SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20450
                              FORM 10-KSB/A No. 1

(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, 1998 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.
            (Exact name of registrant as specified 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 of 1934 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 issuer's  revenues for the most recent  fiscal year ended  December 31, 1998
were $27,847,477.

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 12, 1999 was $1.19.

   
The number of shares of the  registrant's  common stock  outstanding as of April
12, 1999 was 7,572,046.
    

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

                       DOCUMENTS INCORPORATED BY REFERENCE

Portions of Registrant's  definitive Proxy Statement relating to the 1999 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, 1998.


                                       ii
<PAGE>

                               TABLE OF CONTENTS

                                                            Page No.
                                                            -------- 

PART I...................................................     1

Item 1.  Description of Business.........................     2
Item 2.  Description of Property.........................     23
Item 3.  Legal Proceedings...............................     25
Item 4.  Submission of Matters to a Vote of 
          Security Holders...............................     27

PART II..................................................     27

Item 5.  Market for Common Equity and Related 
          Stockholder Matters.............................    27
Item 6.  Management's Discussion and Analysis 
          or Plan of Operation............................    27
Item 7.  Financial Statements.............................    27
Item 8.  Changes in and Disagreements with Accountants 
          on Accounting and Financial Disclosure..........    27

PART III..................................................    28

Item 9.  Directors, Executive Officers, Promoters and 
          Control Persons, Compliance with Section 
          16(a) of the Exchange Act........................   28
Item 10. Executive Compensation............................   30
Item 11. Security Ownership of Certain Beneficial 
          Owners and Management............................   32
Item 12. Certain Relationships and Related Transactions....   34
Item 13. Exhibits, and Reports on Form 8-K.................   36

                                      iii
<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
productions, the expansion of existing and potential gaming and tourist markets,
the Company's exposure to various trends in the gaming industry, its acquisition
plans and the  benefits  the Company  anticipates  from such  acquisitions,  the
Company's business strategy, its outstanding litigation matters and the defenses
available  to the  Company,  the  seasonality  of the  Company's  business,  and
liquidity  as well as  information  contained  elsewhere  in this  Report  where
statements  are  preceded  by,  followed  by or  include  the words  "believes,"
"expects,"  "anticipates"  or  similar  expressions.  For such  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 such  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 the Company from  achieving its
goals--and cause the assumptions  underlying the forward-looking  statements and
the actual results of the Company to differ  materially  from those expressed in
or implied by those forward-looking statements--include, but are not limited to,
the  information  provided  under  the  heading  "Description  of  Business-Risk
Factors" in Item 1 as well as the following: (i) The Company's dependence on its
flagship Legends in Concert production and its principal production venues; (ii)
The ability of the Company to  successfully  produce and market new  productions
and to manage the growth  associated with the any new  productions;  (iii) Risks
associated  with the  Company's  acquisition  strategy,  including the Company's
ability to successfully identify, complete and integrate strategic acquisitions;
(iv)  The  Company's  ability  to meet  its  commitments  under  certain  credit
facilities,   which  are  currently  in  default,  and  to  obtain  alternative,
additional  financing on  commercially  reasonable  terms;  (v) The  competitive
nature of the leisure and entertainment  industry and the ability of the Company
to  continue  to  distinguish  its  services;  (vi)  Fluctuations  in  quarterly
operating  results and the highly  seasonal  nature of the  Company's  business;
(vii) The ability of the Company 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 its ability to protect its  intellectual
property  rights;  (viii) The ability of the Company to successfully  manage the
litigation  pending  against  it and to avoid  future  litigation;  and (ix) The
results of  operations  which  depend on  numerous  factors  including,  but not
limited to, the commencement and expiration of contracts,  the timing and amount
of new business generated by the Company,  the Company's 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."
<PAGE>

ITEM 1.  Description of Business

General

The Company  produces and markets live theatrical  productions and operates live
theaters and dinner  theaters  worldwide.  The Company  markets its  productions
directly to audiences at theaters in resort and urban tourist locations.  During
1998,  the Company  operated the  following  live  theaters and dinner  theaters
worldwide.


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

                      Various                   Trump Taj Mahal    Contracted 

                      Various                   Atlantic City 
                                                Hilton             Contracted
--------------------- ------------------------- ----------------  --------------
Branson, Missouri     Legends in Concert        Legends Family 
                                                Theater            Leased
--------------------- ------------------------  ----------------  --------------
Berlin, Germany       Legends in Concert        Estrel Residence 
                                                & Congress Center  Contracted
--------------------- ------------------------ -----------------  --------------
Buena Park (Anaheim), Wild Bill's Dinner        Wild Bill's
California            Extravanganza             Dinner Theater     Leased
--------------------- ------------------------ -----------------  --------------
Las Vegas, Nevada     Legends in Concert        Imperial Palace    Contracted
--------------------- ------------------------ -----------------  --------------
Laughlin, Nevada      Spice 'N Ice              River Palms 
                                                Casino             Contracted
--------------------- ------------------------ -----------------  --------------
Myrtle Beach,
 South Carolina       Legends in Concert        Legends Theater    Owned

                      Eddie Miles Show          Eddie Miles        Leased
                                                Theater             
--------------------- ------------------------ -----------------  --------------
Orlando, Florida      King Henry's Feast        King Henry's 
                                                Dinner Theater     Owned

                      Wild Bill's Dinner        Wild Bill's 
                      Extravaganza              Dinner Theater     Owned
                                                Fort Liberty 
                                                Retail Complex

                      Blazing Pianos            Blazing Pianos     Leased
                                                Bar
--------------------- ------------------------ ------------------- -------------
Toronto, Orlando      Legends in Concert        Legends Theater 
                                                at Sheraton        Leased
                                                Centre Hotel
--------------------- ------------------------ ------------------- -------------
Valley Forge, 
  Pennsylvania        Various                   Lily Langtry 
                                                Dinner Theater     Contracted
--------------------- ------------------------ ------------------ --------------


                                       2
<PAGE>

The Company also markets its  productions to commercial  clients,  which include
casinos,  corporations,  fairs and  expositions,  theme and amusement parks, and
cruise lines.  The Company has performed in locations such as the Illinois State
Fair,  MGM 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,  Hewlett Packard,  IBM, Pitney Bowes, Levi
Strauss and Texaco.

For the years  ended  December  31,  1998 and 1997,  approximately  40% and 25%,
respectively,  of the  Company's  net revenue was  generated  from  theaters and
dinner theaters that the Company  operates in resort and urban tourist  markets;
approximately  41% and 61%,  respectively,  of the  Company's  net  revenue  was
generated from live productions  performed in gaming markets,  predominantly Las
Vegas and Atlantic  City; and  approximately  16% and 9%,  respectively,  of the
Company's net revenue was generated from sales to commercial  clients other than
casinos. The remaining 3% and 5%, respectively, of the Company's net revenue was
generated from merchandise and souvenir photography sales.

Such  percentages  reflect  the early  results of the  Company's  new  strategic
objective to become the leading owner and operator of affordable live theatrical
productions,  dinner theaters and other  location-based  entertainment  in North
America. The Company's primary strategy is to build location-based entertainment
clusters  consisting of live  theatrical  productions  and other forms of middle
market entertainment including, for example, musical reviews and magic shows, in
major  tourist  markets.  The Company  plans to achieve  this  strategy  by: (i)
establishing a significant  market presence  through the acquisition of multiple
entertainment  venues with  strong,  predictable  cash flows;  (ii)  pooling its
contacts with ticket wholesalers,  tour operators and individual ticket sellers;
and,  (iii)  rolling out a variety of successful  entertainment  concepts in the
localities in which the Company  establishes its presence.  Management  believes
this "clustering" strategy will reduce the Company's financial exposure and will
enhance the Company's  revenue by (i)  increasing  the Company's  visibility and
market acceptance in a greater number of entertainment venues; (ii) enabling the
Company to realize cost savings through the consolidation of sales and marketing
and the elimination of duplicative  administrative  overhead; and (iii) enabling
the Company to market productions  traditionally performed in a particular venue
in a greater number of venues or an array of markets.

