SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-KSB

(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

For the fiscal year ended December 31, 1996

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

Commission file #: 33-87714


                        OLYMPIC ENTERTAINMENT GROUP, INC.
              ---------------------------------------------------
             (Exact name of registrant as specified in its charter)

             Nevada                                      88-0271810
   ---------------------------                       ---------------------
  (State or other jurisdiction                          (IRS Employer
      of incorporation)                              Identification Number)

        2755 E. Desert Inn Road, Suite 200, Las Vegas, NV         89121
        ---------------------------------------------------------------
        (Address of principal executive offices)              (Zip Code)

Registrant's telephone number:  (702) 369-2588
                                --------------

Securities registered pursuant to Section 12(b) of the Act:

         Common Stock $0.01 Par Value                        NONE
         ----------------------------                 ----------------------
               (Title of Class)                       (Name of Each Exchange
                                                       on Which Registered)

Securities registered pursuant to Section 12(g) of the Act:

                                      NONE
                                 --------------
                                (Title of Class)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days. (1) Yes X  No       (2) Yes X   No
                                          ---    ---          ---     ---

Indicate by check mark if disclosure of delinquent  filers  pursuant to Item 405
of Regulation  S-K is not contained  herein,  and will not be contained,  to the
best of Registrant's  knowledge,  in definitive proxy or information  statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.     X
             -----





<PAGE>


At January 25, 1997 there were 2,938,681 shares of common stock outstanding. The
aggregate  market  value  of the  common  stock  held by  non-affiliates  of the
registrant  (i.e.,  excluding shares held by executive  officers,  directors and
control persons as defined in rule 405) on that date was $1,309,801.

Documents incorporated by reference:
------------------------------------

Form S-8 dated July 26, 1996






                                       2


<PAGE>

                                     PART I

Item 1.  Business
-------  --------

     (a) General Development of Business
         -------------------------------

Olympic  Entertainment  Group, Inc. (the "Company") is a multimedia  educational
company and was incorporated on May 21, 1987 in the State of Nevada. The Company
was originally  formed to finance,  produce  co-produce  and  distribute  motion
pictures and television  shows and pursued various  opportunities  through 1993,
when the Company's  management  decided to focus upon the development of a cable
television  network for the  distribution  of children's  nonviolent  television
programming.  From 1993 through 1995 the Company  developed  this concept and in
1995,  launched the  Children's  Cable  Network.  Management  believes  that the
Company's growth plan and experience of senior  management are likely to enhance
shareholder value, long term growth and expansion.

     (b) Financial Information About Industry Segments
         ---------------------------------------------

The Company's activities are in one segment of the entertainment  industry --the
development of a children's cable television network.

     (c) Narrative Description of Business
         ---------------------------------

The Company has created a  children's  educational  division  called  Children's
Cable Network ("CCN" or the "Network").  The Company acquires, by purchase,  and
licenses educational programming for the Children's Cable Network;  specializing
in  nonviolent,   educational,   informative  and  special  interest   preschool
programming,   children's   classics  programs  and  G-rated  children's  motion
pictures.

All  reference  to the  Company  in the  following  discussion  of the  business
activities  of  the  Company  includes  its  children's   educational  division,
Children's Cable Network.

Children's Cable Network

CCN provides  award-winning,  nonviolent,  educational,  informative and special
interest   children's   programming   and  in  the  process  of  providing  this
programming,  creates business  opportunities  for individuals and syndication's
looking to get into the cable television broadcasting business.

The  network's  primary  market is the 11,100 FCC cable  system  licenses in the
United States.  The Company  licenses its programming to Cable Affiliates to air
on their local cable systems.  The Cable  Affiliates  obtain revenue through the
sale of commercial advertising time in the programs.



                                       3

<PAGE>

Federal Legislation

The Federal  Communications  Act of 1984  requires  cable  operators  to provide
channels  for lease to the  public in an attempt to  enhance  the  diversity  of
program choices available to cable  subscribers.  Generally,  such allocation of
channels is referred to as "leased  access."  Section 612 of the  Communications
Act of 1984  established  a federal  scheme  through  channel  leasing to assure
access to cable systems by third parties  unaffiliated  with the cable operator.
Under the  amendments to Section 612,  cable  operators  were also  permitted to
place programming from a qualified minority or educational programming source on
up to 33 percent of the cable system's designated leased access channels.

Additionally,  the Cable Act of 1992  mandated that every cable system with more
than  thirty-six  channels  and less than  fifty-five  activated  channels  must
designate 10 percent of their  capacity to leased  access.  Systems with greater
than 55 activated channels must set aside 15 percent of their capacity to leased
access. In addition, the Federal Communications Act of 1984 provides individuals
and groups the opportunity to use the public,  educational and government access
channels  offered by the cable  companies.  Systems with fewer than 36 activated
channels  are not  required  to make lease  channel  capacity  available  unless
otherwise  required to do so by terms of the franchise in effect on December 29,
1994.  The Cable  Television Act of 1992 renewed  government  supervision of the
franchised cable  television  industry which was deregulated by the Cable Act of
1984.  Both Acts are  amendments to the  Communications  Act of 1934.  The Cable
Television  Act of 1992 ("1992 Act")  authorized  the FCC to implement  rate and
service  regulation  for certain basic cable  television  services and to create
regulations that will increase  competition to franchised  cable  operators.  On
April 1, 1993,  the FCC  announced  several  features of the rules it planned to
implement in connection with the 1992 Act. Most of the announced rules concerned
rate  regulation for franchised  services as well as a temporary rate freeze and
rollback.  In order to promote competition with franchised cable operators,  the
FCC announced  program access  regulations as part of the Act. These  provisions
essentially allow competitive cable operators to purchase television programming
at fair prices.  Management believes that these provisions of the Act may result
in lower  operating  costs for the Company,  however,  there can be no guarantee
that revisions in said regulation will not materially affect the Company.

The  cable  television  industry  is  subject  to both  regulatory  restrictions
implemented primarily by the Federal Communications Commission, ("FCC") and also
legislation which affects communications/broadcast industries in general.


                                       4



<PAGE>

The Children's  Television Act of 1990  established new  requirements  including
that each broadcasting  station must provide programs that serve the educational
and informational needs of young viewers.  Accordingly,  broadcasters must limit
the amount of advertising aired during  children's  programming and must provide
programs that meet the educational and informational needs of children.


Cable Affiliates

The Company  licenses its  programming  to Cable  Affiliates  who cablecast this
programming on their local cable system through the purchase of time on a leased
access  channel.   The  Company  obtains  Cable   Affiliates   through  business
opportunity   shows  and   seminars,   direct  mail  and  business   opportunity
advertisements in national publications and on the Internet. There are currently
11,100 FCC cable system  licenses  located coast to coast where  potential cable
affiliates can be licensed to cablecast the Company's  programming.  The Company
licenses  only one Cable  Affiliate  in each cable  system  market.  The Company
currently has active cable  affiliates in  approximately  20 markets  across the
United States.

Employees

The  Company  currently  has  eighteen  employees  with  twelve  of those in the
corporate office in Las Vegas,  Nevada and six in Burbank,  California.  None of
the Company's employees are represented by a labor union.

Competition

The Company's  business is very competitive.  The Company is in competition with
many  cable  companies  none of  which  specialize  in  nonviolent,  educational
programming.  Many  competitors  exist which have  greater  financial  resources
and/or more  experience  in the delivery of  programming  than the Company.  The
Company competes with all other broadcasters of children's programming. On cable
television  competitors include The Family Channel,  The Learning Channel,  PBS,
Nickelodeon,  and The Disney Channel.  The Company intends to offer  programming
Monday through  Friday,  6:00 AM to 12:00 Noon which is potentially  more weekly
air  time  of  nonviolent,   educational  programming  than  all  of  the  other
competitors.

Programming

The  programs  consist  of  nonviolent,  educational,  informative  and  special
interest programming which teach positive character  development,  morality, and
introduction to numbers,  letters and music.  Each program is  approximately  25
minutes in length,  which  leaves 5 minutes of time for the Cable  Affiliate  to
sell commercial advertisements,  sponsorships, and/or create and produce locally
originated programming.


                                       5


<PAGE>


The Company,  through its own research,  has located nearly every  award-winning
children's series produced since 1950, many of which the Company plans to obtain
through direct  acquisition or licensing.  The programming for children includes
puppet shows, live action and animated  characters,  children's  classic stories
and music that is designed to teach children in a fun and entertaining way.


Library

The library of programs,  many of which are award-winning,  focus on educational
value as well as character  and morality  development.  To date,  each series of
programs is aimed at the 1 1/2 to 6 year old  audience  assisting  them in their
preparation  for school.  The Company owns outright or licenses  under long term
leases each of the following programs.

                          CCN's Library Of Programming

          The Shari Show
          26 1/2 hour episodes
          The  Shari  Show  takes  place  in  the  TV  station   called   Bearly
          Broadcasting  where all of the positions are manned by puppets.  Shari
          Lewis is the secretary to the station manager, Mr. Bearly. As they put
          on the full  range of  typical  shows at  Bearly  Broadcasting,  human
          interaction and value  judgments are explored and revealed.  More than
          an  entertainment  show for  children  of all  ages,  The  Shari  Show
          stimulates  children's  senses of curiosity  and humor,  which creates
          involvement...  a basic measurement of the educational process.  Shari
          Lewis and The Shari Show have won seven (7) Emmys,  the Peabody  award
          and numerous other prestigious  awards for excellence.  Programming on
          license.

          Bill Cosby's PicturePages
          80 1/2 hour episodes
          Bill  Cosby's  PicturePages,  winner of a Golden  Globe award and Gold
          Medalist  of  the  International  Film  Festival  of New  York,  helps
          children develop important skills like following directions,  drawing,
          hand-eye coordination, clear thinking and numbers. PicturePages is the
          epitome of educating  children  with love and  laughter.  Bill Cosby's
          unique approach, which delights children and adults, is recommended by
          the National Education Association. Programming on license.

