U.S. SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549
                                   FORM 10-QSB

(Mark One)
[X] Quarterly  report under Section 13 or 15 (d) of the Securities  Exchange Act
of 1934 For the quarterly period ended June 30, 1999

[] Transition report under Section 13 or 15 (d) of the Exchange Act

For the Transition period from ________ to __________

Commission file number:   0-92402

                          ON STAGE ENTERTAINMENT, INC.
        (Exact Name of Small Business Issuer as Specified in Its Charter)

          NEVADA                                               88-0214292
(State or Other Jurisdiction                                 (IRS Employer
of Incorporation or Organization)                          Identification No.)

4625 W. NEVSO DRIVE, LAS VEGAS, NEVADA                            89103
(Address of Principal Executive Offices)                        (ZIP CODE)

                                 (702) 253-1333
                 Issuer's Telephone Number, Including Area Code

--------------------------------------------------------------------------------
         (Former Name, Former Address and Former Fiscal Year, if Changed
                               Since Last Report)

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the  Exchange Act during the past 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.

Yes [X]        No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date.

         Class                             Outstanding at August 13, 1999
         -----                             ------------------------------
Common Stock, $0.01 par value                         6,985,279


<PAGE>


                  ON STAGE ENTERTAINMENT, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

                                                                     PAGE NO.

Part I. Financial Information


       Item 1. Consolidated Financial Statements

                   Balance sheets..................................     1
                   Statements of operations........................     2 -3
                   Statements of cash flows........................     4
                   Notes to financial statements...................     5-12
       Item 2. Management's Discussion and Analysis
                   Of Financial Condition and Results of Operations.    13-20

Part II. Other Information

     Item 1. Legal Proceedings......................................    21
     Item 2. Changes in Securities and Use of Proceeds..............    21
     Item 3. Defaults Upon Senior Securities........................    22
     Item 4. Submission of Matters of a Vote of Security Holders....    22
     Item 5. Other Information......................................    22
     Item 6. Exhibits and Reports on Form 8-K.......................    22


Signatures..........................................................    23



















                                       i
<PAGE>

                         PART I. FINANCIAL INFORMATION

Item 1.  Consolidated Financial Statements

                  On Stage Entertainment, Inc. and Subsidiaries
                           Consolidated Balance Sheets

<TABLE>
<S>                                     <C>                                               <C>                     <C>

                                                                                      December 31,            June 30,
                                                                                          1998                  1999
                                      Assets                                        ---------------       ---------------
                                                                                                            (Unaudited)
Current assets
      Cash and cash equivalents.............................................           $  1,009,768       $       466,077
      Accounts receivable, net..............................................              1,264,526             1,072,708
      Inventory.............................................................                243,413               247,851
      Deposits..............................................................                125,784               346,135
      Prepaid and other assets..............................................                594,777               667,928
    Notes receivable from officers  ........................................                 77,330                93,754
                                                                                    ----------------      ---------------
               Total current assets.........................................              3,315,598             2,894,453
                                                                                    ----------------      ---------------

Property, equipment and leasehold improvements..............................             24,130,663            24,156,527
Less:  Accumulated depreciation and amortization............................            (4,396,229)           (5,020,946)
                                                                                    ----------------      ---------------
Property, equipment and leasehold improvements, net.........................             19,734,434            19,135,581
                                                                                    ----------------      ---------------
Deferred financing costs, net of amortization of  $80,813 and $136,812......              1,039,187               983,188
                                                                                    ================      ===============
                                                                                       $ 24,089,219       $    23,013,222
                                                                                    ================      ===============

                       Liabilities and Stockholders' Equity
Current liabilities
    Working capital line ...................................................            $   999,679       $       871,845
    Accounts payable and accrued expenses...................................              2,533,232             2,389,736
    Accrued payroll and other liabilities...................................              1,891,924             2,677,693
    Current maturities of long-term debt....................................             14,682,246            14,665,016
    Note payable to officer ................................................                      -               217,000
                                                                                    ----------------      ---------------
    Total current liabilities...............................................             20,107,081            20,821,290
                                                                                    ----------------      ---------------

Long-term debt, less current maturities.....................................                786,468               539,722
                                                                                    ----------------      ---------------
           Total liabilities and long-term debt.............................             20,893,549            21,361,012
                                                                                    ----------------      ---------------

Commitments and contingencies (Note 4)

Stockholders' equity
     Preferred stock, par value $1 per share, 1,000,000 shares
         authorized; none issued and outstanding............................                     -                     -
     Common stock, par value $0.01 per share; authorized 25,000,000
          Shares; 7,452,350 and 6,985,279 shares issued and outstanding.....                74,523                69,853
    Additional paid-in-capital..............................................            11,254,587            11,332,250
      Currency exchange adjustment..........................................                67,289               (17,167)
      Accumulated deficit...................................................            (8,200,729)           (9,732,726)
                                                                                    ----------------      ---------------
          Total stockholders' equity........................................             3,195,670             1,652,210
                                                                                    ----------------      ---------------
                                                                                    $   24,089,219        $   23,013,222
                                                                                    ================      ===============
</TABLE>





                                       1
<PAGE>

                  On Stage Entertainment, Inc. and Subsidiaries
                      Consolidated Statements of Operations

<TABLE>
 <S>                         <C>                                                            <C>                    <C>
                                                                                           Three months ended
                                                                                                 June 30,
                                                                                         1998                  1999
                                                                                    ---------------      ----------------
                                                                                      (Unaudited)          (Unaudited)

Net revenues....................................................................         $ 8,244,581          $ 7,403,008

Costs of revenues...............................................................           6,466,463            5,379,324
                                                                                    ----------------     -----------------

Gross profit....................................................................           1,778,118            2,023,684

Selling, general & administrative...............................................           1,076,753            1,035,952

Depreciation and amortization...................................................             329,939              353,534

Restructuring charges (Note 10).................................................                   -              262,793
                                                                                    ----------------     -----------------

Operating income................................................................             371,426              371,405

Interest, net...................................................................             384,514            1,019,838
                                                                                    ----------------     -----------------

Net loss........................................................................         $  (13,088)         $  (648,433)
                                                                                    ================     =================

Basic and diluted loss per share................................................          $   (0.00)          $    (0.09)
                                                                                    ================     =================

Basic and diluted average number of common shares outstanding...................           7,193,008            7,354,676
                                                                                    ================     =================

</TABLE>


                                       2
<PAGE>

                  On Stage Entertainment, Inc. and Subsidiaries
                      Consolidated Statements of Operations
<TABLE>
                                                                                          <C>                  <C>
<S>
                                                                                              Six months ended
                                                                                                 June 30,
                                                                                    --------------------------------------
                                                                                         1998                  1999
                                                                                    ---------------      ----------------
                                                                                      (Unaudited)          (Unaudited)

Net revenues....................................................................     $    11,969,067      $    13,675,247

Costs of revenues...............................................................           9,130,737           10,829,833
                                                                                    ----------------     -----------------

Gross profit....................................................................           2,838,330            2,845,414

Selling, general & administrative...............................................           2,461,414            2,081,868

Depreciation and amortization...................................................             463,896              603,601

Restructuring charges (Note 10).................................................                   -              262,793
                                                                                    ----------------     -----------------

Operating loss..................................................................            (86,980)            (102,848)

Interest, net...................................................................             454,834            1,429,149
                                                                                    ----------------     -----------------

Net loss........................................................................     $     (541,814)      $    (1,531,997)
                                                                                    ================     =================

Basic and diluted loss per share................................................     $        (0.08)      $         (0.21)
                                                                                    ================     =================

Basic and diluted average number of common shares outstanding...................         6,883,421               7,459,597
                                                                                    ================     =================
</TABLE>


                                       3
<PAGE>

                  On Stage Entertainment, Inc. and Subsidiaries
                      Consolidated Statements of Cash Flows

                Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
                                                                                           <C>                  <C>
<S>

                                                                                                 Six months ended
                                                                                                     June 30,
                                                                                     -----------------------------------------
                                                                                           1998                   1999
                                                                                     -----------------     ------------------
                                                                                        (Unaudited)           (Unaudited)

Cash flows from operating activities
       Net loss..............................................................             $   (541,814)       $   (1,531,997)
                                                                                     ------------------    -------------------
       Adjustments  to  reconcile  net  loss  to  net  cash  used  in  operating
activities:
       Depreciation and amortization.......................................                    318,799              676,087
       Increase (decrease) from changes in operating assets and liabilities
                    Accounts receivable....................................                   (898,311)             180,505
                    Inventory..............................................                     11,687               (4,438)
                    Deposits...............................................                   (152,127)            (223,792)
                    Pre-opening costs......................................                 (1,256,382)                   -
                    Prepaid and other assets...............................                         (8)             (73,151)
                    Accounts payable and accrued expenses..................                    297,458             (143,496)
                    Accrued payroll and other liabilities..................                    808,063              794,769
                                                                                    ------------------    -------------------
         Total adjustments.................................................                   (870,821)           1,206,484
                                                                                     ------------------   -------------------
Net cash used in operating activities......................................                 (1,412,635)            (325,513)
                                                                                     ------------------    ------------------

