SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-KSB

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

                   For the fiscal year ended December 31, 1998
                                             ------------------

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

                           Commission file #: 33-87714

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

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

             2550 E. Desert Inn Road, Suite 338, Las Vegas, NV 89121
             -------------------------------------------------------
              (Address of principal executive offices) (Zip Code)

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

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

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

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

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

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

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

At December 31, 1998 there were  2,169,785  shares of common stock  outstanding.
The  aggregate  market value of the common stock held by  non-affiliates  of the
registrant  (i.e.,  excluding shares held by executive  officers,  directors and
control persons as defined in rule 405).

Documents incorporated by reference:  None.

<PAGE>

                                     PART I

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

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

Olympic  Entertainment  Group, Inc. (the "Company") is a multimedia  educational
company and was incorporated on May 21, 1987 in the State of Nevada. The Company
was originally  formed to finance,  produce  co-produce  and  distribute  motion
pictures and television  shows and pursued various  opportunities  through 1993,
when the Company's  management  decided to focus upon the development of a cable
television  network for the  distribution  of children's  nonviolent  television
programming.  From 1993 through 1995 the Company  developed  this concept and in
1995,  launched the Children's Cable Network  ("CCN").  To date, the Company has
had success in several markets but has experienced marginal or poor results from
the efforts of licensees and has  determined it to be in the Company's  interest
to seek to recapitalize the Company and to seek other venues of distribution.

(b) Narrative Description of Business
    ---------------------------------

The Company has created a  children's  educational  division  called  Children's
Cable  Network  ("CCN" or the  "Network").  Prior to January  1998,  the Company
acquired,  purchased,  and licensed  educational  programming for the Children's
Cable Network; specializing in nonviolent, educational,  informative and special
interest  preschool  programming,   children's  classics  programs  and  G-rated
children's  motion pictures.  The Company's  present lack of any revenue and any
cash reserves has resulted in cessation of these activities.

All  reference  to the  Company  in the  following  discussion  of the  business
activities of the Company includes Children's Cable Network.

Children's Cable Network

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

Federal Legislation

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

Additionally,  the Cable Act of 1992  mandated that every cable system with more
than  thirty-six  channels  and less than  fifty-five  activated  channels  must
designate 10 percent of their  capacity to leased  access.  Systems with greater
than 55 activated channels must set aside 15 percent of their capacity to leased
access. In addition, the Federal Communications Act of 1984 provides individuals
and groups the opportunity to use the public,  educational and government access
channels  offered by the cable  companies.  Systems with fewer than 36 activated
channels  are not  required  to make lease  channel  capacity  available  unless
otherwise  required to do so by terms of the franchise in effect on December 29,
1994.  The Cable  Television Act of 1992 renewed  government  supervision of the
franchised cable  television  industry which was deregulated by the Cable Act of
1984.  Both Acts are  amendments to the  Communications  Act of 1934.  The Cable
Television  Act of 1992 ("1992 Act")  authorized  the FCC to implement  rate and

<PAGE>


service  regulation  for certain basic cable  television  services and to create
regulations that will increase  competition to franchised  cable  operators.  On
April 1, 1993,  the FCC  announced  several  features of the rules it planned to
implement in connection with the 1992 Act. Most of the announced rules concerned
rate  regulation for franchised  services as well as a temporary rate freeze and
rollback.  In order to promote competition with franchised cable operators,  the
FCC announced  program access  regulations as part of the Act. These  provisions
essentially allow competitive cable operators to purchase television programming
at fair prices.  Management believes that these provisions of the Act may result
in lower  operating  costs for the Company,  however,  there can be no guarantee
that revisions in said regulation will not materially affect the Company.

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

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

Cable Affiliates

Prior to  January  1,  1998,  the  Company  licensed  its  programming  to Cable
Affiliates  who would  cablecast  this  programming on their local cable systems
through the purchase of time on a leased  access  channel.  The Company  obtains
Cable Affiliates  through business  opportunity shows and seminars,  direct mail
and business  opportunity  advertisements  in national  publications  and on the
internet.  The Company  licensed  only one Cable  Affiliate in each cable system
market.

Employees

The Company  currently  has no employees in the  corporate  office in Las Vegas,
Nevada,  having  reduced its staff from  eighteen  employees  in order to reduce
costs. The Company is being run by Directors.

Competition

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

Programming

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

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

<PAGE>

Library

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

                            CCN's Library Of Programming

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

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

         Dusty's Treehouse
         260 1/2 hour episodes
         Dusty's  Treehouse is a children's show designed for ages 2-6. The show
         uses both adult and children  mixed with  puppets.  Winner of eight (8)
         Emmys and the coveted George Foster Peabody award, Dusty's Treehouse is
         very entertaining,  while at the same time teaches children how to cope
         when someone was injured, what love is, to look both ways when crossing
         the street,  never let  strangers  into the house and other  social and
         practical skills for dealing with today's world. Owned by the Company.

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


<PAGE>

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

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

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

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

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

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

         Metric Series
         38  15 minute episodes
         (approximately 600 minutes of animation)
         A series of animation  programs designed to teach children,  as well as
         adults, the metric system of

<PAGE>
         weights  and  measures.  The Metric  Series  features  a mild  mannered
         character named Newton Joule who, when conversion problems arise, turns
         into the superhero  Metric Man to teach children  about liters,  meters
         and grams.  They learn the metric  system is used  worldwide,  and that
         once  understood,  it is easier to use then gallons,  yards and pounds.
         The series is fun, entertaining and most of all, highly educational.