          Dusty's Treehouse
          260 1/2 hour episodes
          Dusty's Treehouse is a children's show designed for ages 2-6. The show
          uses both adult and children  mixed with puppets.  Winner of eight (8)
          Emmys and the coveted George Foster Peabody award,  Dusty's  Treehouse
          is very  entertaining,  while at the same time teaches children how to
          cope when someone was injured, what love

                                       6



<PAGE>

          is, to look both ways when  crossing the street,  never let  strangers
          into the house and other social and practical  skills for dealing with
          today's world. Owned by the Company.

          Achievements In African-American History
          10 1/2 hour programs
          Achievements  in  African-American  History  documents  in a ten  part
          series,  the  historical  achievements  of black  women and men in the
          fields of  literature  and  poetry,  cinema,  religion,  medicine  and
          science.  This series features noted black personalities such as Abbey
          Lincoln,  Roscoe Lee Browne,  Brock Peters and Lou  Gossett,  Jr., who
          document through narration,  dramatic scenes and readings, some of the
          important historical  contributions made by African- Americans.  Owned
          by the Company.

          The Chuck Jones Collection
          6 1/2 hour episodes
          The Chuck  Jones  Collection  is  comprised  of  beautifully  animated
          stories/fairy tales written by such authors as Rudyard Kipling.  Chuck
          Jones is one of the leading  award  winning  animators of our time. As
          creator of such characters as Road Runner, Wile E. Coyote, Pepe Le Pew
          and  co-creator of Bugs Bunny,  Porky Pig and Daffy Duck,  this series
          portrays  the beauty,  creativity  and  quality of its  Academy  Award
          winning creator. Programming on license.

          Hot Fudge
          75 1/2 hour episodes
          Hot Fudge is the  recipient  of two  national  honors,  the Action for
          Children's  Television  Award for  Outstanding  Contribution to Mental
          Health  Programming for children,  and the San Francisco State College
          Excellence in Broadcasting  Award. This nationally  recognized program
          that  combines  live  action and a  delightful  cast of  puppets  with
          lessons,  music and fun.  Join the Hot Fudge Gang as they learn  about
          the complexities of relationships,  friendship, self esteem, feelings,
          and cooperation,  among many others,  through song, live action skits,
          and game  shows.  Each  energetic  show  follows a single  theme  with
          engaging dialogue And lively performances. Owned by the Company.

          KidStreet
          130 1/2 hour episodes
          This highly  exciting game show for children is also family  oriented.
          Three  pairs of  siblings,  the red team,  the blue team and the green
          team,  vie for  victory and prizes by  guessing  how one sibling  will
          answer a set of questions.  Points are awarded for correct answers and
          the team  with the most  points  wins the  chance  to solve  the final
          puzzle. The show motivates kids to learn problem solving skills and to
          better understand their sisters and brothers. Programming on license.


                                       7


<PAGE>

          Gigglesnort Hotel
          80 1/2 hour episodes
          The Gigglesnort  Hotel brings kids worthwhile  story lines filled with
          comedy,  action and  surprises.  The Hotel has a very funny human desk
          clerk,  B.J.,  presiding  over a crew of puppets  such as Hotel guests
          Mrs. Plumtree and the old Professor,  Hotel Detective W.C.  Cornfield,
          and the Janitor  Dirty  Dragon.  Through the  everyday  running of the
          Hotel,  concepts such as love, hope anger,  and trust are presented in
          ways that are both  thought-provoking  and  highly  entertaining.  The
          Gigglesnort  Hotel  garnered two (2) Chicago  Emmys and the Iris award
          for  program  excellence  from the  National  Association  of  Program
          Executives. Programming on license.

          Coming To Ametrica
          2 1/2 hour episodes
          Coming To  Ametrica  is a  combination  of live  action and  animation
          designed  to teach  children  as well as adults the  metric  system of
          weights and  measures.  In this series,  a spaceship  kidnaps  Admiral
          Gordon and six young people who have been chosen to teach  America the
          metric system of  measurements.  While detained aloft in the spaceship
          the Admiral and his young crew learn everything there is to know about
          the metric system.

          The spaceship computer uses lively and entertaining animation to teach
          the skeptical  Americans about liters,  meters,  and grams. They learn
          that the metric system is used worldwide, and that once understood, it
          is easier to use than  gallons,  yards and pounds.  The series is fun,
          entertaining  and  most  of  all,  highly  educational.  Owned  by the
          Company.

          Metric Series
          38 15 minute episodes
          (approximately 600 minutes of animation)
          A series of animation programs designed to teach children,  as well as
          adults,  the metric system of weights and measures.  The Metric Series
          features a mild  mannered  character  named  Newton  Joule  who,  when
          conversion  problems  arise,  turns into the  superhero  Metric Man to
          teach children about liters,  meters and grams.  They learn the metric
          system is used worldwide,  and that once  understood,  it is easier to
          use then gallons,  yards and pounds.  The series is fun,  entertaining
          and most of all, highly educational.

          Scott McGrout Inside Out
          1 30 minute special
          A highly  informative and  entertaining  film on body awareness.  This
          beautifully  animated  story  introduces  Scott  McGrout  who  takes a
          fascinating  journey  through  the human body.  This film  teaches the
          child how  important  each part of the body is and how each part works
          together to keep the body healthy and strong. Owned by the Company.

          Kerchoo - What Really Happens When You Catch A Cold
          1 10 minute film short
          In this imaginative film, Scott McGrout learns about the common cold.


                                       8


<PAGE>

          Experiencing cold spells and sneeze quakes, Scott and the viewer watch
          the body fight off Elvirus and her  vacation  companion,  Common Cold.
          Owned by the Company.

          Rod Rocket
          135 5 minute episodes (675 minutes of animation)
          The exciting  adventures of two astronauts in outer space in wonderful
          animation. Owned by the Company.



Item 2.  Properties
-------  ----------

The following table sets forth information regarding the Company's facilities:

    Location                    Size                    Function
    --------                    ----                    --------

Las Vegas, Nevada           4,468 sq. feet           Corporate offices
Burbank, California.        4,000 Sq. feet           Production facility

The Company leases the Burbank facility on a month to month basis and has a five
year lease on the Las Vegas office.


                                       9


<PAGE>


Item 3  Legal Proceedings
------  -----------------

The Company is currently involved in the following legal matters:

The Company is plaintiff in Los Angeles Superior Court, Central District,  civil
action # BC145541,  Olympic  Entertainment  Group, Inc. etc. v. Nationwide Media
Investments,  Inc. et al. A cross-complaint  was filed by Nationwide against the
Company. It was then stipulated by and between all parties that the matter would
be  submitted  to  binding  arbitration.  The  Company  has been  informed  that
Nationwide is incapable of prosecuting the  cross-complaint  and both sides have
agreed to mutual dismissals of the action, without prejudice.  It is the opinion
of  counsel  to  the   Company   that  it  is   extremely   unlikely   that  the
cross-complaint,  even if prosecuted,  would result in an unfavorable outcome to
the Company.

The Company is plaintiff in Los Angeles Superior Court, Central District,  civil
action # BC144306,  Olympic  Entertainment  Group,  Inc.  etc. v.  Preferred Way
Management,  et al. No cross action was filed by any of the  defendants  against
the Company in this action.  It was  stipulated  by and between all parties that
the matter would be submitted to binding arbitration to take place in Las Vegas,
Nevada.  Defendant's  counsel  has since been  relieved  as counsel of record by
reason of his client's  failure to pay legal fees. It is the plan of the Company
to dismiss the action,  without  prejudice,  due to its inability to collect any
potential judgment against the insolvent defendants.

The Company is plaintiff in United States District Court,  Central District,  in
civil action #CV 96 3287 JGD(JRx),  Olympic  Entertainment  Group, Inc., etc. v.
Scott  Severson,  et al.  No cross  action  was  filed by any of the  defendants
against the Company in this action.  No answer is on file by the  defendants.  A
motion  was filed by the  defendants  to  dismiss  the  action  based on lack of
personal  jurisdiction.  Jurisdiction has been established by the court over the
corporate  defendant  but not against  Scott  Severson  personally.  The Company
intends to  vigorously  pursue its claims for  licensing  fees owed in excess of
$100,000 and for damages caused by Mr. Severson  through  tortuous  interference
with various contracts.




                                       10

<PAGE>

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

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter ended December 31, 1996.

                                     PART II

Item 5.  Market for Registrant's Common Equity & Related Stockholder Matters
-------  -------------------------------------------------------------------

     (a) Market Information

          (1) (i)     None

              (ii)    Not applicable

              (iii)   Fiscal Year End                    Fiscal Year End
                      December 31, 1996                  December 31, 1995
                      -----------------                  -----------------

                       High Bid   Low Bid                High Bid   Low Bid
   First Quarter        $3.38      $1.75                     -         -
   Second Quarter       $3.63      $1.75                     -         -
   Third Quarter        $2.38      $0.75                     -         -
   Fourth Quarter       $1.19      $0.50                     -         -

Source:  The Company's stock was not traded in sufficient  volume during 1995 to
establish market prices.

                (iv)    Not applicable

                (v)     Not applicable

          (2)   (a)     Not applicable

          (b) Holders
              -------

             (1)      Title of Class              Number of Record Holders
                      --------------              ------------------------

                      Common Stock,               Approximately 145
                      $0.01 Par Value

             (2)      Not applicable


          (c) Dividends
         

             (1)      There have never been any dividends declared by the
                      Registrant.

             (2)      Registrant's losses do not currently indicate the ability
                      to pay cash dividends.