Cash flows from investing activities
                    Advances on notes receivable from officer.............                     (81,127)             (31,950)
                    Payments received on notes receivable from officer....                      32,626               15,526
                    Capital expenditures..................................                    (167,920)             (42,538)
              Direct acquisition costs ...................................                     829,665                    -
              Payment for purchase of Gedco, USA, net of cash received (Note 5)            (14,602,005)                   -
                                                                                     ------------------    ------------------
Net cash used in investing activities.....................................                 (13,988,761)             (58,962)
                                                                                     ------------------    ------------------

Cash used in financing activities
      Borrowings/repayments under working capital line (Note 5)...........                   1,000,000             (127,834)
      Proceeds from long-term borrowing...................................                  13,727,237                    -
      Repayment on long-term borrowing....................................                    (561,426)            (263,976)
      Notes payable to officer............................................                           -              300,000
      Cash received on notes payable from officer.........................                           -              (83,000)
      Issuance of common stock............................................                           -              100,050
                                                                                     ------------------    ------------------
Net cash provided by (used in) financing activities.......................                  14,165,811              (74,760)
                                                                                     ------------------    ------------------

Effect of exchange rate changes on cash and cash equivalents..............                           -              (84,456)
                                                                                     ------------------    ------------------

Net decrease in cash and cash equivalents.................................                   (1,235,585)           (543,691)
Cash and cash equivalents at beginning of period..........................                    2,323,559           1,009,768
                                                                                     ------------------    -------------------

Cash and cash equivalents at end of period................................            $       1,087,974     $       466,077
                                                                                     ==================    ===================

Supplemental  disclosure  of cash flow  information  Cash paid during
the period for:
       Interest...........................................................            $         539,303    $          460,827
                                                                                     ==================    ===================
</TABLE>


                                       4
<PAGE>

Supplemental schedule of non-cash investing and financing activities

     On  February  23,  1999,  On Stage  entered  into a Common  Stock  Purchase
Agreement  with  Richard S. Kanfer,  effectively  unwinding  the  November  1996
acquisition of Interactive Events, Inc. Under the Interactive Re-Conveyance,  On
Stage  re-conveyed  all of the assets of Interactive to Kanfer in  consideration
for  Kanfer's  re-conveyance  of the 30,304  shares of On Stage's  common  stock
valued at  $1.125  per  share,  issued to  Kanfer  during  On  Stage's  original
acquisition of Interactive,  along with the cancellation of a non-plan option to
purchase  15,000 shares of common stock and incentive  stock options to purchase
19,835  shares of common stock at a price of $5.00 per share.  In addition,  the
parties  agreed to release one  another  from any  liability  arising out of the
acquisition  of  Interactive  by On Stage and any  claim  relating  to  Kanfer's
subsequent  employment  with us. Kanfer also entered into an exclusive  right of
representation  agreement  with us in February  1999,  under which we granted to
Kanfer the right to represent  our Legends  production  in  designated  areas in
consideration   for  a  portion  of  the  gross   proceeds   generated  by  that
representation.

     On April 23, 1999, On Stage granted its securities counsel, Nida & Maloney,
P.C. an option to purchase  40,000 shares of common stock at a purchase price of
$1.00 per share as payment for $38,469 in legal services  performed for On Stage
by Nida & Maloney,  P.C. The  securities  were issued under the  exception  from
registration provided by Section 4 (2) of the Securities Act.

     On May 7, 1999,  On Stage  issued  8,471  shares of common  stock valued at
$1.06 per share to Jim Owen, a former performer with On Stage. These shares were
issued in connection  with the resolution of litigation that arose several years
ago  between  On Stage and Owen with  regard to the right to the use of  certain
photographs  taken of Owen by On Stage.  The  securities  were issued  under the
exception from registration provided by Section 4 (2) of the Securities Act.

     On May 27, 1999,  Hanover  Restaurants,  Inc. returned 595,238 shares of On
Stage common stock  originally  issued to Hanover in  connection  with the Gedco
asset acquisition.  The Hanover shares were returned to On Stage under the terms
of a Mutual  Release and  Settlement  Agreement,  which was entered  into by and
between  On Stage and Gedco as a result of a dispute  that  arose in  connection
with the Gedco  asset  acquisition.  In  exchange  for the return of the Hanover
shares,  On Stage:  (1) granted Hanover a warrant to purchase  595,238 shares of
common  stock at a  purchase  price of  $1.50;  and (2)  released  its  claim to
approximately  $925,000  which was being  held in escrow as  security  for those
representations and warranties made by Gedco  representatives in connection with
the Gedco asset acquisition.



                                       5
<PAGE>


                  On Stage Entertainment, Inc. and Subsidiaries
                   Notes to Consolidated Financial Statements
                                  June 30, 1999

Basis of Presentation

     The financial  statements  include herein included the accounts of On Stage
Entertainment,  Inc., a publicly traded Nevada corporation and its subsidiaries:
Legends in Concert,  Inc., a Nevada  corporation;  On Stage  Marketing,  Inc., a
Nevada corporation;  On Stage Theaters, Inc., a Nevada corporation;  Wild Bill's
California,  Inc.,  a  Nevada  corporation;   Blazing  Pianos,  Inc.,  a  Nevada
corporation;  King Henry's  Inc., a Nevada  corporation;  On Stage  Merchandise,
Inc., a Nevada  corporation;  On Stage Events,  Inc., a Nevada  corporation;  On
Stage Casino  Entertainment,  Inc., a Nevada corporation;  On Stage Productions,
Inc., a Nevada corporation; On Stage Theaters North Myrtle Beach, Inc., a Nevada
corporation;  On Stage Theaters Surfside Beach, Inc., a Nevada corporation;  and
Interactive Events, Inc., a Georgia corporation.

On Stage derives net revenues from five reportable segments:

o    Casinos. The Casinos segment primarily sells live theatrical productions to
     casinos  worldwide for a fixed fee. In addition,  this Casinos segment also
     operates our Legends show at the Imperial  Palace in Las Vegas,  Nevada and
     Biloxi, Mississippi and at Bally's Park Place in Atlantic City, New Jersey.
o    Theaters.  The Theaters  segment owns and/or rents live theaters and dinner
     theaters  in urban and resort  tourist  locations  primarily  in the United
     States.  This Theaters  segment derives  revenues from the sale of tickets,
     along with food and  beverages  to patrons  who attend our live  theatrical
     productions.
o    Events. The Events segment sells live theatrical  productions to commercial
     clients,  which include corporations,  theme and amusement parks and cruise
     lines for a fixed  fee.  Revenues  generated  from the Events  segment  are
     included in the Casinos segment.
o    Merchandise.   The  Merchandise  segment  sells  merchandise  and  souvenir
     photography products to patrons who attend our Casinos, Theaters and Events
     segment  productions.  Revenues generated from the Merchandise  segment are
     included in the Theaters segment.
o    Production  Services.  The  Production  Services  segment  sells  technical
     equipment  and services to commercial  clients.  However,  the  Productions
     Services segment's primary focus is to provide technical support for all of
     the Casinos, Theaters, Events and Merchandise segments.

(1)       Subsequent Events

     On July 9, 1999 David Hope resigned from his positions with On Stage as its
President,  Chief  Operating  Officer and  Director to pursue  other  interests.
However,  Mr.  Hope has agreed to provide  consulting  services to On Stage on a
part-time basis to assist On Stage with the  consummation  of its  restructuring
and strategic growth strategies.

     On July 14, 1999, James Nederlander  resigned his post as a Director for On
Stage.  The reason given for such resignation was that Mr.  Nederlander's  other
business interests were increasingly  consumming the majority of his time, which
left him unable to devote  sufficient time to his future duties as a Director of
On Stage.

     On July 12, 1999,  First Security Bank of Nevada filed a complaint  against
On Stage, its subsidiaries and John W. Stuart in the District Court of Nevada in
Clark  County,  Nevada.  The  complaint  alleges  that On Stage has breached its
contract with First Security by refusing to repay our  outstanding  indebtedness
to First  Security Bank and First  Security  Leasing.  The  complaint  prays for
repayment  of the matured  loan and lease  lines in the amount of  approximately
$1,955,998,  together  with  interest,  attorneys'  fees and  associated  costs.
Additionally, the complaint seeks to enforce the personal guaranty of Mr. Stuart
to  repay  $1,000,000  of this  outstanding  balance  and  prays  for  writs  of
garnishment and attachments of On Stage's personal property.


