalents (31) (15,473) Beginning cash 31 15,504 ----------- ----------- Ending cash $ -- $ 31 =========== =========== Supplemental cash flow information: Cash paid for: Interest $ -- $ -- Income taxes $ -- $ -- The accompanying notes are an integral part of the financial statements. F-5
Olympic Entertainment Group, Inc. Notes to Financial Statements December 31, 1999 Note 1. 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. The ceased its principal business activity during the first quarter of 1998. SIGNIFICANT ACCOUNTING POLICIES Estimates: The preparation of the Company's financial statements requires management to make estimates and assumptions that effect the amounts reported in the financial statements and accompanying notes. Actual results could differ from these estimates. 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 $ 0 and $4,337 of depreciation expense for the years ended December 31, 1999 and 1998, respectively. During the second quarter of 1998, the Company abandoned substantially all of its office and computer equipment in connection with the cessation of its operations. Additionally, the Company abandoned its rights under a long term operating lease for its corporate offices including certain leasehold improvements. The Company recognized a loss of $134,740 in connection with the abandonment of these assets. F-6 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 an adjustment to reduce the carrying value of its film library of $74,876. Amortization charged to operations during 1997 aggregated $128,355 (See Note 6). During the year ended December 31, 1998, the Company ceased its principal business activities. In connection therewith the Company reduced the carrying value of its film library to its estimated net realizable value of $100,000 and charged an aggregate of $717,557 to costs and expenses. During the year ended December 31, 1999, the Company determined that the remaining unamortized balance of the film rights was not expected to be realized in future years and charged the full amount to operations. 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 specified 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 $ 0 and $7,839 for the years ended December 31, 1999 and 1998, respectively F-7 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 approximate 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 did not maintain cash deposits at financial institutions in excess of the $100,000 limit covered by the Federal Deposit Insurance Corporation 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: In February 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." The statement is effective for financial statements issued for periods ending after December 15, 1997. 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 anti-dilutive. F-8 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, 1997 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. In March 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use ("SOP 98-1"). SOP 98-1 provides authoritative guidance on when internal-use software costs should be capitalized and when these costs should be expensed as incurred. Effective January 1, 1998, the Company adopted SOP 98-1. Costs capitalized by the Company during the year ended December 31, 1998 in accordance with these guidelines were not significant. Effective December 31, 1998, the Company adopted SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information ("SFAS 131"). SFAS 131 superseded SFAS No. 14, Financial Reporting for Segments of a Business Enterprise. SFAS 131 establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports. SFAS 131 also establishes standards for related disclosures about products and services, geographic areas, and major customers. The adoption of SFAS 131 did not affect results of operations or financial position. To date, the Company has operated in one business segment only. Effective December 31, 1998, the Company adopted the provisions of SFAS No. 132, Employers' Disclosures about Pensions and Other Post-retirement Benefits ("SFAS 132"). SFAS 132 supersedes the disclosure requirements in SFAS No. 87, Employers' Accounting for Pensions, and SFAS No. 106, Employers' Accounting for Post-retirement Benefits Other Than Pensions. The overall objective of SFAS 132 is to improve and standardize disclosures about pensions and other post-retirement benefits and to make the required information more understandable. The adoption of SFAS 132 did not affect results of operations or financial position. The Company is in its development stage and has not initiated benefit plans to date, which would require disclosure under the statement. F-9 In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities ("SFAS 133"), which is required to be adopted in years beginning after June 15, 1999. SFAS 133 will require the Company to recognize all derivatives on the balance sheet at fair value. Derivatives that are not hedges must be adjusted to fair value through income. If the derivative is a hedge, depending on the nature of the hedge, changes in the fair value of derivatives will either be offset against the change in fair value of hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. The ineffective portion of a derivative's change in fair value will be immediately recognized in earnings. The Company has not yet determined what the effect of SFAS 133 will be on earnings and the financial position of the Company, however it believes that it has not to date engaged in significant transactions encompassed by the statement. During 1998, the American Institute of Certified Public Accountants issued Statement of Position 98-5 - Reporting on the Costs of Start-Up Activities. The statement is effective for fiscal years beginning after December 15, 1998 and requires that the cost of start-up activities, including organization costs be expensed as incurred. The Company adopted the statement upon its issuance, however, the Companies organization costs had been fully amortized in prior years. Note 2. STOCKHOLDERS' EQUITY During the year ended December 31, 1998, the Company issued an aggregate of 178,233 shares of its common stock to certain employees and a vendor for services provided to the Company. The shares were valued at $.50 per share, which represents the market value of the stock at the dates at which the services provided to the Company were substantially complete. During the year ended December 31, 1999, the Company settled a lawsuit for the collection of fees with a consultant who has assumed management responsibilities for the Company. The settlement specifies the issuance of 660,000 shares of the Company's common stock, which at the settlement date had a fair market value of $13,200 based upon the bid price of the common stock. The shares remained unissued at December 31, 1999. F-10 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 on 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. Following is a summary of the transactions in the plan: Range of Weighted Shares Exercise Average Prices Price ------- ------------ --------- Balance December 31, 1997 730,000 &.60 - $1.40 $.99 Granted - Canceled 335,000 $.60 - $1.40 $.92 Exercised - ------- Balance December 31, 1998 395,000 $.60 - $1.40 $1.08 Granted - Canceled - Exercised - ------- Balance December 31, 1999 395,000 $.60 - $1.40 $1.08 Options available at December 31, 1999 405,000 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. F-11 The Company currently has net operating loss carryforwards aggregating approximately $3,134,000 which expire beginning in 2003 through 2014. 