                                       11


<PAGE>
<TABLE>
<CAPTION>



Item 6.  Selected Financial Data
-------  ------------------------

                                  1996                 1995                1994               1993                1992
                               -----------         -----------         -----------         ----------          ----------
Income statement data:

<S>                            <C>                 <C>                 <C>                 <C>                 <C>      
Revenues                       $ 2,518,253         $   358,932         $      --           $      --           $      --

Income (loss)
  from
  Operations                       378,090            (545,396)         (2,170,003)           (102,899)            (38,001)

Net interest
  expense                          (23,234)            (33,605)            (36,546)            (31,646)            (21,069)

Income (loss)
  before income
  taxes                            355,856         $  (579,001)        $(2,176,549         $  (134,545)        $   (59,070)

Income taxes                          --                  --                  --                  --                  --

Net income
  (loss)                       $   355,856         $  (579,001)        $(2,176,549)        $  (134,545)        $   (59,070)
                               ===========         ===========         ===========         ===========         ===========

Per share data:
Primary:

Net income
  (loss)                       $      0.14         $      (.30)        $     (1.92)        $      (.15)        $      (.07)
                               ===========         ===========         ===========         ===========         ===========
Weighted
  average shares
  outstanding                    2,626,390           1,915,038           1,132,125             900,000             900,000

Fully diluted:

Net income
  (loss)                       $      0.12         $      (.30)        $     (1.92)        $      (.15)        $      (.07)
                               ===========         ===========         ===========         ===========         ===========
Weighted
  average shares
  outstanding                    2,922,390           1,915,038           1,132,125             900,000             900,000

Balance sheet data:

Working capital
  (deficiency)                     162,296         $  (872,167)        $    10,305         $   465,138         $   (34,844)

Total assets                     1,368,723             545,152             260,354             245,760             212,867

  

                                                             12

<PAGE>


Long-term debt                        --                  --                  --                  --                  --

Redeemable
  preferred
  stock                            203,000             213,000             213,000                --                  --


Total stockholders'
  equity
  (deficiency)                     782,004            (492,441)             86,560            (225,229)           (110,685)

</TABLE>


                                       13


<PAGE>


Item 7.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations
-------------------------------------------------------------------------

The  Company  is a new  emerging  cable  network  that is unique in that it only
distributes nonviolent children's television programming through local broadcast
affiliates who utilize the leased access  channels of their local cable company.
The Company's fiscal year end is December 31. Unless otherwise noted, references
to fiscal  1996,  1995 and 1994 relate to the fiscal  years ended  December  31,
1996, 1995 and 1994.

Overview

As  a  new  cable  network  the  Company  faces  two  principal  problems:   (1)
distribution of programming,  and (2) audience  acceptance of that  programming.
Audience  acceptance is always  difficult to predict.  The Company is,  however,
licensing   award-winning   programming   which  has  already  earned   consumer
acceptance,  and is being well  received  through the  Company's  current  cable
affiliates.  Traditional  methods  of  distribution  for  a  cable  company  are
difficult because  transponder time on satellites (which are traditionally  used
for  distribution of the cable signal) is very scarce,  and even when available,
very  expensive.  The  channel  space on many  cable  systems  is also  limited,
prohibiting  additional  satellite feeds of new cable networks.  The Company has
adjusted to the  uncertainties  of the availability of delivery systems to reach
the market place by utilizing the "leased  access" rules provided by the Federal
Communications  Commission  ("FCC") since 1984. Under these  regulations,  cable
companies are required by law to provide leased access channels to third parties
who request it. Thus the Company does not  distribute its programs by satellite,
but instead  provides  videotape  programs to affiliates which are then aired by
the purchase of leased access cable time by the Company's cable  affiliates from
local cable systems.

With 11,100 cable broadcast systems nation wide, the Company's  potential market
is enormous.  At December 31, 1996, the Company had seven licensed affiliates on
the air, including the territories of Denver, Colorado; Beverly Hills/Hollywood,
California;  Orange County,  California;  San Fernando Valley,  and Simi Valley,
California;  San Diego  Southeast  in  California;  and  Greeley,  Colorado,  in
addition  to  the  Company  operated   territories  of  Las  Vegas,  Nevada  and
Burbank/Glendale,  California.  The  Company  is  scheduled  to go on the air in
fifteen additional territories in 1997, including new Cable System Affiliates in
San  Jose,  California;   Oakland,   California;   San  Francisco,   California;
Sacramento,  California; Anaheim, California; Salt Lake City, Utah; Puget Sound,
Washington; Seattle, Washington; Tacoma, Washington;  Portland, Oregon; Phoenix,
Arizona; Bakersfield,  California;  Lancaster/Palmdale,  California; San Gabriel
Valley,  California;  and Carlsbad,  California. The Company's affiliates on the
air are currently  bringing the Company's product to 2,234,000 cable subscribers
with an additional  3,673,000  subscribers  to be added to the  Company's  total
available viewing audience when the above listed affiliates go on the air.



                                       14


<PAGE>

Results of Operations

The following  table sets forth,  for the fiscal years ended  December 31, 1996,
1994, and 1993 certain items from the Company's Statement of Operations.

<TABLE>
<CAPTION>
                                        1996              1995              1994
                                     -----------       -----------       -----------                                 ----
<S>                                  <C>               <C>               <C>      
Revenues                             $ 2,518,253       $   358,392       $      --
Expenses                               2,140,163           903,788         2,140,003
                                     -----------       -----------       -----------

Income (loss)
         from operations                 378,090          (545,396)       (2,140,003)

Other income (expense)                   (22,234)          (33,605)          (36,546)
                                     -----------       -----------       -----------

Income before taxes                      355,856          (579,001)       (2,176,549)

Provision for income taxes                 --                --                --
                                     -----------       -----------       -----------

Net income (loss)                    $   355,856       $  (579,001)      $(2,176,549)
                                     ===========       ===========       ===========

Earnings per share
Primary:
  Weighted average
         common shares
         outstanding                   2,626,390         1,915,038         1,132,125
                                     ===========       ===========       ===========

  Income (Loss) per
         common share                $       .14       $      (.30)      $     (1.92)
                                     ===========       ===========       ===========

Full diluted:
Earnings per share
  Weighted average
         common shares
         outstanding                   2,922,390         1,915,038         1,132,125
                                     ===========       ===========       ===========

Income (Loss) per
         common share                $       .12       $      (.30)      $     (1.92)
                                     ===========       ===========       ===========
</TABLE>

The Company's  activities  during the 1996 and 1995  consisted of developing the
Company's products,  licensing cable affiliates, and negotiating acquisitions of
rights to various children's television programs, and the initial release of the
Company.

                                       15

<PAGE>

Comparison of 1996 to 1995

Revenues in 1996 are up 584% versus 1995 due to the fact that the Company is now
better  established and has more cable affiliates.  In addition,  the Company is
now able to  charge a  higher  license  fee to  Company  affiliates  than in the
previous  year.  The fees charged during 1995 ranged from $10,000 to $40,100 per
affiliate based on the number of potential customers,  whereas in 1996 affiliate
licenses  are selling for as much as  $100,000 in the large cable  markets.  The
Company  recognizes  revenue  from  network  license  agreements  not related to
specific  programming over the term of the related agreements.  Revenue from the
sale of licenses for television  program  rights is recorded in accordance  with
SFAS #53,  which  provides for  recognition  of revenue at the  beginning of the
license period when specified conditions have been met. During 1996, the bulk of
the Company's sales were  attributable to the sale of television  program rights
to affiliates which increased the Company's 1996 recorded sales.

Selling,  general  and  administrative  expenses  are up 146% from  $903,788  to
$2,140,163  because of the increased activity generated by the additional sales,
including,  but not limited  to, the hiring of  additional  personnel.  Interest
expense is down in 1996 due to the partial repayment of debt in early 1996.

Comparison of 1995 to 1994

The  Company's  initial  revenues  were $358,592 in 1995 as opposed to the prior
year when the Company had not  commenced  selling  cable  affiliates  and had no
revenue. Expenses decreased by $1,236,215, the net effect of an increase in cash
operating  expenses,  and the absence of the significant  non-cash expenses that
had been incurred in 1994. Those 1994 transactions are summarized as follows:

          - The  issue of  200,000  common  shares  valued  at $2 per  share for
          consulting services totaling $400,000.

          - The issue of 228,500 common shares valued at $2 per share to certain
          officers  and  directors.  The  aggregate  value of these  shares  was
          $457,000.

          - The issue of 32,800 shares of its Series C preferred stock valued at
          $2 per share for consulting services of $65,600.

          - The issue of 98,000 shares of its Series D preferred stock valued at
          $2 per share to an officer and  director  in lieu of cash  payment for
          services for the aggregate value of $196,000.

          - The Company charged off film rights of $200,793.

After  giving  effect to the  non-cash  expenses  listed  above,  1995  expenses
increased  $83,178 or approximately  10%. This increase was due to the increased
activity due to the commencement of licensing activities.


                                       16


<PAGE>

Capital Resources & Sources of Liquidity

During 1996, the Company's  working capital  increased to $162,296 compared to a
deficiency  of $872,167 at December  31,  1995.  This was  primarily  due to the
significant  increase in  affiliate  sales in 1996 in addition to  approximately
$913,000 in proceeds from various equity financings during 1996.

The Company's  primary cash requirements are for operating  expenses,  primarily
labor and general and administrative expenses, and for the acquisition of rights
to additional  television  series. In 1996, the Company's primary source of cash
was from revenues which accounted for  approximately  67% of all cash brought in
to the  Company.  The  Company  also  brought in  approximately  33% of its cash
inflows from equity  financing.  Historically,  the Company's  primary source of
cash have been through equity and long term debt financing.

In 1995,  the Company's  primary source of cash was from revenues as the revenue
stream accounted for approximately 96% of all cash brought in to the Company.