                                       6
<PAGE>

(2)  New Accounting Pronouncements

     Statement of Position 98-5, "Reporting on the Costs of Start-up Activities"
("SOP 98-5") issued by the American Institute of Certified Public Accountants is
effective for financial  statements  beginning after December 15, 1998. SOP 98-5
requires that the costs of start-up activities, including organization costs, be
expensed as incurred.  Start-up activities are defined broadly as those one-time
activities  related  to opening a new  facility,  introducing  a new  product or
service, conducting business in a new territory,  conducting business with a new
class of customers (excluding ongoing customer acquisition costs, such as policy
acquisition costs and loan origination  costs) or beneficiary,  initiating a new
process in an existing  facility,  or commencing  some new operation.  We do not
expect  the  adoption  of SOP 98-5 to have a  material  impact,  if any,  on our
financial position or results of operations.

     In June 1998,  the FASB  issued SFAS No. 133,  "Accounting  for  Derivative
Instruments  and Hedging  Activities"  ("SFAS No. 133")  effective for financial
statements  with  fiscal  years  beginning  after  June 15,  1999.  SFAS No. 133
provides  a  comprehensive  and  consistent  standard  for the  recognition  and
measurement of derivatives  and hedging  activities and requires all derivatives
to be recorded on the balance sheet at fair value. We do not expect the adoption
of SFAS No. 133 to have a material impact, if any, on our results of operations,
financial position or cash flows.

(3)       Loss Per Share

     Statement  of  Financial  Accounting  Standard No. 128 provides a different
method of  calculating  earnings per share than is currently  used in accordance
with APB 15, Earnings per Share.  SFAS 128 provides for the calculation of Basic
and Diluted  earnings per share.  Basic  earnings per share includes no dilution
and is computed by  dividing  income  available  to common  shareholders  by the
weighted  average number of common shares  outstanding  for the period.  Diluted
earnings per share reflect the potential dilution of securities that could share
in the earnings of the entity, similar to fully diluted earnings per share. SFAS
128 is effective for fiscal years and interim  periods after  December 15, 1997.
We have adopted  this  pronouncement  during the fiscal year ended  December 31,
1997.

     For the six  months  ended June 30,  1998,  potential  dilutive  securities
representing  773,853  outstanding  stock  options  and  4,480,956   outstanding
warrants are not included,  since their effect would be  anti-dilutive.  For the
six months  ended June 30,  1999,  potential  dilutive  securities  representing
1,121,550  outstanding stock options and 3,660,155  outstanding warrants are not
included, since their effect would be anti-dilutive.

(4) Commitments and Contingencies

     We are a party to various legal  proceedings  in which the adverse  parties
are seeking  damages from us.  While there can be no  assurance  that any of the
instituted or threatened lawsuits will be settled or decided in favor of us, the
management  of On Stage does not believe the final  resolution  of these matters
will have a material adverse effect upon the our financial condition and results
of operations.

(5) Business Acquisition

Interactive Events, Inc. Acquisition and Re-Conveyance

     On November 1, 1996, On Stage entered into Common Stock Purchase  Agreement
with Interactive Events, Inc. Under this agreement,  Interactive sold all of its
assets to On Stage in exchange  for an  aggregate  of 30,304 share of On Stage's
common stock. Additionally,  Richard S. Kanfer, President of Interactive, agreed
to join On Stage as our Vice President of Sales.  On Stage recorded  $129,180 as
the excess of the purchase price over the net assets  acquired,  which was being
amortized over ten years. At December 31, 1998, On Stage determined there was an
impairment in the value of the excess of the purchase  price over the net assets
acquired in connection with the Interactive purchase and wrote off the remaining
unamortized balance of $102,131.


                                       7
<PAGE>

     On  February  23,  1999,  On Stage  entered  into a Common  Stock  Purchase
Agreement  with  Richard S. Kanfer,  effectively  unwinding  the  November  1996
acquisition of Interactive Events, Inc. Under the Interactive Re-Conveyance,  On
Stage  re-conveyed  all of the assets of Interactive to Kanfer in  consideration
for  Kanfer's  re-conveyance  of the 30,304  shares of On Stage's  common  stock
valued at  $1.125  per  share,  issued to  Kanfer  during  On  Stage's  original
acquisition of Interactive, along with the  cancellation of a non-plan option to
purchase  15,000 shares of common stock and incentive  stock options to purchase
19,835  shares of common stock at a price of $5.00 per share.  In addition,  the
parties  agreed to release one  another  from any  liability  arising out of the
acquisition  of  Interactive  by On Stage and any  claim  relating  to  Kanfer's
subsequent  employment  with us. Kanfer also entered into an exclusive  right of
representation  agreement  with us in February  1999,  under which we granted to
Kanfer the right to represent  our Legends  production  in  designated  areas in
consideration   for  a  portion  of  the  gross   proceeds   generated  by  that
representation.

Gedco USA, Inc. Acquisition

     On March 13, 1998,  we completed  our  acquisition  of certain  assets from
Gedco  USA,  Inc.  and its  affiliates  for a  purchase  price  of  $14,000,000,
consisting of  $11,500,000  in cash and 595,238 shares of common stock valued at
$2,500,000.  Included in the Gedco asset  acquisition were  substantially all of
the income producing  assets and associated real property of Orlando  Entertains
and LA Entertains,  consisting of King Henry's Feast,  Blazing Pianos piano bar,
the Fort Liberty  shopping  complex that includes a Wild Bill's Dinner  Theater,
each of which is located in greater Orlando,  Florida,  and a second Wild Bill's
Dinner Theater located in Buena Park, California. Gerard O'Riordan, President of
Gedco  joined us as President of On Stage  Theaters,  Inc., a wholly  subsidiary
have On Stage that manages the acquired dinner theaters and piano bar as well as
other selected theaters.

     On May 27, 1999,  Hanover  Restaurants,  Inc. returned 595,238 shares of On
Stage common stock  originally  issued to Hanover in  connection  with the Gedco
asset  acquisition.  The Hanover  shares were  returned to On Stage under to the
terms of a Mutual  Release and Settlement  Agreement,  which was entered into by
and between On Stage and Gedco as a result of a dispute that arose in connection
with the Gedco  asset  acquisition.  In  exchange  for the return of the Hanover
shares,  On Stage:  (1) granted Hanover a warrant to purchase  595,238 shares of
common  stock at a  purchase  price of  $1.50;  and (2)  released  its  claim to
approximately  $925,000  which was being  held in escrow as  security  for those
representations and warranties made by Gedco  representatives in connection with
the Gedco asset acquisition.

     On  March  13,  1998,   Imperial  Credit  Commercial   Mortgage  Investment
Corporation  signed  an  agreement  with On Stage to fund up to  $20,000,000  of
mortgage  financing.  On the same day, On Stage used $12,500,000 of the facility
to fund the cash portion of the Gedco asset  acquisition.  On June 30, 1998,  On
Stage used an additional  $1,100,000 to fund the cash portion of the purchase of
a fee simple interest in the Legends Theater in Surfside Beach,  South Carolina,
and the  purchase  of a leasehold  interest in the Eddie Miles  Theater in North
Myrtle Beach,  South  Carolina.  On October 7, 1998, On Stage used an additional
$550,000 for working capital  purposes.  In addition,  On Stage granted Imperial
Credit and related entity warrants to purchase an aggregate of 575,000 shares of
common  stock at an  exercise  price of $4.44 per share.  In  consideration  for
Imperial Credit's October 7, 1998 funding of $550,000, On Stage reset the strike
price on 325,000 of the Imperial Credit warrants from $4.44 to $1.25 per share.

     We made January,  February and March 1999 payments to Imperial Credit after
the due date for those  payments.  As a result of those  delinquencies,  we have
incurred  late charges and default  interest,  which we have not paid. We are in
default  under  the  Imperial  Credit  facility  and we  are  unable  to  borrow
additional funds under the facility.  As of August 6, 1999, we have not made our
payments to Imperial  Credit due April 1, 1999, May 1, 1999,  June 1, 1999, July
1, 1999 or August 1, 1999. We are currently  negotiating with Imperial Credit to
extend some of the repayment  terms under this facility and to obtain waivers or
amendments with respect to other defaults under the facility, including a breach
of debt service coverage ratio warranties.