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

         Kerchoo - What Really Happens When You Catch A Cold
         1  10 minute film short
         In this  imaginative  film, Scott McGrout learns about the common cold.
         Experiencing cold spells and sneeze quakes,  Scott and the viewer watch
         the body fight off Elvirus and her  vacation  companion,  Common  Cold.
         Owned by the Company.

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


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

The Company  presently  leases no space and during the report period  terminated
its leases in Burbank, California, and subsequently in Las Vegas, Nevada.


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

The Company is a party to the following litigation:

Capital Funding & Financial Group, Inc., et al, v. Olympic  Entertainment Group,
Inc.,  et al,  Civil Action No. 96- CV-1930,  in the  District  Court,  City and
County of Denver,  Colorado:  Although the Company is one of the  Plaintiffs  in
this case, in which it sought to recover  $100,000 from the  Defendants,  on the
Defendant's   counterclaim,   a   default   judgement,   due  to   extraordinary
circumstances,  was entered  against the Plaintiff for  $1,000,000.  The Company
expects  that the default  judgement  will be set aside and that it will recover
the $100,000 sought in its complaint.

Lee Van Dyke, et al, v. Children's Cable Network,  Olympic  Entertainment Group,
Inc., et al, Case No. BC 189116 in the Superior Court of the State of California
for the County of Los Angeles:  This case was filed as a class action but,  with
several  months having  passed,  it has never been  certified as such. It is the
Company's  position  that this case is  without  merit  and will  ultimately  be
dismissed or the Company will prevail on the merits. However, Defendants Pacific
Health  Management Inc. d/b/a Carousel Media Marketing and James Alex have filed
a cross-complaint for indemnity, apportionment of fault, and contribution, which
the Company also believes has no merit.

Desert Inn Office Center II Limited Partnership, et al, v. Olympic Entertainment
Group,  Inc.,  et al, Case No.  A394431 in the District  Court of Clark  County,
Nevada:  This  is a  civil  action  brought  by the  Company's  former  landlord
resulting from breach of an unexpired lease. While the landlord sought extensive


<PAGE>


damages for major tenant  improvements,  back rent of some  $88,000,  and future
rent for the balance of the term of the lease, the premises  previously occupied
by the Company have been relet to a new tenant,  so that,  under the rule that a
landlord   must  mitigate  his  damages,   the  Company's   liability  has  been
substantially reduced.  Accordingly,  the Company expects that this case will be
settled.

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

No  matters  were  submitted  to a vote of  security  holders  during the fourth
quarter ended December 31, 1998.

                                     PART II

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

(a)      Market Information
         ------------------
         (1)      (i)      None
                  (ii)     Not applicable
                  (iii)    Fiscal Year End               Fiscal Year End
                          December 31, 1997              December 31, 1998
                          High Bid   Low Bid         High Bid        Low Bid
                          ------------------         -----------------------
         First Quarter     $1.12     $0.56            $ .05            $ .01
         Second Quarter    $1.12     $0.53            $ .05            $ .01
         Third Quarter     $0.81     $0.40            $ .05            $ .01
         Fourth Quarter    $1.12     $0.43            $ .05            $ .01

                           (iv)             Not applicable
                           (v)              Not applicable
         (2)      (a)      Not applicable

(b)      Holders
         -------

         (1)      Title of Class            Number of Record Holders
                  --------------            ------------------------
                  Common Stock,             Approximately 138
                  $0.01 Par Value

         (2)      Not applicable

(c)      Dividends
         ---------

         (1)     There have never been any dividends declared by the Registrant.
         (2)     Registrant's losses do not currently indicate the ability to
                 pay cash dividends.


Item 6. Selected Financial Data

<TABLE>
<CAPTION>

                                1998           1997            1996              1995              1994
                              ---------     ----------       ----------        ---------        ----------
Income statement data:

<S>                           <C>           <C>              <C>               <C>              <C>    
Revenues                      $  5,950      $1,736,491       $2,518,253        $ 358,932        $    --

Income (loss)
    from Operations           (681,380)       (402,646)         378,090         (545,396)       (2,170,003)

Net interest expense            (1,622)        (28,680)         (23,234)         (33,605)          (36,546)



<PAGE>

Income (loss)
    before income taxes                (817,742)          (431,326)           355,856          (579,001)        (2,176,549)

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

Net income (loss)                   $  (817,742)       $  (431,326)       $   355,856       $  (579,001)       $(2,176,549)
                                    ===========        ===========        ===========       ===========        ===========


                                         1998              1997              1996             1995                1994
                                    -----------        -----------        -----------       -----------        -----------
Per share data:
Primary:
Net income (loss)                   $      (.31)       $      (.16)       $       .14       $      (.30)       $     (1.92)
                                    ===========        ===========        ===========       ===========        ===========
Weighted average shares
    outstanding                       2,626,390          2,626,390          2,626,390         1,915,038          1,132,125

Fully diluted:
Net income (loss)                   $      (.31)       $      (.16)       $       .12       $      (.30)       $     (1.92)
                                    ===========        ===========        ===========       ===========        ===========
Weighted average shares
    outstanding                       2,626,390          2,626,390          2,922,390         1,915,038          1,132,125