In 1994, the Company  raised  approximately  $600,000 and $145,000  respectively
from the issuance of 500,000  shares of common and 106,500  shares of cumulative
convertible  redeemable  preferred stock. The Company used the proceeds of these
offerings to fund current  operating  requirements  and to acquire the rights to
television programming.

The Company has experienced a significant  increase in sales volume and projects
sufficient  cash  flows  from  the sale of  existing  products  to fund  current
operations.  In  addition,  the Company is  pursuing  numerous  possible  equity
arrangements  that could lead to significant  cash infusions during 1997. In the
event that these deals do not come to fruition,  and the Company's sales were to
take a downturn,  the Company currently has no material  commitments for capital
expenditures  and could  easily  scale  back  operations  in the event  that the
Company's does not meet its cash flow projections.

The  Company  intends  to use the  proceeds  from  any  equity  infusion  to buy
additional   programming  and  to  expand  its  marketing  of  licenses  to  new
affiliates.

The Company is a plaintiff in certain  litigation  arising from various disputes
(see  "Legal  Proceedings").  The  Company  is  charging  legal  costs from this
litigation to operations as they are incurred. These costs totaled approximately
$152,000 and $64,000 in 1996 and 1995  respectively.  The Company  believes that
internally  generated  cash will be  sufficient  to satisfy any  obligations  in
connection  with any  realistically  adverse  outcome  that may result from such
litigation.

                                       17


<PAGE>

New Accounting Standards

The Company  adopted  Statement  of Financial  Accounting  Standard No. 123 (FAS
123), Accounting for Stock-Based Compensation in 1996. Upon adoption of FAS 123,
the  Company  measured   compensation   expense  for  its  stock-based  employee
compensation  plans using the fair value-based  method  prescribed by FAS 123 to
measure compensation expense.

In 1996 Financial Accounting Standards No. 125 (FAS 125) Accounting for Transfer
and Servicing of Financial Assets and Extinguishments of Liabilities was issued.
FAS 125 is  effective  for  transfers  and  servicing  of  financial  assets and
extinguishments  of liabilities  occurring  after December 31, 1996. The Company
will  adopt  FAS 125 in  1997.  Adoption  of FAS 125 is not  expected  to have a
material effect on the Company's  consolidated  financial  position or operating
results.

Related Party Transactions

During 1996, the Company  purchased program rights for Kidstreet and Gigglesnort
Hotel from an entity  controlled  by one of the Company's  directors.  The total
acquisition  price was $166,511  including  $75,625 which is included in amounts
due to stockholders at December 31, 1996.

In 1996 and 1995,  the Company also received  legal services from firms in which
another  of the  Company's  directors  is a  principal.  Such  services  totaled
$185,000 and $25,000 for 1996 and 1995 respectively of which $37,644 was payable
at December 31, 1996.

The Company  believes  that such  amounts  represented  the fair market value of
comparable  products and services that could have been obtained  elsewhere under
similar terms and circumstances.

Major customers

The  Company  made sales in excess of 10% of total  revenues in 1996 and 1995 to
major customers as follows:

Customer:               Sales/% of total           Receivable at 12/31/96

1996:
  Carousel Media
    Marketing              $1,550,000  62%                    $  320,000
  Capital Funding             269,840  11%                          -

1995:
  Worldwide
    Marketing                 211,584  59%                          -

In the event that sales to Carousel  were to  discontinue,  management  believes
that there is  sufficient  demand for the  Company's  product that such revenues
could be replaced from other sources.

                                       18



<PAGE>

Employment contract

On January 15, 1997, the Company entered into a five year  employment  agreement
with its  chief  executive  officer  whereby  the  officer  is to  receive  base
compensation of $480,000 per year, and a bonus of $10,000 for each new affiliate
added to the Company's cable television network.

The agreement  also grants the executive  options to purchase  800,000 shares of
common  stock at an exercise  price of 80% of the fair value of the stock at the
grant date. The options vest at a rate of 20% per year during the contract term.
The  agreement  also provides for  termination  payments to the executive of all
accrued but unpaid  salary and bonus,  the rights to vested stock  options and a
cash payment of $5,000,000 if  termination  (as defined in the contract)  occurs
during the first  contract  year. The cash payment after the first contract year
is an amount equal to twice the  remaining  base salary that would be due during
the remaining  contract  term. It is  management's  belief that this contract is
representative  of similar  contracts in the industry and is necessary to secure
the talents of Mr. Orsatti on a long term basis.

Item 8.  Financial Statements
-------  --------------------

The  following  financial  statements  are filed  with this  report as pages F-1
through F-15 following the signature page

                                                        Reference
                                                        ---------

         Report of independent public accountants          F-1
         Balance sheets                                    F-2
         Statements of operations                          F-4
         Statements of stockholders' equity                F-5
         Statements of cash flows                          F-6
         Notes to financial statements                     F-7



Item 9.  Changes in and Disagreements with Accountants on Accounting and
         Financial Disclosure.
------------------------------------------------------------------------

     None

     There were no changes or  disagreements  with accountants on accounting and
financial disclosures.


                                       19

<PAGE>

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant

     The  following  table sets forth the name,  age, and position  held of each
director and officer of Olympic Entertainment Group, Inc.:

Name                           Age              Position - Year
--------------------           ---              ---------------
Dominic Orsatti                65               Chief Executive Officer
                                                Chairman of the Board of
                                                Directors

Michael Marcovsky              52               President(1)
                                                Chief Operating Officer(1)
                                                Director

John Holt Smith                55               Corporate Secretary/
                                                Director

Steve Henson                   35               Treasurer and Chief Financial
                                                Officer

H.C. Hernandez                 65               Executive Vice President

Kathleen Hitt                  47               Vice President - Public Affairs

Jack Rhodes                    70               Director


Officers and Directors

Pursuant to the Bylaws,  each Director  shall serve until the annual  meeting of
the stockholders,  or until his or her successor is elected and qualified. It is
the intent of the  Company to support the  election  of a majority of  "outside"
directors at such meeting. The Company's basic philosophy mandates the inclusion
of  directors  who  will be  representative  of  management,  employees  and the
minority shareholders of the Company. Directors may only be removed for "cause".
The term of office of each  officer  of the  Company is at the  pleasure  of the
Company's Board.

BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS

Dominic Orsatti
Chairman  of the Board,  Chief  Executive  Officer  and  Founder,  was  formerly
President of Orsatti Productions, Inc., a leading producer of educational films.
Among Orsatti  Productions  credits were an NBC Children's  Television  Special,
"All About Me",  a musical  television  special,  "Get  Down",  hosted by Milton
Berle,  more than 100 educational  films and two educational  children's  record
albums. Mr. Orsatti is the recipient of more than 18 major industry awards,


                                       20


<PAGE>

including four gold and three silver medal awards by the New York  International
Film  Festival  and two  Golden  Babe  awards  awarded at the  Chicagoland  Film
Festival.  Mr.  Orsatti  co-wrote and was executive  producer of the first place
Telly  award-winning  "Coming To Ametrica"  in 1993.  He is also a member of the
Writer's Guild of America.

Michael E. Marcovsky
President,  Chief Operating Officer and Director, is a pioneer in both the cable
television and cellular communications  industries. As Vice President of program
operations  with Warner Cable and QUBE, Mr.  Marcovsky was  responsible  for the
implementation of a number of programming  concepts,  which later developed into
successful  cable  networks such as  Nickelodeon,  The Movie Channel and MTV. As
Vice President of Pay-TV at Buena Vista Distribution,  a division of Walt Disney
Productions,  Mr. Marcovsky laid the foundation for what would eventually be The
Disney  Channel.  He also served as President of the STV Division of Golden West
Broadcasters.  As President and owner of Marnel Associates, Ltd., a multi-tiered
Los  Angeles-based  telecommunications  firm, he developed  strategies for entry
into new arenas of pay television, cable, and pay-per-view for such clientele as
CBS, ABC, and Cox Cable.

John Holt Smith, Esq.
Corporate Secretary and Director,  is a senior partner of Smith & Associates and
was  formerly a partner in the Fort  Worth,  Texas  firm of  McDonald,  Sanders,
Ginsburg,  Phillips, Maddox & Newkirk. As a partner, he served as Vice President
of the United States Trust  Company of New York and in that capacity  opened the
Beverly Hills, California office of the company. Mr. Smith subsequently returned
to the practice of law to ultimately  head the securities  department of the Los
Angeles firm of Bushkin,  Gaims,  Gaines & Jonas.  In that  capacity,  Mr. Smith
represented clients including Johnny Carson, Kareem Abdul-Jabbar,  Diane Keaton,
Joan Rivers, Bill Cosby, David Letterman, Neil Simon and many NBC personalities.
Mr.  Smith is  currently  engaged in the private  practice  of law  representing
broker-dealers,  individuals  and entities  raising capital as well as preparing
private  placements and  subsequent  public  offerings.  Mr. Smith is a two-time
graduate of Vanderbilt  University  (B.A.  1963, LL.B. 1966) and a member of the
State Bars in Texas and California.

Steve Henson
Steve Henson is a  founding partner  of Henson & Company,  a Pasadena  based CPA
firm.  Steve's  firm  specializes  in  providing  auditing,  accounting  and tax
services.  Prior to founding the firm,  Steve was with Arthur Young & Company as
an audit  manager.  During  Steve's  five years at Arthur  Young,  Steve  served
clients ranging from start-up enterprises to billion dollar conglomerates. Steve
was also a national  seminar  instructor and was responsible for audit education
for a staff of over 600 professionals. Mr. Henson obtained a Bachelor of Science
in Public Accounting in June, 1983 from the University of Southern California.