                                       8
<PAGE>

        The  components of the purchase  price and its allocation to the assets
and liabilities are as follows:

<TABLE>
<S>                                                                            <C>

Purchase Price:
     Liabilities assumed..............................................        $ 986,044
     Issuance of 595,238 restricted shares of common stock............        2,500,000
                                                                          --------------
                                                                              3,486,044
     Costs of acquisition incurred....................................        1,645,874
       Cash paid......................................................       11,500,000
                                                                          --------------
                                                                            $16,631,918
                                                                          ==============
</TABLE>

         The acquisition was accounted for as a purchase and the assets acquired
were  recorded at a fair market  value.  The  building and  equipment  are being
depreciated over twenty and three years,  respectively,  under the straight-line
method. The allocation of the purchase price was as follows:
<TABLE>
<S>                                                                             <C>


Cash.................................................................     $     383,444
Inventory............................................................           120,084
Prepaid expenses.....................................................           157,516
Land.................................................................        11,275,507
Building.............................................................         3,214,740
Equipment............................................................           730,627
Deferred financing acquisition expenses..............................           750,000
                                                                          ==============
                                                                          $  16,631,918
                                                                          ==============
</TABLE>

     The assets acquired and liabilities  assumed were  transferred to either to
our  wholly  owned  subsidiary,  On Stage  Theaters,  Inc.,  or a  wholly  owned
subsidiary of On Stage Theaters, Inc., concurrent with the acquisition.

     The unaudited  pro-forma results of operations  presented below reflect our
operations  as though the  acquisition  had taken place at the beginning of each
period  presented.  The  pro-forma  results have been  prepared for  comparative
purposes only, and are not  necessarily  indicative of what the actual result of
operations  would have been had such  acquisitions  occurred at the beginning of
the periods presented, or what results of operations will be in the future.


<TABLE>
<S>                                                            <C>               <C>

                                                             Six months ended June 30,
                                                        --------------------------------------
                                                              1998               1999
                                                        ----------------- --------------------

Revenues ...............................................$     14,449,952          13,675,247
Operating income (loss).................................         188,632            (102,848)
Net loss................................................        (175,298)         (1,531,997)
Basic and diluted loss per share........................$          (0.04)              (0.21)
Basic and diluted average number of common
   Shares outstanding...................................       6,883,421           7,459,597



</TABLE>

                                       9
<PAGE>

(6)  Going Concern

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming  that we  will  continue  as a going  concern  which  contemplates  the
realization of assets and the  satisfaction  of liabilities in the normal course
of business.  The carrying  amounts of assets and  liabilities  presented in the
financial  statements  do not  purport to  represent  realizable  or  settlement
values.  However, we have suffered recurring operating losses and have a working
capital  deficit that impairs our ability to obtain  additional  financing.  Our
auditors  have  included an  explanatory  paragraph in their report for the year
ended December 31, 1998,  indicating  that there is substantial  doubt regarding
our  ability to  continue  as a going  concern.  The  accompanying  consolidated
financial  statements do not include any adjustments  that might result from the
outcome of any uncertainty.

     We have  historically  met  our  working  capital  requirements  through  a
combination  of cash  flow  from  operations,  equity  and debt  offerings,  and
traditional  bank  financing.  We  anticipate,  based on our proposed  plans and
assumptions  relating to our operations  that our current cash,  cash equivalent
balances,  anticipated  revenues from  operations are  insufficient  to fund our
ongoing operations.

     On Stage  intends  to manage  short-term  liquidity  concerns  through  the
renegotiation  of our expired working capital line,  capital leases and mortgage
facilities.  We have either closed down or restructured  any business units that
are not  generating  positive cash flow. In addition,  we have lowered  selling,
general and administrative  costs as a percent of net revenues from 20.6% in the
six months  ended June 30,  1998 to 15.2% in the six months  ended June 30, 1999
and continue to downsize and restructure our selling, general and administrative
functions.

     In addition,  we are continuing  our efforts to secure working  capital for
operations, expansion and possible acquisitions, mergers, joint ventures, and/or
other business combinations.  However, there can be no assurance that we will be
able to secure additional capital or that if such capital is available,  whether
the terms or conditions would be acceptable to us.

(7)  Year 2000

     We believe that our accounting and financial  reporting systems are in full
compliance with Year 2000 preparedness.  We have invested in the latest hardware
and software and have  implemented  standards that require Year 2000  compliance
from  all  vendors.  We do not  anticipate  any  problems  in  maintaining  this
compliance in the future.

     However,  On Stage is continuing to assess Year 2000 preparedness,  through
actively coordinating with vendors,  creditors,  and financial  organizations to
prepare  for  possible  repercussions  of  non-compliance.   On  Stage  is  also
undertaking  exhaustive  surveys in each of our geographic  locations to further
determine  preparedness.  We  have a  full-time  certified  in-house  management
information  systems  employee  who has the  authority  to hire  local  computer
certification  companies to visit each site and physically  re-certify that each
machine,  microprocessor and software program in use is Year 2000 compliant.  We
have  allocated  $25,000 to complete our  certification  program and  anticipate
completion by September 30, 1999.



                                       10
<PAGE>



(8)   Segment Information

      The  following  tables  set  forth  the  segment   profit/loss  and  asset
information.
<TABLE>
<CAPTION>

                     For the six months ended June 30, 1998
                                             <S>             <C>            <C>            <C>            <C>

                                         -------------- -------------- ------------- ------------- ----------------
                                                                                                        Total
                                            Casino       Production      Theaters        OSE        Consolidated
                                         -------------- -------------- ------------- ------------- ----------------
Revenues from external customers         $4,498,359     $          -   $  7,470,708  $          -  $  11,969,067

Interest expense                         $     (33)     $          -   $    432,713  $     22,154  $     454,834

Depreciation and amortization            $   96,048     $         59   $    200,230  $    167,559  $     463,896

Segment profit (loss)                    $  964,534     $   (134,727)  $     74,541  $ (1,446,162) $    (541,814)

Segment assets                           $2,763,234     $    740,828   $ 18,288,553  $  1,641,129  $  23,433,744

Additions to long-lived assets           $  241,897     $     33,089   $  2,155,928  $    625,212  $   3,056,126
</TABLE>


<TABLE>
<CAPTION>

                     For the six months ended June 30, 1999
                                             <S>              <C>            <C>           <C>          <C>

                                         -------------- -------------- ------------- ------------- ----------------
                                                                                                        Total
                                            Casino      Production       Theaters        OSE        Consolidated
                                         -------------- -------------- ------------- ------------- ----------------
Revenues from external customers         $4,848,049     $     45,499   $   8,781,699  $         -   $  13,675,247

Interest expense                         $       27     $      1,123   $   1,323,694  $    104,305  $   1,429,149

Depreciation and amortization            $  185,583     $     43,923   $     280,397  $     93,698  $     603,601

Segment profit (loss)                    $1,246,182     $   (342,939)  $  (1,092,935) $ (1,342,305) $  (1,531,997)

Segment assets                           $3,182,401     $    775,783   $  18,336,767  $  1,861,576  $  24,156,527

Additions to long-lived assets           $   20,091     $          -   $      22,447  $          -  $      42,538

</TABLE>

(9)  Possible Delisting of Securities from the Nasdaq SmallCap Market

     In order to continue to be listed on The Nasdaq SmallCap  Market,  On Stage
must maintain  $2,000,000 in total assets, a $200,000 market value of the public
float and  $1,000,000  in total  capital and  surplus.  In  addition,  continued
inclusion requires two market-makers and a minimum bid price of $1.00 per share;
provided,  however, that if On Stage falls below that minimum bid price, we will
remain  eligible for continued  inclusion on The Nasdaq  SmallCap  Market if the
market value of the public float is at least  $1,000,000 and we have  $2,000,000
in capital  surplus.  Our stock price has been below $1.00 per share for most of
1999.  Nasdaq  has  recently   proposed  new  maintenance   criteria  which,  if
implemented,  would  eliminate the foregoing  exception to the minimum bid price
requirement and require, among other things,  $2,000,000 in net tangible assets,
$1,000,000 market value of the public float and adherence to certain  governance
provisions.

     On April 20,  1999,  On Stage  received a letter of inquiry from The Nasdaq
Stock Market,  Inc.  requesting that we submit a detailed letter  describing our
plan to address the specific  items that led to the issuance of "going  concern"
opinion from our  independent  auditors.  The letter  further  requested that we
discuss why we believe we will be able to sustain  compliance with the continued
listing  standards of Nasdaq. We were required to provide a responsive answer by
June 4, 1999, which we did. The failure to meet the maintenance  criteria in the
future, and the failure to adequately assure Nasdaq that we will be able to meet
the  listing  criteria  in  the  future,  may  result  in the  delisting  of our
securities from The Nasdaq SmallCap Market. If this occurs, the trading,



                                       11
<PAGE>

if any, in our securities would be conducted in the non-Nasdaq  over-the-counter
market.  As a  result  of  such a  delisting,  an  investor  would  find it more
difficult to dispose of, or to obtain accurate quotations as to the market value
of our securities.

     On June 4, 1999,  On Stage  responded  to the April 30,  1999,  letter from
Nasdaq  providing  information  regarding the auditors'  "going concern" and On
Stage's  growth  strategy and the ability to comply with the  continued  listing
standards of The Nasdaq SmallCap Market.

