SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20450

                                   FORM 10-KSB

(Mark One)

[X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange
    Act  of 1934.

For the fiscal year ended December 31, 1999 or

[ ] Transition report pursuant to section 13 or 15(d) of the Securities Exchange
    Act of 1934.

For the transition period from ____________ to ___________

                         Commission File Number 0-92402

                          ON STAGE ENTERTAINMENT, INC.
________________________________________________________________________________
                 (Name of Small Business Issuer in its Charter)


          Nevada                                              88-0214292
_______________________________                          _______________________
(State or Other Jurisdiction of                           (I.R.S. Employer
Incorporation or Organization)                           Identification No.)

4625 W. Nevso Drive Las Vegas, Nevada                           89103
________________________________________________________________________________
(Address of principal executive offices)                     (Zip Code)

Registrant's telephone number, including area code: 702-253-1333

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

Title of each class: None

Name of each exchange on which registered: None

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

                     Common Stock, par value $0.01 per share
               Redeemable Warrants to purchase shares of Common Stock
                                (Title of Class)

     Check  whether  the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing  requirements for the past 90 days:
YES [X] NO [ ]

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of  Regulation  S-B  contained  in  this  form,  and no  disclosure  will be
contained,  to the  best  of  registrant'  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]

<PAGE>
     The  registrant's  revenues for the most recent fiscal year ended  December
31, 2000 were $24,137,441.

     The  aggregate  market  value of the voting  stock  held by  non-affiliates
computed  by  reference  to the  average  bid and asked  prices of such stock as
quoted on April 06,  2001 was $1,282,238.

     The number of shares of the  registrant's  common stock  outstanding  as of
April 06, 2001 was 11,307,930.

     Transitional Small Business Disclosure Format (check one): Yes [] No [X]

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of Registrant's  definitive  Proxy Statement  relating to the 2000
Annual  Meeting of  Stockholders  are  incorporated  by reference  into Part III
hereof.  Part II hereof  incorporates  information by reference from portions of
the  Registrant's  Annual Report to Stockholders for the year ended December 31,
1999.


<TABLE>
                                TABLE OF CONTENTS
                                                                                                        Page No.
                                                                                                       --------
<S>                                                                                                       <C>
PART I..................................................................................................  1
Item 1.  Description of Business........................................................................  2
Item 2.  Description of Property........................................................................  10
Item 3.  Legal Proceedings..............................................................................  10
Item 4.  Submission of Matters to a Vote of Security Holders............................................  11

PART II.................................................................................................  12

Item 5.  Market for Common Equity and Related Stockholder Matters.......................................  12
Item 6.  Management's Discussion and Analysis or Plan of Operation......................................  12
Item 7.  Financial Statements...........................................................................  21
Item 8.  Changes in and Disagreements with Accountants
          on Accounting and Financial Disclosure........................................................  21

PART III................................................................................................  21

Item 9.  Directors, Executive Officers, Promoters and
          Control Persons, Compliance with Section
          16(a) of the Exchange Act.....................................................................  21
Item 10. Executive Compensation.........................................................................  23
Item 11. Security Ownership of Certain Beneficial
          Owners and Management.........................................................................  25
Item 12. Certain Relationships and Related Transactions.................................................  26
Item 13. Exhibits, and Reports on Form 8-K..............................................................  26
</TABLE>


<PAGE>
                                     PART I

This  document  contains  certain  forward-looking  statements  that  are
subject to risks and uncertainties.  Forward-looking  statements include certain
information  relating to potential new show openings,  the potential markets for
the  Company's  the  expansion  of  existing  and  potential  gaming and tourist
markets, our exposure to various trends in the gaming industry,  our acquisition
plans and the  benefits we  anticipate  from these  acquisitions,  our  business
strategy,  our outstanding  litigation matters and the defenses available to us,
the seasonality of our business,  and liquidity  issues,  as well as information
contained  elsewhere in this Report,  where current  statements are preceded by,
followed by or include the words "believes," "expects," "anticipates" or similar
expressions. For these statements, the Company claims the protection of the safe
harbor  for  forward-looking  statements  contained  in the  Private  Securities
Litigation Reform Act of 1995. The  forward-looking  statements in this document
are  subject  to risks  and  uncertainties  that  could  cause  the  assumptions
underlying  the  forward-looking  statements  and the  actual  results to differ
materially  from  those  expressed  in or implied  by the  statements.  The most
important  factors that could prevent us from achieving our goals--and cause the
assumptions underlying the forward-looking  statements and the actual results to
differ  materially from those  expressed in or implied by those  forward-looking
statements--include,  the information provided under the heading "Description of
Business-Risk Factors" in Item 1, as well as the following:

o    On Stage's dependence on our flagship Legends in Concert production and our
     principal production venues;
o    The  ability to  successfully  produce  and market new  productions  and to
     manage the growth associated with the
o    new productions;
o    Risks  associated  with our  expansion  strategy,  including our ability to
     successfully identify, complete and integrate strategic acquisitions;
o    The competitive  nature of the leisure and  entertainment  industry and the
     ability to continue to distinguish our services;
o    Fluctuations in quarterly  operating results and the highly seasonal nature
     of our business;
o    The ability to  reproduce  the  performance,  likeness and voice of various
     celebrities  without infringing on the publicity rights of such celebrities
     or their  estates,  as well as our  ability  to  protect  our  intellectual
     property rights;
o    The ability to successfully manage the litigation pending against us and to
     avoid future litigation; and
o    The results of operations which depend on numerous factors  including,  the
     commencement  and  expiration  of  contracts,  the timing and amount of new
     business  generated  by us,  our  revenue  mix,  the  timing  and  level of
     additional  selling,  general  and  administrative  expense and the general
     competitive conditions in the leisure and entertainment industry as well as
     the overall economy. See "Description of Business-Risk Factors."

                                       1
<PAGE>
ITEM 1.  Description of Business

General

     We produce and market live theatrical productions and operate live theaters
and dinner theaters worldwide.  We market our productions  directly to audiences
at theaters in resort and urban  tourist  locations.  During 2000,  we performed
full-time shows in the following locations:

---------------------- ------------------------ ---------------- --------------
                                                                  Leased/
 Tourist Market           Production             Location         Discontinued
                                                                  Contracted
--------------------- ------------------------  --------------- ---------------
Atlatic City,
 New Jersey           Legends in Concert        Bally's Park       Contracted
                                                Place

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

Biloxi, Mississippi   Legends in Concert        Imperial Palace    Contracted

-------------------- ------------------------- ----------------  --------------
Branson, Missouri     Legends in Concert        Legends Theater    Leased
--------------------- ------------------------  ----------------  --------------

Buena Park (Anaheim), Wild Bill's Dinner        Wild Bill's
California            Extravanganza             Dinner Theater     Leased
--------------------- ------------------------ -----------------  --------------
Las Vegas, Nevada     Legends in Concert        Imperial Palace    Contracted
--------------------- ------------------------ -----------------  --------------
North Myrtle Beach,
 South Carolina       Sub-Leased                Sub-Leased         Leased
--------------------- ------------------------ -----------------  --------------
Orlando, Florida      King Henry's Feast        King Henry's
                                                Dinner Theater     Discontinued

                      Wild Bill's Dinner        Wild Bill's
                      Extravaganza              Dinner Theater     Discontinued

                      Fort Liberty Shopping     Fort Liberty
                      Malls                     Retail             Discontinued

                      Blazing Pianos            Blazing Pianos     Discontinued
                                                Bar
--------------------- ------------------------ ------------------- -------------
Surfside Beach,
South Carolina          Legends in Concert      Legends Theater    Leased
--------------------- ------------------------ ------------------ --------------

     On Stage also markets our productions to commercial clients,  which include
casinos,  corporations,  fairs and  expositions,  theme and amusement parks, and
cruise lines.  We have  performed in locations  such as the Illinois State Fair,
MGM Grand Theme Park and  Dollywood  Theme  Park;  in  locations  as far away as
Australia,  Russia,  China,  Africa,  Japan and the  Philippines;  and for major
corporate  clients such as McDonald's,  Bank of America,  Hewlett Packard,  IBM,
Pitney Bowes, Levi Strauss and Texaco.

     For the years ended December 31, 1999 and 2000,  approximately 60% and 51%,
respectively,  of On Stage's net revenue was generated  from theaters and dinner
theaters that we operate in resort and urban tourist markets;  approximately 27%
and 26%,  respectively,  of our net revenue was generated from live  productions
performed in gaming  markets,  predominantly  Las Vegas and Atlantic  City;  and
approximately  6% and 16%,  respectively,  of our net revenue was generated from
sales to  commercial  clients  other than  casinos.  The remaining 7% of our net
revenue for each  respective  year was generated from  merchandise  and souvenir
photography  sales. On Stage was incorporated on October 30, 1985 under the laws
of the state of Nevada as Legends in Concert,  Inc.  Subsequently,  on August 7,
1996,  On Stage changed its name to On Stage  Entertainment,  Inc. Our principal
executive offices are located at 4625 West Nevso Drive, Las Vegas, Nevada 89103,
and our telephone number is (702) 253-1333.


                                       2
<PAGE>
Developments During 2000

     On May 1,  2000,  we  entered  into a  partial  settlement  with our  first
mortgage  lender,   Imperial  Credit   Commercial   Mortgage   Investment  Corp.
("ICCMIC"),  pursuant to which we agreed not to take measures to prevent  ICCMIC
from  foreclosing  upon the Fort  Liberty,  King  Henry's  Feast and  Legends in
Concert  Surfside  Beach  theaters in exchange for an  aggregate  credit of $9.0
million for its Fort Liberty ($3.0  million),  King Henry's Feast ($4.0 million)
and Legends in Concert Surfside Beach ($2.0 million) theaters.  Additionally, we
agreed to operate the King  Henry's  and Fort  Liberty  Theaters  until June 21,
2000,  at which time the  theaters  were closed to the public On  September  15,
2000, On Stage Entertainment  subsidiary, On Stage Theaters Surfside Beach, Inc.
sold its Legends in Concert  Theater in Surfside  Beach,  South  Carolina to LIC
Theatres,  LLC for $2.0  million.  We have  subsequently  resolved the remaining
issues with ICCMIC on October 12, 2000, as discussed below.

     On August 21,  2000,  On Stage  negotiated  the live  production  licensing
rights  to  "Ripley's  Believe  it or Not" for the  United  States  and  Canada,
excluding New York, for an initial fee of $250,000 and 15% of gross revenue from
each production.  Pursuant to the express terms of the licensing  agreement,  On
Stage must open two  full-scale  Ripley's Live  productions  within the next two
years.  On Stage has  entered  into a lease  agreement  with the  Osmond  Family
Theater to open the first Ripley's live  productions in Branson  Missouri on May
24, 2001.

     On September  15, 2000,  our  wholly-owned  subsidiary,  On Stage  Theaters
Surfside  Beach,  Inc.  sold its Legends in Concert  theater in Surfside  Beach,
South  Carolina to LIC Theatres,  LLC for $2.0 million.  In connection  with the
sale of the Theater,  we entered into a ten (10) year lease  agreement  with LIC
Theatres,  LLC,  to ensure  that the  performances  of its  Legends  in  Concert
production at the theater,  which is one of our largest  revenue  sources,  will
continue for many years to come.  The proceeds from the sale of the theater were
paid to ICCMIC in accordance with the terms of the partial settlement  agreement
with ICCMIC discussed above.

     On  October  12,  2000,  we  successfully  restructured  our debt with both
ICCMIC,  and First  Security Bank.  Under the terms of the settlement  agreed to
convert our outstanding loan and accrued interest of approximately  $8.2 million
in exchange for 4,061,122 shares of common stock. As part of the  restructuring,
Timothy J.  Parrott,  our new  President & CEO,  purchased  2,630,000  shares of
common stock from ICCMIC for $1.0 million.  Additionally,  On Stage restructured
its only remaining debt of approximately  $1.2 million with First Security Bank.
Under the terms of the agreement with First Security Bank, we have agreed to pay
First Security Bank $50,000 per month in exchange for their  agreement to extend
their loan for the period of 24 months from  September 1, 2000. The loan accrues
interest  annually at the rate of Prime plus 2%. On Stage recorded a net gain on
debt restructuring of $141,122.

     Also joining Mr. Parrott at On Stage is Jeffrey  Victor,  as Executive Vice
President. Most recently Mr. Victor served as Vice President and General Manager
of "Star Trek: The  Experience" at the Las Vegas Hilton Hotel.  Previously,  Mr.
Victor worked directly for Parrott as Vice President of Entertainment for all of
the Boomtown casinos.

     On November 21,  2000,  we entered into a letter of intent with Bounce Back
Technologies.com,  Inc. to  purchase  their award  winning  production  "Country
Tonite."  Under the terms of the  letter of  intent,  we agreed to  purchase  to
purchase all the Country  Tonite assets for an aggregate  purchase price of $3.8
million.  On January 29, 2001 On Stage entered into an agreement with BounceBack
Technologies.com, Inc. to purchase all of the rights to the live production show
entitled  Country  Tonite.   Country  Tonite  is  an  award-winning   theatrical
production, which has been presented in Las Vegas, Nevada, Branson, Missouri and
Pigeon Forge, Tennessee. On January 29, 2001, On Stage completed the acquisition
for a  purchase  price of  $3,800,000.  The terms of the  agreement  call for an
initial  payments of;  $100,000 on November  21,  2000,  $250,000 on January 29,
2001,  $150,000 on February 15, 2001 and $500,000 on March 15, 2001, the balance
of  $2,800,000  plus  interest  due on July 31,  2001.  The show opened under On
Stage's management and control on about March 7, 2001. The Company also acquired
the right to oversee the Country Tonite  production in Pigeon Forge,  Tennessee.
However, the rights to present the Pigeon Forge show were previously licensed to
an unrelated third party and were not included in this acquisition.

                                       3
<PAGE>
     During late 2000 and early 2001, On Stage raised an aggregate of $1,350,000
from  accredited  private  investors  to assist the Company  with  meetings  its
capital requirements,  paying for expenses associated with its restructuring and
making  deposits for the  acquisition  of Country  Tonite and the live licensing
rights  for  Ripley's.  This  private  placement  was  issued  in  the  form  of
convertible  debentures,  which accrue interest at the rate of ten percent (10%)
per annum and feature a conversion rate of $0.79.

SHOW OFFERINGS

     Since our  inception,  On Stage has  developed,  produced or acquired  many
different productions. These productions include Legends, other tribute shows, a
variety of musical reviews, magic shows,  ice-skating  productions and specialty
shows and most recently,  Country Tonite.  The principal  productions  currently
produced by On Stage are as follows:

Legends in Concert

     Our flagship  Legends in Concert  production is a live  theatrical  tribute
show  featuring  impersonators  who recreate  past and present  music and motion
picture  superstars.  Legends  is the  longest  running  independently  produced
production in Las Vegas and Atlantic City.  Based on our access to approximately
75 different  Legends  tribute acts, we can tailor each tribute show to suit the
unique  demographics of any audience and the size of any venue, and we have been
able to attract significant repeat business by varying regularly the composition
of the acts in our shows. In 2000,  full-time resident Legends  productions were
performed in Atlantic City, New Jersey; Biloxi, Mississippi;  Branson, Missouri;
Las Vegas, Nevada and Myrtle Beach, South Carolina.

Wild Bill's Dinner Extravangaza

     Wild Bill's Dinner Extravaganza is a two-hour dinner show that features the
best of the Wild West. The show includes Indian tribal dances, gun fighting, and
show  girls.  The show runs  every day  throughout  the year at the Wild  Bill's
Dinner Theater in Buena Park, California

Intellectual Property
On Stage have filed/obtained the following intellectual property marks:
<TABLE>
<S>                                                     <C>                 <C>             <C>
Name:                                                Class (es)            Status          Country
-------------------                         -------------------        -----------      -----------------
Legends in Concert                          6,16,18,21,25,26,41        Registered          United States
Legends in Concert w/ design                6,16,18,21,25,26,41        Registered          United States
Legends in Concert                                   41                Registered          Canada
Legends in Concert                                   41                Registered          Europe
Legends in Concert                                   41                Registered          Great Britain
Legends in Concert                                   41                Registered          Japan
Legends in Concert                                   41                Registered          Mexico
Legends in Concert                                   41                Pending              Australia
Legends of Country                                   41                Registered          United States
Atlantic City Experience                             41                Registered          United States
Camouflage Aux Folles                                41                Published           United States
</TABLE>

     On Stage  anticipates  filing  applications  for  protection of its Legends
service  mark in  several  other  foreign  countries,  as need be. We believe we
either  own or have  appropriately  licensed  all of the  intellectual  property
rights  required to perform our shows in the manner in which they are  currently
produced,  including,  but not  limited  to the right to  publicly  present  and
otherwise perform all non-dramatic  copyrighted musical compositions pursuant to
musical  licenses with Broadcast  Music,  Inc.  ("BMI") and American  Society of
Composers, Authors and Publishers ("ASCAP").

     On  Stage  typically  requires  its  independent  contractors,   employees,
consultants   and   advisors   to  execute   appropriate   confidentiality   and
non-competition  agreements in connection with their  employment,  consulting or
advisory relationship with us.

                                       4
<PAGE>
Employees

     As of April 9, 2001, On Stage  employed  approximately  402 employees  (217
full-time and 185 part-time),  including 123 entertainers, 11 theater operations
personnel,   58  production  personnel,   92  food  &  beverage  personnel,   22
administrative  personnel,  26  marketing  personnel,  67 box  office/concession
personnel  and its 3  executive  officers.  None of our  current  employees  are
covered by a collective bargaining  agreement.  We believe that our relationship
with our employees is good.

RISK FACTORS

     Increased  Operating  Expenses.  Increased operating expenses in connection
with our recent  acquisition  of Country  Tonite our proposed  expansion  plans,
delays in the  introduction of new productions and factors  adversely  affecting
our  current  productions,  could have a material  adverse  effect on our future
operating results.  There can be no assurance that we will generate  significant
net income in the future or that our future operations will be profitable.

     Dependence on Legends. To date, our revenue has been limited largely to the
production of Legends.  Our future success will depend, to a significant extent,
on our ability to successfully produce and market Legends shows in other venues.
To the extent we are unsuccessful in expanding the production of Legends,  or to
the extent the Legends production concept ceases to be successful or profitable,
there will be a material adverse effect on us.