                                       21


<PAGE>

H.C. Hernandez
Executive Vice President, is a seasoned business executive in finance, marketing
and sales  with over 20 years  experience  in the  entertainment  industry.  Mr.
Hernandez is a former Vice President of Orsatti  Productions,  Inc. and formerly
President  of  Educational  Film  Systems,   Inc.,  a  national  distributor  of
educational  materials,  as well as a founder of the Motion Picture  Development
Fund, Ltd. Mr.  Hernandez'  solid  experience and background is an asset for the
Management team of Olympic Entertainment Group, Inc.

Kathleen Hitt
Vice  President  Public  Affairs,  brings  with her 27 years  experience  in law
enforcement, politics and public affairs. Ms. Hitt served as Administrative Aide
first to powerful  Sheriff,  Ralph Lamb then Sheriff John Moran, one of the most
popular police  officers and  politicians  in Clark  County's  history until his
retirement in 1994. The Las Vegas  Metropolitan  Police  Department is respected
nationwide  and charged  with  protecting  one of the most  exciting and fastest
growing regions in the nation. A lifelong resident of Las Vegas, Kathleen became
well known in the community as a dynamic force for making things happen.  She is
Chair of Membership for the Republican Men's Club in Nevada, serves on the Board
of Directors  for the Youth  Camerata  Orchestra,  who introduce the classics to
at-risk neighborhoods.  As Kate Hitt, she has hosted open line talk shows for 15
years over KDWN Radio,  a 50,000 watt clear  channel  station (720 AM) earning a
large and loyal following. Kathleen currently hosts a weekly radio show, "Taking
Care of Business" , sponsored by the Nevada  Development  Authority.  She, along
with elected  officials,  business leaders and celebrities,  are ambassadors for
Southern Nevada and encourage  those listening  throughout the western region to
bring their corporation or business into Nevada.

Jack E. Rhodes
Director,  is the  President  of  Rhodes  Productions  and  has  held  executive
positions with Independent Television Corporation and Warner Brothers television
prior to joining  Westinghouse  Broadcasting Company as Vice President / General
Manager. Mr. Rhodes through Westinghouse's Group W Productions,  was responsible
for the launching of the "Merv  Griffin" and "Mike Douglas"  shows.  Mr. Rhodes'
successes  include   introducing  "Mary  Hartman,   Mary  Hartman"  to  American
television  for Norman  Lear.  He was Creator  and  Executive  Producer  for the
multi-award  winning "Second City Television (SCTV)" comedy series which brought
to us favorite  comedians like John Candy and Eugene Levy. Rhodes Productions is
also responsible for introducing the night-time version of "Hollywood Squares".


                                       22


<PAGE>

Item 11.  Executive Compensation
--------  ----------------------

The table below sets forth the payroll and  consulting  compensation  for fiscal
1996 for the executive officers and directors of the Company.

Name of Individual        Capacities in Which Served         Compensation
------------------        --------------------------        -------------
Dominic Orsatti           Chairman & CEO                     $ 130,793
Michael Marcovsky         President & COO                       70,000
John Holt Smith           Secretary & Director                 125,279*
Steve Henson              CFO & Treasurer                       16,334**
H.C. Hernandez            Executive VP                          29,600
Kathleen Hitt             Vice President                         9,600
Jack Rhodes               Director                             166,511***


*    Represents moneys paid to law firms in which Mr. Smith is a principal.

**   Paid to Henson & Company,  a California  partnership in which Mr. Henson is
     partner.

***  Paid to  Encore  Entertainment,  Inc.  a Company  in which Mr.  Rhodes is a
     principal. The moneys were paid for video production services.


                                       23



<PAGE>

Item 12.   Security Ownership of Certain Beneficial Owners and Management
--------   --------------------------------------------------------------

There are currently 2,824,552 Common Shares outstanding. The following tabulates
holdings of Common  Shares of the  Company by each  person  who,  subject to the
above,  at the  date of this  Memorandum,  holders  of  record  or is  known  by
Management  to own  beneficially  more than 5.0% of the Common  Shares  and,  in
addition,  by all  directors and officers of the Company  individually  and as a
group.

                             Table I - Common Stock
                             ----------------------

Name & Address of                    Number of Shares of         Percentage
Beneficial Owner                     Common Stock Owned          of Ownership
------------------------             ------------------          -----------
Dominic Orsatti(2)                         800,000                  27.22%
2755 E. Desert Inn Road #200
Las Vegas, Nevada  89121

Nevada Entertainment
Partners, Ltd.(2)                          800,000                  27.22%
2755 E. Desert Inn Road #200
Las Vegas, Nevada  89121

Michael Marcovsky                                0                      0%
801 S. Main Street
Burbank, California  91506

John Holt Smith                             18,000                   0.61%
1901 Avenue of the Stars
18th floor
Los Angeles, California 90067

Steve Henson                                     0                      0%
87 N. Raymond Avenue, Suite 320
Pasadena, California  91103

H.C. Hernandez                                   0                      0%
801 S. Main Street
Burbank, California  91506

Kathleen Hitt                                    0                      0%
2755 E. Desert Inn Road #200
Las Vegas, Nevada  89121

Jack Rhodes                                      0                      0%
124 11th Street
Manhattan Beach, California  90266

All Directors & Officers
as a group (7)                             818,000                  27.83%


                                       24


<PAGE>

(1)  Pursuant  to Rule  13d-3  under the  Securities  Exchange  Act of 1934,  as
     amended,  beneficial  ownership  of a security  consists  of sole or shared
     voting power (including the power to vote or direct the voting) and/or sole
     or shared  investment  power  (including the power to dispose or direct the
     disposition)  with  respect  to a  security  whether  through  a  contract,
     arrangement,  understanding,  relationship or otherwise.  Unless  otherwise
     indicated,  each person  indicated above has sole power to vote, or dispose
     or direct the  disposition  of all shares  beneficially  owned,  subject to
     applicable community property laws.

(2)  Includes Nevada  Entertainment  Partners,  Ltd., and Dominic  Orsatti,  the
     managing  general partner  thereof,  who together  constitute a "group," as
     that term is defined in Section 13D of the Securities Exchange Act of 1934,
     as amended.

(3)  Does not  include  any  Common  Shares to be issued  upon  exercise  of any
     outstanding warrants.

After the Warrant Distribution pending, the Company shall have approximately 109
Common Shareholders.


The following  tabulates  holding of Series "C" Preferred  Shares of the Company
owned beneficially by all directors and officers of the Company individually and
as a group.

                      Table 2 - Series "C" Preferred Shares
                      -------------------------------------

                                       Number of Series "C"       Percent of
    Name and Address                    Preferred Shares(1)          Class
------------------------                ------------------        -----------

Dominic Orsatti(2)                           12,000                 36.58%
2001 E. Flamingo Road
Las Vegas, Nevada  89119

Nevada Entertainment
Partners, Ltd.(2)                            12,000                 36.58%
2001 E. Flamingo Road
Las Vegas, Nevada  89119

John Holt Smith                               8,000                 24.39%
530 Wilshire Boulevard, Fourth Floor
Santa Monica, California  90401

All Directors & Officers
as a group (7)                               20,000                  60.97%


(1)  Pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,


                                       25


<PAGE>

as amended, beneficial ownership of a security consists of sole or shared voting
power  (including  the power to vote or direct the voting) and/or sole or shared
investment power (including the power to dispose or direct the disposition) with
respect to a security  whether through a contract,  arrangement,  understanding,
relationship or otherwise.  Unless  otherwise  indicated,  each person indicated
above has sole power to vote, or dispose or direct the disposition of all shares
beneficially owned, subject to applicable community property laws.

(2)Includes Nevada Entertainment Partners, Ltd. and Dominic Orsatti,
the managing general partner thereof, who together constitute a
"group," as that term is defined in Section 13D of the Securities
Exchange Act of 1934, as amended.


                      Table 3 - Series "D" Preferred Shares
                      -------------------------------------

                               Number of Series "D"            Percent of
    Name and Address            Preferred Shares(1)               Class
------------------------       --------------------           -----------

Dominic Orsatti(2)                    98,000                      100%
2001 E. Flamingo Road
Las Vegas, Nevada  89119

Nevada Entertainment
Partners, Ltd.(2)                     98,000                      100%
2001 E. Flamingo Road
Las Vegas, Nevada  89119

All Directors & Officers
as a group (7)                        98,000                      100%

The  following  tabulates  holdings of 7%  Convertible  Preferred  Shares of the
Company  owned  beneficially  by all  directors  and  officers  of  the  Company
individually and as a group.

                    Table 4 - 7% Convertible Preferred Shares
                    -----------------------------------------

                                          Number of 7%
                                          Convertible              Percent
    Name and Address                  Preferred Shares(1)          of Class
------------------------              ------------------         -----------

All Directors & Officers
as a group (7)                                 0                      0%

(1)  Pursuant  to Rule  13d-3  under the  Securities  Exchange  Act of 1934,  as
     amended,  beneficial  ownership  of a security  consists  of sole or shared
     voting power (including the power to vote or direct the voting) and/or sole
     or shared  investment  power  (including the power to dispose or direct the
     disposition) with

                                       26


<PAGE>

     respect   to  a  security   whether   through  a   contract,   arrangement,
     understanding,  relationship or otherwise. Unless otherwise indicated, each
     person  indicated  above has sole  power to vote,  or dispose or direct the
     disposition  of  all  shares  beneficially  owned,  subject  to  applicable
     community property laws.

(2)  Includes  Nevada  Entertainment  Partners,  Ltd. and Dominic  Orsatti,  the
     managing  general partner  thereof,  who together  constitute a "group," as
     that term is defined in Section 13D of the Securities Exchange Act of 1934,
     as amended.

The following  tabulates  holdings of 10%  Convertible  Preferred  Shares of the
Company  owned  beneficially  by all  directors  and  officers  of  the  Company
individually and as a group.