     On June 8, 1999, On Stage received a response letter from Nasdaq,  pursuant
to which Nasdaq afforded On Stage ninety (90) days in which to raise its minimum
bid price to $1.00 or more for a minimum of ten (10)  consecutive  trading days.
In the event, we are unsuccessful in our attempt to accomplish this requirement,
our securities will be delisted at the opening of business on September 9, 1999.

(10) Downsizing and Restructuring

     On April 30, 1999, the board of directors adopted a restructuring plan. The
restructuring plan focuses on four key areas:

o        overhead reduction;
o        debt restructuring;
o        accounts payable rescheduling; and
o        overall cost containment.

     We have  already  implemented  the  initial  phase of the plan by  reducing
overhead by  approximately  $707,000 on an annualized  basis. We also expect the
cost  containment  measures  implemented to yield another $100,000 of annualized
savings,  for a total  savings  of  $807,000  for the two  measures.  Subsequent
overhead  reductions  were  implemented  by June 30, 1999.  In addition to these
measures,  we are also in the process of attempting to restructure our debts and
rescheduling payments of our accounts payable in order to maximize cash flow.

(11) Toronto Closing

     Our Legends in Concert  production  opened at the Sheraton  Centre  Toronto
Hotel in May 1997.  Unfortunately,  for reasons  discussed  below,  this Legends
production  did not prove to be successful  and was  discontinued  in April 1999
after  generating an operating  loss of $717,000 for the year ended December 31,
1998 and $264,000 for the four months ended April 1999. At December 31, 1998, On
Stage had an impairment of net assets associated with the Toronto show and wrote
off net assets of $409,000.

     We believe that the operating performance of Legends at the Sheraton Centre
Toronto Hotel  suffered from  inadequate  sales and marketing  resulting in less
than optimal  ticket sales in the start-up  phase of the  production.  The lower
than anticipated  revenue levels,  combined with high indirect  production costs
associated with the "four wall" costs structure resulted in the losses.




                                       12
<PAGE>

Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations

     This document contains certain forward-looking  statements that are subject
to  risks  and   uncertainties.   Forward-looking   statements  include  certain
information  relating to potential new show openings,  the potential markets for
On Stage's  productions,  the  expansion  of existing and  potential  gaming and
tourist  markets,  our exposure to various  trends in the gaming  industry,  our
acquisition  plans and the benefits we anticipate from these  acquisitions,  our
business strategy, our outstanding litigation matters and the defenses available
to us,  the  seasonality  of our  business,  and  liquidity  issues,  as well as
information  contained  elsewhere in this report where  current  statements  are
preceded  by,   followed  by  or  include  the  words   "believes,"   "expects,"
"anticipates" or similar expressions.  For these statements, On Stage claims the
protection of the safe harbor for  forward-looking  statements  contained in the
Private Securities Litigation Reform Act of 1995. The forward-looking statements
in this  document  are subject to risks and  uncertainties  that could cause the
assumptions underlying the forward-looking  statements and the actual results to
differ materially from those expressed in or implied by the statements.

     The most  important  factors that could prevent On Stage from achieving our
goals--and cause the assumptions  underlying the forward-looking  statements and
the actual results to differ  materially  from those  expressed in or implied by
those  forward-looking  statements  include the  information  provided under the
heading "Description of Business-Risk Factors" in Item 1 of our Annual Report on
Form 10-KSB for the year ended December 31, 1998, as well as the following:

o    On Stage's dependence on our flagship Legends in Concert production and our
     principal production venues;

o    The  ability to  successfully  produce  and market new  productions  and to
     manage the growth associated with the any new productions;

o    Risks  associated with our acquisition  strategy,  including our ability to
     successfully identify, complete and integrate strategic acquisitions;

o    The ability to meet our commitments under our credit facilities,  which are
     currently in default,  and to obtain alternative,  additional  financing on
     commercially  reasonable  terms;

o    The ability to continue as an ongoing concern;

o    The competitive  nature of the leisure and  entertainment  industry and the
     ability to continue to distinguish our services;

o    Fluctuations in quarterly  operating results and the highly seasonal nature
     of our business;

o    The ability to reproduce the performance, likeness and voice of various
     celebrities without infringing on the publicity rights of those celebrities
     or their  estates,  as well as our  ability  to  protect  our  intellectual
     property  rights;

o    The ability to successfully manage the litigation pending against us and to
     avoid future litigation;and

o    The results of operations which depend on numerous  factors,  including the
     commencement  and  expiration  of  contracts,  the timing and amount of new
     business  generated  by us,  our  revenue  mix,  the  timing  and  level of
     additional  selling,  general  and  administrative  expense and the general
     competitive conditions in the leisure and entertainment industry as well as
     the overall economy.



                                       13
<PAGE>

Results of Operations

     The  following  tables  set  forth,  the  results  of  operations  for  the
reportable segments indicated:

<TABLE>

<CAPTION>
                                                         For the quarter ended June 30, 1998

<S>                              <C>             <C>           <C>           <C>               <C>           <C>
                            -------------- ------------- -------------- --------------- ---------------- ---------------
                                                                          Sub-Total
                                                                          Operating                          Total
                               Casino      Production      Theaters        Segments           OSE         Consolidated
                            -------------- ------------- --------------  --------------  ---------------  --------------
Net revenues.............   $   2,420,165  $         -   $    5,824,416  $   8,244,581   $            -   $   8,244,581

Cost of revenues.........       1,601,519       94,711        4,770,233      6,466,463                -       6,466,463
                            -------------- ------------- --------------  --------------  ---------------  --------------

Gross profit (loss)......         818,646      (94,711)       1,054,183      1,778,118                -       1,778,118

Selling, general &
administrative...........         230,948             -        338,280         569,228          507,525       1,076,753

Depreciation &
amortization............           54,898           59         183,043         238,000           91,939         329,939
                           -------------- -------------  --------------  --------------  ---------------  --------------

Operating income (loss).          532,800      (94,770)         532,860        970,890         (599,464)        371,426

Interest expense, net...             (13)             -         369,337        369,324           15,190         384,514
                            -------------- ------------- --------------  --------------  ---------------  --------------

Net income (loss).......    $    532,813   $   (94,770)  $      163,523  $     601,566   $     (614,654)  $     (13,088)
                            ============== ============= ==============  ==============  ===============  ==============

</TABLE>



<TABLE>
<CAPTION>
                                         For the quarter ended June 30, 1999

<S>                               <C>           <C>            <C>             <C>             <C>             <C>
                            -------------- -------------  ------------- ---------------  --------------- ---------------
                                                                          Sub-Total
                                                                          Operating                          Total
                               Casino       Production     Theaters        Segments           OSE         Consolidated
                            -------------- -------------  -------------  --------------  ---------------  --------------
Net revenues..........      $   2,274,856  $     26,929  $   5,101,223   $   7,403,008   $          -     $    7,403,008

Cost of revenues......          1,437,970       170,628      3,770,726       5,379,324              -          5,379,324
                            -------------- -------------  -------------  --------------  ---------------  --------------

Gross profit (loss)...            836,886      (143,699)     1,330,497       2,023,684              -          2,023,684

Selling, general &
administrative........            132,112             -        425,132         557,244          478,708        1,035,952

Depreciation &
amortization..........             86,204        22,029        199,724         307,957           45,577          353,534

Restructuring charges              10,000             -        113,359         123,359          139,434          262,793
                            -------------- -------------  -------------  --------------  ---------------  --------------

Operating income (loss).          608,570      (165,728)       592,282       1,035,124        (663,719)          371,405

Interest expense, net..                27             -        966,804         966,831           53,007        1,019,838
                            -------------- -------------  -------------  --------------  ---------------  --------------
Net income (loss)......     $     608,543  $   (165,728)  $   (374,522)  $      68,293   $     (716,726)  $    (648,433)
                            ============== =============  =============  ==============  ===============  ==============

</TABLE>


                                       14
<PAGE>

<TABLE>

<CAPTION>
                                                       For the six months ended June 30, 1998

<S>                               <C>           <C>           <C>            <C>               <C>              <C>
                            -------------- ------------- -------------- --------------- ---------------- ---------------
                                                                          Sub-Total
                                                                          Operating                          Total
                               Casino      Production      Theaters        Segments           OSE         Consolidated
                            -------------- ------------- -------------- --------------- ---------------- ---------------
Net revenues..........      $   4,498,359      $      -    $ 7,470,708   $  11,969,067   $            -   $  11,969,067

Cost of revenues......          2,922,840       126,260      6,081,637       9,130,737                -       9,130,737
                            -------------- ------------- -------------- --------------- ---------------- ---------------

Gross profit (loss)...          1,575,519     (126,260)      1,389,071       2,838,330                -       2,838,330

Selling, general &
administrative........            514,970         8,408        681,587       1,204,965        1,256,449       2,461,414