     Reliance on Principal  Production Venues. On Stage anticipates that we will
continue to rely upon our four current  largest  revenue  producing  show sites,
including  our  resident  Legends  productions  in Las Vegas,  Nevada,  Branson,
Missouri and Myrtle  Beach,  South  Carolina,  as well as our Wild Bill's Dinner
Theater in Buena Park, California,  for the substantial majority of our revenue.
The loss of all or a  substantial  portion of the  business  generated  at those
venues or the termination or impairment of contractual  relationships  that make
some of these venues available to us would have a material adverse effect on us.

     Risks  Associated  with Proposed  Acquisition  Strategy.  If we are able to
pursue our expansion  plans, we intend to pursue  strategic  acquisitions of, or
joint ventures with, independent  production companies,  and to market our brand
name products to the established  customer bases of any acquired  companies,  in
order to increase  revenues and market share. In addition,  we intend to acquire
additional established, brand-name shows, which we believe have the potential to
be  successful  in new  markets.  We have  planned to enter into these  types of
arrangements  on a  shared  revenue  and/or  profit  basis  and  to  make  these
acquisitions  through  limited  equity  distributions  rather than  through cash
payments or investments.  In addition, if our stock price is too low, we may not
be able or willing to use our common stock for  acquisitions.  There may, in the
future, be attractive  acquisition candidates for which cash funding is our only
choice,  in which  case,  any  acquisitions  will likely be  contingent  upon us
acquiring additional  financing.  There can be no assurance that we will be able
to acquire financing or, even with additional financing, that we will be able to
acquire acceptable production companies or shows, nor can there be any assurance
that we will be able to enter into  beneficial  joint  ventures on  commercially
reasonable terms or in a timely manner. Furthermore, we can provide no assurance
that any acquired customer bases will be receptive to our productions or that we
will be able to successfully develop any acquired shows. To the extent we effect
an acquisition or joint venture,  there can be no assurance that we will be able
to successfully  integrate any business or productions which we may acquire into
our operations.  Any inability to do so, particularly in instances,  in which we
make significant  capital  investments,  could have a material adverse effect on
us. In addition,  there can be no  assurance  that any  acquired  business  will
increase our revenue  and/or  market share or  otherwise  improve our  financial
condition.

     Competition.  The leisure and  entertainment  market,  which  includes  the
market for live theatrical  productions,  is highly competitive,  and many of On
Stage's markets contain a large number of competing live theatrical productions.
In resort and urban  tourist  locations,  we compete  for ticket  sales with the
producers of other live  productions,  many of whom have greater  financial  and
other  resources than we do and/or feature  productions  and headline stars with
greater name recognition than those we have. In addition,  we compete with other
production  companies for the most  desirable  commercial and tourist venues and

                                       5
<PAGE>
for talent and  production  personnel.  Any  inability to secure those venues or
personnel could have a material  adverse effect on us. In addition,  one or more
of the  commercial  venues in which we currently  have,  or plan to have, a live
production show could decide to self-produce its live entertainment needs. There
can be no  assurance  that we will be able  to  secure  alternative  venues  for
displaced  productions or that those  alternative  venues could be secured under
similar or favorable terms.

     Availability of Talent and Lack of Long-Term Contracts.  Our future success
will  depend   largely  upon  our  ability  to  attract  and  retain   personnel
sufficiently  trained in performing  arts and theatrical  production,  including
singers, dancers, musicians, choreographers and technical personnel. We maintain
rigorous  standards  with respect to the  abilities  and level of  experience of
these personnel in order to ensure  consistency,  quality and professionalism in
our  productions.  This may make it more  difficult  for us to obtain  qualified
personnel. Moreover, that difficulty is compounded by the fact that Legends, our
flagship  production,  features  impersonators  of past  and  present  superstar
vocalists.  Because  these  headline  performers  must look,  sound and act like
specific  celebrities,  the  pool of  performers  from  which we can  choose  is
significantly reduced. In addition,  while our musicians,  singers,  dancers and
production personnel are generally employees,  our headline acts are independent
contractors  who enter into new contracts  with us for each new show or venue in
which  they  perform.  We do not  maintain  any  long-term  contracts  with  our
performers.   We  will  need  to  hire  additional   performers  and  production
technicians  as we continue to open new  productions,  as well as to  supplement
personnel  in our  existing  productions.  Our  inability  to attract and retain
needed personnel, for either new or existing productions,  could have a material
adverse effect on us.

     Fluctuations in Quarterly  Operating  Results;  High  Seasonality.  We have
experienced,  and expect to continue to  experience,  fluctuations  in quarterly
results  of  operations.  The live  theatrical  production  business  is  highly
seasonal.  We  expect  these  seasonal  trends  to  continue.  Additionally,  we
typically spend significant resources on new resident theatrical  productions up
to six months in advance of show  openings,  and believe  that,  as we emphasize
pre-opening market research and development as part of our expansion plans, both
the amount of pre-opening  expenditures and the lag between the time in which we
incur those expenditures and the receipt of post-opening  revenue will increase.
Accordingly,  our operating results may also vary  significantly from quarter to
quarter  or year to year due to the  opening  and  timing  of new  shows and the
fluctuations  associated  with  the  pre-opening  and  start-up  phases  of  new
productions in new and varying venues.  Consequently,  revenue as well as profit
and loss may vary  significantly  from quarter to quarter and the results in any
one period may not necessarily be indicative of results in subsequent periods.

     Cyclical  and  Economy-Sensitive   Industry;   Changing  Trends.  The  live
entertainment  industry is cyclical,  with consumer  spending tending to decline
during  recessionary  periods when disposable income is low. Although we believe
our  moderate  ticket  prices  may  enhance  the  appeal of our  productions  to
consumers in a recessionary  environment,  there can be no assurance that a poor
general  economic  climate  will not have an  adverse  impact on our  ability to
compete for limited consumer resources.  The live entertainment industry is also
subject to changing  consumer demands and trends and, while the markets for live
entertainment have grown significantly over the past several years, there can be
no  assurance  that such growth will  continue or that these  trends will not be
reversed.  For instance,  the rate of growth in the casino  gaming  industry has
recently begun to decrease due to consolidation within the industry. Our success
will  depend on our  ability to  anticipate  and  respond to  changing  consumer
demands and trends and other factors affecting the live entertainment  industry,
including new artists and  musicians,  as well as general  trends  affecting the
music  industry  and its  performers.  Failure to respond to these  factors in a
timely manner could have a material adverse effect on us.

     Dependence on the Casino Gaming  Industry.  Our success has been,  and will
continue to be, highly dependent on the casino gaming industry.  Consequently, a
change in the laws or  regulations  governing the casino gaming  industry,  or a
significant decline in casino gaming in the United States, could have a material
adverse effect on us.

     Intellectual  Property. On Stage's success depends to a large extent on our
ability to reproduce the performance,  likeness and voice of various celebrities
without  infringing  on the  publicity  rights  of  those  celebrities  or their
estates.  Although  we  believe  that  our  productions  do  not  violate  those
intellectual  property  rights under  applicable  state and federal laws, in the
event a claim were made against us, litigation, regardless of the outcome, could
be  expensive  and time  consuming  for us to defend.  Additionally,  if we were
determined to be infringing any  intellectual  property rights in the production
of our  performances,  we could be required to pay  damages--possibly  including
treble and/or statutory damages--costs and attorney fees, alter our productions,
obtain  licenses or cease  certain  activities,  all of which,  individually  or
collectively,  could have a material  adverse effect on us.  Furthermore,  if we
were required to obtain licenses from the celebrities we impersonate,  there can
be no assurance that we would be able to acquire those licenses on  commercially
favorable terms, if at all. In addition,  an element of our business strategy is
to expand our  merchandising  program by introducing a wider variety of clothing
items and new products,  such as compact  discs,  and audio and video tapes.  We
have filed trademark applications,  as necessary, in order to protect our rights
in the products that we sell.  There can be no assurance that we will be able to
obtain any trademarks on terms and conditions acceptable to us. Our inability to
obtain  those  rights  could have a material  adverse  effect on our  ability to
successfully implement our merchandising strategy.


                                       6
<PAGE>
Government Regulation

     Providing  entertainment to the casino gaming industry may subject On Stage
to various  licensing  regulations.  We are  regulated  and required to obtain a
casino industry license from the New Jersey Casino Control  Commission  pursuant
to the New Jersey  Casino  Control  Act.  Our current  casino  service  industry
license from the New Jersey  Casino  Control  Commission  was issued on July 10,
2000 and is valid through  September  30, 2003.  In connection  with the license
application,  the  New  Jersey  Division  of  Gaming  Enforcement  conducted  an
investigation of On Stage to determine our suitability for licensure. Management
believes that we are not required to obtain a license to provide our services to
casinos  in  Nevada,  Mississippi  or in any  other  jurisdictions  in  which we
operate, other than New Jersey. The Nevada and Mississippi Gaming Control Boards
and similar authorities in other jurisdictions, however, have broad authority to
order providers of services to casinos to file  applications,  be  investigated,
have their  suitability  determined,  obtain  licenses and cease providing their
services, if they find the service providers to be unfit. Additionally,  many of
the casinos mandate that a production company is properly licensed in accordance
with the local gaming laws before it will contract for their services.

     In  addition,  On Stage  leases or owns certain of the theaters for our new
brand-name  resident   productions,   thereby  absorbing  all  costs  and  risks
associated  with  producing  the  show in  order to  retain  100% of the  show's
profits.  Producing shows under this  "four-wall"  arrangement may require us to
obtain and maintain  certain  local  licenses and permits as we were required to
obtain for the opening of our Myrtle Beach and Branson  show,  both of which are
"four-wall"  productions.  These licenses and permits could  include,  amusement
licenses,  music  licenses  (i.e.,  BMI or  ASCAP),  business  licenses,  liquor
licenses,  retail sales tax  licenses,  food and beverage  licenses and a health
inspection rating (if dairy products and/or hot food, other than popcorn,  is to
be sold).  Difficulties or failure in obtaining  required licenses or regulatory
approvals  could delay or prevent the opening of a new show or, alter,  delay or
hinder our expansion  plans.  In addition,  the  suspension  of, or inability to
renew,  a license  needed to operate any of our  currently  running  productions
would adversely affect our operations.

     Dependence on Key Personnel.  On Stage's future success will depend largely
on the efforts and abilities of our existing senior management, particularly Mr.
John W.  Stuart,  On Stage's  Chairman  and Founder and Timothy J.  Parrott,  On
Stage's President and Chief Executive Officer.  The loss of the services of such
officers,  or other members of On Stage's  management team could have a material
adverse  effect on us.  Although we currently  maintain a key-man life insurance
policy on the life of Mr. Stuart in the amount of $2,500,000, those proceeds may
not be sufficient to compensate us for the loss of his services.  In particular,
Mr.  Stuart's death would result in the loss of his creative  contribution to On
Stage and would give the owner of the Imperial Palace the right to terminate its
contract with us relating to our resident  Legends  production in Las Vegas, one
of our largest revenue producing venues. Mr. Stuart and Mr. Parrott are employed
by On Stage pursuant to employment  agreements.  These officers have  employment
agreements, which are valid through October 12, 2003 and contain non-competition
clauses  thereafter for a period of three years.  There can be no assurance that
these non-competition  clauses will be enforceable or that On Stage will be in a
position  to  pay  the   contractual   amount   required  to  effectuate   their
non-competition  agreements.  Finally,  there can be no assurance  that On Stage
will be able to renew Mr.  Stuart's  employment  contracts  and/or  attract  and
retain the additional  qualified senior management personnel necessary to manage
our planned growth.

     Risk of Employment Tax Liability.  Consistent with industry  standards,  On
Stage has,  since  inception,  treated,  and expects to  continue to treat,  the
headline  acts  of  productions  as  independent   contractors  rather  than  as
employees. In making the determination that we are qualified to characterize the
headline acts as  independent  contractors,  On Stage,  in addition to following
industry precedent,  made an independent review of, and analyzed, the applicable
guidelines  issued by the Internal Revenue  Service.  There can be no assurance,
however,  that we are  qualified  to  treat  the  headline  acts as  independent
contractors.  If we have improperly  classified the headline acts as independent
contractors,  then we would be liable for the  payment of  employment  taxes for
those  periods in which the  headline  acts were  incorrectly  characterized  as
independent contractors.  If imposed, that employment tax liability would have a
material adverse effect on us.

     Litigation. On Stage is involved in certain pending and threatened lawsuits
in which the adverse parties are seeking damages. There can be no assurance that
any of the  instituted or threatened  lawsuits will be settled or decided in our

                                       7
<PAGE>
favor.  Moreover,  regardless of the outcome of those lawsuits and claims, if we
were to be engaged in protracted litigation,  the costs of that litigation could
be  substantial.  Even in  situations  where we are fully  indemnified  by third
parties,  the time and effort  expended by On Stage personnel in connection with
those matters could be significant,  leaving us with less  opportunity to pursue
our strategic goals.

     Limitations on Liability of Directors and Officers.  On Stage's Articles of
Incorporation  include provisions to eliminate,  to the full extent permitted by
Nevada General Corporation Law, the personal liability of directors for monetary
damages  arising  from a breach  of their  fiduciary  duties as  directors.  Our
Articles of  Incorporation  also include  provisions to the effect that On Stage
shall,  to the maximum extent  permitted  under Nevada law,  indemnify and, upon
request,  advance  expenses  to any  director  or officer to the extent that the
indemnification and advancement of expense is permitted under that law.

     No Dividends. On Stage has never paid any dividends on our common stock and
we do not  anticipate  paying cash  dividends  in the  foreseeable  future.  Our
existing credit facilities also prohibit the payment of dividends.  We currently
intend to retain all  earnings  for use in  connection  with our  business.  The
declaration  and  payment  of  future  dividends,  if any,  will be at the  sole
discretion  of our board of  directors  and will depend upon our  profitability,
financial condition, cash requirements,  future prospects, credit agreements and
other factors deemed relevant by the board.

     Possible  Adverse Effects of  Authorization  of Preferred Stock. On Stage's
Articles  of  Incorporation  authorize  the  board of  directors  to issue up to
10,000,000  shares of "blank check"  preferred  stock,  with such  designations,
rights and  preferences  as may be determined  from time to time by the board of
directors.  Accordingly,  the  board of  directors  will be  empowered,  without
stockholder  approval,  to issue  preferred  stock with  dividend,  liquidation,
conversion,  voting,  or other rights,  which could adversely  affect the voting
power of the holders of common stock and,  under  certain  circumstances,  could
make it  difficult  for a third  party to gain  control of On Stage,  prevent or
substantially delay a change in control, discourage bids for the common stock at
a premium,  or otherwise  adversely affect the market price of the common stock.
We recently  entered  into a financing  agreement  with McCown De Leeuw and Co.,
Inc.  pursuant to we issued  convertible  securities  that may be converted into
shares of our common stock.

     Risks Relating to Penny Stocks.  On Stage's  preferred  stock is subject to
the  requirements  of certain rules,  promulgated  under the Exchange Act, which
require  additional  disclosure by  broker-dealers in connection with any trades
involving a stock defined as a "penny  stock."  Generally,  "penny stock" is any
non-Nasdaq equity security that has a market price of less than $5.00 per share,
subject to limited  exceptions.  Those rules require the delivery,  prior to any
penny stock  transaction,  of a disclosure  schedule  explaining the penny stock
market  and the risks  associated  with it, and impose  various  sales  practice
requirements  on  broker-dealers  who sell penny  stocks to  persons  other than
established  customers and  accredited  investors--generally  institutions.  For
these types of transactions,  the broker-dealer must make a special  suitability
determination  for the  purchaser  and have  received  the  purchaser's  written
consent to the  transaction  prior to sale. The additional  burdens imposed upon
broker-dealers  by  these  requirements  may  discourage   broker-dealers   from
effecting  transactions  in the common  stock,  which could  severely  limit the
market liquidity of the common stock and the ability of stockholders to sell the
common stock in the market.

     Current  Annual  Report on Form 10-KSB and State  Registration  Required to
Exercise  Warrants.  Holders of outstanding  warrants to acquire On Stage common
stock will be able to exercise their warrants only if a current Annual Report on
Form 10-KSB under the Securities  Act relating to the securities  underlying the
warrants,  is then in effect  and those  securities  are  qualified  for sale or
exempt from qualification under the applicable  securities laws of the states in
which the various holders of warrants reside. Although we intend to use our best
efforts  to  maintain  a current  Annual  Report  on Form  10-KSB  covering  the
securities  underlying  the warrants at the earliest  practicable  date,  to the
extent required by federal  securities  laws,  there can be no assurance that we
will be able to do so. The value of the  warrants  may be  greatly  reduced if a
Annual Report on Form 10-KSB covering the securities  issuable upon the exercise
of the warrants is not kept current or if the securities  are not qualified,  or
exempt  from  qualification,  in the  states in which the  holders  of  warrants
reside.  Persons  holding  warrants who reside in  jurisdictions  in which those
securities  are not qualified and in which there is no exemption  will be unable
to exercise  their  warrants and would either have to sell their warrants in the
open market or allow them to expire unexercised.

     Restrictive  Debt Covenants.  On Stage's  various loan  agreements  contain
covenants  that,  among other  things,  restrict  the  ability of our  operating
subsidiaries  to dispose  of assets,  incur  additional  indebtedness,  pay cash
dividends,  create liens on assets, make investments or acquisitions,  engage in
mergers  or  consolidations,   make  capital  expenditures,  engage  in  certain
transactions  with  affiliates or redeem or repurchase the  indebtedness of such
subsidiaries.  See "Management  Discussion and Analysis of Financial  Conditions
and Results of Operations."
                                       8
<PAGE>
     Prior Losses.  For the years ended December 31, 1999 and December 31, 2000,
we had net losses of $2,090,339 and  $4,701,666,  respectively.  There can be no
assurance  that we will  generate  net  income in the  future or that our future
operations  will be  profitable.  See  "Management's  Discussion and Analysis of
Financial Condition and Results of Operations,"  "Certain  Transactions" and the
financial statements contained elsewhere in this Annual Report on Form 10-KSB.

     No Assurance of Continued Public Market;  Possible Continued  Volatility of
Market Price of Common Stock.  There can be no assurance that a regular  trading
market  for the  common  stock  will be  sustained.  The  market  prices  of our
securities  may  continue  to be  characterized  by  volatility  and low trading
volume.  Factors  such  as our  operating  results,  announcements  by us or our
competitors  of new  production  contracts,  and various  factors  affecting the
entertainment  industry  generally,  may have a significant impact on the market
price of our securities.