Balance sheet data:
Working capital
    (deficiency)                    $(1,096,649)       $  (404,694)       $   162,296       $  (872,167)       $    10,305
Total assets                            836,141          1,093,232          1,368,723           545,152            260,354

Long-term debt                             --               16,623               --                --                 --
Redeemable preferred
    stock                               203,000            203,000            203,000           213,000            213,000
Total stockholders' equity
    (deficiency)                       (266,817)           350,676            782,004          (492,441)            86,560


</TABLE>

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

The Company has continued to experience severe cash flow problems  occasioned by
(I) no revenue from license renewal fees or new Broadcast  Affiliates  licenses;
(ii) the failure of the Optimist Group  licensing  program  initiated in January
1998,  and  terminated by mutual consent on April 1, 1998; and (iii) the failure
of the TSR program to produce  significant  new revenue from its cause marketing
initiatives.  Since January 1998, the Company has sought to reduce  overhead and
expenditures by (I) eliminating all paid personnel; (ii) ceasing to pay salaries
to corporate officers;  and (iii) terminating its leasehold office space at 2755
East Desert Inn Road, Suite 200, Las Vegas, Nevada 89121.

In order to generate  revenue,  the  Company has  retained a firm to license its
library  of  children's  programming  to  non-competitive  venues of  broadcast.
Additionally,  the Company is seeking a strategic  financial  partner to provide
the necessary capital so that CCN can be delivered to homes via direct broadcast
satellite  (Primestar  and Direct TV are  examples  of DBS).  Revenue  from this
method of  delivery  can be  substantial  and would be  derived  from  potential
national advertisers or fees based on the number of subscribers serviced. Should
the Company be unsuccessful in the next 120 days in either of the foregoing,  it
would  seek to  reorganize  its debt and to sell its  programming  in an orderly
proceeding under the protection of the Bankruptcy Court.



<PAGE>

Results of Operations

The following  table sets forth,  for the fiscal years ended  December 31, 1998,
1997, and 1996 certain items from the Company's Statement of Operations.
<TABLE>
<CAPTION>

                                            1998                 1997                 1996
                                     ------------------   ------------------    -----------------

<S>                                  <C>                  <C>                   <C>              
Revenues                             $            5,950   $        1,736,491    $       2,518,253
Expenses                                        687,330            2,139,137            2,140,163

Income(loss) from Operations         (          681,380)  (          402,646)             378,090
Other income (expense)               (          136,362)  (           28,680)   (          22,234)

Income before taxes                  (          817,742)  (          431,326)             355,856
Provision for income taxes                           --                   --                   --
Net income (loss)                    $(         817,742)  $(         431,326)   $         355,856
                                     ==================    =================    =================

Earnings per Share
Primary:
    Weighted Average
    Common Shares Outstanding                 2,626,390            2,626,390            2,626,390
                                     ==================   ==================    =================

    Income (Loss) per Common
    Share                            $(             .31)  $(             .16)   $             .14
                                     ==================   ==================    =================
Fully Diluted:
Earnings per share
    Weighted Average
    Common Shares Outstanding                 2,626,390            2,626,390            2,626,390
                                     ==================   ==================    =================

    Income (Loss) per Common
    Share                            $(             .31)  $(             .16)   $             .12
                                     ==================   ==================    =================
</TABLE>

Comparison of 1998 to 1997

The Company's  activities  during 1998 consisted of closing down  operations and
trying to sell the Company.  Cable  affiliates  had not renewed their  licensing
rights and new cable  affiliates  had not been sold.  The  selling,  general and
administrative expenses were down since the operations ceased.

Comparison of 1997 to 1996

The  company's  activities  during 1997 and 1996  consisted  of  developing  the
Company's products,  licensing cable affiliates and negotiating  acquisitions of
rights to various children's television programs.  Revenues were down thirty-one
percent (31%) in 1997 versus 1996 due to the fact that cable  affiliates did not
renew their license  agreements  when all specified  conditions  have been made.
During 1997 and 1996,  the bulk of the  Company's  sales were  attributed to the
sale of network license  agreements.  The selling and general and administrative
expenses were almost the same from $2,140,163 in 1996 to $2,139,137 in 1997.

Capital Resources & Sources of Liquidity

During  1998,  the  Company's  working  capital  decreased  to a  deficiency  of
$1,096,649  compared to  $(404,694)  at December 31, 1997,  primarily due to the
operations ceasing.

During 1997, the Company's working capital decreased to a deficiency of $404,694
compared to  $162,296  at  December  31,  1996.  This was  primarily  due to the
significant decrease in affiliate sales in the fourth quarter.


<PAGE>


The Company's primary cash requirements were for operating  expenses,  primarily
labor and general and administrative expenses, and for the acquisition of rights
to additional  television  series. The Company's primary source of cash was from
revenues  which  accounted for  approximately  93% of all cash brought in to the
Company. The Company did obtain $125,000 in financing during the year.

Related Party Transactions

All deferred compensation to Officers and Directors was forgiven during 1997.

Major customers

The  Company  made  sales in  excess of 10% of total  revenues  in 1997 to major
customers as follows:

Customer:                                        Sales/% of total
--------------------------------------------------------------------------------
Carousel Media Marketing                    $1,750,000        99%

Employment Contract

During  1998,  Mr.  Orsatti and the Company  mutually  agreed to  terminate  all
deferred compensation  features and a five -year compensation  agreement entered
into on January 15, 1997.  Mr.  Orsatti  retains  executive  options to purchase
400,000  shares of common stock at an exercise price of 80% of the fair value of
the stock at the grant date.