The Company believes that strong  fundamentals for the consolidation of multiple
entertainment  venues  and the  establishment  of  location-based  entertainment
clusters exist, including:

- a large number of North American resort and urban tourist-driven  locations; 
- fragmented ownership of location-based  entertainment businesses; 
- ownership by individuals who lack the ability to capitalize on economies  of  
  scale in sales  and marketing, operations, systems and capital formation;
- ownership by individuals who lack a clear exit strategy;
- acquisitions  characterized  by  predictable  cash flows and the  ability to  
  leverage  real and  personal property;
- numerous  cost  reduction  and revenue  enhancement  opportunities;  
- limited competition for acquisitions;  and 
- low acquisition  multiples (typically 4.0 - 5.0x EBITDA).

                                       3
<PAGE>

The Company was  incorporated on October 30, 1985 under the laws of the state of
Nevada as Legends in Concert, Inc. Subsequently,  on August 7, 1996, the Company
changed  its  name to On  Stage  Entertainment,  Inc.  The  Company's  principal
executive offices are located at 4625 West Nevso Drive, Las Vegas, Nevada 89103,
and its telephone number is (702) 253-1333.

DEVELOPMENTS DURING 1998

Gedco Acquisition - March 1998

On March 13, 1998,  the Company  purchased  certain  assets of Gedco USA Inc., a
Florida corporation,  for $14 million. The Company utilized $11.5 million of its
mortgage financing facility with Imperial  Commercial Credit Mortgage Investment
Corporation ("ICCMIC") and 595,238 shares of the Company's Common Stock at $4.20
per share,  or $2.5 million  worth of the Company's  Common Stock,  to fund this
transaction.  Included  in the  purchase  were  substantially  all of the income
producing  assets and  associated  real  property of Orlando  Entertains  and LA
Entertains,  consisting  of King  Henry's  Feast and Blazing  Pianos  located in
Orlando,  Florida, and the Fort Liberty retail shopping complex,  which includes
the Wild Bill's Dinner Theater,  located in Kissimmee,  Florida, and Wild Bill's
Dinner Theater  located in Buena Park,  California.  For the year ended December
31,  1997,  audited  revenues  of the assets  purchased  were $13.9  million and
earnings  before  interest,  taxes,  depreciation  and  amortization  were  $2.7
million.

Kodak Relationship - June 1998

On June 3, 1998, the Company and Kodak Themed  Entertainment,  a division of the
Eastman  Kodak  Company  ("Kodak")that  is  interested  in  developing a branded
imaging presence in key entertainment environments, executed a letter of intent,
which  contemplates  the joint  development  of retail outlets known as Kodak On
Stage Fantasy Stores (the "Fantasy Stores"). The Fantasy Stores will incorporate
Kodak's digital photographic  technology with live impersonators from Legends In
Concert to create a unique and  entertaining  retail  experience,  blending  the
strengths of Kodak's  brand and products  with the "star power"  provided by the
Company's  impersonators.  The retail  store will include  Legends  merchandise;
licensed themed clothing,  souvenirs of legendary superstars,  Kodak traditional
photographic  products  and  Kodak  proprietary  digital  photographic  products
featuring licensed  character images from The Walt Disney Company,  Warner Bros.
Studios and Universal  Studios.  Initial launch sites in New York, Las Vegas and
Los Angeles are currently under evaluation.

Kodak  and the  Company  have  also  agreed to share  revenue  generated  by the
operation of digital  photography  systems to be provided by Kodak in certain of
the Company's  theaters under a digital  imaging systems  agreement  executed on
June 3, 1998.  The new systems are  currently in place in  entertainment  venues
located in Myrtle  Beach,  South  Carolina,  Branson,  Missouri  and Buena Park,
California.

                                       4
<PAGE>

Calvin Gilmore Acquisition - June 1998

On June 30,  1998,  the  Company  purchased  certain  assets of  Calvin  Gilmore
Productions,  Inc.  ("Calvin  Gilmore"),  Myrtle Beach's oldest and largest live
theater operator, for approximately $2.0 million,  consisting of $1.0 million in
cash and 206,612  shares of the  Company's  Common Stock at a price of $3.50 per
share (the "Calvin  Gilmore  Acquistion").  The Company used $1.1 million of its
mortgage financing facility with ICCMIC to fund the cash portion of the purchase
price. The assets acquired in the transaction  include the Legends Theater and a
leasehold interest in the Eddie Miles Theater.

Upon  consummation  of the  transaction,  Calvin  Gilmore  also  agreed to order
television programming and production services from the Company, and to give the
Company a 30-day right of negotiation to acquire  certain live  theatrical/stage
rights in  projects  developed  and owned by Calvin  Gilmore  over the next five
years.  Also,  Calvin Gilmore increased its stock ownership to a 5% equity stake
in the Company,  and Mel Woods,  President of Calvin Gilmore, was elected to the
Company's Board of Directors.

Substantial Indebtedness Incurred

During 1998 the Company  received  mortgage  financing  from ICCMIC and extended
exiting lines of credit with First  Security  Bank of Nevada and First  Security
Leasing Company in order to fund its existing  operations and finance its growth
strategy  and future  acquisitions.  The  Company has been unable to service its
substantial   indebtedness  and  is,   consequently,   in  default  under  these
facilities.   (See  "Description  of  Business-Existing  Defaults  under  Credit
Facilities.")

Industry Background

The  Company has focused its  clustering  efforts in North  American  resort and
tourist markets. In 1996, international and domestic travelers spent over $473.0
billion on travel and  tourism  within the U.S.  The table  below  outlines  the
spending of domestic and  international  travelers  within the U.S. for the past
ten years.

[Bar Graph Representing Tourism Expenditures in the U.S. omitted]

According to the Travel Industry Association's National Travel Survey of the 715
million trips taken in 1997,  over 61% were pleasure  trips.  In 1997,  the most
popular ten states among U.S.  travelers  were  California,  Florida,  New York,
Texas, Illinois,  Nevada, Hawaii, New Jersey,  Pennsylvania and Georgia. In 1998
the  Company  ran  productions  in seven of these ten states and has  identified
potential acquisitions in the other three. Below is a chart illustrating the top
ten states by traveler expenditures.

[Bar Graph Representing Travel Expenditures by State Omitted]

According  to the  Travel  Industry  Association  of  Americans,  theme park and
entertainment  attractions  are one of the  top six  types  of  family  vacation
destinations.  While the most popular destinations include the top gaming sites,
Las Vegas,  Nevada and Atlantic City, New Jersey,  and the top theme park sites,
Orlando, Florida and Los Angeles, California,  several emerging resort locations
such as Myrtle Beach, Florida and Branson, Missouri were also included.


                                       5
<PAGE>

Set forth below, is general  information on the key markets in which the Company
currently operated in 1998.