     Risks Relating to Proposed  Expansion Plans;  Possible Inability to Achieve
or Manage Growth. On Stage's continued growth depends,  to a significant degree,
on our ability to produce and market new theatrical  productions on a profitable
basis. Our expansion plans include  increasing both the number of productions in
operation at any given time and the rate at which such  productions  open.  This
expansion strategy  contemplates the opening of additional resident productions,
which if successful,  will place significant pressures on our personnel, as that
growth will require development and operation of a significantly larger business
over a broader  geographical  area.  The success of our expansion  strategy will
depend upon a number of factors, including, among others:

o    our ability to hire and retain additional  skilled  management,  marketing,
     technical and performing arts and theatrical production personnel;

o    our ability to secure suitable venues for new productions on a timely basis
     and on commercially reasonable terms; and

o    our ability to  successfully  manage our growth  (which will  require us to
     develop and improve upon our operational,  management and financial systems
     and controls).

     Our  prospects and future  growth will also be largely  dependent  upon the
ability of our  productions  to achieve  significant  market  share in  targeted
tourist  and  gaming  markets  and our  ability to develop  and/or  acquire  and
commercialize additional productions.  There can be no assurance that we will be
able to  achieve  our  expansion  goals or that,  if we are able to  expand  our
operations,  we will be able to  effectively  manage our growth,  anticipate and
satisfy  all of the  changing  demands  and  requirements  that this growth will
impose upon us or achieve greater operating income or  profitability.  Moreover,
in light of:

     (1)  the  significant   up-front   capital   expenditures  and  pre-opening
          costs--estimated  to be  approximately  $500,000 to  $1,000,000 in the
          case of a leased  theater--associated  with the establishment of a new
          resident production,

     (2)  the  length of time  required  to  prepare  for the  opening  of a new
          resident production (typically three to six months), and

     (3)  the  significant  time required  before a new resident  production can
          achieve the market acceptance and name recognition  required for local
          ticket wholesalers and tour specialists to promote it,

the  discontinuation  of any new  production--whether  due to inadequate advance
marketing, inadequate performances, poor site selection or otherwise--would have
a material adverse effect on us. For instance,  during 1998, we discontinued our
resident  production  of Legends in  Toronto,  Canada,  as a result of less than
optimal  ticket  sales  in the  start-up  phase of the  show,  which  caused  an
aggregate estimated loss to us during 1999 of $443,096.

     Control by Principal Stockholders.  John W. Stuart, On Stage's Chairman and
Founder,  and  Timothy J.  Parrott,  On Stage's  President  and Chief  Executive
Officer  beneficially  own  approximately  31.4% and 29.9%  respectively  of the
outstanding common stock.  Accordingly,  Messrs.  Stuart and Parrott are able to
control On Stage and direct our affairs,  including  the election of  directors,
and cause an increase in our authorized  capital or the  dissolution,  merger or
sale of On Stage or substantially all of our assets.

                                       9
<PAGE>
     Our Facilities.  On Stage's corporate headquarters consist of approximately
16,000  square  feet of  nondescript  office and  warehouse  space  located in a
commercial  strip mall in Las Vegas,  Nevada.  This  lease is  currently  set to
expire on August 31, 2002.

ITEM 2.  Description of Property

     The table provided below lists certain information regarding our facilities
that we used during 2000.

--------------------- ------------ ------------- -----------  ----------------
                        Square      Type of         Lease        Principal
    Location           Footage     Possession     Expiration      Function
--------------------- ------------ ------------- -----------  ----------------
Atlantic City, NJ      2,000        Lease         12/00       Office
Atlantic City, NJ (1)  N/A          Lease         06/00        Residential
Branson, MO       (2) 27,500        Lease         12/03        Theater/Office
Buena Park, CA    (3) 27,599        Lease         06/10        Theater
Las Vegas, NV         16,000        Lease         08/02        Office
Las Vegas, NV     (4)  4,668        Lease         05/01        Warehouse
N.Myrtle Beach, SC(5) 15,000        Lease         12/04        Theater/Office
Myrtle Beach, SC  (6) 16,171        Lease         12/10        Theater/Office
--------------------- -------------- ------------ ---------- -----------------
(1)  Consists of seven condominium units for use by our performers when they are
     performing in our Legends show at Bally's Park Place in Atlantic  City, New
     Jersey. We lease these units from John W. Stuart, our Chairman and Founder,
     and his wife, at a rate equivalent to the fair market value.
(2)  On Stage Entertainment, Inc. leases this property from TCK, L.P.
(3)  On Stage's wholly-owned subsidiary, On Stage Theaters, Inc., subleases this
     property from Wild Bill's California, Inc., a wholly-owned subsidiary of On
     Stage Theaters.  Wild Bill's  California,  Inc. leases the property from an
     unrelated third party.
(4)  This lease may be terminated at any time after August 31, 1999 by providing
     written notice of that intention.
(5)  On Stage is currently attempting to sub-lease this theater.
(6)  On Stage  Theaters  Surfside  Beach,  Inc.  leases this  property  from LIC
     Theaters.

     We believe that our existing  facilities  are suitable and adequate for our
current operations and are adequately insured.

ITEM 3.  Legal Proceedings

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

     On March 28,  1998,  First  Security  agreed to increase the line of credit
from $250,000 to $1,000,000  and the  expiration  date was extended to March 25,
1999. As of December 31, 1998, we had drawn $1,000,000 on the line of credit. As
of March 31, 1999,  we had failed to pay off any part of the line of credit and,
were in default  under its terms.  On April 29,  1999,  we  received a notice of
default  under  the  line of  credit  from  First  Security  Bank.  The  Company
subsequently restructured the line of credit with First Security Bank on October
12, as discussed below.

     On September 29, 1997,  First Security  Leasing  Company  ("First  Security
Leasing"), a Utah corporation,  approved the $1,000,000 lease line for On Stage.
Advances under the lease line incur  interest at a rate of 9.75% per annum.  The
lease line has been utilized in the following  amounts:  $389,290,  $442,997 and
$167,713, commencing in April, 1998, April 1998 and May, 1998, respectively, and
terminating  on October,  2001,  September,  2001 and  November,  2001.  We also
received a notice of default under this line on April 29, 1999. We  subsequently
restructured  the lease line with First  Security  on October  12, as  discussed
below.

                                       10
<PAGE>

     From March 13,  1998 to  October  7, 1998,  we  borrowed  an  aggregate  of
$14,150,000   from  Imperial  Credit   Commercial   Mortgage   Investment  Corp.
("ICCMIC").  While we made our January,  February and March 1999 payments  under
this loan after the due date for those payments, no other payments were made. As
a result of these delinquencies,  we incurred late charges and default interest,
which we did not pay.

     On  November 5, 1999,  we received a formal  demand from ICCMIC to pay them
the sum of $16,163,305 as a guarantor under the loan,  which  represented all of
the  indebtedness  due as of that date.  On November  12,  1999,  ICCMIC filed a
complaint against us in the District Court for Clark County,  Nevada,  alleging,
among other  things,  that we breached the  guaranty.  On December 10, 1999,  we
agreed  to allow  them to obtain a  judgment  against  us for the  amount of the
guaranty,  in return for  forbearance  on the  collection of this judgment until
March 31, 2000.  ICCMIC  extended the date for collection on this judgment until
June 1, 2000.

     On May 1, 2000, we entered into a partial settlement with ICCMIC,  pursuant
to which we agreed not to take measures to prevent ICCMIC from  foreclosing upon
the Fort  Liberty  and King  Henry's  Feast  theaters in  exchange  for:  (1) an
aggregate  credit of $9.0  million for its Fort  Liberty  ($3.0  million),  King
Henry's  Feast  ($4.0  million)  and  Legends in Concert  Surfside  Beach  ($2.0
million)  theaters;  and (2) a thirty (30) day  extension  of time during  which
ICCMIC agreed:  (i) to forego  collection on its deficiency  judgment in Nevada;
and (ii) to extend the foreclosure date on the Legends in Concert Surfside Beach
theater.  Additionally,  we orally agreed with ICCMIC to temporarily operate the
King Henry's and Fort  Liberty  Theaters  for an  indefinite  period of time and
engaged  in  active  negotiations  with  ICCMIC  to  resolve  the  issue  of the
deficiency judgment.  The Company subsequently  restructure the loan with ICCMIC
on October 12, as discussed below.

     On October 12, 2000, On Stage  restructured  our loans with Imperial Credit
Commercial Mortgage Investment Corp, and First Security Bank. Under the terms of
this restructuring,  Imperial Credit Commercial Mortgage Investment Corp. agreed
to  covert  its  outstanding  loan  and  accrued  interest  to  the  Company  of
approximately  $8.2 million into 4,061,122  shares of common stock, or $2.46 per
share.  As part of the  transaction,  Timothy J.  Parrott,  our President & CEO,
purchased  2,630,000 shares of our common stock from ICCMIC for $1.0 million. In
connection with this  transaction,  we  restructured  our only remaining debt of
approximately  $1.2 million  with First  Security  Bank.  Under the terms of the
agreement with First Security Bank,  which became  effective  August 1, 2000, On
Stage is has agreed to pay $50,000 per month.  The loan accrues  interest at the
annual rate of Prime plus 2%.

     On August 2,  1999,  Hemisphere  Tour & Travel,  Inc.,  n/k/a  HT&T,  Inc.,
Richard  Winokur,  Media Corp. of America and Stephen  Zadrick filed a complaint
against On Stage and Gedco USA, Inc. in the and for the Ninth  Judicial  Circuit
Court  in  and  for  Orange  County,   Florida.   The  complaint   alleges  that
representatives  from  On  Stage  and  Gedco  breached  an  oral  contract  with
plaintiffs  to pay  them  a  commission  in  connection  with  the  Gedco  asset
acquisition.  More specifically,  the plaintiffs allege that had it not been for
their  introduction  of  Gedco  and On  Stage,  the  parties  would  never  have
consummated the Gedco asset acquisition.  On February 13, 2001, On Stage entered
into a settlement agreement for $309,607 with the Plaintiffs,  which effectively
resolved all of their differences.

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

     The following  matters were submitted to a vote of Security  Holder's at On
Stage's 1999 Annual Meeting of the Stockholders:  (1) to re-elect John W. Stuart
and Matthew Gohd as directors and (2) BDO Seidman, LLP as On Stage's independent
public accountants for the fiscal year ending December 31, 2000.

                                       11
<PAGE>
                                     PART II

ITEM 5.  Market for Common Equity and Related Stockholder Matters

     The common  stock trades on the Over the Counter  Bulletin  Board under the
symbol "ONST.OB" The following table sets forth, for the periods indicated,  the
high and low sales  prices as quoted on the OTCBB,  which  reflect  inter-dealer
prices,  without retail  mark-up,  mark-down or commission and may not represent
actual transactions.

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

           Period                                               High                   Low
           ------                                      -------------------    ------------------
           Fiscal 2000:
               First Quarter......................             .94                      .28
               Second Quarter.....................             .63                      .22
               Third Quarter......................             .44                      .19
               Fourth Quarter.....................             .88                      .25

           Fiscal 1999:
               First Quarter......................             1.69                     .88
               Second Quarter.....................             1.59                     .63
               Third Quarter......................             .88                      .31
               Fourth Quarter....................              .44                      .09
</TABLE>

     As of April 8, 2001 there were  approximately  700 holders of record on our
common stock and the closing sale price of the common stock as reported over the
counter was $0.875.

     We have never declared or paid any cash dividends on its capital stock.  We
currently  intends to retain its earnings to finance  future  growth and working
capital needs and therefore does not anticipate paying any cash dividends in the
foreseeable future.

ITEM 6.  Management's Discussion and Analysis or Plan of Operation

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Overview

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

     On Stage derives net revenues from five business units segments categorized
by three reportable segments:

o      Casinos. The Casinos segment primarily sells live theatrical productions
       to casinos worldwide for a fixed fee. In addition, this Casinos segment
       also operates our Legends show at the Imperial Palace in Las Vegas,
       Nevada and at Bally's Park Place in Atlantic City, New Jersey.

                                       12
<PAGE>

o      Theaters. The Theaters segment owns and/or rents live theaters and dinner
       theaters in urban and resort tourist locations primarily in the United
       States. This Theaters segment derives revenues from the sale of tickets,
       along with food and beverages to patrons who attend our live theatrical
       productions.
o      Events. The Events segment sells live theatrical productions to
       commercial clients, which include corporations, theme and amusement parks
       and cruise lines for a fixed fee. Revenues generated from the Events
       segment are included in the Casinos segment.
o      Merchandise. The Merchandise segment sells merchandise and souvenir
       photography products to patrons who attend our Casinos, Theaters, and
       Events segment productions. Revenues generated from the Merchandise
       segment are included in the Theaters segment.
o      Production Services. The Production Services segment sells technical
       equipment and services to commercial clients. However, the Productions
       Services segment's primary focus is to provide technical support for all
       of the Casinos, Theaters, Events and Merchandise segments.

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

     The most  important  factors that could prevent On Stage from achieving our
goals--and cause the assumptions  underlying the forward-looking  statements and
the actual results to differ  materially  from those  expressed in or implied by
those  forward-looking  statements  include the  information  provided under the
heading "Description of Business-Risk Factors" in Item 1 of our Annual Report on
Form 10-KSB for the year ended December 31, 2000, as well as the following:

o    The  dependence  on our  flagship  Legends  in Concert  production  and our
     principal production venues;
o    The  ability to  successfully  produce  and market new  productions  and to
     manage the growth associated with any new productions;
o    Risks  associated with our acquisition  strategy,  including our ability to
     successfully identify, complete and integrate strategic acquisitions;
o    The competitive  nature of the leisure and  entertainment  industry and the
     ability to continue to distinguish our services;
o    Fluctuations in quarterly  operating results and the highly seasonal nature
     of our business;
o    The ability to  reproduce  the  performance,  likeness and voice of various
     celebrities without infringing on the publicity rights of those celebrities
     or their  estates,  as well as our  ability  to  protect  our  intellectual
     property rights;
o    The ability to successfully manage the litigation pending against us and to
     avoid future litigation; and
o    The results of operations which depend on numerous  factors,  including the
     commencement  and  expiration  of  contracts,  the timing and amount of new
     business  generated  by us,  our  revenue  mix,  the  timing  and  level of
     additional  selling,  general  and  administrative  expense and the general
     competitive conditions in the leisure and entertainment industry as well as
     the overall economy.

     The accounting  policies of the reportable  operating segments are the same
as those described in the Summary of Accounting Policies.  On Stage's management
evaluates the  performance  of its operating  segments based upon the profit and
loss from operations.

     On Stage's  reportable  segments are strategic  business units because each
unit services a different  market or performs a specialized  function in support
of a given market.

                                       13
<PAGE>
Results of Operations

     The following table sets forth the various  components our net revenue as a
percentage of the total net revenue for the periods indicated:

                                                   Years Ended December 31,
                                                   1999              2000
                                                  --------         --------
Net revenue.....................................   100.0%            100.0%
Costs of Revenues...............................    77.7              85.3
                                                  --------         --------
Gross profit....................................    22.3              14.7
Selling, general and administrative.............    15.2              17.2
Depreciation and amortization...................     4.4               4.5
Expenses at closed locations....................     1.5               2.5
                                                  --------         ---------
Operating Income (loss).........................     1.2              (9.5)
Other income....................................     1.5               1.4
Loss on disposal of fixed assets...............      0.0               6.5
Interest expense, net ..........................    10.1               5.0
                                                  --------         ---------
Loss before income tax and extraordinary item...   (7.4)             (19.6)
Income taxes....................................   (0.0)              (0.4)
Loss before extraordinary item..................   (7.4)             (20.0)

Extraordinary item - trouble debt restructuring
                     gain, net..................    0.0                0.6
                                                  --------         ---------
Net loss........................................   (7.4)%            (19.4)%
                                                  ========         =========

     Loss before income taxes and extraordinary item for the year ended December
31,  1999,  was  $2,090,339,  as  compared  to a loss  before  income  taxes and
extraordinary item of $4,751,397 for the year ended December 31, 2000.