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

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

                                                                Reference
                                                                ---------
         Report of independent public accountants                  F-1
         Balance sheets                                            F-2
         Statements of operations                                  F-4
         Statements of stockholders' equity                        F-5
         Statements of cash flows                                  F-7
         Notes to financial statements                             F-9

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

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

                                    PART III

Item 10.  Directors and Executive Officers of the Registrant
------------------------------------------------------------

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



<PAGE>

Name                      Age            Position
----                      ---            --------

Dominic Orsatti           67             Chief Executive Officer and Chairman of
                                         the Board of Directors
John Holt Smith           58             Secretary and Director
Bonnie Houldsworth        45             Treasurer and Chief Financial Officer
---------------

Officers and Directors

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

<PAGE>

             BUSINESS EXPERIENCE OF DIRECTORS AND EXECUTIVE OFFICERS

Dominic Orsatti, Chairman of the Board, Chief Executive Officer and Founder, was
formerly  President  of  Orsatti  Productions,   Inc.,  a  leading  producer  of
educational  films.  Among Orsatti  Productions  credits were an NBC  Children's
Television Special,  "All About Me", a musical television  special,  "Get Down",
hosted by Milton  Berle,  more than 100  educational  films and two  educational
children's  record  albums.  Mr.  Orsatti is the recipient of more than 18 major
industry  awards,  including  four gold and three silver medal awards by the New
York  International  Film  Festival  and two Golden Babe  awards  awarded at the
Chicagoland Film Festival.  Mr. Orsatti  co-wrote and was executive  producer of
the first place Telly  award-winning  "Coming To Ametrica" in 1993. He is also a
member of the Writer's Guild of America.

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

Bonnie  Houldsworth,  Treasurer and Chief Executive Officer,  started her public
accounting  career at Laventhol & Horwath.  Ms.  Houldsworth has been a founding
principal in a Las Vegas public accounting firm since 1987, Houldsworth, Russo &
Company,  which is a full service  accounting  firm in which she  specializes in
accounting and auditing for highly regulated industries such as banks,  mortgage
companies and gaming companies.  Ms. Houldsworth  obtained a Bachelor of Science
in Accounting in June 1984 from the University of Nevada,  Las Vegas, and became
a licensed Certified Public Accountant in Nevada and California.

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

The table below sets forth the payroll and  consulting  compensation  for fiscal
1998 for the executive officers and directors of the Company.

Name of Individual            Capacities in Which Served            Compensation
--------------------------------------------------------------------------------

Dominic Orsatti         Chairman and Chief Executive Officer           $ 0
John Holt Smith         Secretary and Director                        *$ 0
Bonnie Houldsworth      Treasurer and Chief Financial Officer        **$ 0

---------------

*    Represents moneys paid to law firms in which Mr. Smith is a principal.
**   Represents moneys paid to Houldsworth, Russo & Company, a firm in which Ms.
     Houldsworth is a principal and an accountant.

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

As of December 31, 1998,  there were 2,824,552  Common Shares  outstanding.  The
following tabulates holdings of Common Shares of the Company by each person who,
subject to the above,  are holders of record or are known by  Management  to own
beneficially  more than 5.0% of the  Common  Shares  and,  in  addition,  by all
directors and officers of the Company individually and as a group.

<PAGE>
<TABLE>
<CAPTION>

                                               Table I - Common Stock
Name and Address                                Number of Shares of                                     Percentage
of Beneficial Owner                             Common Stock Owned(1)                                  of Ownership
-------------------                             ---------------------                                  ------------

<S>                                                   <C>                                            <C>          
Dominic Orsatti(2)                                     800,000                                        28.32 Percent
2550 E. Desert Inn Road #338
Las Vegas, Nevada  89121

Nevada Entertainment Partners, Ltd.(2)                 800,000                                        28.32 Percent
2550 E. Desert Inn Road #338
Las Vegas, Nevada  89121

John Holt Smith                                          8,000                                        .0028 Percent
1925 Century Park East #1600
Los Angeles, California  90067

All Directors and Officers as a Group (3)              808,000                                      28.3228 Percent
</TABLE>

---------------

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

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

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

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

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

Dominic Orsatti(2)                            12,000                36.58%
2550 East Desert Inn Road, Suite 338
Las Vegas, Nevada  89121

Nevada Entertainment Partners Ltd.(2)          12,000               36.58%
2550 East Desert Inn Road, Suite 338
Las Vegas, Nevada  89121

John Holt Smith                                 8,000               24.39%
1925 Century Park East #1600
Los Angeles, California  90067

All Directors & Officers
as a group (3)                                 20,000               60.97%


--------------

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

<PAGE>


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

                      Table 3 - Series "D" Preferred Shares
                      -------------------------------------
                                         Number of Series "D"    Percent of
Name and Address                          Preferred Shares(1)     Class
----------------                          -------------------     -----

Dominic Orsatti(2)                            98,000               100%
2755 East Desert Inn Road, Suite 200
Las Vegas, Nevada  89121

Nevada Entertainment Partners Ltd.(2)          98,000              100%
2755 East Desert Inn Road, Suite 200
Las Vegas, Nevada  89121

All Directors & Officers
as a group (3)                                 98,000              100%

                                     PART IV

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

(a)      Financial Statements
         --------------------
                                                                 Reference
                                                                 ---------
         Report of independent public accountants                    F-1
         Balance sheets                                              F-2
         Statements of operations                                    F-4
         Statements of stockholders' equity                          F-5
         Statements of cash flows                                    F-7
         Notes to financial statements                               F-9

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

         None

(c)      Exhibits
         --------
         None


<PAGE>



                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  Registrant  has duly  caused  this report to be signed on its
behalf by the  undersigned,  thereunto duly  authorized  this 14th day of April,
1999:

Olympic Entertainment Group, Inc.