Anaheim /Buena Park, California

Anaheim/Buena Park, California, home of Disneyland, hosted 37.5 million visitors
in 1997,  according to the  Anaheim/Orange  County Visitors & Convention Bureau.
Visitors spent  approximately  $5.6 billion,  of which $1.3 billion was spent on
entertainment.  In Buena Park alone, over $81 million was spent on entertainment
in 1997. The Anaheim  Convention  Center,  in conjunction with  Disneyland,  has
announced a plan to spend over $2 billion over the next five years to revitalize
the convention center and surrounding  areas, and expand  Disneyland.  Expansion
plans for Disneyland include the construction of: (i) a 750-room Craftsman-style
hotel;  (ii) a second theme park to be named "Disney's  Californian  Adventure;"
and (iii) a 200,000 square foot entertainment, dining and retail complex joining
the two theme parks.  The Company  believes  this new  investment  will increase
tourism to this market with potentially positive results for other entertainment
suppliers.  In March 1998, the Company acquired Wild Bill's Dinner  Extravaganza
which  performs at the Wild  Bill's  Dinner  Theater in Buena Park,  California.
Buena Park is in close proximity to Anaheim, California.

Atlantic City, New Jersey

In 1997,  Atlantic City received  approximately 37 million visitors according to
the Atlantic City Convention and Visitors Bureau. The Company currently produces
Legends at Bally's Park Place in Atlantic City, and various  productions at both
the Atlantic City Hilton and at the Trump Taj Mahal,  and has produced  numerous
other shows in this market  including  Magic!,  Magic!,  Magic!  at the Showboat
Hotel and  Casino,  Cabaret  on Ice at  Trump's  Castle,  and Bon Voyage and The
Atlantic  City  Experience  at Bally's Park Place.  Furthermore,  the Company is
aware of at least two new casino hotel  projects  under  development in Atlantic
City and believes that these will also contain showrooms for live entertainment.

Branson, Missouri

Branson is less than a one-day  drive for half of the U.S.  population  and is a
popular vacation  destination.  The Branson Chamber of Commerce reported that in
1997,   Branson  attracted  six  million   visitors.   Branson  is  home  to  40
entertainment  venues  with  over 70 live  productions.  The live  entertainment
industry in Branson is atypical of other theater districts, with shows beginning
mid-morning and continuing  throughout the day and into the evening. The Company
has presented  Legends in Branson since 1995 for limited runs,  with  successful
results to date.  Legends is currently being performed in Branson at the Legends
Family Theater.

Myrtle Beach, South Carolina

Myrtle  Beach,  which has 99 golf courses and 11 live  theatrical  venues,  was,
according  to BYWAYS  magazine,  ranked the second most highly  preferred  motor
coach  destination  in the United  States in 1997.  The Myrtle Beach  Chamber of
Commerce  reported  that 13.4 million  people  visited  Myrtle Beach in 1997 and
spent  approximately  $2.6  billion.  Visitors,  according  to the Myrtle  Beach
Chamber of Commerce,  have an average stay of 5.7 days.  The Company's  resident
Legends  production at the Legends Theater at Surfside Beach (located just South
of Myrtle Beach in beautiful  Surfside Beach) opened in March 1995, and is known
as one of the top shows in town.

                                       6
<PAGE>

Las Vegas, Nevada

In  1997,  Las  Vegas  had  over 30  million  visitors  according  to Las  Vegas
Convention  and Visitors  Authority,  an increase of almost 30% since 1993,  and
spent $25  billion.  Las Vegas has 80 hotels and casinos and 35  different  live
productions.  Visitors  to Las  Vegas,  according  to Las Vegas  Convention  and
Visitors Authority,  spent an average of $33.24 a day on shows during an average
4.5 day stay per visitor.  According to the Las Vegas Visitor  Profile Study, of
these  30  million   visitors,   48%  attended   shows  during  their  stay,  up
significantly from 40% in 1994.

Of those people that attended shows,  almost 78% attended a regularly  scheduled
production  show. The Company's  Legends has been playing at the Imperial Palace
in  Las  Vegas  since  1983  and  the  Company  has  produced  numerous  limited
engagements and other shows in Las Vegas.

Laughlin, Nevada

Laughlin,  Nevada is another  emerging  tourist market in close proximity to Las
Vegas.  According to the Laughlin  Visitor's  Bureau,  5 million  people visited
Laughlin  in 1997 and spent an average  of $187 per day.  In 1997,  visitors  to
Laughlin spent almost $20 per day on shows and stayed an average of 3.5 days. In
1998, the Company began performances of Spice'N Ice, an ice skating extravaganza
at the River Palms Hotel & Casino.

Orlando, Florida

Orlando is one the most popular  destination cities in the United States and was
voted as the number one theme park  destination in 1996 by the National  Tourism
Association.  According to Orlando's Visitors Bureau, approximately 36.5 million
tourists  visited Orlando in 1997 and spent $15.9 billion.  In 1997, the Orlando
Visitor's Bureau reported that visitors spent $3.3 billion on entertainment  and
stayed for an average  of 3.7 days.  Orlando's  hotel  industry  is meeting  the
demands of  visitors,  with over 85,000  hotel rooms  available  in 1996,  an 8%
growth over the prior four  years.  In March 1998,  the  Company  acquired  King
Henry's Feast, Wild Bill's Dinner  Extravaganza and Blazing Pianos,  all located
within the greater Orlando area.

Toronto, Ontario

Toronto is the tenth  largest  metropolitan  area in North America and the third
largest  English-speaking  theater market in the world after London and New York
according to Tourism  Toronto,  the official  tourism sales and marketing agency
for the Toronto region.  Approximately  20.2 million tourists visited Toronto in
1997 and spent  approximately  $3.3  billion.  Of the $3.3 billion  spent,  $193
million was spent on  entertainment.  Tourism Toronto estimates average spending
per  person  to be  approximately  $93  per  day.  Toronto  is  home  to 83 live
productions  in 39 live  entertainment  venues  including the Company's  Legends
production featured at the Sheraton Centre Hotel since May of 1998.

Other Potential Urban and Resort Markets

The Company  believes that there are numerous  other  emerging  urban and resort
tourist markets,  both in the United States and Canada,  where the demand exists
for quality, affordable live entertainment. The Company believes that the

                                       7
<PAGE>
following   urban  and  resort  tourist   locations  may  be  suitable  for  the
acquisition, production and marketing of location-based entertainment:


                 Chicago                Niagara Falls
              Corpus Christi               Orlando
                  Miami                    Phoenix
                Montreal                Pigeon Forge
              New Orleans                 San Diego
             New York City              San Francisco
          South Padre Island              Vancouver


OTHER COMMERCIAL CLIENTS

The Company has also produced  limited-run  Legends shows in the last five years
for other types of commercial  clients,  including  theme parks (Six Flags,  MGM
Theme Park,  Lotte World in Korea),  cruise ships (Royal Caribbean Cruise Lines,
Singapore Cruise Lines), and major fairs (Dade County Youth Fair, Illinois State
Fair). In addition, in 1997 and 1998, the Company produced approximately 185 and
172 events, respectively, for corporate clients, such as McDonald's, Bell South,
Home Depot, IBM, Norwest Bank, and Anheuser Busch.

Show Offerings

Since its  inception,  the Company  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.  The  principal  productions  currently  produced  by the  Company are as
follows:

Legends in Concert 

The  Company's  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 the  Company's  access to
approximately 75 different Legends tribute acts, it can tailor each tribute show
to suit the unique  demographics of any audience and the size of any venue,  and
has been able to attract  significant  repeat business by varying  regularly the
composition of the acts in its shows. In 1998, Legends was performed in Atlantic
City, New Jersey; Berlin, Germany; Branson,  Missouri; Las Vegas, Nevada; Myrtle
Beach, South Carolina; and Toronto, Canada.

Wild Bill's Dinner Extravaganza

As a result of the Gedco  Acquisition,  the Company  acquired Wild Bill's Dinner
Extravaganza  ("Wild Bill's"),  a two hour dinner show that features the best of
the Wild West.  The show  includes  Indian  tribal  dances,  gun  fighting,  and
showgirls. The show runs every day throughout the year at the Wild Bill's Dinner
Theater at the Company's Fort Liberty Complex in Kissimmee, Florida and the Wild
Bill's Dinner Theater in Buena Park, California.