     The following  tables sets forth, the results of operations by On Stage for
reportable segment indicated:

                          Year ended December 31, 1999

                             Casino      Production     Theaters     Operations
                                                         Services     Sub-Total
                            ---------- ------------ -------------   ------------
Net revenues............... $10,006,642 $  103,896    $18,438,104   $28,548,642
Cost of  revenues..........   6,565,776    679,128     14,931,965    22,176,869
                            ----------- ------------ -------------  ------------
Gross profit...............  3,440,866    (572,232)     3,506,139     6,371,773
Selling, general &
administrative.............    766,964           -      1,747,966     2,514,930
Depreciation & amortization    401,664      90,239        559,335     1,051,238
Expenses at closed locations    41,494           -        111,880       153,374
                            ----------- ------------ -------------  ------------
Total operating expenses...  1,210,122      90,239      2,419,181     3,719,542

Operating income (loss)....  2,230,744    (665,471)     1,086,958     2,652,231

Other (income) expenses....    (97,490)          -         61,237       (36,253)

Interest expense, net......         84       1,123      2,648,061     2,649,268
                            ----------- ------------ -------------  ------------
Net income (loss) before
    Income taxes...........  2,328,150    (666,594)    (1,622,340)       39,216
Income taxes...............          -           -              -             -
                            =========== ============ =============  ============
Net income (loss).......... $2,328,150  $ (666,594)   $(1,622,340)  $    39,216
                            =========== ============ =============  ============

                                       14
<PAGE>


                          Year ended December 31, 1999
                                (continued)


                            Operating        Corporate        Total
                             Sub-Total         Office      Consolidated
                           ------------     ----------    -------------
Net revenues.............. $28,548,642      $       -      $28,548,642
Cost of revenues..........  22,176,869              -       22,176,869
                           ------------     ----------    -------------
Gross profit..............   6,371,773              -        6,371,773
Selling, general &
administrative............   2,514,930      1,836,871        4,351,801
Depreciation & amortization  1,051,238        192,910        1,244,148
Expenses at closed locations   153,374        273,580          426,954
                            ----------    ------------     ------------
Total operating expenses...  3,719,542      2,303,361        6,022,903

Operating income (loss)....  2,652,321     (2,303,361)         348,870

Other income...............    (36,253)      (404,165)        (440,418)
Loss on disposal of assets.          -              -                -
Interest expense, net......  2,649,268        230,359        2,879,627
                             -----------     ----------    ------------
Net income (loss) before
    income taxes...........     39,216     (2,129,555)      (2,090,339)
Income taxes...............          -              -                -
                             ===========     ==========    ============
Net income (loss).......... $   39,216     $(2,129,555)    $(2,090,339)
                             ===========     ==========    ============

                                Year ended December 31, 2000


                             Casino      Production     Theaters    Operations
                                          Services                   Sub-Total
                             ---------- ------------ -------------  ------------
Net revenues............... $8,981,520  $   29,719    $15,126,202   $24,137,441
Cost of revenues..........   6,283,811     848,820     13,460,766    20,593,397
                            ----------- ------------ -------------  ------------
Gross profit...............  2,697,709    (819,101)     1,665,436     3,544,044
Selling, general &
administrative.............    379,801           -        902,748     1,282,549
Depreciation & amortization    398,667      110,461       372,236       881,364
Expenses at closed locations         -           -              -             -
                            ----------- ------------ -------------  ------------
Total operating expenses....   778,468      110,461     1,274,984     2,163,913
Operating income (loss)....  1,919,241     (929,562)      390,452     1,380,131
Other income...............          -            -             -             -
Loss on disposal of........    198,143            -     1,377,485     1,575,628

Interest expense, net......      2,037            -       914,348       916,385
                            ----------- ------------ -------------  ------------
Net income (loss) before
   Income taxes and
   extraordinary item......  1,719,061     (929,562)   (1,901,381)   (1,111,882)
Income taxes...............          -            -       (71,391)      (71,391)

Extraordinary item-trouble
  debt restructure (loss)
  gain.....................          -            -    (6,918,309)   (6,918,309)
                            =========== ============ =============  ============
Net income (loss).......... $1,719,061  $  (929,562) $ (8,891,081)  $(8,101,582)
                            =========== ============ =============  ============

                                       15
<PAGE>


                          Year ended December 31, 2000
                                (continued)

                             Operating        Corporate        Total
                             Sub-Total         Office      Consolidated
                           ------------     ----------    -------------
Net revenues.............. $24,137,441      $       -     $ 24,137,441
Cost of revenues..........  20,593,397              -       20,593,397
                           ------------     ----------    -------------
Gross profit..............   3,544,044              -        3,544,044
Selling, general &
administrative............   1,282,549      2,873,442        4,155,991
Depreciation & amortization    881,364        195,140        1,076,504
Expenses at closed locations         -        608,878          608,878
                            ----------    ------------     ------------
Total operating expenses...  2,163,913      3,677,460        5,841,373

Operating income (loss)....  1,380,131     (3,677,460)      (2,297,329)

Other income...............          -       (333,657)        (333,657)
Loss on disposal of assets.  1,575,628              -        1,575,628
Interest expense, net......    914,348        295,712        1,212,097
                             -----------     ----------    ------------
Net income (loss) before
   Income taxes and
   extraordinary item...... (1,111,882)       3,639,515     (4,751,397)
Income taxes...............    (71,391)         (20,000)       (91,391)

Net income (loss) before
  extraordinary item....... (1,182,273)      (3,659,515)    (4,842,788)

Extraordinary item-trouble
  debt restructure (loss)
  gain..................... (6,918,309)      7,059,431         141,122
                             ===========     ==========    ============
Net income (loss).......... $(8,101,582)    $3,399,916     $(4,701,666)
                             ===========     ==========    ============


Year Ended December 31, 1999 versus Year Ended December 31, 2000

Net Revenues

     Net revenues were approximately $24,137,000 for the year ended December 31,
2000 compared to $28,549,000 for the year ended December 31, 1999, a decrease of
$4,412,000,  or 15.5%.  The  Company's  revenue is derived  from five  principal
segments: Casinos, Events, Merchandise, and Theaters.

     Casinos revenues were approximately  $8,982,000 for the year ended December
31,  2000  compared to  $10,007,000  for the year ended  December  31,  1999,  a
decrease of $1,025,000, or 10.2 %. This decrease was primarily attributable to a
decrease in limited engagements and corporate events.

     Production Services revenues were approximately  $30,000 for the year ended
December 31, 2000  compared to $104,000 for the year ended  December 31, 1999, a
decrease of $74,000,  or 71.2%.  The decrease was  primarily  attributable  to a
reduction in equipment rental revenues.

     Theaters  revenues  were  approximately  $15,126,000  for  the  year  ended
December 31, 2000 compared to $18,438,000  for the year ended December 31, 1999,
a decrease of $3,312,000,  or 18.0 %. The decrease was primarily attributable to
the discontinuation of our shows in Orlando, Florida.

                                       16
<PAGE>
Cost of Revenue

     Total costs of revenues were  $20,593,000  for the year ended  December 31,
2000 compared to $22,177,000 for the year ended December 31, 1999, a decrease of
$1,584,000, or 7.1%. This decrease in revenues was primarily attributable to the
discontinuation of our shows in Orlando,  Florida. Cost of revenues increased to
85.3% of net revenues for the year ended December 31, 2000, as compared to 77.7%
for the year ended  December 31, 1999.  This  increase in costs of revenues as a
percent of net revenues was primarily attributable to a change in the mix of our
revenues.

Selling, General and Administrative

     Selling, general and administrative costs were approximately $4,156,000 for
the year ended  December  31,  2000  compared to  $4,352,000  for the year ended
December  31,  1999,  a decrease  of  $196,000,  or 4.5%.  Selling,  general and
administrative  costs  increased  to 17.2% of net  revenues  for the year  ended
December  31, 2000,  as compared to 15.2% for the year ended  December 31, 1999,
which  was  primarily  attributable  to an  increase  in  professional  fees and
licensing rights.

Depreciation and Amortization

     Depreciation  and  amortization  was $1,077,000 for year ended December 31,
2000 compared to $1,244,000  for the year ended December 31, 1999, a decrease of
$167,000,  or 13.4%. This decrease was primarily due to the  discontinuation  of
our shows in  Orlando,  Florida and a result the  foreclosure  of certain of our
assets.

Expenses at Closed Locations

     On Stage decided to  discontinue  operations  at its Legends  production in
Toronto,  Canada  in  November  of 1998.  As part of the  closing,  we  incurred
additional expenses of $489,000 during 1997. Additionally,  during 1999 we wrote
off $427,000 related to the closing of this location.

     For the year ended  December 31, 2000,  we wrote off  acquisition  costs of
$597,000 on a show location that was put into full production.

Operating Income

     Our operating loss was approximately $2,297,000 for the year ended December
31, 2000 compared to an operating income of $349,000 for the year ended December
31, 1999.

Other Income

     Other income in 2000 and 1999  represents a savings  related to  discounted
consulting fees and legal services.

Loss on Disposal of Assets

     For the year ended  December 31, 2000, a loss on  disposition  of assets in
the amount of $1,575,000, of which $1,203,000 was attributable to the sale of On
Stage Theaters Surfside Beach, Inc. and the write down on assets  transferred to
Imperial Credit Corporation and $372,000 related to obsolete equipment.

Interest Expense, Net

     Interest expense was  approximately  $1,212,000 for year ended December 31,
2000, compared to $2,880,000 for the year ended December 31, 1999, a decrease of
$1,668,000, or 57.9%. The decrease was primarily due to our restructuring of the
and First Security Bank debts.

                                       17
<PAGE>

Income Taxes

     Income tax was approximately  $91,000 for the year ended December 31, 2000,
compared  to $0.0 for the  year  ended  December  31,  1999.  The  increase  was
primarily due to income taxes accrued for the Legends show in Surfside Beach, in
South Carolina.

Extraordinary Item

     The gain On Stage  incurred as a result of the debt  restructuring  for the
year ended December 31, 2000, was primarily  attributable to a combination of a:
write down of assets foreclosed  ($6,918,000) and gain in the conversion of debt
into common stock ($7,059,000).

Seasonality and Quarterly Results

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

     The  following  table sets forth the  Company's net revenue for each of the
last eight quarters ended December 31, 2000:

<TABLE>
                                            Net Revenues
                                            ($ in thousands)

                              March 30,       June 30,       September 30,     December 31,
                             ----------      -----------     ------------      ------------
<S>                             <C>             <C>              <C>                <C>
Fiscal 1999...............  $  6,272        $    7,403         $    7,793       $    7,081
Fiscal 2000...............  $  6,106        $    7,151         $    6,393       $    4,487

</TABLE>

Tax Net Operating Losses

     At  December  31, we had  federal  net  operating  loss carry  forwards  of
approximately  $14,570,050 in 2000, and $8,663,116 in 1999, respectively.  Under
Section  382 of the  Internal  Revenue  Code,  certain  significant  changes  in
ownership  contemplated  by us may restrict the future  utilization of these tax
loss  carry  forwards.  The  net  deferred  tax  assets  have a  100%  valuation
allowance, as management cannot determine if it is more likely than not that the
deferred tax assets will be realized.

Liquidity and Capital Resources

General

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

                                       18
<PAGE>
     For the year ended  December  31,  1999,  we had a net cash deficit used in
operations  of $9,700.  The net cash deficit used in  operations  was  primarily
attributable  an  increase  in  revenue,  decrease  in  costs  of  revenue,  and
forgiveness  of debts.  For the year ended  December 31,  2000,  we had net cash
provided  by  operations  of  approximately   $137,000.  The  cash  provided  by
operations  was  primarily  attributable  to a decrease in accounts  receivable,
inventory,   deposits,  increase  in  accounts  payable  and  accrued  expenses,
partially offset by increase in prepaid and other assets.

     The net cash used in investing  activities  for the year ended December 31,
1999 of $78,000,  was primarily  attributable to capital expenditures and direct
acquisition  costs.  The net cash provided by investing  activities for the year
ended  December 31, 2000 of $1,893,000  was primarily  attributable  to proceeds
from the sale of the  Legends  in  Concert  Theater  in  Surfside  Beach,  South
Carolina.

     Net cash used in financing  activities for the year ended December 31, 1999
of $480,000 was primarily  attributable to repayment of working capital line and
long-term  debt. Net cash used in financing for the year ended December 31, 2000
of $1,886,000  was  primarily  attributable  to  repayments  of long-term  debt,
working  capital  line and  payment  on  acquisition,  offset by  proceeds  from
convertible debentures.

Working Capital

     At  December  31,  1999,  On  stage  had  a  working   capital  deficit  of
approximately $18,827,000,  which resulted primarily from an increase in accrued
interest  expense and late charges,  which was partially  offset by decreases in
the working capital line of credit and accounts  payable.  At December 31, 2000,
On Stage  had a working  capital  deficit  of  approximately  $2,615,000,  which
resulted primarily from a decrease in: accounts  receivable,  inventory,  a note
receivable from Mr. Stuart, accrued payroll, other liabilities,  long-term debt,
which was partially offset by increases in cash and convertible debentures.

Debt Restructuring

     On October 12, 2000, On Stage  restructured  our debts with Imperial Credit
Commercial Mortgage Investment Corp, and First Security Bank. Under the terms of
this  restructuring,  ICCMIC agreed to convert its outstanding  loan and accrued
interest to the Company of approximately  $8.2 million in exchange for 4,061,122
shares of common stock.  Additionally,  Timothy J. Parrott,  the new President &
CEO,  purchased  2,630,000  shares from Imperial Credit Mortgage  Investment for
$1.0  million.  Under the  terms of the  agreement  with  First  Security  Bank,
effective  August 1, 2000,  On Stage agreed to pay $50,000 per month in exchange
for their agreement to extend the maturity date of the loan for an additional 24
months, or until September 1, 2002. The loan accrues interest at the annual rate
of prime plus 2%.

                                       19
<PAGE>
Subsequent Events

     On  January  16,  On  Stage  entered  into  an  agreement  with  BounceBack
Technologies.com, Inc. to purchase all of the rights to the live production show
entitled  Country  Tonite.   Country  Tonite  is  an  award-winning   theatrical
production, which has been presented in Las Vegas, Nevada, Branson, Missouri and
Pigeon Forge, Tennessee. On January 29, 2001, On Stage completed the acquisition
for a purchase price of $3,800,000.  The terms of the agreement call for initial
payments  of;  $100,000  on November  21,  2000,  $250,000 on January 29,  2001,
$150,000 on February  15, 2001 and  $500,000 on March 15,  2001,  the balance of
$2,800,0000 plus interest due on July 31, 2001. The show opened under On Stage's
management  and control on about March 7, 2001.  We also  acquired  the right to
oversee the Country Tonite production in Pigeon Forge,  Tennessee.  However, the
rights to present  the Pigeon  Forge show have been  previously  licensed  to an
unrelated third party and are not included in this acquisition.

     On February 28,  2001,  On Stage  entered into an agreement  with McCown De
Leeuw & Co., Inc., a private equity investment firm with over $1.0 billion under
management,  to  invest  up to  $20,000,000  in  the  Company  in  the  form  of
convertible preferred securities.  The transaction was closed on March 13, 2001.
According  to the  terms  of  the  agreement,  McCown  De  Leeuw  will  have  an
opportunity  to stage its funding in four separate  investments of $6.0 million,
$4.0  million,  $5.0  million  and  $5.0  million,  respectively.  Each  of  the
investments will bear interest at the rate of twelve percent (12%) per annum and
be convertible  into the common stock of at a conversion price of $0.50 or $0.75
per share,  depending on certain factors.  The first  $6,000,000  investment was
made on March 13,  2001,  which will  primarily  be used to fund On Stage's  new
productions  slated to open this year.  The remaining  investments  will be made
available  to On Stage for  future  growth  opportunities,  subject  to  certain
conditions.

     During January and February 2001, On Stage  completed a $1,350,000  private
placement  in  the  form  of  convertible  debentures  with  a 10%  coupon.  The
debentures are convertible  into our common stock at a price per share of $0.79.
These fund were used for a  combination  of  working  capital  requirements  and
expenses associated with On Stage's restructuring  completed in October 2000 and
deposits for the Country Tonite and acquisition and Ripley's licensing fee.

     On March 27,  2001,  On Stage  entered  into a multiple  year lease to open
Ripley's Live... Believe It or Not in Branson, Missouri at the Osmond Family.

Impact of Inflation

     The  Management of On Stage  believes that inflation has not had a material
impact on our operations. However, substantial increases in material costs could
adversely affect the operations of On Stage for future periods.

New Accounting Pronouncements

     Statement of Financial  Accounting  Standards No. 131,  "Disclosures  about
Segments of an Enterprise  and Related  Information"  ("SFAS No. 131") issued by


                                       20
<PAGE>

the FASB is effective for financial statements with fiscal years beginning after
December 15, 1997. Earlier application is permitted.  SFAS No. 131 requires that
the public  companies  report  certain  information  about  operating  segments,
products,  services and geographical areas in which they operate and their major
customers. On Stage adopted SFAS No. 131 on January 1, 1998 and it had no effect
on our financial  position or results of  operations;  however,  disclosures  on
certain of these items were expanded.

     In December 1999, the SEC staff released Staff Accounting Bulletin No. 101,
"Revenue  Recognition  in  Financial  Statements"  (SAB 101").  SAB 101 provides
interpretive guidance on the recognition  presentation and disclosure revenue in
the financial statements, SAB 101 must be applied to the financial statements no
later than the fourth quarter of fiscal years ending after December 15, 2000. On
Stage  adopted  SAB 101 during the year ended  December  31,  2000 and it had no
impact on our financial position or result of operations and cash flows.

     In  March  2000,   the   Financial   Accounting   Standards   Board  issued
Interpretation No. 44 ("FIN 44") Accounting for Certain  Transactions  Involving
Stock  Compensation,  an  Interpretation of APB Opinion No. 25. FIN 44 clarifies
the application of APB No. 25 for (a) the definition of employee for purposes of
applying APB No. 25, (b) the criteria for  determining  whether a plan qualifies
as  a  non-compensatory  plan,  (c)  the  accounting   consequences  of  various
modifications  to the terms of a previously fixed stock option or award, and (d)
the  accounting  for an  exchange  of  stock  compensation  awards  in  business
combination.  FIN 44 is effectively July 2, 2000, but certain  conclusions cover
that occur either December 15, 1998, or January 12, 2000.  During the year ended
December 31, 2000, the Company adopted FIN 44 in accounting for stock options.

ITEM 7.  Financial Statements and Supplementary Data

     Submitted on a separate section of this report,  commencing on page F-1 and
incorporated by reference.

ITEM  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosure

     None.

                                    PART III

ITEM 9. Directors, Executive Officers, Promoters and Control Persons; Compliance
with Section 16(a) of the Exchange Act

     The following sets forth biographical  information about each of On Stage's
directors  and  executive  officers who served  during 2000 or who are presently
serving in those capacities.

Name                                Age   Position

John W. Stuart.................     58    Chairman and Founder
Timothy J .Parrott ............     53    President and Chief Executive Officer
Jeffery Victor.................     37    Executive Vice-President & COO
Pedro Perez....................     53    Chief Accounting Officer and Treasurer
Christopher R. Grobl...........     31    General Counsel and Secretary
Mel Woods......................     47    Former Director
Matthew Gohd...................     43    Former Director
Gregory McIntosh...............     44    Director
Robert B. Hellman, Jr..........     39    Director
Chris Frigon...................     31    Director
Fred Ordower...................     48    Director

     John W. Stuart has served as the Chairman and Chief Executive Officer of On
Stage since April 1996 and also was the  President of On Stage from October 1985
through  March 1996.  He founded On Stage in 1985.  He has been  involved in the
theatrical  business  since age seven and has  produced  or appeared in over 200
theater productions and several feature films. Mr. Stuart received a Bachelor of
Arts degree in 1967 from California State University at Fullerton.

                                       21
<PAGE>

     Timothy J. Parrott has served as  president,  Chief  Executive  officer and
Director  of On Stage since  October  2000.  Mr.  Parrott has been a Director of
Pinnacle Entertainment since June 1997; President and Treasurer, Boomtown, Inc.,
from June 1987 to September 1992;  Director,  Boomtown,  Inc., since 1987; Chief
Executive Officer,  Parrott Investment Company (a family-held investment company
with agricultural  interest in California) since April 1995; and Director of The
Chronicle Publishing Company from April 1995 to June 2000.

     Jeffrey T. Victor has served as the Chief  Operating  Officer and Executive
Vice President of On Stage since October 2000. Mr. Victor was the Vice President
of Entertainment  for Boomtown Casinos and former General Manager of Paramount's
$70 million  Star Trek  Experience  at the Las Vegas  Hilton  where he managed a
staff of 300 and increased profitability by 40% during his two year.

     Pedro Perez has been the Chief  Accounting  Officer of On Stage since April
1999 and is a Certified Public Accountant.  Mr. Perez joined the company in July
of  1996.  Before  joining  the  company,  Mr.  Perez  served  as the  Corporate
Controller of Mednet, Inc., a publicly traded pharmaceutical  company, from 1993
to 1996.  Mr.  Perez holds a Bachelor  of Arts degree in Finance and  Accounting
from the University of Puerto Rico.