By:  /s/ Dominic Orsatti                             Date:    4/14/99
     -------------------------------------
         Dominic Orsatti, Chairman and
         Chief Executive Officer

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

NAME & POSITION                                       DATE
---------------                                       ----


/s/ Dominic Orsatti                                  4/14/99
-----------------------------------------            -------
Dominic Orsatti,
Chairman & Chief Executive Officer


/s/  John Holt Smith                                 4/14/99
-----------------------------------------            -------
John Holt Smith
Corporate Secretary & Director


/s/  Bonnie Houldsworth                              4/14/99
-----------------------------------------            -------
Bonnie Houldsworth
Treasurer and Chief Financial Officer

<PAGE>


                       OLYMPIC ENTERTAINMENT GROUP, INC.
                                 Balance Sheet
                                December 31, 1998
                                  (unaudited)



                                     Assets
                                     ------
Current assets:
   Cash and cash equivalents                                            $     31
   Accounts receivable - trade                                             4,680
   Accounts receivable - other                                             1,598
                                                                        --------

     Total current assets                                                  6,309
                                                                        --------

Other assets:
   Film library                                                          817,557
   Deposits and other assets                                              12,275
                                                                        --------

                                                                         829,832
                                                                        --------

     Total assets                                                       $836,141
                                                                        ========




                             See accompanying notes.


<PAGE>



                        OLYMPIC ENTERTAINMENT GROUP, INC.
                                  Balance Sheet
                                December 31, 1998
                                   (unaudited)
                                   (continued)

                      Liabilities and Stockholders' Equity
                      ------------------------------------


Current liabilities:
   Notes payable                                                    $   234,596
   Accounts payable-trade                                               446,440
   Accrued expenses                                                     166,236
   Amounts due related party                                            255,686
                                                                    -----------

     Total current liabilities                                        1,102,958
                                                                    -----------

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

   Preferred stock, convertible, $.01 par value
     5,000,000 total shares authorized,                                  65,600
   Preferred stock, convertible, 40,000 shares
     authorized, 32,800 shares issued and
     outstanding, $10 per share liquidating
     preference (Series C)

Preferred stock, convertible, 98,000 shares
   authorized, issued and outstanding
   $3 par share liquidating preference (Series D)                       196,000

Common stock, $.01 par value, 20,000,000
   shares authorized, 2,824,552 shares issued
   and outstanding                                                       28,246
Paid in capital                                                       3,306,979
Accumulated deficit                                                  (4,066,642)
                                                                    -----------

                                                                       (266,817)
                                                                    -----------

       Total liabilities and stockholders' equity                   $   836,141
                                                                    ===========





                             See accompanying notes.


<PAGE>



                        OLYMPIC ENTERTAINMENT GROUP, INC.
                             Statements of Operation
                 For the years ended December 31, 1998 and 1997
                                   (unaudited)



                                                       1998             1997
                                                   -----------      -----------

Revenue                                            $     5,950      $ 1,736,491

Costs and expenses:

   General and administrative                          687,330        2,139,137
   General and administrative - related
     parties                                                 0                0
                                                   -----------      -----------

     Total expenses                                    687,330        2,139,137
                                                   -----------      -----------

Income (loss) from operations                         (681,380)        (402,646)

Other income and (expenses):
     Interest expense                                   (1,622)         (28,680)
     Loss on sale of assets                           (134,740)               0
                                                   -----------      -----------

                                                      (136,362)         (28,680)
                                                   -----------      -----------

Net loss before income taxes                          (817,742)        (431,326)
                                                   -----------      -----------

Net (loss)                                         $  (817,742)     $  (431,326)
                                                   ===========      ===========

Net (loss) per share                               $      (.31)     $     (0.16)
                                                   ===========      ===========

Weighted average shares                              2,626,390        2,626,390
                                                   ===========      ===========












                             See accompanying notes.