King Henry's Feast

As a result of the Gedco Acquisition, the Company acquired King Henry's Feast, a
two hour dinner show that takes the patrons back to the time of King Henry VIII.
The show includes a sword swallower,  a jester, a trapeze act and a sword fight.
The show runs every day  throughout the year at the Company's King Henry's Feast
Castle located in Orlando, Florida.

                                       8
<PAGE>

Blazing Pianos

As a result of the Gedco  Acquisition,  the Company acquired Blazing Pianos,  an
interactive  piano bar  featuring  three  talented  comedic  piano  players  and
vocalists,  who  simultaneously  play song  requests  from  patrons on  separate
pianos.  The shows runs nightly  throughout  the year at the  Company's  Blazing
Pianos Bar in Orlando, Florida.

Spice 'N Ice

Spice 'N Ice  combines  performances  by world  class  skaters  with  adagio and
comedic skits by skating clowns, dancers and ensemble skating.  Currently, Spice
'N Ice runs at the River Palms Casino in Laughlin, Nevada.

PRODUCTION ECONOMICS

   
Most financial  structures for theatrical  productions in theaters in resort and
urban  markets  and in larger  casinos  are based on the  "four-wall"  method of
expense and revenue allocation between the producer and the client,  while those
produced for clients, such as smaller casinos, corporations, fairs, cruise lines
and theme parks, are typically "contracted  productions" as those produced for a
fixed or "guaranteed" fee.
    

The four  "walls"  of any  live  theatrical  production  can be  illustrated  as
follows:

[Graphic  presenting  four walls of live  theaterical  production  described  in
following paragraph Omitted]

The Company  generally  operates  its resident  productions  in resort and urban
tourist markets and in Las Vegas casinos under either a "four-wall"  arrangement
or a  "two-wall"  arrangement.  Under the  "four-wall"  arrangement  the Company
assumes  the  responsibility  for the cost of the  theater,  whether  leased  or
purchased,  and the expenses  associated  with (i) the  artistic  aspects of the
production of a show; (ii) the technical requirements  associated with producing
a show;  (iii) the promotion of a show; (iv) and ticket sales,  concession sales
and  maintenance.  The Company  receives  100% of the revenues,  profits  and/or
losses  generated  by a  show  under  that  arrangement.  Under  the  "two-wall"
arrangement  the client owns or manages the theater.  The Company and the client
are responsible for two of the costing  responsibilities,  or "walls," described
above.  The Company and its client share revenue  generated by a show under this
arrangement(each  retains  certain  percentages of the show's  revenues).  Shows
produced  under  either of these two  arrangements  are referred to as "at-risk"
shows, as the Company's revenues are dependent upon customer  attendance levels.
The  Company's  resident  Legends  shows at Myrtle  Beach,  South  Carolina  and
Toronto, Canada are examples of "four-wall"  arrangements,  and its Legends show
at the  Imperial  Palace in Las  Vegas,  Nevada is an  example  of a  "two-wall"
arrangement.   Although  most  contracts  of  this  type  are  by  their  nature
short-term, clients typically renew their contracts or host a variety of Company
productions on a regular basis.

The Company also operates "low-risk" productions where the client is responsible
for all  non-production  related expenses and retains all revenue generated from
ticket  sales.  In  such  arrangements,  the  Company  is  responsible  for  all
production related expenses (performers, orchestra, dancers and company manager)
and typically receives a guaranteed weekly fee, regardless of attendance levels.
This is a  typical  structure  for  shows  sold to  commercial  clients  such as
corporations,  fairs and theme  parks,  and to  casinos  outside  the Las Vegas,
Nevada  market.  The  Company's  Legends  show at Bally's Park Place in Atlantic
City,  New Jersey is an example of a "low-risk"  arrangement.  Although  many of
these contracts are short term, clients typically renew their contracts with the
Company on a regular basis.

                                       9
<PAGE>

CORPORATE STRUCTURE

On Stage Casino Entertainment


The Company has been a leading  provider  of live  entertainment  to casinos for
over 15 years.

In 1998,  On Stage  Casino  Entertainment  had long running  productions  in the
following locations:

------------------- ----------------------- ----------------------------------
     Venue                    City                   Type of Structure
------------------- ----------------------- ----------------------------------
Imperial Palace          Las Vegas                      "Two-Wall"
Bally's Park Place       Atlantic City                Guaranteed Fee
River Palms Casino       Laughlin                     Guaranteed Fee
Trump's Taj Mahal        Atlantic City                Guaranteed Fee
------------------- ----------------------- ----------------------------------

On Stage Theaters

Upon completion of the acquisition of the Gedco  properties,  the Company formed
On Stage  Theaters,  Inc.,  a  wholly-owned  subsidiary  created  to manage  the
Company's theaters from its offices in Orlando, Florida. During 1998 the Company
operated eight live theater productions, managed the sublease of the Eddie Miles
Theater and produced two shows under contract in the following locations:


-----------------     --------------   -----------   ------------- ------------
Venue                    City          # of Seats      Own/lease/     Date of
                                                       contracted    expiration
-----------------     --------------   -----------   ------------- ------------
Contracted 
 Productions:

Lily Langtry 
 Dinner Theater       Valley Forge, PA      500        Contracted        1/00

"Four -  Wall" 
   Productions:

Blazing Pianos Bar     Orlando, FL          400        Lease             10/00
Eddie Miles Theater *  N.Myrtle Beach, SC   946        Lease             12/04
King Henry's Dinner 
 Theater               Orlando, FL          620        Own               N/A
Legends Theater        Myrtle Beach, SC     800        Own               N/A
Legends at Sheraton 
 Centre Hotel          Toronto, ON          647        Lease             2/03
Wild Bill's Dinner 
 Theater               Buena Park, CA       820        Lease             6/10
Wild Bill's Dinner 
 Theater               Kissimmee, FL        628        Own               N/A
Legends Family 
 Theater               Branson, MO          984        Lease             12/98
-----------------    ---------------   -----------   ------------  -------------
* Included in discussion of  the Calvin Gilmore Acquisition.

                                       10
<PAGE>

On Stage Events

On Stage  Events  creates  numerous  types of special  entertainment  events for
corporate  clients  such as  casinos,  fairs,  theme  parks,  cruise  lines  and
corporations.   These  events   utilize  the   Company's   inventory  of  props,
decorations,   sound,   lighting   and   costumes.   In   addition  to  creative
custom-designed  events, this business segment has in-stock,  unique interactive
shows,  as well as stage shows,  which have played for long runs at theaters and
casinos and are now available for private events.  On Stage Events has typically
produced  either  interactive  dinner  shows or theme  parties such as Las Vegas
Spectacular,  a theme  party in which a casino is created and  participants  are
allowed to gamble as if they were in a Las Vegas casino.  In 1998,  the division
had sales offices in Atlantic City, New Jersey, Atlanta,  Georgia, Palm Springs,
California and Las Vegas,  Nevada.  Examples of the Company's  corporate clients
are:

Illinois State Fair       Dollywood Theme Park        Hyatt Hotels Worldwide
MGM Theme Park            McDonald's                  Six Flags Over Georgia
Hewlett Packard           IBM                         National Football League
Levi Strauss              Texaco                      Xerox

On Stage Merchandise

On Stage Merchandise sells merchandise at all of its venues in tourist locations
and,  if  permitted,  in client  venues.  Merchandise  includes  logo  clothing,
keychains,  magnets,  pins,  canvas tote bags and coffee  mugs,  plus  specialty
licensed  merchandise  featuring the Company's more popular Legends acts such as
Elvis,  the Blues Brothers and Marilyn Monroe.  In addition,  this  wholly-owned
subsidiary sells autographed photographs of impersonators or other headline acts
posing with audience  members,  for which it pays nominal  royalties to featured
performers.  The  Company  believes  that its  relationship  with  Kodak  Themed
Entertainment   will  further   augment   revenues   from   merchandising   (see
"Developments During 1998").