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 years ended December 31, 1999 and 1998 due to operating losses incurred. 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 $1,065,000 related thereto is fully reserved. The reserve balance increased by approximately $63,000 as a result of the loss generated in the current year. Note 4. RELATED PARTY TRANSACTIONS The Company made $87,200 of cash advances to its president during 1997. The advances were repaid during 1998 and as of December 31, 1998 $82,731 of repayments had been made in cash or by payment of Company expenses by the officer. The amount due to the officer at December 31, 1998 consists of the net loan balance of $4,159 offset by an accrual of salary due to the officer pursuant to an employment contract of $260,000. The Company received legal services of $18,165 for the year ended December 31, 1998 provided by a firm associated with one of its then directors and had a year end balance due such firm of $42,296. 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 per month, including interest imputed at 8% per annum are due for a forty 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. The loan is in default and all amounts due under the loan at December 31, 1999 ($36,787) have been classified as a current liability. F-12 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 were 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. The notes are considered to be due on demand. Note 6. FILM LIBRARY At December 31, 1999, the Company's film library consisted of the following: License costs $ 912,935 Mastering costs 43,235 --------- 956,170 Less accumulated amortization (956,170) --------- $ - During 1998, in connection with the cessation of the Company's principal business operations, the Company made a reduction of the carrying amounts of the film rights and masters of $717,557, which reduced the carrying amounts to an estimated net realizable value of $100,000. The Company further reduced the carrying value to $ 0 during the year ended December 31, 1999 as it is unlikely that any future value will be received therefrom. F-13 Note 7. COMMITIENTS AND CONTINGENCIES During August, 1997, the Company entered into a lease for office space in Las Vegas, Nevada for a sixty month period ending August 31, 2002 at a monthly rental of $4,445, increasing by approximately 3.5% per year throughout the lease. Rent expense was $160,883 and $143,158 for the years ended December 31, 1998 and 1997, respectively. In connection with the cessation of its principal business activity in 1988, the Company abandoned its rights pursuant to the lease. The landlord has commenced legal action to recover unpaid rent and build out costs aggregating $229,765. The Company has accrued the full amount of the claim in trade accounts payable. Note 8. LITIGATION Capital Funding & Financial Group, Inc. et al. v. Olympic Entertainment Group, Inc., et al. Colorado state court, Case No. 96-CV-001980. The claim by the plaintiff is for the refund of $120,000 in licensing fees paid to the Company in 1996 and for other damages. The Company had filed a counter claim and based on the opinion of its Colorado attorney as of April 26, 1998 had not made any accrual pursuant to the case for the year ended December 31, 1997. As a result of the Company's cessation of its principal business operations, the Company was forced to abandon its counterclaim effort in California. A trial was held in Colorado in November 1998 and the plaintiff was awarded a default judgement of $1,000,000, including punitive damages of $520,000. A motion to set aside the default judgement has been made by the Company and stayed by the Court. The Company's Colorado attorney believes that the motion to set aside the judgement will be approved as the plaintiff has been subject to numerous cease and desist orders for violation of state securities regulations which may be directly related to the case. The Company has not accrued any amount of the default judgement in the foregoing financial statements. Lee Van Dyke et al. v. Olympic Entertainment Group, Inc., et al. Superior Court of Los Angeles County, Case No. BC189116. The plaintiffs seek class action status and allege violations of California securities laws, breach of contract and violation of the California Business and Professions Code. The suit has not been certified by the Court for class action status. F-14 The Company is also named as an adverse party in a cross-complaint filed in the same case filed by Pacific Health Management, Inc. d/b/a Carousel Media Marketing (Carousel). The cause of action relates to the sale of limited partnership investment units to investors by Carousel. Carousel had been the Company's major customer during the years ended December 31, 1996 and 1997. The Company maintains that it did not materially participate in the sale of the securities. The Company cannot predict the possible outcome of the case nor estimate the range of potential damages that might arise therefrom. 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 Communications Commission, made sales in excess of 10% of total revenues for the year ended December 31, 1998 to Carousel Media Marketing in the amount of $2,800 which constituted 100% of the Company's sales in that year. No amounts were due from Carousel at December 31, 1998. 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, 1999 and 1998 aggregating $183,771 and $1,779,890, respectively and the Company has a working capital deficit of $1,303,809 at December 31, 1999. There can be no assurance that profitable operations will be attained due to the Company's cessation of its principal business operation. Profitable operations are dependent upon, among other factors, the Company's ability to obtain equity or debt financing, the ability of management to restructure its liabilities either by repayment at less than face value or by conversion to equity and the Company's ability to locate and merge with a profitable business operation. Management is exploring plans for a merger of the Company with another operating entity and is attempting to restructure its liabilities. F-15 EX-27 2 FINANCIAL DATA SCHEDULE
5 12-MOS DEC-31-1999 JAN-01-1999 DEC-31-1999 0 0 0 0 0 0 0 0 0 1,303,918 0 0 0 30,028 0 0 0 0 0 146,758 0 0 37,013 (183,771) 0 (183,771) 0 0 0 (183,771) (.06) (.06)
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