<PAGE>
<TABLE>
<CAPTION>

                                         OLYMPIC ENTERTAINMENT GROUP, INC.
                                         Statement of Stockholders' Equity
                                  For the years ended December 31, 1998 and 1997
                                                    (unaudited)


                                                                                            Additional
                                     Common                       Preferred                  Paid - In    Accumulated
                                     Shares       Amount          Shares       Amount        Capital       Deficit        Total
                                   ---------    -----------    -----------   -----------   -----------   -----------    -----------

<S>                                 <C>          <C>            <C>           <C>           <C>           <C>            <C>        
Balance December 31, 1996          2,938,681    $    29,387    $   138,800   $   261,600   $ 3,305,838   $(2,814,823)   $   782,002

Cancellation of shares
 at par value                      (114,129)        (1,141)          --            --           1,141          --             --

Net (loss) for the year                 --             --             --            --            --        (431,326)       431,326
                                 -----------    -----------    -----------   -----------   -----------   -----------    -----------

Balance December 31, 1997          2,824,552         28,246        130,800       261,600     3,306,979    (3,246,149)       350,676

Prior period adjustment                 --             --             --            --            --          (2,751)        (2,751)

Net loss for the year                   --             --             --            --            --        (817,742)      (817,742)
                                 -----------    -----------    -----------   -----------   -----------   -----------    -----------

Balance December 31, 1998          2,824,552    $    28,246        130,800   $   261,600   $ 3,306,979   $(4,066,642)      (469,817)
                                 ===========    ===========    ===========   ===========   ===========   ===========    ===========


</TABLE>









                                              See accompanying notes


<PAGE>
                        OLYMPIC ENTERTAINMENT GROUP, INC.
                            Statements of Cash Flows
                 For the years ended December 31, 1998 and 1997
                                   (unaudited)

                                                           1998          1997
                                                        ---------     ---------
Net (loss)                                              $(817,742)    $(431,326)
Adjustments to reconcile net income
   (loss) to net cash:
   Depreciation                                             4,337        20,197
   Amortization of film costs                                --         128,355
   Sale of assets                                         126,208          --
   Film masters rights charged off                           --          74,876
   (Increase) decrease in accounts receivable               9,257       304,465
   (Increase) decrease in prepaid expenses                   --          12,145
   (Increase) in other assets                               1,500           248
   Increase (decrease) in accrued expenses                 82,618        34,725
   Increase (decrease) in accounts payable                235,463        95,230
   Increase in accounts payable - related party           255,686       (76,956)
                                                        ---------     ---------

     Total adjustments                                    715,069       593,285
                                                        ---------     ---------

Net cash provided by (used in)
 operating activities                                    (102,673)      (81,400)
Cash flows from investing activities:
   (Increase) in film library                                --        (275,287)
   Purchase of property and equipment                        --         (61,887)
                                                        ---------     ---------
Net cash provided by (used in)
   Investing activities                                      --        (337,174)
Cash flows from financing activities:
   Common stock sold for cash                                --         923,787
   Advances to stockholder                                 87,200       (87,200)
   Proceeds from notes payable                               --         125,000
   Repayment of long-term debt                               --         (22,164)
                                                        =========     ---------
Net cash provided by (used in)
   financing activities                                    87,200        15,636
Net decrease in cash and cash equivalents                 (15,473)     (159,579)

Beginning cash                                             15,504       175,083
                                                        ---------     ---------

Ending cash                                             $      31     $  15,504
                                                        =========     =========








                             See accompanying notes.


<PAGE>




                        OLYMPIC ENTERTAINMENT GROUP, INC.
                          Notes to Financial Statements
                                December 31, 1998


NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNT POLICIES

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

     Estimates
     ---------
     Timely  preparation  of financial  statements in conformity  with generally
     accepted  accounting  principles  requires management to make estimates and
     assumptions that affect certain  reported amounts and disclosures,  some of
     which may require revision in future periods.

     Fixed assets
     ------------
     Property and equipment are carried at cost.  Depreciation is computed using
     the  straight-line  method over the  estimated  useful lives of the assets.
     When assets are retired or otherwise  disposed of, the cost and the related
     accumulated  depreciation are removed from the accounts,  and any resulting
     gain or loss is  recognized  in  operations  for the  period.  The  cost of
     repairs  and   maintenance   is  charged  to  operations  as  incurred  and
     significant renewals or betterments are capitalized.

     The Company  depreciates its office  equipment  utilizing the straight line
     method over a period of five years.  The  Company has  recorded  $4,337 and
     $20,197 of  depreciation  expense for the years ended December 31, 1998 and
     1997, respectively.

     Film Library
     ------------
     The Company  amortizes  the costs of its film  library  over the  estimated
     economic life of the film using the film forecast method in accordance with
     SFAS  #53.  The  amortization  periods  begin  at the time  the  films  are
     available  for  showing by the  Company's  Broadcast  Affiliates.  When the
     Company  concludes that any such costs will not benefit future periods said
     costs are  charged  to  operations  for the  period.  During the year ended
     December 31,  1997,  the Company  made  adjustments  to reduce the carrying
     value of its film library of $74,876.

     Amortization  charged to operations during 1997 aggregated  $128,355.  (See
     Note 6).






<PAGE>

                        OLYMPIC ENTERTAINMENT GROUP, INC.
                          Notes to Financial Statements
                                December 31, 1998
                                   (continued)

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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

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

     Advertising
     -----------
     Advertising  expenses  are charged to expense upon first  showing.  Amounts
     charged to expense were $7,840 and $39,937 for the years ended December 31,
     1998 and 1997, respectively.

     Fair value of financial instruments
     -----------------------------------
     The Company's  short-term  financial  instruments  consist of cash and cash
     equivalents,  accounts  and loans  receivable,  and  accounts  payable  and
     accruals. The carrying amounts of these financial instruments  approximates
     fair value because of their short-term  maturities.  Financial  instruments
     that  potentially  subject  the Company to a  concentration  of credit risk
     consist principally of cash and accounts receivable, trade. During the year
     the Company maintained cash deposits at financial institutions in excess of
     the $100,000 limit covered by the Federal  Deposit  Insurance  Corporation.
     The Company has several major  customers,  (see Note 9) the loss of any one
     of which could have a material negative impact upon the Company.