                   Table 5 - 10% Convertible Preferred Shares
                   ------------------------------------------

                                      Number of 10%
                                       Convertible                Percent
    Name and Address                Preferred Shares(1)           of Class
------------------------            ------------------          -----------

All Directors & Officers
as a group (7)                             0                        0%

(1)  Pursuant  to Rule  13d-3  under the  Securities  Exchange  Act of 1934,  as
     amended,  beneficial  ownership  of a security  consists  of sole or shared
     voting power (including the power to vote or direct the voting) and/or sole
     or shared  investment  power  (including the power to dispose or direct the
     disposition)  with  respect  to a  security  whether  through  a  contract,
     arrangement,  understanding,  relationship or otherwise.  Unless  otherwise
     indicated,  each person  indicated above has sole power to vote, or dispose
     or direct the  disposition  of all shares  beneficially  owned,  subject to
     applicable community property laws.

                                       27



<PAGE>
                                     PART IV

Item 14.   Exhibits, Financial Statements, and Reports on Form 8-K
--------   -------------------------------------------------------

(a) Financial Statements
    --------------------

                                                          Reference
                                                          ---------

         Report of independent public accountants            F-1
         Balance sheets                                      F-2
         Statements of operations                            F-4
         Statements of stockholders' equity                  F-5
         Statements of cash flows                            F-6
         Notes to financial statements                       F-7

(b) Reports on form 8-K
    -------------------


     None


(c) Exhibits
    --------


         (10.1)      Orsatti employment contract
         (28)        Olympic Entertainment Group, Inc. 1996 Stock Option
                     Plan, incorporated by reference to form S-8 filed
                     July 29, 1996



                                       28



<PAGE>


         SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto duly  authorized  this 18th day of March,
1997:

Olympic Entertainment Group, Inc.


By:  /s/  Michael Marcovsky                               Date:  3/18/97
    ---------------------------                                  --------
   Michael Marcovsky, President

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed by the following  person on behalf of the  Registrant and in the
capacity and on the date indicated.

NAME & POSITION                                        DATE


   /s/ Dominic Orsatti                             March 18, 1997
------------------------------
Dominic Orsatti,
Chairman & Chief Executive Officer


  /s/  Michael Marcovsky                           March 18, 1997
------------------------------
Michael Marcovsky
President


  /s/  John Holt Smith                             March 18, 1997
-------------------------------
John Holt Smith
Corporate Secretary & Director


  /s/  Steve Henson                                March 18, 1997
-------------------------------
Steve Henson,
Treasurer & Chief Financial Officer


  /s/  H. C. Hernandez                             March 18, 1996
-------------------------------
H. C. Hernandez,
Executive Vice-president


  /s/  Kathleen Hitt                               March 18, 1996
-------------------------------
Kathleen Hitt
Vice president


  /s/  Jack Rhodes                                 March 18, 1996
-------------------------------
Jack Rhodes, Director


                                       29



<PAGE>
                          INDEPENDENT AUDITOR'S REPORT


Board of Directors and Shareholders
Olympic Entertainment Group, Inc.

We have audited the balance  sheet of Olympic  Entertainment  Group,  Inc. as of
December  31,  1996,  and the  related  statements  of  operations,  changes  in
stockholders'  equity,  and cash  flows for each of the two years in the  period
ended December 31, 1996. These financial  statements are the  responsibility  of
the Company's  management.  Our responsibility is to express an opinion on these
financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards  require that we plan and perform the audit to obtain reasonable
assurance   about  whether  the  financial   statements  are  free  of  material
misstatement.  An audit includes examining on a test basis,  evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.

In our opinion,  the financial  statements referred to above, present fairly, in
all material respects,  the financial position of Olympic  Entertainment  Group,
Inc. as of December 31, 1996, and the related statements of operations,  changes
in stockholders'  equity, and cash flows for each of the two years in the period
ended  December 31, 1996,  in  conformity  with  generally  accepted  accounting
principles.

The  accompanying  financial  statements  have been  prepared  assuming that the
Company  will  continue  as a  going  concern.  As  discussed  in Note 11 to the
financial statements,  the Company has suffered recurring losses from operations
in prior  years,  has made  significant  commitments  and relies  upon one major
customer which raise substantial doubts about its ability to continue as a going
concern.  Management's  plans in regard to these  matters are also  described in
Note 11. The  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.




                                    Winter, Scheifley & Associates, P.C.
                                    Certified Public Accountants

Englewood, Colorado
February 12, 1997


                                       F-1

<PAGE>

                       Olympic Entertainment Group, Inc.
                                 Balance Sheet
                            As of December 31, 1996

Assets
                                                              1996
Current Assets:
Cash and cash equivalents                                $   175,083
Accounts receivable - trade                                  320,000
Prepaid expenses                                              12,145
                                                         -----------
Total current assets                                         507,228

Property and equipment, at cost                              116,820
Less accumulated depreciation                                (14,849)
                                                         -----------
                                                             101,971
Other Assets:
  Film library                                               745,501
  Deposits and other assets                                   14,023
                                                         -----------

                                                             759,524
                                                         -----------

Total assets                                             $ 1,368,723
                                                         ===========





















    The accompanying notes are an integral part of the financial statements.



                                      F-2

<PAGE>

                       Olympic Entertainment Group, Inc.
                                 Balance Sheet
                            As of December 31, 1996
                                  (Continued)
 
Liabilities and Stockholders' Equity
                                                                     1996
Current Liabilities:
Note payable                                                     $   10,000
Current portion of long-term debt                                    22,164
Accounts payable - trade                                            139,548
Accrued expenses                                                     66,570
Amounts due stockholders and                                   
 and related parties                                                106,652
                                                                 ----------     
Total current liabilities                                           344,934

Long-term debt                                                       38,787

Commitments and contingencies

Redeemable preferred stock:
 Preferred stock, 10% cumulative convertible
  $.01 par value, 650,000 shares authorized,
  101,500  and 106,500 shares issued
  and outstanding in 1996 and 1995                             
  liquidating preference $1 per share                               203,000

Stockholders' equity:
 Preferred stock, $.01 par value, 5,000,000
  total shares authorized:
 Preferred stock, convertible, 40,000 shares
  authorized, 32,800 shares issued and
  outstanding, $10 per share liquidating
  preference (Series C)                                              65,600
 Preferred stock, convertible, 98,000 shares
  authorized, issued and outstanding, $3 per
  share liquidating preference (Series D)                           196,000
Common stock, $.01 par value, 20,000,000
 shares authorized, 2,938,681 and 1,978,500
 shares issued and outstanding                                       29,387
Paid in capital                                                   3,305,838
Accumulated deficit                                              (2,814,823)
                                                                -----------
                                                                    782,002
                                                                -----------
                                                               
Total liabilities and
  stockholders' equity                                          $ 1,368,723
                                                                ===========
  





    The accompanying notes are an integral part of the financial statements.



                                      F-3


<PAGE>
                       Olympic Entertainment Group, Inc.
                            Statements of Operations
                 For the Years Ended December 31, 1996 and 1995

                                                        1996            1995

Revenue                                             $ 2,518,253    $   358,392

Costs and expenses:
 General and administrative                           1,955,163        878,788
 General and administrative - related
  parties                                               185,000         25,000
                                                    -----------    -----------
                                                      2,140,163        903,788

Income (loss) from operations                           378,090       (545,396)

Other income and (expense):
 Investment income                                         --           16,411
 Interest expense                                       (23,234)       (50,016)
 Other                                                    1,000           --
                                                    -----------    -----------
                                                        (22,234)       (33,605)

Net income before income taxes                          355,856       (579,001)
Provision for income taxes                                 --             --
                                                    -----------    -----------
Net income (loss)                                   $   355,856    $  (579,001)
                                                    ===========    ===========


Per share information:
Primary
 Net income (loss) per share                        $      0.14    $     (0.30)
                                                    ===========    ===========
 Weighted average shares outstanding                  2,626,390      1,915,038
                                                    ===========    ===========

 Net income (loss) per share                        $      0.12    $      --
                                                    ===========    ===========
 Weighted average shares outstanding                  2,922,390      1,915,038
                                                    ===========    ===========


    The accompanying notes are an integral part of the financial statements.

                                      F-4

<PAGE>
<TABLE>
<CAPTION>

                                                     Olympic Entertainment Group, Inc.
                                                     Statement of Stockholders' Equity
                                          For the Years Ended December 31, 1996 and 1995

                                                                                            Additional       Common
                                     Common                    Preferred                    Paid-In          Stock      Accumulated
                                     Shares       Amount         Shares        Amount        Capital     Subscriptions    Deficit

<S>                                <C>         <C>               <C>        <C>            <C>           <C>           <C>         
Balance December 31, 1994          1,828,500   $    18,285       163,300    $   586,600    $ 1,560,353   $   300,000   $(2,591,678)

Issuance of subscribed shares        150,000         1,500       298,500       (300,000)

Net loss for the year                   --            --            --             --             --            --        (579,001)
                                 -----------   -----------   -----------    -----------    -----------   -----------   -----------
Balance December 31, 1995          1,978,500        19,785       163,300        586,600      1,858,853          --      (3,170,679)

Issuance of common
  shares for cash                    218,181         2,182          --             --          280,605          --            --
Exercise of common
  stock warrants                     320,500         3,205          --             --          637,795          --            --
Issuance of common
  shares for services                 91,500           915          --             --          182,085          --            --
Conversion of Series A
  preferred stock                    325,000         3,250       (32,500)      (325,000)       321,750          --            --
Conversion of redeemable
  preferred stock                      5,000            50         9,950
Compensation attributed
  to stock options                    14,800

Net income for the year                 --            --            --             --             --            --         355,856
                                 -----------   -----------   -----------    -----------    -----------   -----------   -----------
Balance December 31, 1996          2,938,681        29,387       130,800        261,600      3,305,838          --      (2,814,823)
                                 ===========   ===========   ===========    ===========    ===========   ===========   ===========




                             The accompanying notes are an integral part of the financial statements.