On Stage Productions

On Stage  Productions is a centralized  division of the Company,  located in Las
Vegas,  Nevada.  This division is capable of producing multiple shows of varying
complexity.  Among  its  responsibilities  are  choreography,  costume,  talent,
lighting  and sound.  The  Company  intends to  produce  multiple  shows in each
locality in which the Company has established itself through a single production
facility.  In  addition,  the  Company  intends  to  offset  some  of the  costs
associated with this production  division by producing and/or renting production
services to other clients, such as Fox Family.

CORPORATE OPERATIONS

Sales and Marketing

Since many people plan to attend a specific  live  performance  prior to leaving
for  vacation,  it is  imperative  that the Company  market  itself to potential
customers  before  they  arrive  at  their  destination.   The  development  and
maintenance  of  amicable,  professional  relationships  with  individual  sales
representatives  and individuals  working in group sales offices is,  therefore,
integral to the Company's clustering strategy.  At some point in the future, the
Company may invest in or acquire receptive operators in the future.

The Company  generally targets mass market audiences with average prices for its
productions  ranging  from $20.00 to $40.00 per adult  ticket.  Show  pricing is
determined by competition in the local  marketplace and is typically neither the
lowest nor the highest in a  particular  market.  Once  ticket  pricing has been
determined,  the  composition  of the show  (number of headline  acts,  singers,
dancers, orchestra,  technicians,  etc.) and facility and equipment requirements
are  adjusted  so that each show will  generate  profits  based  upon  projected
attendance.  The Company  distributes,  from time to time, show coupons offering
discounts  of up to  20% on  individual  ticket  purchases,  and  offers  volume
discounts  of up to 60% to ticket and tour  wholesalers  buying  large blocks of
tickets.

                                       11
<PAGE>

Advertising and Promotion

The Company provides  advertising and publicity  support and seeks major ongoing
media  coverage  for all of its shows  through  its  network of media  contacts.
Exposure  on  television  and  radio,   and  in  national   periodicals,   major
metropolitan  newspapers,  and local tourist  entertainment guides has served to
promote the Company's shows both regionally and nationally.  Over the last three
years,  publicity for the Company included appearances at the 1996 Miss Universe
Pageant,  Jay Leno's Tonight Show from Las Vegas,  Nevada, VH1's Route 96, CNN's
Burden of Proof and on Wheel-of-Fortune. In February 1999, the Company's Legends
Show in  Branson,  Missouri  was  featured  on a winter  season  special  on The
Nashville Network.

Advertising  designed to target the individual  tourist  includes  newspaper and
magazine  print  ads,  television  and radio  commercials,  airport  videos  and
signage, billboard and outdoor advertising,  transit advertising,  and brochures
placed in areas with a high  concentration  of  tourists  (such as  visitor  and
tourist welcome centers).  In some resort markets,  such as Myrtle Beach,  South
Carolina and Branson,  Missouri advertising  commences up to one year in advance
of a show's opening, and includes direct mail campaigns,  attendance at consumer
and  travel  trade  shows,  and  placement  of print  ads in  travel  and  trade
publications.  Within casinos and hotels, table tent cards, coupons,  flyers and
brochures  are  placed  in each  guest-room,  restaurant  and  lounge,  whenever
possible  and  promotional  show videos are  broadcast  on  in-house  television
systems.  As the  Company  begins to control  other  pieces of the  distribution
chain, and forms entertainment  clusters,  traditional advertising and promotion
costs can be decreased due to economies of scale.

Competition

The  leisure  and  entertainment  market,  which  includes  the  market for live
theatrical  productions,  is highly  competitive.  Many of the Company's markets
contain a large number of competing live theatrical  productions.  In resort and
urban tourist  locations,  the Company competes for ticket sales with other live
productions  and headline stars,  many of whom have better name  recognition and
greater financial and other resources than the Company.

The live  theatrical  entertainment  industry is highly  fragmented and contains
many  small,  independent  production  companies  and several  major  production
companies.  The Company  competes with these  production  companies for the most
desirable   commercial  and  tourist  venues,  and  for  talent  and  production
personnel.  Major  production  companies in the Company's  markets  include Feld
Entertainment   Productions,   Blair  Farrington  Productions  and  Dick  Foster
Productions in Las Vegas, and Greg Thompson  Productions in Seattle. In addition
to competition  from major  production  companies,  which produce other forms of
live theatrical shows, the Company also competes directly against a large number
of smaller  independent  producers who sometimes produce tribute or impersonator
shows. However, the Company believes that only one of these competitors,  Spring
Time  Productions,  produces  such shows on a continuous  basis in more than one
location,  and therefore  presently  offers any real competition to the Company.
Spring Time Productions currently produces its American Superstars  impersonator
shows at the Stratosphere Hotel and Casino in Las Vegas, Nevada and at the Grand
Casinos in Gulfport, Mississippi.

In  Orlando,  Florida  and Buena Park,  California,  where the Company  operates
dinner  theaters,  other major competing  dinner theater shows include  Medieval
Times,  Arabian  Nights,  and  Wizards.  The  dinner  theater  market  is highly
competitive  and the Company  finds  itself  competing  with other forms of live
entertainment in addition to the dinner theaters, primarily theme parks.

                                       12
<PAGE>

Talent

The Company has featured  approximately  175  impersonators and numerous variety
acts (magicians,  aerial acts,  jugglers,  clowns,  sword fighters,  jesters and
comedians),   singers,   dancers,   musicians  and  musical   directors  in  its
productions,  and regularly receives promotional  materials from individuals who
are eager for work. An average of 30 inquiries  are received per month,  and for
every working performer,  the Company has access to three potential  performers.
The Company  periodically  holds auditions for new impersonators,  singers,  and
dancers in Las Vegas,  Atlantic  City,  Myrtle  Beach,  South  Carolina  and Los
Angeles, California and often views acts in outside show environments and clubs.

All  performers  receive  creative and  professional  support from the Company's
various in-house personnel.  The Company employs choreographers to work with new
and existing  entertainers to develop their skills and improve their  confidence
on stage.  Utilizing the Company's in-house music library,  musical arrangements
are  developed  for new and  existing  performers  and  digital  audio tapes are
developed  for  principal  acts.  The  Company's  in-house  wardrobe  personnel,
together with several well established costume designers, create new performers'
wardrobes and update the  wardrobes of existing  talent.  The Company  contracts
with an  independent  photographer  to provide  promotional  photographs  of the
headline acts and employs a writer to prepare professional biographies and press
releases.

The Company believes it is the premier producer of impersonator  shows worldwide
and has the  ability  to  offer a  variety  of  consistent  work to its  acts by
rotating them among its  different  shows and events.  The Company's  musicians,
singers,  dancers  and  production  personnel  are  generally  employees  of the
Company,  while  headline  acts,  including  the  impersonators  utilized in the
Company's  tribute shows,  are treated as independent  contractors in accordance
with industry practice.