     Stock-based compensation
     ------------------------
     The Company adopted Statement of Financial Accounting Standard No. 123 (FAS
     123), Accounting for Stock-Based  Compensation beginning with the Company's
     first quarter of 1996.  Upon adoption of FAS 123, the Company  continued to
     measure  compensation  expense for its  stock-based  employee  compensation
     plans using the intrinsic value method prescribed by APB No. 25, Accounting
     for  Stock  Issued  to  Employees,  and has  provided  in Note 2 pro  forma
     disclosures  of the effect on net income and  earnings  per share as if the
     fair value-based method prescribed by FAS 123 had been applied in measuring
     compensation expense.

     Earnings (loss) per share
     -------------------------
     InFebruary 1997, the Financial  Accounting  Standards Board ("FASB") issued
     SFAS No.128,  "Earnings Per Share." SFAS No. 128  supersedes and simplifies
     the existing  computational  guidelines under  Accounting  Principles Board
     ("APB") Opinion No. 15, "Earnings Per Share."






<PAGE>



                        OLYMPIC ENTERTAINMENT GROUP, INC.
                          Notes to Financial Statements
                                December 31, 1998
                                   (continued)

NOTE 1. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     Earnings (loss) per share (continued)
     -------------------------------------
     The  statement is effective  for  financial  statements  issued for periods
     ending  after  December  15,  1998.  Among  other  changes,  SFAS  No.  128
     eliminates the  presentation of primary  earnings per share and replaces it
     with basic  earnings per share for which common stock  equivalents  are not
     considered in the  computation.  It also revises the computation of diluted
     earnings  per share.  The Company has adopted  SFAS No. 128 and there is no
     material impact to the Company's earnings per share,  financial  condition,
     or  results  of  operations.  The  Company's  earnings  per share have been
     restated for all periods presented to be consistent with SFAS No. 128.

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

     Recent Pronouncements
     ---------------------
     SFAS No. 130, "Reporting Comprehensive Income",  establishes guidelines for
     all  items  that  are  to  be  recognized  under  accounting  standards  as
     components  of  comprehensive  income  to  be  reported  in  the  financial
     statements.  The  statement is effective  for all periods  beginning  after
     December 15, 1998 and reclassification of financial statements of financial
     statements for earlier periods will be required for  comparative  purposes.
     To date, the company has not engaged in transactions  which would result in
     any significant  difference between its reported net loss and comprehensive
     net loss as defined in the statement.

NOTE 2. STOCKHOLDERS' EQUITY

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

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





<PAGE>




                        OLYMPIC ENTERTAINMENT GROUP, INC.
                          Notes to Financial Statements
                                December 31, 1998
                                   (continued)

NOTE 2. STOCKHOLDERS' EQUITY (CONTINUED)

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

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

     During May 1996, in connection with a lawsuit  settlement (see Note 8), the
     Company  issued  common stock  purchase  warrants for 329,500  shares to an
     individual.  The warrants are  exercisable  for a period of eighteen months
     from the date of issue at a price  of $2 per  share.  The  Company  has not
     recorded any expense related to the warrants as the estimated fair value of
     the warrants is less than the exercise price at the grant date.

     During the year  ended  December  31,  1998,  the  Company  reacquired  and
     canceled  certain of its  shares  issued  for  services  which had not been
     completed. The shares were retired at their par value.

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











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                        OLYMPIC ENTERTAINMENT GROUP, INC.
                          Notes to Financial Statements
                                December 31, 1998
                                   (continued)

NOTE 2. STOCKHOLDERS' EQUITY (CONTINUED)

     The following is a summary of the transactions in the plan:

                                                  Range of         Weighted
                                     Shares      exercise          Average
                                                  prices            Price
                                     ------      --------         ---------
Balance December 31, 1997
   and 1998                          730,000    $  .05-$60            .32

Options available at
   December 31, 1997 and 1998        70,000

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

NOTE 3. INCOME TAXES

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

     The Company  currently has net  operating  loss  carryforwards  aggregating
     approximately  $3,000,000  which expire  beginning in 2003.  The  principal
     difference  between  the  Company's  book  operating  losses and income tax
     operating losses results from the issuance of and  subscriptions for common
     stock and preferred stock during 1994 and 1996 for services. The effects of
     these  differences  are expected to be  permanent  in nature,  therefore no
     deferred tax asset had been recorded related thereto.

     The  Company  did not  provide  Federal  income  taxes  for the year  ended
     December 31, 1997 due to an operating loss.

     The Company is unable to predict future taxable income that would enable it
     to utilize the deferred tax asset  arising from the future value of the net
     operating  loss and  therefore  the  deferred  tax  asset of  approximately
     $680,000 related thereto is fully reserved.


<PAGE>




                        OLYMPIC ENTERTAINMENT GROUP, INC.
                          Notes to Financial Statements
                                December 31, 1998
                                   (continued)


NOTE 4. RELATED PARTY TRANSACTIONS

     During the years ended  December  31, 1994 and 1993,  certain  officers and
     shareholders  made  advances to the Company for working  capital  purposes.
     During 1996 the Company repaid $75,313,  the balance payable by the Company
     of $3,985 at December 31, 1996 was repaid  during 1997.  Additionally,  the
     Company made $87,200 of cash  advances to its  president  during 1997.  The
     advances will be paid out of future bonuses.