     Christopher R. Grobl has been the General Counsel and Secretary of On Stage
since  November  1994.  Mr.  Grobl  received a Bachelor of Arts in 1990 from the
University  of Illinois  and a Juris  Doctor in 1994 from the John  Marshall Law
School in Chicago, Illinois.

     Mel Woods was a  director  of On Stage  from July 1998 to March  2001.  Mr.
Woods is the  President  and Chief  Operating  Officer of Fox Family  Worldwide,
Inc., Saban Entertainment's parent company since 1997. Previously, Mr. Woods was
the Chief Financial Officer and Senior Vice President of DIC Enterprises.

     Matthew Gohd was a director of On Stage from  September 1998 to March 2001.
Mr. Gohd is currently a Senior Managing  director at Whale  Securities Co., LP.,
the  underwriter for On Stage's  initial public  offering.  Mr. Gohd has over 20
years in the securities field working in various companies in industries such as
retail, technology, healthcare and consumer finance.

     Gregory J. McIntosh has been a director of On Stage since October 2000. Mr.
McIntosh has been employed at Imperial  Credit  Commercial  Mortgage  Investment
Corp. and its affiliates,  Imperial Credit  Commercial  Assets  Management Corp.
since 1998,  where he has held various titles,  including Senior Vice President.
Previously,  Mr. McIntosh was Chief  Operating  Officer and 20% shareholder of a
privately held manufacturing company.

     Robert B. Hellman,  Jr., is a managing  director of MDC Management  Company
III, L.P.,  which is the general  partner of McCown De Leeuw & Co. III, L.P. and
McCown De Leeuw Offshore  (Europe) III, L.P. He is also managing director of MDC
Management Company IIIA, L.P., which is the general partner of McCown De Leeuw &
Co. (Asia),  L.P. These partnerships are engaged in investment  activities.  Mr.
Hellman  is also a member of The Gamma  Fund LLC,  a limited  liability  company
engaged in investment activities. Mr. Hellman has been associated with McCown De
Leeuw & Co.  since  1987.  From 1982 to 1985,  he worked for Bain &  Company,  a
management  consulting company.  Mr. Hellman has been a director of TeleSpectrum
since 1999.

     Chris  Frigon  received  an MBA from  Harvard  Business  School and a BS in
economics and computer  application from the University of Notre Dame. He worked
with McCown De Leeuw & Co. as a summer  associate in 1998 and joined the firm as
a Senior  Associate in 1999 after  completing  business  school.  Mr. Frigon was
promoted to principal in January  2001.  Prior to joining  McCown De Leeuw,  Mr.
Frigon was an associate with Investcorp  International limited in London and New
York. He also worked as an analyst at Morgan Stanley.

     Fred  Ordower has been a director of On Stage since  March,  2001,  and has
served as an advisor to the company  since July,  1998.  Mr.  Ordower has been a
Senior  Executive  of Fox  Family  Worldwide,  Inc.  since  August  1997.  Since
February,  1997,  Mr. Ordower has been the President of Evergreen  Events,  Inc.
which provides business  development and marketing  advisory services related to
the  convergence  of technology and  entertainment.  From 1992 through 1996, Mr.
Ordower  was  Executive  Vice  President  of  Universal   (formerly  MCA)  Music
Entertainment  Group,. From 1987 through 1992, Mr. Ordower was founder and chief
operating officer of Ogden Presents, and Vice President, Business Development of
Ogden Entertainment Services, both subsidiaries of a Fortune 500 conglomerate.

                                       22
<PAGE>

Compensation of Directors

     Directors  currently  are  not  paid a fee  for  their  services,  but  are
reimbursed for all reasonable expenses incurred in attending board meetings.  In
addition,  each  non-employee  director  will  receive  options to  purchase  an
aggregate of 10,000 shares of common stock each year that the director serves as
a director,  partially  contingent  upon the  director's  attendance at the four
scheduled board of directors  meetings during the year of grant.  One-quarter of
the  annual  option  grant  will vest as of each of the grant  year's  scheduled
meetings.


ITEM 10.  Executive Compensation.

                 <TABLE>
                             Executive Compensation

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

                                                Annual                Long Term
                                              Compensation           Compensation
                                              ------------           ------------
                                                                     Securities
                                                      Other Annual    Underlying    All Other
Name and Principal Position   Year    Salary   Bonus  Compensation   Options/SAR   Compensation
---------------------------   ----    -------  ------ -------------  ----------    ------------

Timothy J. Parrott.........   2000   $1           -       23,000(1)          -            -
  President and Chief
  Executive Officer

John W. Stuart.............   2000   $308,333  87,500(2)  24,612(3)           -            -
 Chairman and Chief           1999   $250,000     -       35,869(4)     300,000            -
 Executive Officer            1998   $250,000     -       35,869(4)      75,000            -

Jeffrey Victor.............   2000   $  33,461    -              -            -            -
 Vice President/Chief
 Executive Officer

David Hope.................   2000   $      -     -              -            -            -
 President and Chief          1999   $104,784     -        9,513(5)           -            -
 Operating Officer            1998   $207,308     -       19,578(6)      50,000            -

Kiran Sidhu................   2000          -     -              -            -            -
 Senior Vice President        1999   $ 55,659     -       50,359(7)     140,000(8)         -
 Chief Finanical Officer      1998   $157,385     -       14,993(9)      30,000            -
 and Treasurer

Gary Panter................   2000   $114,400     -       12,612(10)          -            -
 Senior Vice President        1999   $ 95,920     -       12,612(10)          -            -
 Operations                   1998   $102,370     -       13,627(11)     21,439            -

Gerard O' Riordan..........   1998   $106,664     -       14,424(12)          -            -

Richard Kanfer.............   1998   $109,154     -       14,791(13)           -            -

</TABLE>
1)   Represents housing and transportation  costs associated with staying in Las
     Vegas.
2)   Bonus paid in 2000 per employment agreement.
3)   Represents car and health allowance paid in 2000.
4)   Represents $11,971 in unused vacation time accrued but not paid and $23,898
     of car allowance and health allowances  accrued,  of which $14,895 was paid
     in 1999.  Does not include  $149,686  of rent  accrued for the leases to On
     Stage of which $76,028 was paid in 1999.
5)   Represents $9,519 payments made to Mr. Hope as a consultant for On Stage in
     connection with the restructuring of his employment.
6)   Represents  $6,346 in unused vacation time accrued but not paid and $13,232
     of car allowance accrued, of which $9,732 was paid in 1999.
7)   Includes $25,000 for unpaid insurance, car allowance and expenses;  $17,887
     for all accrued, but unused vacation pay; and a forgiveness of a promissory
     note in the amount of $7,472, all of which were paid in connection with the
     restructuring of Mr. Sidhu's employment.
8)   Represents 140,000 incentive stock options,  which were issued to Mr. Sidhu
     in exchange for his previously  issued stock options in connection with the
     restructuring of Mr. Sidhu's employment agreement.
9)   Represents  $5,393 in unused  vacation time accrued but not paid and $9,600
     of car allowance accrued, of which $6,100 was paid in 1999.
10)  Represents car and health allowance.
11)  Represents  $3,238 in unused vacation time accrued but not paid and $10,389
     of car  allowance  accrued of which  $8,639 was paid in 1999 and $11,050 of
     housing allowance payments.
12)  Represents $14,424 of car and health allowances paid in 1999
13)  Represents  $4,232 in unused vacation time accrued but not paid and $10,560
     of car allowances accrued, of which $7,560 was paid in 1999.


                                       23
<PAGE>

                                 Option Grants.

     The table below sets forth the grants of stock options to the persons named
in the Summary Compensation Table during the year ended December 31, 2000:

<TABLE>
                                                Option Grant in Last Fiscal Year
                                                                                                          Potential
                                                                                                         Realizable
                                                                                                          Value at
                                                                                                        Assumed Rate
                                            Percent of                                                    of Stock
                                           Options/SARS                                                     price
                                            Granted to                                                  Appreciation
 Name and Principal         Option         Employees in       Exercise       Expire        Potential     for Option
      Position              Granted        Fiscal Year          Price          Date           5%            Term
---------------------     ------------    ---------------    ------------    ---------     ---------    --------------
<S>                          <C>                <C>               <C>           <C>           <C>           <C>
Timothy J.                750,000(1)           4.4%             $0.50        01/01/03       $0.00           $0.00
Parrott...........
 President and Chief
 Executive Officer

Jeffrey                   200,000(2)           1.2%             $0.50        90 days        $0.00           $0.00
Victor................                                                         after
 Senior Vice President                                                        termination
 And Chief operating                                                         of
 Officer                                                                      employment
</TABLE>
(1) Issued in connection with his employment agreement.
(2) Issued in connection with his employment agreement.

Option Exercise and Fiscal Year-End Option Values

     The  following   table   summarizes   the  value  of  vested  and  unvested
in-the-money  options for the persons named in the Summary Compensation Table at
December  31, 2000.  Year-end  values are based upon a price of $1.01 per share,
which was the closing  market  price of a share of common  stock on December 31,
2000. No options were exercised by the named executive officers in 2000.

<TABLE>
                    Aggregated Option Exercise in Last Year and Year-End Option Values

                                                                                Value of Unexercised
                                       Number of Unexercised                   In-the-Money Options
                                    Options at December 31, 2000               at December 31, 2000
                                    ---------------------------------      ----------------------------

Name                                Exercisable      Unexercisable         Exercisable      Unexercisable
--------------------------          --------------   -----------------     -------------    -------------
<S>                                     <C>                 <C>                 <C>             <C>
John W. Stuart............            350,000             25,000            $    -           $    -
Gary Panter...............             35,000                  -            $    -           $    -
Timothy J. Parrott........            250,000            500,000            $128,900         $257,800
Jeffrey Victor............             50,000            150,000            $ 25,780         $ 77,340
-------
</TABLE>

                                       24
<PAGE>

ITEM 11. Security Ownership of Certain Beneficial Owners Management

     The  following  table sets forth certain  information  as of April 14, 2001
(except as otherwise noted) regarding the ownership of On Stage common stock:

     (1)  by each  person  known by us to be the  beneficial  owner of more than
          five percent of the outstanding common stock,

     (2)  by each director

     (3)  by each executive officer named in the Summary Compensation Table and

     (4)  by all current executive officers and directors as a group.

     Unless otherwise indicated, On Stage believes that all persons named in the
table have sole voting and investment power with respect to all shares of common
stock shown as beneficially  owned by them,  subject to community  property laws
where  applicable.  In accordance  with the rules of the Securities and Exchange
Commission,  a person is deemed to be the beneficial  owner of common stock that
can be acquired by that person  within 60 days,  upon the exercise of options or
warrants. Each beneficial owner's percentage ownership is determined by assuming
that  options and  warrants  that are held by that person (but not those held by
any other person) and which are exercisable  within 60 days have been exercised.
Percentages   herein  assume  a  base  of  11,307,930  shares  of  common  stock
outstanding  as of April 14, 2001.  The address of all officers and directors is
in care of On Stage at 4625 West Nevso, Las Vegas, NV 89103.

<TABLE>

                                            Number of Shares           Percentage of
Name                                        Beneficially Owned            Class
-------------------------------------    ------------------------     ----------------
<S>                                             <C>                           <C>
John W. Stuart .........................        3,551,155                  31.4%
David Hope (1)..........................          372,550                   3.3%
Kiranjit S. Sidhu (2)...................          145,625                   1.3%
Mel Woods (3)...........................           37,500                    *
Matt Gohd (4)...........................          137,500                   1.2%
Hanover Restaurants, Inc. (5)...........          595,238                   5.3%
Imperial Credit Industries, Inc (6).....          250,000                   2.2%
Timothy J. Parrott (7)..................        3,380,000                  29.9%
Jeffrey T. Victor (8)...................          200,000                   1.8%
Gary Panter(9)..........................           35,000                    *
ICCMIC(10)..............................        1,756,122                  15.5%
Fred Ordower(11).........................          75,000                    *
All executive officers and directors
as a group (9) persons/entities) .......       10,535,690                  93.2%
-------------------------
</TABLE>
*Less than one percent
(1)  Includes  372,550 shares of common stock and common stock issuable upon the
     exercise of options or warrants.
(2)  Includes  145,625 shares of common stock and common stock issuable upon the
     exercise of options or warrants.
(3)  Includes  37,500  shares of common  stock  issuable  upon the  exercise  of
     options.
(4)  Includes  137,500  shares of common  stock  issuable  upon the  exercise of
     options.
(5)  Includes  595,238  shares of common  stock  issuable  upon the  exercise of
     warrants.
(6)  Includes  250,000  shares of common  stock  issuable  upon the  exercise of
     warrants.
(7)  Includes  750,000  shares of common  stock  issuable  upon the  exercise of
     options.
(8)  Includes  200,000  shares of common  stock  issuable  upon the  exercise of
     options.
(9)  Includes  35,000  shares of common  stock  issuable  upon the  exercise  of
     options.
(10) Includes  325,000  shares of common  stock  issuable  upon the  exercise of
     warrants.
(11) Includes  75,000  shares of common  stock  issuable  upon the  exercise  of
     options.

                                       25
<PAGE>

ITEM 12. Certain Relationships and Related Transactions

     None.

ITEM 13.  Exhibits & Reports on Form 8-K

     (a) Exhibits

     The following is a list of exhibits  filed as part of this annual report on
Form 10-KSB.  Where so indicated by footnote,  exhibits,  which were  previously
filed,  are incorporated by reference.  For exhibits  incorporated by reference,
the location of the exhibit in the previous filing is indicated  parenthetically
except in those  situations  where the exhibit  number Was the same as set forth
below.

Exhibit
Number     Description
<TABLE>
<S>        <C>
3.1        Articles of Incorporation of the Registrant(1)
3.2        Bylaws of the Registrant(3)
4.1        Specimen Stock Certificate Representing the Common Stock(3)
4.2        Specimen Warrant Certificate Representing the Warrants(3)
4.3        Form of Public Warrant Agreement(3)
4.4        Form of Underwriter's Warrant Agreement(3)
10.1       Employment Agreement between the Registrant and John W. Stuart(1)
10.2       Employment Agreement between the Registrant and David Hope(1)
10.3       Employment Agreement between the Registrant and Kiranjit S. Sidhu(1)
10.4       Confidentiality and Non-Competition Agreement between the Registrant and John W.Stuart(1)
10.5       Confidentiality and Non-Competition Agreement between the Registrant and David Hope(1)
10.6       Confidentiality and Non-Competition Agreement between the Registrant and Kiranjit S Sidhu(1)
10.7       Amended and Restated 1996 Stock Option Plan(1)
10.8       Contribution Agreement between the Registrant and John W. Stuart(1)
10.9       Security and Pledge Agreement between the Registrant and John W. Stuart Relating toContribution of LVHE shares(1)
10.10      Security and Pledge Agreement between the Registrant and John W. Stuart relating to LVHE Litigation Indemnity(1)
10.11      Indemnification Agreement between the Registrant, John W. Stuart and Grand Strand Entertainment, Inc.(1)
10.12      Security and Pledge Agreement between the Registrant and John W. Stuart relating to Grand Strand Entertainment, Inc.
           Litigation Indemnity(1)
10.13      Promissory Note to John Stuart dated March 4, 1999 (5)
10.14      Entertainment Production Agreement between the Registrant, Imperial Palace, Inc. and John W. Stuart dated December, 1995
           (3) (Filed in redacted form pursuant to Rule 406 promulgated under the Securities Act. Filed separately in unredacted
           form subject to a request for confidential treatment pursuant to Rule 406 under the Securities Act.)
10.15      Agreement between the Registrant and Bally's Park Place, Inc. dated September 1, 1994 and subsequent renewal letters(3)
           (Filed in redacted form pursuant to Rule 406 promulgated under the Securities Act. Filed separately in unredacted form
           subject to a request for confidential treatment pursuant to Rule 406 under the Securities Act.)
10.16      Common Stock Purchase Agreement between Registrant and Interactive Events, Inc.(2)
10.17      (a) Show Production Agreement between the Registrant and Kurz Management(3)
10.18      Portions of 1998 Annual Report to Stockholders
10.19      Promissory Note to John Stuart dated April 5, 1999(5)
10.20      First Security Bank Agreement(5)
10.21      Common Stock Purchase Agreement with Whale Securities dated December 1998(5)
10.22      Common Stock Purchase Agreement between On Stage Entertainment, Inc. and Richard S. Kanfer(5)
10.23      Stock and Warrant Purchase Agreement between the Registrant and Purchasers dated March 13, 2001+
10.24      Investor Rights Agreement between the Registrant and Investors dated March 13, 2001+
10.25      Right of First Refusal and Co-Sale Agreement between the Registrant and Investors dated March 13, 2001+
10.26      Voting Agreement between the Registrant and  Key Holders dated March 13, 2001+
10.27      Advisory Services Agreement between the Registrant and MDC Management Company IV, L.P. dated March 13, 2001+
10.28      Co-Sale Agreement between the Registrant and Investors and Imperial Credit Commercial Mortgage Investment
           Corporation dated March 13, 2001+
10.29      Form of Series A Preferred Stock Warrant+
10.30      Form of Preferred Stock Warrant+
10.31      Lease Agreement between the Registrant and OFT, Ltd. dated March 2001+
10.32      Sub-Lease Agreement between the Registrant and Flashback, LLC dated March 2001+
21         Subsidiaries of the Registrant(5)
23.1       Consent of Independent Auditors+
------------------
</TABLE>
+    Filed herewith.
(1)  Filed as an exhibit to the Company's Registration Statement on Form SB-2 on
     April 7, 1997 (Registration No. 333-24681).
(2)  Filed  as an  exhibit  to  Amendment  No. 1 to the  Company's  Registration
     Statement on Form SB-2 on June 3, 1997(Registration No. 333-24681)
(3)  Filed  as an  exhibit  to  Amendment  No. 3 to the  Company's  Registration
     Statement on Form SB-2 on August 6,1997 (Registration No. 333-24681)
(4)  Reports on Form 8-K
(5)  Filed as an exhibit to On Stage's Form of 10-KSB filed on April 15, 1999.

     (b)  Reports  on Form 8-K were  filed by the  Company  on May 20,  2000 and
September  15, 2000 The reports  contained  information  regarding the a partial
restructuring  with ICCMIC and the sale and lease-back of its Legends Theater in
Surfside Beach, SC.