Intellectual Property

   
The Company has filed the following intellectual property marks:
    

Name:                Class(es)          Status              Country

Legends in Concert   41                 Registered          United States
Legends in Concert   41                 Registered          Japan
Legends in Concert   41                 Registered          Canada
Legends in Concert   41                 Registered          Great Britain
Legends in Concert   41                 Registered          Mexico
Legends in Concert   6, 16, 18, 21, 
                     25, 26             Registered          United States
Legends in Concert 
  w/ design          6, 16, 18, 21, 
                     25, 26             Registered          United States
Legends in Concert   41                 Pending             Europe
Legends in Concert   41                 Pending             Australia
Legends of Country   41                 Pending             United States
Legends Live         107                Registered          United States
Legends of the 
  Rat Pack           41                 Published           United States
Atlantic City 
  Experience         41                 Registered          United States
Camouflage Aux 
  Folles             41                 Published           United States
Wild Bill's 
  Extravaganza       41                 Pending             United States


                                       13
<PAGE>

The  Company  anticipates  filing  applications  for  protection  of its Legends
service  mark  in  France,  South  America,  China  and  several  other  foreign
countries,  as need be. The Company believes it either owns or has appropriately
licensed all of the  intellectual  property rights required to perform its 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").

The  Company  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 the Company.

Government Regulation

Providing entertainment to the casino gaming industry may subject the Company to
various licensing regulations. The Company is regulated and required to obtain a
casino industry license from the New Jersey Casino Control  Commission  pursuant
to the New Jersey  Casino  Control Act. The  Company's  current  casino  service
industry  license from the New Jersey Casino  Control  Commission  was issued on
January 17, 1997 and expires on  September  30,  1999.  In  connection  with the
license application,  the New Jersey Division of Gaming Enforcement conducted an
investigation  of the  Company  to  determine  its  suitability  for  licensure.
Management  believes  that the  Company is not  required  to obtain a license to
provide its services to casinos in Nevada or in any other jurisdictions in which
it operates,  other than New Jersey. The Nevada Gaming Control Board 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 either properly licensed or in
accordance  with the  local  gaming  laws  before  it will  contract  for  their
services.

In  addition,  the Company  leases or owns  certain of the  theaters for its 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 the
Company to obtain and  maintain  certain  local  licenses  and  permits  (as the
Company  was  required  to obtain  for the  opening of its  Myrtle  Beach  show,
a"four-wall" production). Such licenses and permits could include, among others,
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 the Company's  expansion plans. In addition,  the suspension of,
or  inability  to  renew,  a  license  needed to  operate  any of the  Company's
currently  running  productions  would  adversely  affect the  operations of the
Company.


                                       14
<PAGE>

Employees

As of March 25,  1999,  the Company  employed  approximately  (i) 182  full-time
employees,  including  51  entertainers,  37 theater  operations  personnel,  17
production personnel, 25 food & beverage personnel, 40 administrative personnel,
20 marketing personnel, 8 box office/concession personnel and its nine executive
officers;  and (ii)  402  part-time  employees.  None of the  Company's  current
employees are covered by a collective bargaining agreement. The Company believes
that its relationship with its employees is good.

EXISTING DEFAULTS UNDER CREDIT FACILITIES

Working Capital Line

In May 1997, First Security Bank of Nevada ("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 (10% per
year as of the facility's  inception) and are due on demand.  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, the Company had drawn $1,000,000 on the line of credit.
As of March 31, 1999,  the Company had failed to pay off any part of the line of
credit  and,  is in  default  under its terms.  The  Company  is  continuing  to
negotiate  with First Security to either extend the line of credit or convert it
into a term loan  facility.  As of April 15, 1999 the Company had not received a
notice of default from First  Security,  but there can be no assurance  that the
Company's  attempts to negotiate an extension or restructuring of this loan will
be successful or that First Security will not seek to collect this debt.

Capital Equipment  Financing  Commitment 

On  September  29,  1997,   First  Security  Leasing  Company  ("First  Security
Leasing"), a Utah corporation, approved the Company for a $1,000,000 lease line.
Advances  under the line of credit incur  interest at a rate of 9.75% per annum.
The lease line has been utilized in the following amounts: $389,290,$442,997 and
$167,713, commencing in April, 1998 and May, 1998, respectively, and terminating
on October, 2001, September, 2001 and November 2001. The Company is, as of April
15, 1999, current under this line of credit however,  all of these leases have a
cross-default provision with the working capital line.

Mortgage Financing Commitment

On March 13, 1998, Imperial Credit Commercial  Mortgage  Investment  Corporation
("ICCMIC")  agreed to provide up to  $20,000,000  of mortgage  financing  to the
Company. On the same date, the Company used $12,500,000 of said facility to fund
the cash  portion  of the  Gedco  Acquisition  and  related  fees.  The  Company
subsequently  used  $1,100,000  on June 30, 1998 to fund the cash portion of the
Calvin Gilmore  Acquisition  and $550,000 on October 7, 1998 for its its working
capital  needs.  Concurrently  with  the  ICCMIC  financing,  Mark  Karlan,  the
President of ICCMIC,  was named a member of the  Company's  Board of  Directors,
filling a vacancy  created by the  resignation of Kenneth Berg. The Company made
its  January,  February  and  March  1999  payments  after the due date for such
payments.  As a result of such delinquencies,  the Company incurred late charges
and default interest,  which the Company has not paid. The Company is in default
under the ICCMIC  facility and is unable to borrow  additional  funds under such
facility.  As of April 14, 1999,  the Company had not made its payment to ICCMIC
due April 1, 1999.  The Company is currently  negotiating  with ICCMIC to extend
some of the  repayment  terms  under  this  facility  and to obtain  waivers  or
amendments with respect to certain other defaults under the facility,  including
a breach of certain debt service coverage ratio warrants by the Company.

In the event that First Security, First Security Leasing or ICCMIC issues notice
of default  under any of the  above-referenced  credit  facilities  and initiate
foreclosure  action  against  the  Company,  all or a portion  of the  Company's
property  and assets  securing  the credit  facilities  and  mortgage  financing
extended by such lenders may be sold to satisfy the Company's  commitments under
the terms of such  facilities.  The Company  intends to renegotiate the terms of
its credit facilities,  to obtain extensions of the terms of such facilities and
to seek  alternative  additional  financing.  There can be no assurance that the
Company's efforts will be successful.

                                       15
<PAGE>

RISK FACTORS

The following  risk factors may prevent the Company from achieving its goals and
could  cause the actual  results of the  Company to differ  materially  from any
results that are expressed or implied in forward-looking statements contained in
this document.

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

Dependence on Legends.  To date, the Company's  revenue has been limited largely
to the production of Legends.  The future success of the Company will depend, to
a significant extent, on its ability to successfully  produce and market Legends
shows in other venues.  To the extent the Company is  unsuccessful  in expanding
the  production  of  Legends,  or to the extent the Legends  production  concept
ceases to be successful or profitable for the Company,  there will be a material
adverse  effect on the Company's  business,  financial  condition and results of
operations. 

   
Reliance on Principal Production Venues;  Contractual Arrangements.  The Company
anticipates  that it will continue to rely upon its five current largest revenue
producing show sites, including,  its resident Legends productions in Las Vegas,
Nevada, Branson,  Missouri and Myrtle Beach, South Carolina, as well as its King
Henry's  Dinner Theater in Orlando  Florida,  Wild Bills Dinner Theater in Buena
Park,  California  and  Wild  Bills  Dinner  in  Kissimmee,   Florida,  for  the
substantial  majority of its revenues.  The loss of all or a substantial portion
of the business resulting from these relationships would have a material adverse
effect on the Company's business, financial condition and results of operations.
    
   
    
   
Need for Additional Financing.  The Company's cash, cash equivalent balances and
anticipated  revenues from operations will not be sufficient to fund its current
operators  or to service its  substantial  indebtedness  under  existing  credit
facilities.  The Company must obtain alternative additional sources of financing
in order to avoid foreclosure under its existing credit facilities. There can be
no  assurance  that such funds will be  available to the Company and will not be
exhausted  prior to the  satisfaction  of the  Company's  commitments  under the
existing credit  facilities or the  implementation  of its growth strategy.  The
Company has no current  arrangements  with respect to, or potential  sources of,
additional financing, and any inability to obtain such financing could cause the
Company to curtail, delay or eliminate present or anticipated productions, or to
fund such productions  through  arrangements with third parties that may require
the Company to relinquish rights to substantial portions of its revenues,  which
may result in the foreclosure of its existing credit facilities.
    