     Included in amounts due to  stockholders  at December 31, 1997 is a balance
     due to an entity controlled by one of the Company's directors who is also a
     stockholder.  The Company  received legal services of $108,062 and $185,000
     for the years ended December 31, 1997 and 1996, respectively, provided by a
     firm  associated  with one of its  directors and had a year end balance due
     such firm of $29,696.  Additionally,  the Company  purchased program rights
     and production  costs from another  related entity of $113,625 and $166,511
     during the years ended December 31, 1997 and 1996, respectively. During the
     year ended December 31, 1997, the Company  purchased program rights from an
     officer/stockholder in the amount of $18,000.

NOTE 5. NOTES PAYABLE AND LONG-TERM DEBT

     Long-term  debt consists of an obligation  arising from the settlement of a
     lawsuit  (see Note 8).  Monthly  payments  of  $2,000,  including  interest
     imputed at 8% per annum,  are due for a 40 month period  beginning  June 1,
     1996.  Principal payments due in the years ended December 31, 1998 and 1999
     are $22,164 and $16,623, respectively.

     Notes payable  consists of a short-term  loan of $10,000 made in March 1993
     from an  individual  pursuant  to a debenture  bearing  interest at 10% per
     annum and originally due on March 30, 1994. The holder of the debenture has
     the right to convert the debenture  into common stock of the Company at the
     rate of one share of common stock for each one dollar due on the debenture.
     During March,  1994,  the holder of the debenture  agreed to extend the due
     date on the debenture to March 30, 1995. The note has not been extended and
     is  considered  to be due on demand by the holder.  Also  included in notes
     payable are a series of four notes  aggregating  $125,000 which were issued
     by the Company in December  1997.  The notes are due during  September 1998
     with interest at 10% per annum payable quarterly.  The notes are secured by
     an aggregate of 250,000 shares of the Company's  common stock controlled by
     an  officer  of the  Company.  The fair  value  of the  pledged  shares  is
     equivalent to the face amount of the notes at the issue date of the notes.



<PAGE>




                        OLYMPIC ENTERTAINMENT GROUP, INC.
                          Notes to Financial Statements
                                December 31, 1998
                                   (continued)


NOTE 6. FILM LIBRARY

     At  December  31,  1998,  the  Company's  film  library  consisted  of  the
     following:

              License costs                           $   912,935
              Mastering costs                              43,235
                                                      -----------

                                                          956,170

              Less accumulated depreciation              (138,613)
                                                      -----------
                                                      $   817,557
                                                      ===========

     During 1997 the Company incurred costs in connection with the rights to air
     certain programing,  including film mastering costs,  through the medium of
     cable television. The costs incurred and amortization are as follows:

                                                           1997
                                                       -----------
                Costs incurred                         $   275,287
                Amortization                               128,355

     During 1997,  the Company  charged off to expense the value of film masters
     delivered  to  network  affiliates  that  have not  renewed  their  license
     agreements.

NOTE 7. COMMITMENTS AND CONTINGENCIES

     During July, 1996, the Company entered into a lease for office space in Las
     Vegas,  Nevada for a sixty month period ending August 31, 2001 at a monthly
     rental of $10,145, increasing by approximately 3.5% per year throughout the
     lease.  Rent expense was $138,586 and $143,158 for the years ended December
     31, 1998 and 1997.







<PAGE>




                        OLYMPIC ENTERTAINMENT GROUP, INC.
                          Notes to Financial Statements
                                December 31, 1998
                                   (continued)




NOTE 8. LITIGATION

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

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

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

NOTE 9. INFORMATION ABOUT MAJOR CUSTOMERS

     The Company,  whose customers arrange for programming to air on local cable
     systems in their respective licensed  territories under leased access rules
     of the  Federal  Communication  Commission,  made sales in excess of 10% of
     total revenues for the years ended December 31, 1997 as follows:

          Customer                         Sales           Receivable at 12/31
         ---------                         -----           -------------------
         1997:
         Carousel Media Marketing      $ 1,735,000 100%       $     --






<PAGE>




                        OLYMPIC ENTERTAINMENT GROUP, INC.
                          Notes to Financial Statements
                                December 31, 1998
                                   (continued)


NOTE 10. BASIS OF PRESENTATION

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

     The Company has incurred  operating  losses during the years ended December
     31, 1995 and 1994 aggregating  $579,001 and $2,176,549,  respectively.  The
     Company had net income for the year ended  December  31, 1996 of  $355,856,
     and a loss from operations of $431,326 for the year ended December 31, 1997
     and a loss from  operations  of $817,742  for the year ended  December  31,
     1998. There can be no assurance that profitable operations will be attained
     due to the  Company's  reliance  on one major  customer,  which  ability to
     generate significant revenues from the use of the company's programming has
     not been demonstrated.

     Profitable   operations  are  dependent  upon,  among  other  factors,  the
     Company's  ability to obtain  equity or debt  financing  and the  Company's
     ability to finance,  produce and/or acquire and distribute its  educational
     films.  Management plans to continue to sell additional  affiliate licenses
     and to renew expiring  licenses and to seek  additional  equity  financing.
     Additionally,  management  is  exploring  plans for a merger of the Company
     with another operating entity.





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