                                       26
<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.

                                          ON STAGE ENTERTAINMENT, INC.


Dated: April 13, 2001                     By:/s/ Timothy J. Parrott
                                             _____________________________
                                               Timothy J. Parrot, President and
                                               Chief Executive Officer


Dated: April 13, 2001                     By: /s/ Pedro Perez
                                             _________________________________
                                              Pedro Perez, Chief Accounting
                                              Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities and on the dates indicated.

<TABLE>
               <S>                                      <C>                                  <C>
            Signature                                  Title                                 Date

/s/ Timothy J. Parrott                      President and Chief Executive Officer       April 13, 2001
_______________________
Timothy J. Parrott

/s/ John W. Stuart                                 Chairman and Founder                 April 13, 2001
_______________________
John W. Stuart

/s/ Jeffrey Victor
_______________________                        Chief Operating Officer                  April 13, 2001
Jeffrey Victor

/s/ Pedro Perez
_______________________                        Chief Accounting Officer                 April 13, 2001
Pedro Perez

/s/ Gregory J. McIntosh
_______________________                              Director                           April 13, 2001
Gregory J. McIntosh

/s/ Robert B. Hellman, Jr.
_______________________                              Director                           April 13, 2001
Robert B. Hellman, Jr.

_______________________                              Director                           April __, 2001
Chris Frigon

/s/ Fred Ordawer
_______________________                              Director                           April 13, 2001
Fred Ordawer

</TABLE>

                  On Stage Entertainment, Inc. and Subsidiaries



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




                        Consolidated Financial Statements


                 For the Years Ended December 31, 1999 and 2000



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



<PAGE>

                  ON STAGE ENTERTAINMENT, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

<TABLE>


                                                         Page Number
<S>                                                         <C>
Report of Independent Certified Public Accountants          F-2

Consolidated Financial Statements
     Balance Sheets                                         F-3
     Statements of Operations                               F-4
     Statements of Stockholders' Equity (Deficit)           F-5
     Statements of Cash Flows                               F-7
     Summary of Accounting Policies                         F-10
     Notes to Financial Statements                          F-14

</TABLE>

<PAGE>
               Report of Independent Certified Public Accountants



Board of Directors and Stockholders of
On Stage Entertainment, Inc. and Subsidiaries

We have audited the accompanying consolidated balance sheets of On Stage
Entertainment, Inc. and subsidiaries as of December 31, 1999 and 2000, and the
related statements of operations, stockholders' equity (deficit) and cash flows
for each of the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of On Stage
Entertainment, Inc. and Subsidiaries at December 31, 1999 and 2000, and the
results of their operations and their cash flows for each of the years then
ended, in conformity with accounting principles generally accepted in the United
States of America.


                                              /s/ BDO SEIDMAN, LLP

Los Angeles, California
March 30, 2001

                                      F-2

<PAGE>
                  ON STAGE ENTERTAINMENT, INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
                                                                                     Years ended December 31,
                                                                                  --------------------------------
                                                                                      1999              2000
  <S>                                                                                 <C>                 <C>
                                                                                 --------------    --------------
Assets
Current assets
   Cash and cash equivalents                                                    $       374,587   $       517,353
   Accounts receivable, net                                                           1,249,619           561,239
   Inventory                                                                            234,579            89,996
   Deposits                                                                             198,523           166,092
   Prepaid and other assets                                                             238,274           291,652
   Notes receivable from officers (Note 8)                                              117,906                 -
                                                                                  --------------    --------------
Total current assets                                                                  2,413,488         1,626,332
                                                                                  --------------    --------------
Property, equipment and leasehold improvements (Notes 1 and 2)                       23,720,804         6,185,424
Less:  Accumulated depreciation and amortization                                     (5,176,244)       (5,346,133)
                                                                                  -------------    --------------
Property, equipment and leasehold improvements, net                                  18,544,560           839,291
                                                                                  --------------    --------------
Direct acquisition costs (Note 9)                                                       597,328           100,000
Deferred financing costs, net of  amortization of $80,813 (Note 2)                      927,190                 -
                                                                                  --------------    --------------
                                                                                $    22,482,566 $       2,565,623
                                                                                  --------------    --------------
Liabilities and Stockholders' Equity (Deficit)

Current liabilities

   Working capital line (Note 3)                                                $       459,146 $               -
   Accounts payable and accrued expenses                                              1,444,878         1,625,040
   Accrued payroll and other liabilities                                              3,937,951         1,316,329
   Convertible debentures (Note 4)                                                            -           700,000
   Current maturities of long-term debt (Notes 2 and 3)                              15,398,282           600,000
                                                                                  --------------    --------------
Total current liabilities                                                            21,240,257         4,241,369
Long-term debt, less current maturities (Notes 2 and 3)                                  30,773           551,798
                                                                                  --------------    --------------
Total liabilities                                                                    21,271,030         4,793,167
                                                                                  --------------    --------------
Commitments and contingencies (Note 5)

Stockholders' equity (deficit) (Notes 2 and 6)
   Preferred stock, par value $.01 per share, 10,000,000 shares authorized;
   none issued and outstanding                                                                -                 -
   Common stock; par value $0.01 per share; authorized 100,000,000 shares;
   7,226,808 and 11,307,930 shares issued and outstanding                                72,268           113,079
   Additional paid-in capital                                                        11,430,336        12,652,111
   Accumulated deficit                                                              (10,291,068 )     (14,992,734)
                                                                                  --------------    --------------
Total stockholders' equity (deficit)                                                  1,211,536        (2,227,544)
                                                                                  --------------    --------------
                                                                                $    22,482,566   $     2,565,623
                                                                                  --------------    --------------
</TABLE>
          See accompanying summary of accounting policies and notes to
                       consolidated financial statements.

                                      F-3

<PAGE>
                  ON STAGE ENTERTAINMENT, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
                                                                                     Years Ended December 31,
                                                                                  -------------------------------
                                                                                      1999              2000
                                                                                  -------------     -------------
<S>                                                                                     <C>             <C>
Net revenues                                                                    $   28,548,642    $   24,137,441
Cost of revenues                                                                    22,176,869        20,593,397
                                                                                  -------------     -------------
Gross profit                                                                         6,371,773         3,544,044
                                                                                  -------------     -------------
Operating expenses
   Selling, general and administrative                                               4,351,801         4,155,991
   Depreciation and amortization                                                     1,244,148         1,076,504
   Expenses at closed locations (Note 9)                                               426,954           608,878
                                                                                  -------------     -------------
Total operating expenses                                                             6,022,903         5,841,373
                                                                                  -------------     -------------
Operating income (loss)                                                                348,870        (2,297,329)
Other income                                                                          (440,418)         (333,657)
Loss on disposal of assets (Note 10)                                                         -         1,575,628
Interest expense, net (Notes 3 and 4)                                                2,879,627         1,212,097
                                                                                 -------------     -------------
Loss before income taxes and extraordinary item                                     (2,090,339)       (4,751,397)
Income taxes (Note 11)                                                                       -            91,391
                                                                                  -------------     -------------
Loss before extraordinary item                                                      (2,090,339)       (4,842,788)
Extraordinary item - trouble debt restructure gain, net (Note 2)                             -           141,122
                                                                                  -------------     -------------
Net loss                                                                        $   (2,090,339)   $   (4,701,666)
                                                                                  -------------     -------------
Basic and diluted loss per share from continuing operations                     $         (.29)   $         (.58)
                                                                                  -------------     -------------
Basic and diluted income per share from extraordinary item                      $            -    $          .01
                                                                                  -------------     -------------
Basic and diluted loss per share                                                $         (.29)   $         (.57)
                                                                                  -------------     -------------
Basic and diluted average number of common shares outstanding                        7,293,815         8,298,336
                                                                                  -------------     -------------
</TABLE>
          See accompanying summary of accounting policies and notes to
                       consolidated financial statements.


                                      F-4
<PAGE>
                  ON STAGE ENTERTAINMENT, INC. AND SUBSIDIARIES
            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

                  <TABLE>

                                                                                   Accumulated
                                             Common Stock                              Other
                                        -----------------------                    Comprehensive
                                           Shares       Amount       Capital           Income
                                        -----------   ---------   ------------   -----------------
<S>                                        <C>           <C>           <C>                 <C>
Balance, December 31, 1998              $7,452,350    $  74,523   $11,254,587     $     67,289

Issuance of common stock in connection
   with Whale Securities Co.               150,000        1,500        98,550                -
Issuance of common stock in connection
   with litigation settlement                8,471           85         8,915                -
Issuance of common stock in connection
   with Hawaii settlement                  250,000        2,500       107,000                -
Cancellation of shares in connection
   with Interactive Events                 (30,304)        (303)      (29,817)               -
Cancellation of shares in connection
   with Gedco Acquisition                 (595,238)      (5,952)            -                -
Cancellation of shares in connection
   with litigation settlement               (8,471)         (85)       (8,889)               -
Comprehensive loss:
  Net loss for the year                          -             -            -                -
   Currency exchange adjustment                  -             -            -          (67,289)
Comprehensive loss                               -             -            -                -
                                         -----------   ---------   ------------   -----------------

Balance, December 31, 1999              $7,226,808     $ 72,268    $11,430,336               -

Issuance of common stock in connection
  with Debt Restructuring with ICCMIC
  (Notes 2 and 6)                        4,061,122        40,611    1,177,725                 -
Issuance of common stock in connection
  with services rendered                    20,000           200        6,050                 -
Beneficial conversion feature (Note 4)           -             -       38,000                 -
Net loss for the year                            -             -            -                 -
                                         -----------   ---------   ------------   -----------------
Balance, December 31, 2000             $11,307,930    $  113,079   $12,652,111    $           -
                                        ============  ==========  =============     ===============
</TABLE>

See  accompanying  summary  of  accounting  policies  and notes to  consolidated
financial statements.

                                      F-5


<PAGE>
                  ON STAGE ENTERTAINMENT, INC. AND SUBSIDIARIES
         CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) - Continued
<TABLE>

                                        Accumulated    Comprehensive
                                          Deficit          Loss            Total
                                        -----------    -------------   ------------
<S>                                        <C>              <C>           <C>
Balance, December 31, 1998             $(8,200,729)    $          -     $3,195,670

Issuance of common stock in connection
   with Whale Securities Co.                     -                -        100,050
Issuance of common stock in connection
   with litigation settlement                    -                -          9,000
Issuance of common stock in connection
   with Hawaii settlement                        -                -        109,050
Cancellation of shares in connection
   with Interactive Events                       -                -        (30,120)
Cancellation of shares in connection
   with Gedco Acquisition                        -                -         (5,952)
Cancellation of shares in connection
   with litigation settlement                    -                -         (8,984)
Comprehensive loss:
  Net loss for the year                 (2,090,339)      (2,090,339)    (2,090,339)
   Currency exchange adjustment                  -          (67,289)       (67,289)
Comprehensive loss                               -                -              -
                                         -----------     -----------    -----------
Balance, December 31, 1999             $(10,291,068)     $(2,157,628)   $1,211,536

Issuance of common stock in connection
  with Debt Restructuring with ICCMIC
  (Notes 2 and 6)                                -                 -     1,218,336
Issuance of common stock in connection
  with services rendered                         -                 -         6,250
Beneficial conversion feature (Note 4)           -                 -        38,000
Net loss for the year                   (4,701,666)      $(4,701,666)   (4,701,666)
                                         -----------     -----------    -----------
Balance, December 31, 2000             $(14,992,734)                   $(2,227,544)
                                       ============                     ===========
</TABLE>

   See accompanying summary of accounting policies and notes to consolidated
                             financial statements.

                                      F-6

<PAGE>
                  ON STAGE ENTERTAINMENT, INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                Increase (Decrease) in Cash and Cash Equivalents

<TABLE>
                                                                                        Years ended December 31,
                                                                                  --------------------------------
<S>                                                                                    <C>              <C>
                                                                                      1999              2000
                                                                                  --------------    --------------
Cash flows from operating activities
   Net loss                                                                     $    (2,090,339)    $  (4,701,666)
   Adjustments to reconcile net loss to net cash provided by (used in)
   operating activities:
   Common stock issued for services                                                           -             6,250
   Beneficial conversion                                                                      -            38,000
   Depreciation and amortization                                                        893,318         1,076,504
   Write off of direct acquisition costs                                                      -           597,328
   Extraordinary gain on debt restructure                                                     -          (141,122)
   Loss on disposal of property, plant and equipment                                    (63,056)        1,575,628
   Increase (decrease) from changes in operating assets and liabilities:
     Accounts receivable                                                                  3,594           688,380
     Inventory                                                                            8,834           144,583
     Deposits                                                                           (76,180)           32,431
     Prepaid and other assets                                                           356,503           (53,378)
     Accounts payable and accrued expenses                                           (1,088,370)          180,162
     Accrued payroll and other liabilities                                            2,046,027           693,451
                                                                                  --------------    --------------
Total adjustments                                                                     2,080,670         4,838,217
                                                                                  --------------    --------------
Net cash provided by (used in) operating activities                                      (9,669)          136,551
                                                                                  --------------    --------------
Cash flows from investing activities
   Proceeds from sale of assets                                                               -         2,000,000
   (Advances on) proceeds received on notes receivable from officers                    (40,576)          117,906
   Capital expenditures                                                                (254,952)         (125,288)
   Capital dispositions                                                                 705,257                 -
   Payment for acquisitions, net of cash acquired                                      (487,828)         (100,000)
                                                                                  --------------    --------------
Net cash provided by (used in) investing activities                                     (78,099)        1,892,618
                                                                                  --------------    --------------
Cash flows from financing activities:
   Repayment on long-term borrowing                                                     (39,657)       (2,127,257)
   Repayment on working capital line                                                   (540,517)         (459,146)
   Proceeds received from convertible debentures                                              -           700,000
   Net proceeds from sale of common stock and warrants                                  100,050                 -
                                                                                  --------------    --------------
Net cash provided by (used in) financing activities                                    (480,124)       (1,886,403)
                                                                                  --------------    --------------
Effect of exchange rate changes on cash and cash equivalents                            (67,289)                -
                                                                                 --------------    --------------
Net increase (decrease) in cash and cash equivalents                                   (635,181)          142,766
Cash and cash equivalents at beginning of year                                        1,009,768           374,587
                                                                                  --------------   --------------
Cash and cash equivalents at end of year                                        $       374,587   $       517,353
                                                                                  --------------    --------------
Supplemental Disclosure of Cash Flow Information Cash paid during the year for:
   Interest                                                                     $       502,942   $     2,020,926
   Taxes                                                                        $             -   $        91,391
                                                                                  --------------    --------------
</TABLE>
                                      F-7
<PAGE>

Supplemental Schedule of Non-Cash Investing and Financing Activities

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

On April 23, 1999, On Stage granted it securities counsel,  Nida & Maloney, P.C.
an option to purchase 40,000 shares of common stock at a purchase price of $1.00
per share as payment for  $38,469 in legal  services  performed  for On Stage by
Nida & Maloney, P.C.

On May 7, 1999, On Stage issued 8,471 shares of common stock valued at $1.06 per
share to Jim Owen, a former performer with On Stage. These shares were issued in
connection  with the  resolution of  litigation  that arose between On Stage and
Owen with regard to the right to the use of certain photographs taken of Owen by
On Stage.  On December 8, 1999, the 8,471 shares were returned to the Company in
full settlement of $6,000.

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


                                      F-8
<PAGE>


Supplemental Schedule of Non-Cash Investing and Financing Activities (Continued)

On  September  14,  1999,   250,000   shares  were  issued  to  John  Stuart  in
consideration  for his personal  guaranty to fulfil the settlement  terms in the
Hawaiian Litigation.

In June 2000,  ICCMIC foreclosed on $7,000,000 of debt on properties with assets
having a net book value of $13,918,309.  The Company  correspondingly  wrote off
debt financing costs of $927,190.

On October 12, 2000,  4,061,122 shares were issued to ICCMIC in exchange for its
remaining outstanding debt to the Company.






                                      F-9

<PAGE>
                  ON STAGE ENTERTAINMENT, INC. AND SUBSIDIARIES
                         SUMMARY OF ACCOUNTING POLICIES

BUSINESS ACTIVITY

On  Stage   Entertainment,   Inc.  (the  "Company")   produces  and  sells  live
entertainment  and operates live  theaters and dinner  theaters  worldwide.  The
Company has continuous  running shows in gaming and resort venues in California,
Florida,  Missouri,  Mississippi,  Nevada,  New Jersey and South  Carolina.  The
Company was incorporated on October 30, 1985 in the state of Nevada.

PRINCIPLES OF CONSOLIDATION

The financial statements include the amounts of On Stage Entertainment,  Inc., a
publicly   traded  Nevada   corporation   (the   "Company"  or  "OSE")  and  its
subsidiaries,  Legends in Concert,  Inc., a Nevada corporation ("LIC"); On Stage
Marketing, Inc., a Nevada corporation ("Marketing");  On Stage Theaters, Inc., a
Nevada  corporation  ("Theaters");   Wild  Bill's  California,  Inc.,  a  Nevada
corporation  ("Wild  Bills");  Fort Liberty,  Inc., a Nevada  corporation  ("Ft.
Liberty"); Blazing Pianos, Inc., a Nevada corporation ("Blazing");  King Henry's
Inc., a Nevada  corporation  ("King  Henry's");  On Stage  Merchandise,  Inc., a
Nevada corporation ("Merchandise");  On Stage Events, Inc., a Nevada corporation
("Events"); On Stage Casino Entertainment, Inc. a Nevada corporation ("Casino");
On Stage Productions,  Inc., a Nevada corporation ("Productions");  and On Stage
Theaters North Myrtle Beach,  Inc., a Nevada  corporation  ("North Myrtle");  On
Stage  Theaters  Surfside  Beach,  Inc.,  a  Nevada  corporation   ("Surfside");
(collectively,  the "Subsidiaries").  All significant intercompany  transactions
and balances have been eliminated in  consolidation.  The consolidated  group is
referred to  collectively  and  individually  as the  "Company."  The results of
operations  include King Henry's and Ft. Liberty through June 21, 2000, the date
on which they were closed (see Note 2).

ACCOUNTS RECEIVABLE

Accounts  receivable and revenue are recorded as the stage  productions are run.
Accounts  receivable  represents cash collected  subsequent to the date on which
the show ran.

ESTIMATES

The preparation of financial  statements in conformity  with generally  accepted
accounting principles requires management to make estimates and assumptions that
affect the  reported  amounts  of assets  and  liabilities  and  disclosures  of
contingent assets and liabilities at the date of the financial statement and the
reported  amounts of revenues and expenses during the reporting  period.  Actual
results could differ from those estimates.