                                                                  F-5

</TABLE>



<PAGE>
<TABLE>
<CAPTION>
                             Olympic Entertainment Group, Inc.
                                  Statements of Cash Flows
                       For the Years Ended December 31, 1996 and 1995

                                                                1996                1995

<S>                                                          <C>                  <C>   
Operating activities:
Net income (loss)                                            $ 355,856           $(579,001)
Adjustments to reconcile net income
  (loss) to net cash:
Depreciation                                                     7,300               4,344
Amortization of film costs                                       9,473              21,992
Common stock issued for services                               197,800                --
Film rights charged off                                        198,218                --
Debt issued in lawsuit settlement                               73,880
Sale of trading securities                                        --                66,477
(Increase) in accounts receivable                             (320,000)
(Increase) decrease in prepaid expenses                         26,114             (46,785)
(Increase) in other assets                                        (531)             23,277
Increase (decrease) in accrued expenses                        (21,467)             68,338
Increase (decrease) in deferred revenue                       (607,008)            607,008
Increase (decrease) in accounts payable                       (103,702)            196,979
Increase in accounts payable - related party                   102,667             196,979
                                                             ---------           ---------
Total adjustments                                             (437,256)            941,630
                                                             ---------           ---------
Net cash provided by (used in) operating activities            (81,400)            362,629

Cash flows from investing activities:
(Increase) in film library                                    (592,829)           (382,355)
Purchase of property and equipment                             (94,874)             (5,774)
                                                             ---------           ---------
Net cash provided by (used in)
 investing activities                                         (687,703)           (388,129)

Cash flows from financing activities:
Decrease in deferred offering costs                               --                26,519
Common stock sold for cash                                     923,787                --
Repayment of stockholder loans                                 (75,313)               --
Repayment of notes payable                                     (10,000)
Repayment of long-term debt                                    (12,929)
                                                             ---------           ---------
Net cash provided by (used in)
 financing activities                                          825,545              26,519

Net increase in cash and cash equivalents                       56,442               1,019
Beginning cash                                                 118,641             117,622
                                                             ---------           ---------
Ending cash                                                  $ 175,083           $ 118,641
                                                             =========           =========
Supplemental cash flow information:
Cash paid for:  Interest                                     $    --             $   3,904
                Income taxes                                 $    --             $    --




               The accompanying notes are an integral part of the financial statements. 



                                               F-6
</TABLE>


<PAGE>

                        Olympic Entertainment Group, Inc.
                          Notes to Financial Statements
                                December 31, 1996

Note 1. ORGANIZATION

The Company was incorporated on May 21, 1987, in the State of Nevada,  and is in
the business of acquiring,  licensing and distributing  non-violent educational,
informational  and special  interest  television  programming for children.  The
Company does business as the  "Children's  Cable  Network"  ("CCNII"),  which is
comprised of individuals or entities, known as Broadcast affiliates, who license
the Company's programs to air in the various cable markets throughout the United
States.  The Company commenced the sale of broadcast licenses to such affiliates
during 1995. Prior to 1995 the Company had been in the development stage.

     SIGNIFICANT ACCOUNTING POLICIES

Estimates:
The preparation of the Company's  financial  statements  requires  management to
make estimates and assumptions that effect the amounts reported in the financial
statements  and  accompanying  notes.  Actual  results  could  differ from these
estimates.

Fixed assets:
The Company  depreciates its office equipment utilizing the straight line method
over a period of five years.

Earnings per share:
The  earnings  per share is computed by dividing  the net income  (loss) for the
period by the  weighted  average  number of common  shares  outstanding  for the
period.  Common stock  equivalents  are excluded from the  computation  if their
effect would be anti-dilutive.

Film library:
The Company amortizes the costs of its film library over the estimated  economic
life of the film using the film forecast method in accordance with SFAS #53. The
amortization  periods  begin at the time the films are  available for showing by
the Company's  Broadcast  Affiliates.  When the Company  concludes that any such
costs will not benefit  future  periods said costs are charged to operations for
the period.  Amortization  charged to operations during 1996 and 1995 aggregated
$9,473 and $21,992, respectively (See Note 6).


                                       F-7


<PAGE>

Revenue recognition:
The Company  recognizes  revenue from network license  agreements not related to
specific  programming over the term of the agreements.  Revenue from the sale of
licenses for television  program rights is recorded in accordance with SFAS #53,
which provides for recognition of revenue at the beginning of the license period
when specified conditions have been met.

Cash and cash equivalents
Cash  and  cash  equivalents  consist  of cash  and  other  highly  liquid  debt
instruments with a maturity of less than three months.

Advertising
Advertising expenses are charged to expense upon first showing.  Amounts charged
to expense  were  $12,017 and $6,036 for the years ended  December  31, 1996 and
1995, respectively

Concentration of Credit Risk
Financial instruments that potentially subject the Company to a concentration of
credit risk consist principally of cash and accounts  receivable,  trade. During
the year the Company did not
maintain cash deposits at financial institutions in excess of the $100,000 limit
covered by the Federal Deposit  Insurance  Corporation.  The Company has several
major  customers,  (see  Note  10) the  loss of any one of  which  could  have a
material negative impact upon the Company.

Stock-based Compensation
The Company  adopted  Statement  of Financial  Accounting  Standard No. 123 (FAS
123), Accounting for Stock-Based Compensation beginning with the Company's first
quarter of 1996.  Upon adoption of FAS 123, the Company  applied the measurement
techniques provided therein to determine compensation expense.

Recent Pronouncements
In 1996 Financial Accounting Standards No. 125 (FAS 125) Accounting for Transfer
and Servicing of Financial Assets and Extinguishments of Liabilities was issued.
FAS 125 is  effective  for  transfers  and  servicing  of  financial  assets and
extinguishments  of liabilities  occurring  after December 31, 1996. The Company
will  adopt  FAS 125 in  1997.  Adoption  of FAS 125 is not  expected  to have a
material effect on the Company's  consolidated  financial  position or operating
results.







                                       F-8


<PAGE>

Note 2. STOCKHOLDERS' EQUITY

During the periods  covered by these  financial  statements  the Company  issued
securities in reliance upon an exemption from  registration  with the Securities
and Exchange  commission.  Although the Company  believes that the sales did not
involve  a public  offering  and that it did  comply  with the  exemptions  from
registration,  it could be liable for recession of said sales if such  exemption
was found not to apply. The Company has not received a request for rescission of
shares nor does it  believe  that it is  probable  that its  shareholders  would
pursue rescission nor prevail if such action were undertaken.

The Company issued 4,000,000 common stock purchase  warrants to its shareholders
during  August 1994.  The warrants were  exercisable  into one common share at a
purchase  price of $2 per share for a period  of 18 months  from  issue and were
redeemable by the Company at $.001 per warrant.  During 1996, the Company issued
320,500 shares of common stock and received gross proceeds of $641,000  pursuant
to warrants exercised by its shareholders.
The remaining warrants have expired.

During  1995 the  Company  issued  of  150,000  shares of its  common  stock for
services  which were rendered  during 1994.  The value  ascribed to the services
($300,000)  was  charged  to expense in 1994 and was  included  in common  stock
subscriptions at December 31, 1994.

During October,  1994 the Company issued 32,500 shares of its 7% preferred stock
in settlement of a note payable for $325,000. These shares were convertible into
325,000  shares of the Company's  common stock at the option of the holder.  The
holder exercised his conversion rights during May 1996.

During  May 1996,  the  Company  issued  91,500 to a  shareholder  for  services
provided to the  Company.  The shares  were  valued at a market  price of $2 per
share.  Also,  during May 1996,  the Company sold  218,181  shares of its common
stock pursuant to Regulation S of the US Securities and Exchange  Commission for
cash aggregating  $282,787,  net of expenses of $15,020.  Also, during September
1996, a holder of the  Company's  redeemable  preferred  stock  converted  5,000
shares of  preferred  stock into 5,000  shares of common  stock at a  conversion
price of $2 per share.

                                       F-9


<PAGE>


During  May 1996,  in  connection  with a lawsuit  settlement  (see Note 9), the
Company  issued  common  stock  purchase  warrants  for  329,500  shares  to  an
individual.  The warrants are  exercisable  for a period of eighteen months from
the date of issue at a price of $2.00 per share.  The Company  has not  recorded
any expense  related to the warrants as the estimated fair value of the warrants
is less than the exercise price at the grant date.

During July 1996,  the Company  adopted the 1996 Employee  Stock Option Plan for
the benefit of certain  employees,  officers,  directors  and  consultants.  The
Company  also  filed a  Registration  Statement  on Form S-8 to  register  these
shares. The number of common shares reserved under the plan is 800,000. The plan
provides that the option price on the grant date shall not be less than the fair
market value on such date. During July 1996 the Company
issued  360,000  options  exercisable  at $.1.40 per share  under the plan which
expire after ten years  unless  exercised.  During  December  1996,  the Company
granted additional options under the plan for 370,000 shares exercisable at $.60
for a ten year period.

Following is a summary of the transactions in the plan:

                                          Range of     Weighted
                             Shares       Exercise     Average
                                           Prices       Price
Balance December 31, 1995       -
Granted                      730,000   $.60 - $1.40     $.99
Canceled                        -
Exercised                       -  
                             -------
Balance December 31, 1996    730,000   $.60 - $1.40     $.99

Options available at
 December 31, 1996            70,000

As of the  date  of the  financial  statements  none  of the  options  had  been
exercised.