Depreciation &
amortization..........             96,048            59        200,230         296,337          167,559         463,896
                            -------------- ------------- -------------- --------------- ---------------- ---------------

Operating income (loss).          964,501      (134,727)       507,254       1,337,028       (1,424,008)        (86,980)

Interest expense, net...             (33)             -        432,713         432,680           22,154         454,834
                            -------------- ------------- -------------- --------------- ---------------- ---------------

Net income (loss).......    $     964,534  $   (134,727) $      74,541   $     904,348   $  (1,446,162)  $     (541,814)
                            ============== ============= ============== =============== ================ ===============
</TABLE>


<TABLE>
<CAPTION>

                                         For the six months ended June 30, 1999

<S>                               <C>           <C>           <C>            <C>               <C>              <C>
                            -------------- ------------- -------------- --------------- ----------------- --------------
                                                                          Sub-Total
                                                                          Operating                           Total
                               Casino       Production     Theaters        Segments           OSE         Consolidated
                            -------------- ------------- -------------- --------------- ----------------- --------------
Net revenues..........      $   4,848,049   $    45,499  $   8,781,699   $  13,675,247   $             -   $ 13,675,247

Cost of revenues......          3,082,748       343,392      7,403,693      10,829,833                 -     10,829,833
                            -------------- ------------- -------------- --------------- ----------------- --------------

Gross profit (loss)...          1,765,301      (297,893)     1,378,006       2,845,414                 -      2,845,414

Selling, general &
administrative........            323,509             -        753,491       1,077,000         1,004,868      2,081,868

Depreciation &
amortization..........            185,583        43,923        280,397         509,903            93,698        603,601

Restructuring charges.             10,000             -        113,359         123,359           139,434        262,793
                            -------------- ------------- -------------- --------------- ----------------- --------------

Operating income (loss).        1,246,209      (341,816)       230,759       1,135,152       (1,238,000)       (102,848)

Interest expense, net...               27         1,123      1,323,694       1,324,844           104,305      1,429,149
                            -------------- ------------- -------------- --------------- ----------------- --------------

Net income (loss).......    $   1,246,182     (342,939)     (1,092,935)      (189,692)       (1,342,305)     (1,531,997)
                            ============== ============= ============== =============== ================= ==============
</TABLE>


                                       15
<PAGE>

Quarter Ended June 30, 1998 versus Quarter Ended June 30, 1999

     Net Revenues. Revenues decreased by $841,000 or 10.2% to $7,403,000 for the
quarter ended June 30, 1999  compared to  $8,244,000  for the quarter ended June
30,  1998.  Our  revenue  is derived  from five  principal  operating  segments:
Casinos, Events,  Merchandise,  Production Services, and Theaters. Revenues from
Events are  included  in the  Casino  segment.  Revenues  from  Merchandise  are
included in the Theaters segment.

     Casinos revenues were  approximately  $2,275,000 for the quarter ended June
30, 1999 compared to $2,420,000  for the quarter ended June 30, 1998, a decrease
of $145,000,  or 6.0%.  Contributing to this decrease were decreases in revenues
primarily  attributable  to limited  engagements  and  corporate  events.  These
decreases were  partially  offset by increases in revenue at the Legends show at
the Imperial Palace and Casino in Las Vegas,  Nevada,  the addition of new shows
at The River Palms  Resort and Casino in  Laughlin,  Nevada and The  Showboat in
Atlantic City, New Jersey.

     Production  Services  revenues were  approximately  $27,000 for the quarter
ended June 30,  1999  compared to $0 for the quarter  ended June 30,  1998.  The
increase was attributable to equipment rentals.

     Theaters revenues were approximately  $5,101,000 for the quarter ended June
30, 1999 compared to $5,824,000  for the quarter ended June 30, 1998, a decrease
of $723,000, or 12.4%. This decrease was primarily  attributable to decreases in
revenues  generated by On Stage's dinner theaters,  the  discontinuation  of the
Legends shows at the Estrel Residence & Congress Hotel in Berlin, Germany and at
the Sheraton  Centre Hotel in Toronto,  Canada.  These  decreases were partially
offset by  increases  in revenues at the Legends  show in Branson,  Missouri and
rental income derived from The Eddie Miles Theater.

     Costs of Revenues.  Total costs of revenues were $5,379,000 for the quarter
ended June 30, 1999 compared to $6,466,000  for the quarter ended June 30, 1998,
a decrease of $1,087,000,  or 16.8%. Costs of revenues decreased to 72.7% of net
revenues  for the  quarter  ended June 30,  1999,  as  compared to 78.4% for the
quarter  ended June 30, 1998.  This decrease in cost of sales as a percentage of
revenues was primarily attributable to a change in the mix of our revenues.

     Selling,  General and Administrative.  Selling,  general and administrative
costs were  approximately  $1,036,000  for the  quarter  ended June 30,  1999 as
compared  to  $1,077,000  for the  quarter  ended June 30,  1998,  a decrease of
$41,000,  or 3.8%.  This is primarily  attributable to our reduction of overhead
associated with On Stage discontinued "roll-out" strategy.  Selling, general and
administrative  costs  increased to 14.0% of net revenues for the quarter  ended
June 30, 1999, as compared to 13.1% for the quarter ended June 30, 1998.

     Depreciation  and  Amortization.  Depreciation  and  amortization  for  the
quarter  ended June 30, 1999  increased by $24,000,  or 7.2%, as compared to the
quarter ended June 30, 1998. The increase was primarily due to capital additions
to current shows and new shows.

     Restructuring Charges. Restructuring charges represents expenses related to
the   closing   of  the   Legends   show  in   Toronto,   Canada,   payment   of
employment-related  severance and  termination  benefits,  legal  expenses,  and
relocation expenses of a key executive.

     Operating Income.  Our operating income was approximately  $371,000 for the
quarter ended June 30, 1999, compared to an operating income of $371,000 for the
quarter ended June 30, 1998.

     Interest Expense, Net. Interest expense for the quarter ended June 30, 1999
increased by $635,000, or 165.3% as compared to the quarter ended June 30, 1998.
The increase was primarily due to interest  accrued on the Imperial Credit debt,
together with penalties and default interest rates.

     Income Taxes. On Stage is a Nevada  corporation with a substantial  portion
of revenue  and income  derived  in Nevada.  There are no state or local  income
taxes in Nevada.  We have not  accrued  any  federal  income tax for the quarter
ended June 30,  1998.  At June 30, 1998 and 1999,  we had federal net  operating
loss  carryforwards  of  approximately  $4,339,000 and $7,907,190  respectively.
Under Section 382 of the Internal Revenue Code, certain  significant  changes in
ownership  that On  Stage is  currently  undertaking  may  restrict  the  future
utilization of these tax loss carryforwards.  The net deferred tax assets have a
100% valuation  allowance,  as management  cannot determine if it is more likely
than not that the deferred tax assets will be realized.


                                       16
<PAGE>

Six Months Ended June 30, 1998 versus Six Months Ended June 30, 1999

     Net Revenues. Revenues increased by $1,706,000 or 14.3 % to $13,675,000 for
the six months ended June 30, 1999  compared to  $11,969,000  for the six months
ended  June 30,  1998.  Our  revenue is derived  from five  principal  operating
segments: Casinos, Events, Merchandise,  Productions and Theaters. Revenues from
Events are  included  in the  Casino  segment.  Revenues  from  Merchandise  are
included in the Theaters segment.

     Casinos  revenues were  approximately  $4,848,000  for the six months ended
June 30, 1999 compared to $4,498,000  for the six months ended June 30, 1998, an
increase of $350,000,  or 7.8%.  Contributing to this increase were increases in
revenues  generated at the Legends show at the Imperial Palace and Casino in Las
Vegas, Nevada, the addition of new shows at the River Palms Resort and Casino in
Laughlin,  Nevada,  Taj Mahal  Hotel and  Casino,  Hilton  Hotel and  Casino and
Atlantic City Showboat.

     Production Services revenues were approximately  $45,000 for the six months
ended June 30, 1999  compared to $0 for the six months ended June 30, 1998.  The
increase was attributable to equipment rentals.

     Theaters  revenues were  approximately  $8,782,000 for the six months ended
June 30, 1999 compared to $7,471,000  for the six months ended June 30, 1998, an
increase of $1,311,000,  or 17.6%.  This increase was primarily  attributable to
the fact that the  dinner  theaters  acquired  as a result  of the  Gedco  asset
acquisition  were  given a full six (6) month  results  of  operations  in 1999,
compared to only 4.5 months results of operations during the first six months of
1998.

     Costs of Revenues.  Total costs of revenues  were  $10,830,000  for the six
months ended June 30, 1999 compared to $9,131,000  for the six months ended June
30, 1998, an increase of $1,699,000,  or 18.6%.  Costs of revenues  increased to
79.2% of net revenues  for the six months  ended June 30,  1999,  as compared to
76.3% for the six months ended June 30, 1998. This increased in cost of sales as
a percentage  of revenues was primarily  attributable  to a change in the mix of
our revenues due to the inclusion of the dinner  theaters  revenues,  which have
higher costs of revenues than our other business segments.