                                       16
<PAGE>

   
Risks Associated with Proposed  Acquisition  Strategy.  As part of its expansion
plans if the  Company  is able to pursue  them,  the  Company  intends to pursue
strategic  acquisitions  of,  or joint  ventures  with,  independent  production
companies,  and to market its brand name  products to the  established  customer
bases of any such  acquired  companies,  in order to increase  its  revenues and
market  share.  In  addition,   the  Company   intends  to  acquire   additional
established,  brand-name  shows  which  it  believes  have the  potential  to be
successful  in  new  markets.  The  Company  has  planned  to  enter  into  such
arrangements  on  a  shared  revenue  and/or  profit  basis  and  to  make  such
acquisitions  through  limited  equity  distributions  rather than  through cash
payments or investments.  Nonetheless,  there may, in the future,  be attractive
acquisition  candidates for which cash funding is the Company's only choice,  in
which case, any such  acquisitions may be contingent upon the Company  acquiring
additional financing. There can be no assurance that the Company will be able to
acquire such financing or, even with additional financing,  that it will be able
to  acquire  acceptable  production  companies  or  shows,  nor can there be any
assurance that the Company will be able to enter into beneficial joint ventures,
on commercially reasonable terms or in a timely manner. Furthermore, the Company
can provide no assurance  that any acquired  customer bases will be receptive On
Stage's productions or that the Company will be able to successfully develop any
acquired  shows.  To the extent the Company does effect an  acquisition or joint
venture, there can be no assurance that the Company will be able to successfully
integrate into its operations any business or productions  which it may acquire.
Any inability to do so,  particularly in instances in which the Company has made
significant  capital  investments,  could have a material  adverse effect on the
Company. In addition,  there can be no assurance that any acquired business will
increase the revenues  and/or  market share of the Company or otherwise  improve
the financial condition of the Company.
    

Competition. The leisure and entertainment market, which includes the market for
live theatrical  productions,  is highly competitive,  and many of the Company's
markets  contain a large number of competing  live  theatrical  productions.  In
resort and urban tourist  locations,  the Company competes for ticket sales with
the producers of other live productions, many of whom have greater financial and
other  resources than the Company and/or feature  productions and headline stars
with  greater name  recognition  than those of the  Company.  In  addition,  the
Company  competes  with  other  production  companies  for  the  most  desirable
commercial  and  tourist  venues and for talent and  production  personnel.  The
Company's  inability  to secure such venues or  personnel  could have a material
adverse effect on the Company's  expansion  plans and results of operations.  In
addition,  one or more of the commercial  venues in which the Company  currently
has, or plans to have, a live production  show could decide to self-produce  its
live  entertainment  needs.  There can be no assurance  that the Company will be
able to  secure  alternative  venues  for  displaced  productions  or that  such
alternative  venues  could be secured  under  similar or  favorable  terms.  

                                       17
<PAGE>

Availability  of Talent.  The Company's  future success will depend largely upon
its ability to attract and retain personnel  sufficiently  trained in performing
arts  and  theatrical  production,   including  singers,   dancers,   musicians,
choreographers and technical personnel. The Company maintains rigorous standards
with respect to the abilities and level of experience of such personnel in order
to ensure consistency, quality and professionalism in its productions, which may
make it more difficult for the Company to obtain qualified personnel.  Moreover,
any such  difficulty  is  compounded  by the fact that  Legends,  the  Company's
flagship  production,  features  impersonators  of past  and  present  superstar
vocalists.  Because  such  headline  performers  must  look,  sound and act like
specific  celebrities,  the pool of performers from which the Company can choose
is significantly reduced. In addition,  while the Company's musicians,  singers,
dancers and  production  personnel are generally  employees of the Company,  its
headline acts are independent  contractors who enter into new contracts with the
Company for each new show or venue in which they  perform.  The Company does not
maintain any long-term  contracts with its performers.  The Company will need to
hire  additional  performers and production  technicians as it continues to open
new productions, as well as to supplement personnel in its existing productions.
The Company's inability to attract and retain such personnel,  for either new or
existing  productions,  could have a material  adverse  effect on the  Company's
expansion plans,  business,  financial condition and results of operations.  See
"Business -- Talent."

Fluctuations in Quarterly Operating Results;  High Seasonality.  The Company has
experienced,  and expects to continue to experience,  fluctuations  in quarterly
results of operations.  The Company's  live  theatrical  production  business is
highly  seasonal.   The  Company  expects  such  seasonal  trends  to  continue.
Additionally, the Company typically spends significant resources on new resident
theatrical  productions  up to six  months  in  advance  of show  openings,  and
believes  that,  as the  Company  emphasizes  pre-opening  market  research  and
development  as part of its  expansion  plan,  both the  amount  of  pre-opening
expenditures  and the lag  between  the time in which the  Company  incurs  such
expenditures and the receipt of post-opening revenue will increase. Accordingly,
the  Company's  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, revenues as well as profits
and losses may vary significantly from quarter to quarter and the results in any
one period will not necessarily be indicative of results in subsequent periods.

Effect of Recession on Live  Entertainment  Industry;  Changing Trends. The live
entertainment  industry is cyclical,  with consumer  spending tending to decline
during recessionary  periods when disposable income is low. Although the Company
believes  that  its  moderate  ticket  prices  may  enhance  the  appeal  of its
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 the Company's  ability to compete for limited  consumer  resources.  The live

                                       18
<PAGE>
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.  The Company's success will depend on the Company's 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 such factors in a timely  manner could have a
material  adverse  effect  on  the  Company.  Dependence  on the  Casino  Gaming
Industry.  Although the Company has recently  shifted its primary  emphasis away
from  gaming  markets  and towards  the resort and urban  tourist  markets,  the
Company's  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 the  Company's
business, financial condition and results of operations.

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

Government Regulation. Providing entertainment to the casino gaming industry may
subject the Company to various licensing  regulations.  For instance, the Casino
Control Commission of the State of New Jersey requires that the Company obtain a
Casino  Service  Industry  License to  perform  its shows at its  Atlantic  City
venues.  Although  the Company has  obtained  this  license,  there may be other
licenses  or permits  which may be  required in order for the Company to perform
its shows in casinos in other  areas.  In  addition,  pursuant to the  Company's
expansion  program,  the Company plans to lease or purchase some, if not all, of
the  theaters  for its new  Legends or other  brand-name  resident  productions,

                                       19
<PAGE>
thereby  absorbing  all costs and risks  associated  with  producing the show in
order  to  retain  100% of the  show's  profits  (referred  to as a  "four-wall"
production). Producing shows on this basis may require the Company to obtain and
maintain certain business,  professional,  retail and local licenses and permits
(as the Company was required to obtain for the opening of its Myrtle Beach show,
a  "four-wall"  production).  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 the Company's expansion plans. In addition,  the
suspension  of, or  inability to renew,  a license  needed to operate any of the
Company's currently running productions would adversely affect the operations of
the Company. 