INVENTORY

Inventory consists of various stage and lighting supplies and are stated at cost
on a first-in, first-out basis.

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property and  equipment are stated at cost.  Expenditures  for  maintenance  and
repairs  are  charged  to  expense  as  incurred.  Renewals  or  betterments  of
significant items are capitalized.  When assets are sold or otherwise  disposed,
the cost and related  accumulated  depreciation or amortization are removed from
the respective accounts, and any resulting gain or loss is recognized.


                                      F-10

<PAGE>

PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS (Continued)

Depreciation  and  amortization  of property and  equipment  purchased  prior to
January 1, 1996 are  provided  using  accelerated  methods  while  property  and
equipment  purchased  from January 1, 1996 are  depreciated  on a straight  line
basis  over  the  estimated   useful  lives,  as  indicated   below.   Leasehold
improvements  are amortized over the lesser of the related assets useful life or
the remaining lease term.

                                                      Years
                                               --------------------

Buildings                                             20-30
Stage equipment                                        3-7
Scenery and wardrobe                                   3-7
Furniture and fixtures                                 3-7
Vehicles                                               3-5
Leasehold improvements                                 5-10

IMPAIRMENT OF LONG-LIVED ASSETS

The Company  follows the guidelines set forth in SFAS No. 121,  "Accounting  for
the  Impairment of Long-Lived  Assets and  Long-Lived  Assets to be Disposed Of"
("SFAS  121")  when  reviewing  its  long-lived   assets  and  certain   related
intangibles for impairment  whenever changes in circumstances  indicate that the
carrying  amount of an asset may not be fully  recoverable.  The  measurement of
impairment  losses to be recognized is based on the difference  between the fair
value and the carrying amount of the assets.  Impairment  would be recognized in
operating results if a diminution in value occurred.

STOCK BASED COMPENSATION

Statements  of  Financial   Accounting   Standards  No.  123,   "Accounting  for
Stock-Based  Compensation"  ("SFAS No. 123")  establishes a fair value method of
accounting for stock-based  compensation  plans and for transactions in which an
entity  acquires  goods or services  from  non-employees  in exchange for equity
instruments.  The Company adopted this  accounting  standard on January 1, 1996.
SFAS  No.  123  also  encourages,  but  does not  require  companies  to  record
compensation cost for stock-based employee compensation.  The Company has chosen
to continue to account for  stock-based  compensation  utilizing  the  intrinsic
value  method  prescribed  in  Accounting   Principles  Board  Opinion  No.  25,
"Accounting for Stock Issued to Employees,  and comply with pro forma disclosure
requirements."  Accordingly,  compensation cost for stock options is measured as
the excess,  if any, of the fair market price of the Company's stock at the date
of grant over the amount an employee must pay to acquire the stock.

LOSS PER SHARE

Statement of Financial  Accounting  Standard No. 128 provides a different method
of calculating  earnings per share than is currently used in accordance with APB
15,  Earnings  per Share.  SFAS 128 provides  for the  calculation  of Basic and
Diluted earnings per share. Basic earnings per share includes no dilution and is
computed by dividing  income  available to common  shareholders  by the weighted
average number of common shares outstanding for the period. Diluted earnings per
share  reflects the  potential  dilution of  securities  that could share in the
earnings of the entity, similar to fully diluted earnings per share.

For the years ended  December 31, 1999 and 2000,  potential  diluted  securities
representing  4,885,755 and 5,850,005  outstanding  options and warrants are not
included since their effect would be anti-dilutive.


                                      F-11

<PAGE>


FAIR VALUE OF FINANCIAL INSTRUMENTS

Statement of Financial  Accounting  Standards No. 107,  "Disclosures  about Fair
Value of  Financial  Statements",  ("SFAS No.  107")  issued by the FASB  became
effective December 31, 1995. This statement requires the disclosure of estimated
fair  values  for all  financial  instruments  for  which it is  practicable  to
estimate fair value.

The  carrying  amounts  of  financial   instruments   including  cash,  accounts
receivable,   current  maturities  of  long-term  debt,  and  accounts  payable,
approximate fair value because of their short maturity.

The carrying amount of long-term debt and  convertible  debt  approximates  fair
value because the interest rates on these  instruments  approximate the rate the
Company could borrow at December 31, 2000.

INCOME TAXES

The Company follows Statement of Financial  Accounting  Standards No. 109 ("SFAS
No.  109"),  "Accounting  for Income  Taxes." SFAS No. 109 requires an asset and
liability  approach to providing  deferred  income taxes and specifies  that all
deferred  tax  balances be  determined  by using the tax rate  expected to be in
effect when the taxes will actually be paid or refunds received.

CASH EQUIVALENTS

The Company considers all liquid assets with an initial maturity of three months
or less to be cash and/or cash equivalents.

FOREIGN CURRENCY TRANSLATION

Assets and  liabilities  of the Company's  foreign  affiliates are translated at
current  exchange  rates,  while revenue and expenses are  translated at average
rates  prevailing  during the year.  Translation  adjustments  are reported as a
component of other comprehensive income in stockholders' equity. As indicated in
Note 9, the foreign operations were closed during 1999.

CONCENTRATION OF CREDIT RISK

The  Company  places  its cash  and  temporary  cash  investments  with  banking
institutions.  At December 31, 1999,  the Company had $176,000 on deposit at one
bank. At December  2000, the Company had $194,600 and $125,300 on deposit at two
different  banks.  Account  balances  at an  individual  bank are insured by the
Federal Deposit Insurance Corporation (FDIC) up to $100,000.

SEGMENT REPORTING

Statement of Financial Accounting Standards No. 131, "Disclosures about Segments
of an Enterprise and Related Information" ("SFAS No. 131") issued by the FASB is
effective for financial  statements  with fiscal years  beginning after December
15, 1997.  Earlier  application  is  permitted.  SFAS No. 131 requires  that the
public companies report certain information about operating segments,  products,
services and geographical areas in which they operate and their major customers.
The Company  adopted SFAS No. 131 on January 1, 1998 and it had no effect on its
financial position or results of operations;  however, disclosures on certain of
these items was expanded (See Note 13).

                                      F-12
<PAGE>


NEW ACCOUNTING STANDARDS

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

In December  1999, the SEC staff  released  Staff  Accounting  Bulletin No. 101,
"Revenue  Recognition  in Financial  Statements"  ("SAB 101").  SAB 101 provides
interpretive guidance on the recognition, presentation and disclosure of revenue
in the financial statements. SAB 101 must be applied to the financial statements
no later than the fourth quarter of fiscal years ending after December 15, 2000.
The Company  adopted SAB 101 during the year ended December 31, 2000, and it had
no impact on the Company's  financial position or results of operations and cash
flows.

In March 2000, the Financial  Accounting  Standards Board issued  Interpretation
No.  44  ("FIN  44")  Accounting  for  Certain   Transactions   Involving  Stock
Compensation,  an  Interpretation  of APB Opinion No. 25. FIN 44  clarifies  the
application  of APB No. 25 for (a) the  definition  of employee  for purposes of
applying APB No. 25, (b) the criteria for  determining  whether a plan qualifies
as  a  non-compensatory  plan,  (c)  the  accounting   consequences  of  various
modifications  to the terms of a previously fixed stock option or award, and (d)
the  accounting  for an  exchange  of stock  compensation  awards in a  business
combination.  FIN 44 is effective  July 2, 2000, but certain  conclusions  cover
specific  events that occur after either December 15, 1998, or January 12, 2000.
During  the  year  ended  December  31,  2000,  the  Company  adopted  FIN 44 in
accounting for stock options.

RECLASSIFICATIONS

Certain 1999 amounts have been reclassified to conform to the 2000 presentation.



                                      F-13
<PAGE>
NOTE 1 - PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS

Property, equipment and leasehold improvements consist of the following:
<TABLE>
                                                                                           December 31,
                                                                               --------------------------------------
 <S>                                                                                 <C>                    <C>
                                                                                     1999                 2000
                                                                                -----------------    -----------------
Land                                                                         $       11,878,594   $                -
Buildings                                                                             4,335,632                    -
Stage equipment                                                                       3,737,433            3,127,015
Scenery and wardrobe                                                                  1,469,733            1,332,121
Furniture and fixtures                                                                  938,582              830,808
Vehicles                                                                                 14,557                8,234
Leasehold improvements                                                                1,346,273              887,246
                                                                               -----------------    -----------------

                                                                                     23,720,804            6,185,424
Less accumulated depreciation and amortization                                       (5,176,244)          (5,346,133)
                                                                               -----------------    -----------------
Total property, equipment and leasehold improvements, net                    $       18,544,560   $          839,291
                                                                               -----------------    -----------------
</TABLE>

NOTE 2 - DEBT RESTRUCTURE

On May 1, 2000,  the Company  entered into a partial  settlement  with its first
mortgage  lender,   Imperial  Credit   Commercial   Mortgage   Investment  Corp.
("ICCMIC"), pursuant to which the Company agreed not to take measures to prevent
ICCMIC from foreclosing upon the Fort Liberty, King Henry's Feast and Legends in
Concert  Surfside Beach  theaters in exchange for an aggregate  credit of $9.0mm
for its Fort  Liberty  ($3.0mm),  King  Henry's  Feast  ($4.0mm)  and Legends in
Concert Surfside Beach ($2.0mm)  theaters.  Additionally,  the Company agreed to
operate the King Henry's and Fort Liberty Theaters until June 21, 2000, at which
time the theaters were closed to the public.  In connection with the transfer of
assets to  ICCMIC,  the  Company  recorded a loss of  approximately  $1,600,000,
representing  the write down of the carrying  value to its estimated fair market
value.

On  September  15,  2000,  On Stage was able to sell the assets of the  Surfside
Beach  Theater  independently  and used the  proceeds  to pay off its debt  with
ICCMIC (see Note 10).

On October 12, 2000, On Stage  restructured its remaining debt with ICCMIC,  and
First  Security  Bank of  Nevada  ("First  Security").  Under  the  terms of the
agreement, ICCMIC agreed to convert its outstanding loan and accrued interest of
approximately $8.2 million for 4,061,122 shares of common stock worth $1,218,336
based on the market value at that date. As part of the  transaction,  Timothy J.
Parrott, the new President and CEO of On Stage,  purchased 2,630,000 shares from
ICCMIC for $1.0  million.  As a result of the  restructured  debt,  the  Company
recorded a net gain on debt restructuring of $141,122.

Furthermore,  the Company  restructured its remaining debt of approximately $1.2
million  with  First  Security.  Under the  terms of the  agreement  with  First
Security,  effective  August 1,  2000,  On Stage is paying  $50,000  per  month,
maturing  September 1, 2002. The loan accrues interest at the rate of prime plus
2% (9.5% at December 31, 2000).


                                      F-14
<PAGE>


NOTE 3 - NOTES PAYABLE AND LONG-TERM DEBT

WORKING CAPITAL LINE

In May 1997,  First  Security  issued a line of credit to the  Company for up to
$250,000. Borrowings under such facility bear variable interest at 1.5% over the
First  Security Bank of Idaho's  index.  On September 28, 1998,  First  Security
increased  the line of credit from  $250,000 to  $1,000,000.  As of December 31,
1999, the balance  outstanding was $459,146,  which was repaid during 2000. This
line of credit was personally guaranteed by an officer of the Company.

In August 2000,  as part of the  restructuring,  the Company  entered into a new
agreement  with First  Security,  which  converted the  remaining  capital lease
obligations  into a note due on September 1, 2002.  On Stage is required to make
$50,000 monthly payments which increase upon meeting certain income criteria.

Long-term debt consists of the following:
<TABLE>
                                                                                             December 31,
                                                                                    --------------------------------
                                                                                        1999               2000
                                                                                    --------------      ------------
<S>                                                                                     <C>                 <C>
ICCMIC Mortgage Loan (see Note 2)                                                 $    14,150,000     $           -

Capital lease obligations with interest ranging from 9.7% to 30.7% due in
   monthly installments ranging from $265 to $18,202, including interest various
   maturities dates, secured by office communication equipment, and
   production equipment                                                                 1,279,055                 -

First Security Bank debt with a interest rate of Prime plus 2% (9.5% at December
   31, 2000) due in monthly installments of approximately $50,000
   maturing September 1, 2002 secured by first lien position                                    -         1,151,798
                                                                                    --------------      ------------

Total long-term debt                                                                   15,429,055         1,151,798

Less current maturities                                                                15,398,282           600,000
                                                                                    --------------      ------------

                                                                                  $        30,773     $     551,798
                                                                                    --------------      ------------
</TABLE>
As of December 31, 2000 the future minimum principal debt payments are as
follows:


                                                        Notes
Year ending December 31,                               Payable
--------------------------------                    ------------
         2001                                     $     600,000
         2002                                           551,798
                                                    ------------
    Total                                         $   1,151,798
                                                    ------------

NOTE 4 - CONVERTIBLE DEBENTURES

In December 2000, On Stage completed a $700,000 private placement in the form of
convertible  debentures  with a 10% stated  interest  rate and $0.79  conversion
price.  These funds were used for a combination of working capital  requirements
and expenses associated with On Stage's restructuring completed in October 2000.
The  market  price of the stock in  relation  to the  conversion  price of these
convertible  debentures created a beneficial conversion amount of $38,000, which
was booked as interest expense for the year ended December 31, 2000.

                                      F-15
<PAGE>


NOTE 5 - COMMITMENTS AND CONTINGENCIES

Leases

The Company leases various offices, condominiums,  warehouses and theaters under
operating  leases ranging in monthly  payments from $1,026 to $37,495.  Rent and
lease expense included in cost of revenues for the years ended December 31, 1999
and 2000 was $1,248,961  and  $1,129,267,  respectively.  Rent and lease expense
included in  selling,  general  and  administrative  expense for the years ended
December 31, 1999 and 2000 was $268,870 and $216,827, respectively.

The total minimum rental commitment at December 31, 2000 is as follows:

 Year ending December 31,                             Amount
 --------------------------------                 --------------
    2001                                           $  1,930,844
    2002                                              1,747,087
    2003                                              1,787,785
    2004                                              1,430,078
    2005 and Thereafter                               7,436,894
                                                  --------------
                                                   $ 14,332,688
                                                  --------------
Employment Contracts

On October 12,  2000,  the Company  renewed the  employment  agreement  with the
principal  stockholder,  John W. Stuart,  to employ him as its Chairman of Board
and  Founder  until  October  12,  2003.  In  accordance  with  this  employment
agreement,  Mr.  Stuart will  receive an annual  salary of $350,000  and will be
eligible to  participate  each  calendar  year in  executive  annual  bonus plan
approved by the Board. In no event will the executive  annual bonus be less than
$150,000.

On October 12, 2000,  the Company  entered into an agreement  with the principal
stockholder,  Timothy  J.  Parrott,  to employ  him as its  President  and Chief
Executive  Officer until October 12, 2003.  In accordance  with this  employment
agreement,  Mr. Parrott will receive an annual salary of $1.00 per the period of
the date of this  agreement  through  December  31,  2000,  and $120,000 for the
period  January 1, 2001 through  December 31, 2001,  and an annual  salary to be
determined by the compensation  committee of the Board for the period of January
1, 2002 through December 31, 2002. Additionally, Mr. Parrott was granted 750,000
options to purchase  the  Company's  common  stock at a strike  price of $.50 as
further consideration for his employment.

Aggregate commitments related to employment contracts are as follows:

Year ending December 31,                         Amount
---------------------------------            -------------

       2001                                   $  620,000
       2002                                      500,000
       2003                                      500,000


                                      F-16
<PAGE>


NOTE 5 - COMMITMENTS AND CONTINGENCIES (Continued)

Legal Proceedings

The Company is a party to various legal proceeding in the ordinary course of its
business.  The Company  believes that the nature of the  proceedings are typical
for a company of its size and scope in the entertainment industry, and that none
of  these  proceedings  are  material  to its  financial  position,  results  of
operations and changes in cash flows.

NOTE 6 - STOCKHOLDER'S EQUITY

On May 27, 1999, Hanover  Restaurants,  Inc. returned 595,238 shares of On Stage
common stock  originally  issued to Hanover in  connection  with the Gedco asset
acquisition  in 1998.  The Hanover  Shares  were  returned to On Stage under the
terms of a Mutual Release and Settlement Agreement, which was entered with Gedco
as a  result  of a  dispute  that  arose in  connection  with  the  Gedco  asset
acquisition.  In exchange for the return of the Hanover  shares,  On Stage:  (1)
granted  Hanover a  warrant  to  purchase  595,238  shares of common  stock at a
purchase  price of $1.50  (the  fair  market  value at date of  grant);  and (2)
released its claim to  approximately  $925,000 which was being held in escrow as
security for those  representations and warranties made by Gedco representatives
in connection with the Gedco asset acquisition.

On October  30,  2000,  the  Company  issued  20,000  shares of common  stock in
connection with services rendered. The fair market value at date of issuance was
$.3125 per share.

1996 Stock Option Plan

The Board of Directors  and the  Company's  then sole  stockholder  approved the
Company's  Incentive  Stock Option Plan on August 7, 1996 (the  "Option  Plan").
Pursuant to an amendment to the Option Plan,  effected in 2000,  an aggregate of
1,650,000  shares of common stock have been  reserved  for issuance  pursuant to
options  granted and available for grant under the Option Plan.  The Option Plan
is designed  to further the  interests  of the  Company by  incentivizing  their
employees  to continue to work for the  betterment  of the Company in return for
sharing in the success of the Company through the Option Plan.

Under the Option Plan, a committee (the  "Committee")  has been appointed by the
Board of Directors to  administer  the Option Plan and is  authorized,  to grant
options thereunder to all eligible  employees of the Company,  including certain
officers and directors of the Company as well as to others providing services to
the Company.  The Option Plan provides for the granting of both:  (I) "incentive
stock  options" as defined in Section 422 of the Internal  Revenue Code of 1986,
as  amended,  which are  intended  to qualify  for  special  federal  income tax
treatment ("ISOs") to employees  (including officers and employee directors) and
(ii)  "non-qualified  stock options" ("NQSOs") to employees  (including officers
and employee directors) non-employee directors, and consultants.  Options can be
granted  under the Option Plan on such terms and at such prices as determined by
the Committee,  except that in the case of ISOs, the per share exercise price of
such  options  cannot be less than the fair market  value of the Common Stock on
the date of grant.  In the case of an ISO granted to a 10%  stockholder  (a "10%
Stockholder"),  the per share  exercise  price  cannot be less than 110% of such
fair  market  value.  To the extent  that the grant of an option  results in the
aggregate fair market value of the shares with respect to which  incentive stock
options are  exercisable  by a grantee for the first time in any  calendar  year
exceed $100,000, such option will be treated under the Option Plan as an NQSO.