     Selling,  General and Administrative.  Selling,  general and administrative
costs were  approximately  $2,082,000  for the six months ended June 30, 1999 as
compared to  $2,461,000  for the six months  ended June 30,  1998, a decrease of
$379,000, or 15.4%. Selling, general and administrative costs decreased to 15.3%
of net revenues for the six months ended June 30, 1999, as compared to 20.6% for
the six months  ended  June 30,  1998.  This is  primarily  attributable  to our
reduction  of  overhead  associated  with  On  Stage's  discontinued  "roll-out"
strategy.

     Depreciation  and  Amortization.  Depreciation and amortization for the six
months ended June 30, 1999 increased by $140,000,  or 30.2%,  as compared to the
six months  ended June 30,  1998.  The  increase  was  primarily  due to capital
additions to current shows,  new shows, and an increase in assets as a result of
the Gedco asset acquisition.

     Restructuring Charges. Restructuring charges represents expenses related to
the   closing   of  the   Legends   show  in   Toronto,   Canada,   payment   of
employment-related  severance and  termination  benefits,  legal  expenses,  and
relocation expenses of a key executive.


                                       17
<PAGE>

     Operating Loss. On Stage's  operating loss was  approximately  $103,000 for
the six months ended June 30, 1999, compared to an operating loss of $87,000 for
the six months ended June 30, 1998, an increase of $16,000, or 18.4%.

     Interest  Expense,  Net.  Interest  expense  for the six months  ended June
30,1999  increased  by  $974,000,  or 214.2% as compared to the six months ended
June 30,  1998.  The  increase  was  primarily  due to  interest  accrued on the
Imperial Credit debt, together with penalties and default interest rates.

     Income Taxes. On Stage is a Nevada  corporation with a substantial  portion
of revenue  and income  derived  in Nevada.  There are no state or local  income
taxes in Nevada.  We have not accrued any federal  income tax for the six months
ended June 30,  1998.  At June 30, 1998 and 1999,  we had federal net  operating
loss  carryforwards  of  approximately  $4,339,000 and $7,907,190  respectively.
Under Section 382 of the Internal Revenue Code, certain  significant  changes in
ownership  that On  Stage is  currently  undertaking  may  restrict  the  future
utilization of these tax loss carryforwards.  The net deferred tax assets have a
100% valuation  allowance,  as management  cannot determine if it is more likely
than not that the deferred tax assets will be realized.

Seasonality and Quarterly Results

     On Stage's  business has been, and is expected to remain,  highly seasonal,
with the  majority of our  revenue  being  generated  during the months of April
through October.  Part of our business  strategy is to increase sales in tourist
markets that experience their peak seasons from November through March, so as to
offset this seasonality in revenues.

     The following  table sets forth On Stage's net revenue for each of the last
ten quarters ended June 30, 1999:

<TABLE>

<CAPTION>
                                       Net Revenues ($ in thousands)
<S>                                 <C>                  <C>                 <C>                 <C>

                                 March 31,             June 30,           September 30,       December 31,
Fiscal 1997.................      $ 2,719              $ 3,979               $ 5,071             $ 3,957
Fiscal 1998.................      $ 3,724              $ 8,245               $ 8,059             $ 7,819
Fiscal 1999.................      $ 6,272              $ 7,403

</TABLE>

Liquidity and Capital Resources

General

     We have  historically  met  our  working  capital  requirements  through  a
combination  of cash  flow  from  operations,  equity  and  debt  offerings  and
traditional  bank  financing.  We  anticipate,  based on our proposed  plans and
assumptions  relating to our operations,  that our current cash, cash equivalent
balances,  anticipated  revenue from operations and our working capital line are
insufficient to fund our ongoing operations.

     On Stage  intends  to manage  short-term  liquidity  concerns  through  the
renegotiations of our expired working capital line,  capital leases and mortgage
facilities.  We have either closed down or restructured  any business units that
were not generating  positive cash flow. In addition,  we have lowered  selling,
general and  administrative  expenses as a percentage of net revenues from 20.6%
for the six months ended June 30, 1998 to 15.2% for the six months ended in June
30, 1999 and  continues to downsize  and  restructure  our selling,  general and
administrative functions.


                                       18
<PAGE>


     In addition,  we are continuing  our efforts to secure working  capital for
operations, expansion and possible acquisitions, mergers, joint ventures, and/or
other business combinations.  However, there can be no assurance that we will be
able to secure additional capital or that if such capital is available,  whether
the terms or conditions would be acceptable to us.

     For the six months ended June 30, 1998,  On Stage had net cash deficit used
by operations  of  approximately  $1,413,000.  As of June 30, 1998, On Stage had
approximately $1,100,000 in cash and cash equivalents.  For the six months ended
June 30, 1999, On Stage had net cash deficit used by operations of approximately
$325,000.  As of June 30, 1999, On Stage had approximately  $466,000 in cash and
cash  equivalents.  The  operating  deficits  for both  periods  were  primarily
attributable to pre-opening costs for new shows and business seasonality.

     The net cash used in investing activities for the six months ended June 30,
1998 of  $13,989,000  was primarily  attributable  to direct  acquisition  costs
related  to the  Gedco  asset  acquisition.  The  net  cash  used  in  investing
activities  for the  quarter  ended  June 30,  1999 of  $59,000,  was  primarily
attributable to capital expenditures.

     Net cash provided by financing activities for the six months ended June 30,
1998  of  $14,166,000,   was  attributable  to  Imperial   Credit's  funding  of
$12,500,000  for the Gedco asset  acquisition.  Net cash  provided by  financing
activities  for the six months  ended June 30,  1999 of  $75,000  was  primarily
attributable  to notes  payable from  officer and the issuance of common  stock,
offset by repayment of long-term  borrowing and repayment  under working capital
lines.

Working Capital

     At June 30,  1998,  we had a  working  capital  of  approximately  $112,000
primarily  attributable to the pre-opening costs of new shows. At June 30, 1999,
we had working  capital  deficit of  approximately  $17,927,000  which  resulted
primarily from an increase in the accrued  expenses,  accrued  payroll and other
liabilities,   notes  payable  to  officer,   and  the  default  and  concurrent
acceleration  of our lease lines and loan from First  Security Bank and Imperial
Credit to current  liabilities.  Because of the  recurring  losses,  the working
capital  deficit and the loan  defaults,  our  auditors  issued a going  concern
opinion for the year ended December 31, 1998.

Working Capital Line

     In May 1997,  First  Security  Bank of Nevada issued a line of credit to us
for up to $250,000.  Borrowings under this line of credit bear variable interest
at 1.5% over the First  Security  Bank of  Idaho's  index 10% per year as of the
facility's  inception--and  are due on demand.  John W.  Stuart  has  personally
guaranteed this line of credit.

     On March 28, 1998,  First  Security  agreed to increase this line of credit
from $250,000 to $1,000,000  and the  expiration  date was extended to March 25,
1999.  As of December 31,  1998,  On Stage had drawn  $1,000,000  on the line of
credit.  As of March 31,  1999,  On Stage had  failed to pay off any part of the
line of credit and is in default under its terms.

Capital Equipment Financing Commitment

     On September 29, 1997, First Security Leasing Company,  a Utah corporation,
approved  On Stage for a  $1,000,000  lease line of credit.  Advances  under the
lease line incur interest at a rate of 9.75% per annum.  The lease line has been
utilized in the following amounts: $389,290,  $442,997 and $167,713,  commencing
in April 1998 and May 1998,  respectively,  and  terminating  on  October  2001,
September 2001 and November 2001.



                                       19
<PAGE>

Mortgage Financing Commitment

     On  March  13,  1998,   Imperial  Credit  Commercial   Mortgage  Investment
Corporation  signed  an  agreement  with On Stage to fund up to  $20,000,000  of
mortgage  financing.  On the same day, On Stage used $12,500,000 of the facility
to fund the cash portion of the Gedco asset  acquisition  and related  fees.  On
June 30, 1998, On Stage used an  additional  $1,100,000 to fund the cash portion
of the  purchase of a fee simple  interest  in the  Legends  Theater in Surfside
Beach,  South  Carolina,  and the purchase of a leasehold  interest in the Eddie
Miles  Theater in North Myrtle  Beach,  South  Carolina.  On October 7, 1998, On
Stage used an  additional  $550,000 for working  capital  purposes.  The initial
$12,500,000  loan and the  subsequent  $1,650,000 in loans  extended by Imperial
Credit to On Stage under the mortgage financing facility currently bear interest
at the rate of 9.06% and  9.9%,  respectively.  In  addition,  On Stage  granted
Imperial  Credit and related entity warrants to purchase an aggregate of 575,000
shares of common stock at an exercise price of $4.44 per share. In consideration
for Imperial  Credit's  October 7, 1998 funding of $550,000,  On Stage reset the
strike price on 325,000 of the Imperial  Credit warrants from $4.44 to $1.25 per
share.