The weighted  average fair value at the date of grant for options granted during
1996 was $1.00 per option. The Company recorded $14,800 of compensation  expense
for the year ended December 31, 1996 with respect to stock options granted.  The
fair  value  of the  options  at the  date of  grant  was  estimated  using  the
Black-Scholes model with assumptions as follows:

Month of grant                   July             December
  Market value                  $1.75               $.75
  Expected life                    10                 10
  Interest rate                  6.96%              6.29%
  Volatility                    57.30%             76.34%
  Dividend yield                 0.00%              0.00%


                                      F-10


<PAGE>

Note 3. INCOME TAXES

Deferred income taxes may arise from temporary differences resulting from income
and  expense  items  reported  for  financial  accounting  and tax  purposes  in
different  periods.  Deferred  taxes are  classified as current or  non-current,
depending on the  classification of assets and liabilities to which they relate.
Deferred  taxes arising from  temporary  differences  that are not related to an
asset or liability  are  classified as current or  non-current  depending on the
periods in which the temporary differences are expected to reverse.

The  Company  currently  has  net  operating  loss   carryforwards   aggregating
approximately  $772,000 which expire beginning in 2002. The principal difference
between the Company's  book  operating  losses and income tax  operating  losses
results from the issuance of and  subscriptions  for common stock and  preferred
stock during 1994 and 1996 for services.  The effects of these  differences  are
expected to be  permanent  in nature,  therefore  no deferred tax asset had been
recorded related thereto.

The Company did not provide Federal income taxes for the year ended December 31,
1995 due to an operating  loss.  Taxes at the federal  statutory rate of 34% for
the year ended  December 31, 1996 amounted to $121,000,  however  utilization of
the  Company's  net operating  loss  carryforward  has reduced the provision for
income taxes as reported on the accompanying statement of operations to $ 0.

The Company is unable to predict  future  taxable income that would enable it to
utilize  the  deferred  tax  asset  arising  from  the  future  value of the net
operating  loss and therefore the deferred tax asset of  approximately  $262,000
related thereto is fully reserved.  The Company realized  approximately $121,000
of deferred tax assets applicable to the tax loss carryforward used in 1996.

Note 4. RELATED PARTY TRANSACTIONS

During  the years  ended  December  31,  1994 and  1993,  certain  officers  and
shareholders made advances to the Company for working capital  purposes.  During
1996 the Company repaid  $75,313,  the balance payable by the Company was $3,985
at December 31, 1996.



                                      F-11


<PAGE>

Also included in amounts due to  stockholders  at December 31, 1996 are balances
due to  entities  controlled  by two of the  Company's  directors  who are  also
stockholders.  The Company  purchased program rights from one of the entities of
$166,511  during the year ended December 31, 1996 and had a year end balance due
the entity of  $75,625.  The Company  received  legal  services of $185,000  and
$25,000 for the years ended December 31, 1996 and 1995, respectively provided by
firms  associated  with one of its directors and had a year end balance due such
firms of $27,042.

Note 5. NOTES PAYABLE AND LONG-TERM DEBT

Long-term  debt  consists of an  obligation  arising  from the  settlement  of a
lawsuit (see Note 9). Monthly payments of $2,000 per month,  including  interest
imputed at 8% per annum are due for a forty month period beginning June 1, 1996.
Principal  payments  due in the years ended  December  31, 1997 through 1999 are
$22,164, $21,084 and $17,703, respectively.

Note payable consists of a short term loan of $10,000 made in March 1993 from an
individual  pursuant  to a  debenture  bearing  interest  at 10% per  annum  and
originally  due on March 30, 1994.  The holder of the debenture has the right to
convert the debenture  into common stock of the Company at the rate of one share
of common stock for each one dollar due on the  debenture.  During March,  1994,
the holder of the  debenture  agreed to extend the due date on the  debenture to
March 30, 1995.  The note has not been  extended and is  considered to be due on
demand by the holder.

Note 6. FILM LIBRARY

At December 31, 1996, the Company's film library consisted of the following:

   License costs                        $ 694,625
   Mastering costs                         61,134
                                        ---------
                                          755,759
   Less accumulated amortization          (10,258)
                                        ---------
                                        $ 745,501

During  1996 the Company  incurred  costs in  connection  with the rights to air
certain programming, including film mastering costs, through the medium of cable
television. The costs incurred and amortization are as follows:

   Costs incurred                       $ 592,829
   Amortization                         $   9,473

                                      F-12


<PAGE>

Additionally,   during  1996,  the  Company  charged  off  to  expense  the  net
unamortized cost of programming, aggregating $198,218, acquired in prior periods
that it no longer intends to distribute.

Note 7. MARKETABLE SECURITIES

During the year ended  December 31, 1995 the Company  received net proceeds from
the sale of marketable  securities of $80,862 and realized a gain on the sale of
$15,862.

Note 8. COMMITIENTS AND CONTINGENCIES

During  July,  1996,  the Company  entered  into a lease for office space in Las
Vegas,  Nevada for a sixty  month  period  ending  August 31,  2001 at a monthly
rental of $5,406 per year,  increasing by approximately 3.5% per year throughout
the lease. The Company also leases production facilities in Burbank,  California
on a month to month  basis.  Rent  expense was $92,045 and $69,404 for the years
ended December 31, 1996 and 1995.

On January 15, 1997 the Company  entered into a five year  employment  agreement
with its  chief  executive  officer  whereby  the  officer  is to  receive  base
compensation  of $480,000 per year and a bonus of $10,000 for each new affiliate
territory added to the Company's cable  television  network.  The agreement also
grants the executive  options to purchase  800,000  shares of common stock at an
exercise  price of 80% of the fair  value of the  stock at the grant  date.  The
options vest at a rate of 20% per year during the contract  term.  The agreement
also  provides  for  termination  payments to the  executive  of all accrued but
unpaid  salary and bonus,  the rights to vested stock options and a cash payment
of $5,000,000  if  termination  as (defined in the  contract)  occurs during the
first contract year. The cash payment after the first contract year is an amount
equal to twice the remaining  base salary that would be due during the remaining
contract term.

Note 9. LITIGATION

John Herklotz v. Olympic Entertainment Group, -Inc., et.  Al. Los Angeles
Superior Court Case No. BC 127498

During May, 1995 the individual  holding the preferred stock described in Note 2
filed suit against the Company and its officers seeking recovery of his $325,000
investment plus interest of $32,000 and additional damages of at least $682,000.

                                      F-13


<PAGE>

The Company  settled this claim in 1996 whereby the Company  agreed to make cash
payments  to  Herklotz  aggregating  $125,000  and grant  Herklotz  an option to
purchase  329,500  shares of its common stock at an exercise  price of $2.00 per
share. Herklotz agreed to convert his 32,500 shares of 7% preferred stock issued
to him by the Company into 325,000 shares of the Company's common stock.

Atlas Enterprises, Inc. v. Olympic Entertainment Group, Inc., et al., Los
Angeles Superior Court Case No. SC 039688

During December,  1995 the plaintiff filed an action against the Company and its
officers  seeking  damages  of the  balance  of the  purchase  price of  certain
programming  licensed  to the  Company of  $100,000,  an order  terminating  the
license for the programming, for punitive damages and costs related to the suit.
The Company has included  the $100,000 in accounts  payable at December 31, 1995
and is vigorously  defending  the suit.  The court has enjoined the Company from
distributing the programming.  The programming was included in programming costs
at  December  31,  1995 at  $195,000  which  represented  the cash paid plus the
$100,000 described above. The matter was settled during 1996 whereby the Company
returned  the  licensed   programming  and  charged  the  programming  costs  to
operations.

Nationwide Media Investments, Inc. V. Olympic Entertainment Group, Inc. et. al.
Orange County Superior court case No. 760072

During February,  1996 the plaintiff filed an action against the Company and its
officers for  rescission of the  Company's  license to the plaintiff for certain
programming. During February, 1996 the Company terminated the plaintiffs license
in certain  territories  for failure to pay the license  fees.  The plaintiff is
seeking  return of $70,000 and  compensatory  damages and  exemplary  damages in
excess of $500,000. This matter was submitted to binding arbitration during 1996
as a result of which both parties agreed to dismissal without prejudice.



                                      F-14



<PAGE>


Note 10. INFORMATION ABOUT MAJOR CUSTOMERS

The  Company,  whose  customers  arrange for  programming  to air on local cable
systems in their respective  licensed  territories  under leased access rules of
the  Federal  Communications  Commission,  made  sales in excess of 10% of total
revenues for the years ended December 31, 1996 and 1995 as follows:

 Customer                           Sales/%            Receivable at 12/31

  1996:
  Carousel Media Marketing       $1,550,000 62%             $320,000
  Capital Funding                $  269,840 11%                 -

  1995:
  Worldwide Marketing             $  211,584 59%                -


Note 11. BASIS OF PRESENTATION

The  accompanying  financial  statements have been prepared on a "going concern"
basis  which  contemplates  the  realization  of assets and the  liquidation  of
liabilities in the ordinary course of business.

The Company has incurred  operating  losses during the years ended  December 31,
1995 and 1994 aggregating $579,001 and $2,176,549, respectively. The Company had
net income for the year ended  December 31, 1996 of $355,856,  however there can
be no  assurance  that  profitable  operations  will  continue  due to  a.)  the
Company's reliance on one major customer,  whose ability to generate significant
revenues from the use of the Company's  programming  has not been  demonstrated,
and b.) the anticipated  effects of the employment  contract described in Note 8
upon the Company's income from operations and cash flows.

Profitable  operations are dependent  upon,  among other factors,  the Company's
ability to obtain equity or debt financing and the Company's ability to finance,
produce and/or acquire and distribute its educational films. Management plans to
continue to sell additional  affiliate  licenses and to renew expiring  licenses
and to seek additional equity financing.




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