                                      F-17
<PAGE>


NOTE 6 - STOCKHOLDER'S EQUITY (Continued)

Options granted under the Option Plan will become  exercisable  after successful
completion of the vesting period or periods  specified in each option agreement.
Except as otherwise  determined by the Committee,  options become exercisable as
to  one-third of the shares  subject to the option on each of the first,  second
and third  anniversaries  of the date of grant of the  option.  Options  are not
exercisable,  however,  after the expiration of ten years from the date of grant
(or  five  years  from  such  date  in  the  case  of an  ISO  granted  to a 10%
Stockholder)  and  are not  transferable  other  than by will or by the  laws of
descent and distribution.

Except as the Committee may determine with respect to NQSOs, if the holder of an
option granted under the Option Plan ceases to be an employee,  options  granted
to such holder shall  terminate  three months (12 months if the termination is a
result of the death or disability of the employee)  from the date of termination
of employment and shall be  exercisable as to only those options  exercisable as
of the date of termination.

In March 1996,  the Company hired a new President  and Chief  Operating  Officer
(the  "President").  As part of the new President's  employment  agreement,  the
Company granted him options to purchase  311,300 shares of the Company's  common
stock. The President has elected to classify 75,132 of the options as ISOs which
vest in three equal annual installments commencing on the date of the grant. The
remaining  236,168  are to be  classified  as  NQSOs,  of  which  one-half  vest
immediately,  one-quarter  vest on the first  anniversary of the grant date, and
the balance vest on the second  anniversary of such grant. The exercise price of
all of the  President's  stock  options is $3.99 per  share,  which was the fair
value at the date of grant.

In August and December 1996, the Company  granted options to purchase a total of
120,359 shares of the Company's  common stock to certain other  employees of the
Company.  These options were granted under the Company's  1996 Stock Option Plan
and have an exercise price of $5.00 per share.  Unless  otherwise  determined by
the  Committee,  the options have a term of ten years from the date of grant and
are subject to earlier  termination in certain events related to the termination
of employment. The options vest in three equal annual installments commencing on
the first anniversary of the date of the grant.

In April 1999,  the CFO was granted 40,000 new stock options in exchange for his
old options.

In October 2000, the CEO was granted  750,000  options at $.50 per share and the
COO was granted 200,000 options at $.50 per share.

Non-employee Directors' Options

In March  1997,  the  Company  provided  for each  non-employee  director of the
Company to  receive,  in  addition  to  reimbursement  of  expenses  incurred in
attending  Board  meetings,  an option to purchase 10,000 shares of Common Stock
each year that he or she  serves as such a director  (each  such year,  a "Grant
Year"),  partially  contingent  upon the director's  attendance at the Company's
four scheduled Board of Director meetings during the Grant Year.  One-quarter of
the annual  option  grant shall vest as of each of the Grant  Year's first three
scheduled Board of Director  meetings and the remainder of such option will vest
as of the fourth  scheduled  meeting,  provided,  in the latter  case,  that the
director has attended all four of that Grant Year's scheduled Board meetings.

In 1999, the Company issued warrants to purchase  300,000 shares of common stock
at a price of $1.00 per share to John Stuart.

In June 2000, a director was granted 15,000 options at $5.00 per share.


                                      F-19
<PAGE>


NOTE 6 - STOCKHOLDER'S EQUITY (Continued)

The option and warrant  activity  during the years ended  December  31, 1999 and
2000 is as follows:
<TABLE>
                                                                                                      Weighted
                                                                                    Number of          Average
                                                                                   Options and        Exercise
                                                                                    Warrants            Price
                                                                                  --------------     ------------
<S>                                                                                     <C>             <C>
Options and warrants outstanding at December 31, 1998                                 3,621,261       $     3.90

Granted                                                                               1,431,488             1.31
Canceled                                                                               (166,994)           (2.07)
                                                                                  --------------     ------------

Options and warrants outstanding at December 31, 1999                                 4,885,755             3.14

Granted                                                                                 965,000              .57
Canceled                                                                                   (750)           (5.00)
                                                                                  --------------     ------------

Options and warrants outstanding at December 31, 2000                                 5,850,005       $     2.69
                                                                                  --------------     ------------
Options and warrants exercisable at December 31, 2000                                 4,874,505       $     3.19
                                                                                  --------------     ------------
</TABLE>
Information  relating  to stock  options  and  warrants  at  December  31,  2000
summarized by exercise price are as follows:
<TABLE>

     Exercise                              Outstanding                                        Exercisable
      Price                              Weighed Average                                    Weighted Average
  --------------     --------------------------------------------------------      -----------------------------------
    Per Share        Shares             Life (Year)         Exercise Price         Shares          Exercise Price
  ---------------    ------------- --- -------------- --- -------------------      ------------ -- -------------------
        <S>                <C>             <C>                    <C>                   <C>             <C>
       0.50               950,000          5.6          $        0.50                        -     $       -
       1.00               602,500          5.0                   1.00                  602,500           1.00
       1.25               325,000          2.2                   1.25                  325,000           1.25
       1.50             1,335,788          5.0                   1.50                1,335,788           1.50
       4.38                75,000          7.5                   4.38                   50,000           4.38
       4.44               250,000          2.2                   4.44                  250,000           4.44
       5.00               234,717          5.5                   5.00                  234,217           5.00
       5.50             1,822,500          1.6                   5.50                1,822,500           5.50
       8.25               114,500          1.7                   8.25                  114,500           8.25
       9.08               140,000          1.7                   9.08                  140,000           9.08
                    --------------    ---------------     -------------------     -------------   --------------------
  Total                 5,850,005          2.8          $        2.69                4,874,505     $     3.19
                    --------------    ---------------     -------------------     -------------   --------------------
</TABLE>

                                      F-20
<PAGE>

NOTE 6 - STOCKHOLDER'S EQUITY (Continued)

All stock options  issued to employees  have an exercise price not less than the
fair market value of the  Company's  common  stock on the date of grant,  and in
accordance with accounting for such options utilizing the intrinsic value method
there is no related  compensation  expense  recorded in the Company's  financial
statements.  Had compensation cost for stock-based  compensation been determined
based on the fair value at the grant  dates  consistent  with the method of SFAS
123, the Company's net loss and loss per share for the years ended  December 31,
1999 and 2000 would have been reduced to the pro forma amounts presented below:
<TABLE>
                                                                                       1999             2000
                                                                                   -------------    -------------
<S>                                                                                     <C>             <C>
Net loss
     As reported                                                                 $   (2,090,339)     (4,701,666)
     Pro forma                                                                   $   (2,530,546)     (4,766,281)
Basic and diluted loss per share
     As reported                                                                 $         (.29)           (.57)
     Pro forma                                                                   $         (.35)           (.57)
</TABLE>
The fair value of option grants is estimated on the date of grants utilizing the
Black-Scholes  option-pricing model. The fair value was calculated in 1999 using
the following  assumptions:  expected life of 10 years,  expected  volatility of
16.34%,  risk-free interest rates of 6%, and a 0% dividend yield. The fair value
in 2000 was  calculated  using the  following  assumptions:  expected  life of 4
years, expected volatility of 28.23%,  risk-free interest rates of 4.7% to 6.0%,
and a 0% dividend  yield.  The weighted  average fair value at date of grant for
options  granted  during 1999 and 2000  approximated  $0.69 and $.03 per option,
respectively.

NOTE 7 - SIGNIFICANT VENUES AND CONCENTRATION OF CREDIT RISK

Revenues  from  certain  venues  comprised  10% or more of total  revenues.  The
following  table  shows the  percentage  of  revenues  of these  venues to total
revenues.

                      Years ended December 31,
                  ----------------------------
                      1999             2000
                  ------------      ----------

Venue A               13 %            14 %
Venue B               13              16
Venue C               10               -
Venue D               12              17
Venue E                -              11
                  ------------      ----------
                       48 %            58 %
                   ------------      ----------

                                      F-21
<PAGE>


NOTE 8 - NOTES RECEIVABLE FROM OFFICERS

As of December 31, 1999, the Company had $117,906 in notes  receivable from John
Stuart, an officer of the Company, the notes bore interest at 8% and were due on
demand, and the notes were repaid in 2000.

NOTE 9 - EXPENSES AT CLOSED LOCATION

The Legends in Concert production opened at the Sheraton Centre Toronto Hotel in
May 1997. This Legends  production did not prove to be successful and was closed
in April 1999 after  generating  operating losses in previous years and $264,000
for the four months  ended April 1999.  At December  31,  1999,  On Stage had an
impairment  of net assets  associated  with the  Toronto  show and wrote off net
assets of $426,954.

In 2000,  the  Company  wrote off  acquisition  costs of $608,878 on a show at a
location that was not put into full production.

NOTE 10 - SALE OF THEATER

On September  15, 2000, On Stage  Entertainment  subsidiary,  On Stage  Theaters
Surfside  Beach,  Inc.,  sold its Legends in Concert  Theater in Surfside Beach,
South Carolina to LIC Theaters,  LLC for $2.0mm.  In connection with the sale of
the Theater,  Legends Surfside entered into a ten (10) year lease agreement with
LIC  Theaters,  LLC. The proceeds from the sale of the Theater were given to the
Company's first mortgage lender,  Imperial Credit Commercial Mortgage Investment
Corp.,  in accordance  with the terms of its partial  settlement  agreement with
ICCMIC.  Furthermore,  the  Company  recorded  a loss on  disposal  of assets of
$648,438.

NOTE 11 - INCOME TAXES

Income taxes in the statement of operations consists of the following:

                        1999            2000
                     ------------    -----------

Current
     Federal         $         -     $       -
     State                     -         91,391
                     ------------    -----------
                     $         -     $   91,391


                                      F-22
<PAGE>


NOTE 11 - INCOME TAXES (Continued)

Deferred taxes are as follows:

                                                  Years ended December 31,
                                                 ----------------------------
                                                    1999           2000
                                                 -------------   ------------
Deferred tax assets
   Allowance for doubtful accounts               $     97,912    $   314,444
   Net operating loss carryforward                  3,764,806      5,536,999
                                                 -------------   ------------

Total deferred tax assets                           3,862,718      5,851,443
Less: valuation allowance                          (3,862,718)    (5,851,443)
                                                 -------------   ------------

                                                 $           -   $         -
                                                 -------------   ------------

The net deferred tax assets have a 100% valuation allowance as management cannot
determine  if it is more  likely than not that the  deferred  tax assets will be
realized.

Income taxes in the statement of operations  differs from the amount computed by
applying  the U.S.  Federal  income tax rate (34%)  because of the effect of the
following items:

<TABLE>
<S>                                                                     <C>             <C>
Years ended December 31,                                               1999             2000
------------------------                                            ------------     ------------

U.S. Federal statutory rate applied to pretax income (loss)         $ (710,715)     $(1,585,646)
Permanent differences                                                   (8,103)          (3,220)
Effect of State taxes                                                        -            91,391
Tax effect of unrecognized net operating loss carryforward             718,819         1,588,866
                                                                    ------------     ------------
                                                                    $        -      $     91,391
                                                                   ------------     ------------
</TABLE>
At December 31, 2000, the Company had Federal net operating  loss  carryforwards
of  approximately  $14,571,050,  which expire in 2020. Under Federal Tax Law IRC
Section  382,  certain  significant  changes in  ownership  that the  Company is
currently  undertaking  may  restrict the future  utilization  of these tax loss
carryforwards.

NOTE 12 - BUSINESS ACQUISITIONS

Interactive Events, Inc. Purchase and Re-Conveyance

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

                                      F-23
<PAGE>


NOTE 12 - BUSINESS ACQUISITIONS (Continued)

On February 23, 1999,  On Stage entered into a Common Stock  Purchase  Agreement
with  Kanfer,  under  which  the  parties  agreed  to  rescind  the  Interactive
acquisition.  Under the terms of the repurchase,  On Stage reconveyed all of the
assets of Interactive to Kanfer, in consideration for the reconveyance by Kanfer
of 30,304  shares of On Stage's  common stock valued at $1.125 per share,  along
with the  cancellation  of a non-plan option to purchase 15,000 shares of common
stock and incentive stock options to purchase 19,835 shares of common stock at a
price of $5.00 per share. In addition, the parties agreed to release one another
from any  liability  arising out of the  Interactive  acquisition  and any claim
relating to Kanfer's subsequent employment with the Company. On Stage and Kanfer
also  entered into an exclusive  right of  representation  agreement in February
1999,  under  which the  Company  granted to Kanfer the right to  represent  its
Legends  production in  designated  areas in  consideration  of a portion of the
gross proceeds generated.

NOTE 13 - SEGMENT INFORMATION

The Company derives its net revenues from five reportable  segments.  The Casino
Division  ("Casinos")  primarily  sells live  theatrical  productions to casinos
worldwide for a fixed fee. In addition this division also operates the Company's
Legends show at the Imperial Palace in Las Vegas,  Nevada. The Theaters Division
("Theaters") owns or rents live theaters and dinner theaters in urban and resort
tourist  locations  primarily in the United  States.  This division  derives its
revenues  from the sale of tickets  and food and  beverage to patrons who attend
live  theatrical  performances at these venues.  The Events Division  ("Events")
sells  live  theatrical   productions  to  commercial  clients,   which  include
corporations,  theme and  amusement  parks and cruise lines for a fixed fee. The
Merchandise Division  ("Merchandise") sells merchandise and souvenir photography
products  to  patrons  who  attend  the  Company"   productions.   "Events"  and
"Merchandise" are included in "Casinos" in the following tables.  The Production
Services  Division  ("Production")  sells  technical  equipment  and services to
commercial  clients;  however,  this division's  primary focus is to technically
support all of the other divisions.  The Corporate office segment is responsible
for the corporate and finance portion of the Company's operations.

The  accounting  policies of the reportable  operating  segments are the same as
those described in the Summary of Accounting Policies.  The Company's management
evaluates the  performance  of its operating  segments  based upon the profit or
loss from operations.




                                      F-24
<PAGE>


NOTE 13 - SEGMENT INFORMATION (Continued)

The following table sets forth the segment profit/(loss) and asset information:
<TABLE>

                                                               Year Ended December 31, 2000
                                 -----------------------------------------------------------------------------------------
                                      Casinos          Production                         Corporate           Total
                                    Entertainment       Services         Theaters          Office         Consolidation
                                    -------------     -------------    -------------    --------------    --------------
<S>                                     <C>                 <C>             <C>               <C>               <C>
Revenues from external customers  $    8,981,520    $       29,719   $   15,126,202   $             -   $    24,137,441
Interest expense                           2,037                 -          914,348           295,712         1,212,097
Depreciation and amortization            398,667           110,461          372,236           195,140         1,076,504
Segment profit (loss)                  1,719,061          (929,562)      (8,891,081)        3,399,916        (4,701,666)
Segment fixed assets                   2,967,723           856,134        1,281,187         1,080,380         6,185,424
Additions to long-lived assets            24,292            14,553           66,578            19,865           125,288
</TABLE>

<TABLE>
                                                               Year Ended December 31, 1999
                                 -----------------------------------------------------------------------------------------
                                      Casinos          Production                         Corporate           Total
                                    Entertainment       Services         Theaters          Office         Consolidation
                                    -------------     -------------    -------------    --------------    --------------
<S>                                     <C>                 <C>             <C>               <C>               <C>
Revenues from external customer   $   10,006,642    $      103,896   $   18,438,104   $             -   $    28,548,642
Interest expense                              84             1,123        2,648,061           230,359         2,879,627
Depreciation and amortization            401,664            90,239          559,335           192,910         1,244,148
Segment profit (loss)                  2,328,150          (666,594)      (1,622,340)       (2,129,555)       (2,090,339)
Segment fixed assets                   3,226,262           861,265       17,777,232         1,856,045        23,720,804
Additions to long-lived assets           165,061            18,229            3,419             8,272           194,982
</TABLE>
NOTE 14 - SUBSEQUENT EVENTS

On  January  16,  2001,  On Stage  entered  into an  agreement  with  BounceBack
Technologies,  Inc. to purchase  all of the rights to the live  production  show
entitled Country Tonite.  Country Tonite is a theatrical  production,  which has
been  presented  in Las Vegas,  Nevada,  Branson,  Missouri  and  Pigeon  Forge,
Tennessee.  On  February  1, 2001,  On Stage  completed  the  acquisition  for a
purchase  price of  $3,800,000.  The  terms of the  agreement  call for  initial
payments  of;  $100,000  on November  21,  2000,  $250,000 on January 29,  2001,
$150,000 on  February  15,2001 and  $500,000 on March 15,  2001,  the balance of
$2,800,000  plus  interest is due on July 31, 2001.  The show opened on March 7,
2001.  Additionally,  the  Company  will have the right to oversee  the  Country
Tonite production in Pigeon Forge, Tennesee.  However, the rights to present the
Pigeon Forge show have been previously  licensed to an unrelated third party and
are not included in this acquisition.

                                      F-25
<PAGE>


NOTE 14 - SUBSEQUENT EVENTS (Continued)

On February 28, 2001, On Stage entered into an agreement  with McCown De Leeuw &
Co., Inc., a private equity investment firm ("MDC"), to invest up to $20,000,000
in the Company in the form of convertible preferred securities.  The transaction
was closed on March 13,  2001.  According  to the terms of the letter of intent,
MDC will have an opportunity  to stage its funding in four separate  investments
of $6.0mm,  $4.0mm,  $5.0mm, and $5.0mm,  respectively.  Each of the investments
will  bear  interest  at the rate of  twelve  percent  (12%)  per  annum  and be
convertible  into the common stock of the Company at a conversion price of $0.50
and $0.75  per  share,  depending  on  certain  factors.  The  first  $6,000,000
investment  was made on March 13,  2001,  and will be used  primarily to fund On
Stage's new productions slated to open this year. The remaining investments will
be made  available  to On Stage for  future  growth  opportunities,  subject  to
certain conditions.

On March 27, 2001, On Stage  announced  that it has entered into a multiple year
lease  with  Jimmy  Osmond,   of  Osmond  Family  Theaters,   to  open  Ripley's
Live...Believe  It or Not in Branson,  Missouri at the Osmond Family  Theater in
May 2001.

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