Existing Defaults Under Credit Facilities

     As of March 31,  1999,  On Stage had failed to pay off any part of the line
of credit with First  Security and is in default  under its terms.  On April 29,
1999,  we  received  a notice of  default  under the line of credit  from  First
Security.  Our  default  on the line of credit  with  First  Security  caused an
automatic  default  on our  lease  line with  First  Security  Leasing  due to a
cross-default   provision  contained  in  the  line  of  credit.  While  we  are
negotiating  with First Security and First Security  Leasing to convert the line
of credit and lease line into term loan  facilities,  there can be no  assurance
that we will be successful in accomplishing this task. Additionally, on July 12,
1999,  First  Security  Bank filed a complaint  on behalf of First  Security and
First Security  Leasing against On Stage  demanding  repayment under the line of
credit and lease lines.

     On May 28, 1999, we issued a press release  announcing that we had received
notice of default from Imperial  Credit.  The notice of default was received May
24, 1999. We are currently  negotiating with Imperial Credit to cure the default
through  a  continuation  of  our  restructuring  to  improve  cash  flow  and a
restructuring  of our debt.  There can be no  assurance  that we will be able to
cure the default, effect an appropriate  restructuring or develop an alternative
financing strategy.

     In the event that  First  Security,  First  Security  Leasing  or  Imperial
Credit,  initiates foreclosure action against us or our assets, all or a portion
of our property and assets securing the credit facilities and mortgage financing
extended by those lenders may be sold to satisfy our commitments under the terms
of  those  facilities.  We  intend  to  renegotiate  the  terms  of  our  credit
facilities,  to obtain  extensions of the terms of those  facilities and to seek
alternative  additional  financing,  there can be no assurance  that our efforts
will be successful.


                                       20
<PAGE>

                          PART II. OTHER INFORMATION

Item 1.  Legal Proceedings.

     On May 28, 1998, Silver State Property  Management,  a Nevada  corporation,
Roger A. Bergmann  Enterprises,  a Nevada  corporation,  and R.E. Lyle Corp.,  a
Nevada  corporation  filed a complaint in the Second Judicial  District Court of
the State of Nevada, County of Washoe,  alleging,  among other things, that John
W. Stuart, acting as an agent, chairman of the board and chief executive officer
of On Stage,  breached an alleged oral  agreement  to purchase  the  Plaintiff's
respective  interests  in the  Legends  in Concert  production  in Hawaii for an
aggregate  purchase price of $1,000,000.  The case is currently in the discovery
stage of litigation and the matter has been set for trial on September 20, 1999.

     On July 12, 1999,  First Security Bank of Nevada filed a complaint  against
On Stage,  its'  subsidiaries and John W. Stuart in the District Court of Nevada
in Clark County,  Nevada.  The complaint alleges that On Stage has breached its'
contract with First Security by refusing to repay our  outstanding  indebtedness
to First  Security Bank and First  Security  Leasing.  The  Complaint  prays for
repayment  of the matured  loan and lease  lines in the amount of  approximately
$1,955,998,  together  with  interest,  attorneys'  fees  and  costs  associated
therewith. Additionally, the Complaint seeks to enforce the personal guaranty of
John W. Stuart to repay  $1,000,000  of this  outstanding  balance and prays for
writs of garnishment and attachments of On Stage's personal  property.  On Stage
has recently filed its' answer to this complaint.

     On August 2,  1999,  Hemisphere  Tour & Travel,  Inc.,  n/k/a  HT&T,  Inc.,
Richard  Winokur,  Media Corp. of America and Stephen  Zadrick filed a complaint
against On Stage and Gedco USA, Inc. in the Circuit Court of the Ninth  Judicial
Circuit  in  and  for  Orange  County,   Florida.  The  complaint  alleges  that
representatives  from  On  Stage  and  Gedco  breached  an  oral  contract  with
plaintiffs  to pay  them  a  commission  in  connection  with  the  Gedco  asset
acquisition.  More specifically,  the plaintiffs allege that had it not been for
their  introduction  of  Gedco  and On  Stage,  the  parties  would  never  have
consummated  the Gedco asset  acquisition.  On Stage is  currently  preparing an
answer to this complaint.

Item 2.  Changes in Securities and Use of Proceeds.

     On  February  23,  1999,  On Stage  entered  into a Common  Stock  Purchase
Agreement  with  Richard S. Kanfer,  effectively  unwinding  the  November  1996
acquisition of Interactive Events, Inc. Under the Interactive Re-Conveyance,  On
Stage  re-conveyed  all of the assets of Interactive to Kanfer in  consideration
for  Kanfer's  re-conveyance  of the 30,304  shares of On Stage's  common  stock
valued at  $1.125  per  share,  issued to  Kanfer  during  On  Stage's  original
acquisition of Interactive  along with the  cancellation of a non-plan option to
purchase  15,000 shares of common stock and incentive  stock options to purchase
19,835  shares of common stock at a price of $5.00 per share.  In addition,  the
parties  agreed to release one  another  from any  liability  arising out of the
acquisition  of  Interactive  by On Stage and any  claim  relating  to  Kanfer's
subsequent  employment  with us. Kanfer also entered into an exclusive  right of
representation  agreement  with us in February  1999,  under which we granted to
Kanfer the right to represent  our Legends  production  in  designated  areas in
consideration   for  a  portion  of  the  gross   proceeds   generated  by  that
representation.

     On April 23, 1999, On Stage granted it securities counsel,  Nida & Maloney,
P.C. an option to purchase  40,000 shares of common stock at a purchase price of
$1.00 per share as payment for $38,469 in legal services  performed for On Stage
by Nida & Maloney,  P.C. The  securities  were issued under the  exception  from
registration provided by Section 4 (2) of the Securities Act.

     On May 7, 1999,  On Stage  issued  8,471  shares of common  stock valued at
$1.06 per share to Jim Owen, a former performer with On Stage. These shares were
issued in connection  with the resolution of litigation that arose several years
ago  between  On Stage and Owen with  regard to the right to the use of  certain
photographs  taken of Owen by On Stage.  The  securities  were issued  under the
exception from registration provided by Section 4 (2) of the Securities Act.


                                       21
<PAGE>

     On May 27, 1999,  Hanover  Restaurants,  Inc. returned 595,238 shares of On
Stage common stock  originally  issued to Hanover in  connection  with the Gedco
asset  acquisition.  The Hanover  shares were  returned to On Stage under to the
terms of a Mutual  Release and Settlement  Agreement,  which was entered into by
and between On Stage and Gedco as a result of a dispute that arose in connection
with the Gedco  asset  acquisition.  In  exchange  for the return of the Hanover
shares,  On Stage:  (1) granted Hanover a warrant to purchase  595,238 shares of
common  stock at a  purchase  price of  $1.50;  and (2)  released  its  claim to
approximately  $925,000  which was being  held in escrow as  security  for those
representations and warranties made by Gedco  representatives in connection with
the Gedco asset acquisition.

Item 3.  Defaults Upon Senior Securities.

     On May  24,1999,  On Stage  received  a notice  of  default  from  Imperial
Commercial  Credit and Investment  Corporation,  the first mortgage lender on On
Stage's dinner  theaters in Florida and California and its theatrical  venues in
the greater  Myrtle Beach,  South  Carolina are. See  additional  information as
filed on Form 8-K dated May 28, 1999.

Item 4.  Submission of Matters to a Vote of Security Holders.

         None.

Item 5.  Other Information.

         None.

Item 6. Exhibits & Reports on Form 8-K

     (a) Exhibits.

         None.
     (b) Reports on Form 8-K.

     On May 24,1999,  On Stage filed Form 8-K regarding the notice of default On
Stage received from Imperial Credit Commercial Mortgage Investment Corporation.

     On July 12,1999 On Stage filed Form 8-K regarding the  resignation of David
Hope, On Stage's President and Chief Operating Officer.




                                       22
<PAGE>



                                   SIGNATURES


In accordance with the requirements of the Securities  Exchange Act of 1934, the
registrant  caused  this  report to be signed on its behalf by the  undersigned,
thereunto duly authorized.

                                           ON STAGE ENTERTAINMENT, INC.



Date: August 16, 1999                      /s/ John W. Stuart
                                           -----------------------------------
                                               John W Stuart
                                               Chairman and Chief Executive
                                               Officer




Date: August 16, 1999                      /s/ Pedro Perez
                                           ------------------------------------
                                               Pedro Perez
                                               Chief Accounting Officer




                                       23
<PAGE>