Dependence on Key Personnel. The Company's future success will depend largely on
the efforts and abilities of its existing senior  management,  particularly  Mr.
Stuart,   the  Company's   Chairman,   Chief  Executive  Officer  and  principal
stockholder,  and David  Hope,  the  Company's  President  and  Chief  Operating
Officer.  The loss of the  services  of such  officers  or other  members of the
Company's  management team could have a material adverse effect on the Company's
business,  financial  condition and results of operations.  Although the Company
currently maintains a key-man life insurance policy on the life of Mr. Stuart in
the  amount  of  $5,000,000  and on  the  life  of Mr.  Hope  in the  amount  of
$2,500,000,  such proceeds may not be  sufficient to compensate  the Company for
the loss of their  services.  In particular,  Mr. Stuart's death would result in
the loss of his creative contribution to the Company and would give the owner of
the  Imperial  Palace  the right to  terminate  its  contract  with the  Company
relating to the Company's  resident Legends  production in Las Vegas (one of the
Company's largest revenue producing venues). In addition,  while Messrs.  Stuart
and Hope have entered into non-competition  agreements restricting their ability
to work for a  competitor  of the  Company  during the term of their  employment
agreements  (which expire on May 31, 2000) and  thereafter  for periods of up to
five  and  two  years,  respectively,  there  can  be  no  assurance  that  such
non-competition  agreements  will  be  enforceable.  Finally,  there  can  be no
assurance  that the Company  will be able to attract  and retain the  additional
qualified senior management personnel necessary to manage its planned growth.

Risk of Employment Tax Liability.  Pursuant to industry  standards,  the Company
has,  since its  inception,  treated,  and  expects to  continue  to treat,  the
headline  acts of its  productions  as  independent  contractors  rather than as
employees.  In making the determination that it is qualified to characterize its
headline acts as independent contractors,  the Company, 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 the Company is qualified to treat the headline acts as independent
contractors.  In the  event  that the  Company  has  improperly  classified  the
headline acts as  independent  contractors,  the Company 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,  such
employment tax liability  could have a material  adverse effect on the Company's
financial condition and results of operations.

                                       20
<PAGE>

Litigation.  The Company is involved in certain pending and threatened  lawsuits
in which the adverse parties are seeking damages from the Company.  There can be
no assurance that any of the  instituted or threatened  lawsuits will be settled
or decided in favor of the Company. Moreover,  regardless of the outcome of such
lawsuits and claims,  in the event the Company were to be engaged in  protracted
litigation the costs of such litigation could be substantial. Even in situations
where the Company is fully  indemnified  by third  parties,  the time and effort
expended by the  Company's  personnel in  connection  with such matters could be
significant,  leaving  them with less time and  energy  for the  pursuit  of the
Company's  strategic goals. The Company may utilize a portion of the proceeds of
this offering  allocated to working capital in connection with these  litigation
matters or settlements thereof.  Although the Company does not anticipate that a
material portion of the proceeds of this offering will be required to be used in
connection with such litigation matters, in the event that a material portion is
required,  the Company will have less  financial  resources  available to it for
other  purposes  which could  adversely  affect the Company. 

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

No  Dividends.  The Company has never paid any dividends on its Common Stock and
does not anticipate paying cash dividends in the foreseeable future. The Company
currently  intends  to  retain  all  earnings  for use in  connection  with  the
expansion of its business and for general  corporate  purposes.  The declaration
and payment of future  dividends,  if any, will be at the sole discretion of the
Company's  Board of Directors and will depend upon the Company's  profitability,
financial  condition,  cash  requirements,  future prospects,  and other factors
deemed  relevant  by  the  Board  of  Directors.  Possible  Adverse  Effects  of
Authorization  of  Preferred  Stock.  The  Company's  Articles of  Incorporation
authorize  the Company's  Board of Directors to issue up to 1,000,000  shares of
"blank check"  preferred stock (the "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 the Company,  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.
Although  the  Company  has no current  plans to issue any  shares of  Preferred
Stock,  there can be no assurance that the Board will not decide to do so in the
future.

                                       21
<PAGE>

Current Prospectus and State Registration Required to Exercise Warrants. Holders
of outstanding  Company warrants will be able to exercise their warrants only if
(i) a current  prospectus  under the  Securities  Act relating to the securities
underlying  the  warrants,  is then in  effect  and  (ii)  such  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 the
Company  intends  to use its best  efforts  to  maintain  a  current  prospectus
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 the Company will be able to do so. The value of the warrants may
be greatly  reduced if a prospectus  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
such  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.

Unaffiliated  Bankruptcy.  A real  estate  partnership  (unaffiliated  with  the
Company)  of which  Mr.  Stuart,  the  Chairman,  Chief  Executive  Officer  and
principal  stockholder of the Company, was a partner,  Maze Stone Canyon Estates
Partnership,  filed for  bankruptcy  under  Chapter 11 in  December  1991 in the
United States Bankruptcy Court,  Central District of California (the "Bankruptcy
Court"). The partnership is currently in reorganization  pursuant to the Plan of
Reorganization adopted by the Bankruptcy Court in August 1992.

Possible Delisting of Securities from the Nasdaq SmallCap Market; Risks Relating
to Penny  Stocks.  In order to  continue  to be  listed on the  Nasdaq  SmallCap
Market, the Company must maintain  $2,000,000 in total assets, a $200,000 market
value of the public  float and  $1,000,000  in total  capital  and  surplus.  In
addition, continued inclusion requires two market-makers and a minimum bid price
of $1.00 per share;  provided,  however,  that if the  Company  falls below such
minimum bid price, it will remain eligible for continued inclusion on the Nasdaq
SmallCap  Market if the market value of the public float is at least  $1,000,000
and the Company has $2,000,000 in capital and surplus. The Company's stock price
has recently  approached  or dipped  below $1.00 per share.  Nasdaq has recently
proposed new maintenance  criteria  which,  if implemented,  would eliminate the
foregoing  exception to the minimum bid price  requirement  and  require,  among
other things,  $2,000,000 in net tangible assets, $1,000,000 market value of the
public  float and  adherence to certain  corporate  governance  provisions.  The
failure  to meet  these  maintenance  criteria  in the  future may result in the
delisting of the  Company's  securities  from the Nasdaq  SmallCap  Market,  and
trading,  if any, in the Company's  securities  would thereafter be conducted in
the  non-Nasdaq  over-the-counter  market.  As a result  of such  delisting,  an
investor  could  find it more  difficult  to dispose  of, or to obtain  accurate
quotations as to the market value of, the Company's securities.

In  addition,  if the Common Stock were to become  delisted  from trading on the
Nasdaq  SmallCap Market and the trading price of the Common Stock were to remain
below $5.00 per share,  trading in the Common Stock would also be 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, any non-Nasdaq equity security that
has a market price of less than $5.00 per share, subject to certain exceptions).
Such rules  require the  delivery,  prior to any penny stock  transaction,  of a
disclosure  schedule  explaining the penny stock market and the risks associated
therewith,  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 such 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 purchasers in this offering to sell the Common Stock in the secondary
market.


                                       22
<PAGE>

ITEM 2.  Description of Property

The Company's corporate headquarters consist of approximately 16,000 square feet
of nondescript office and warehouse space located in an industrial strip mall in
Las Vegas, Nevada. This lease is currently set to expire on August 31, 1999. The
table provided  below lists certain  information  regarding the Company's  other
facilities that were in use during 1998.

--------------------- ------------ ------------- -----------  ----------------
                        Square      Type of         Lease        Principal 
    Location           Footage     Possession     Expiration      Function
--------------------- ------------ ------------- -----------  ----------------
Atlantic City, NJ        2,000        Lease         09/99        Office
Atlantic City,NJ (1)      N/A         Lease         06/99        Residential
Branson, MO             27,500        Lease         12/98        Theater/Office
Buena Park, CA (2)      27,599        Lease         06/10        Theater
Kissimmee, FL (3)       31,350        Own           N/A          Retail
Kissimmee, FL (4)       18,221        Own           N/A          Theater
Las Vegas, NV (5)       16,000        Lease         08/99        Corporate
                                     Office
Las Vegas, NV (5)        4,668        Lease         03/99        Warehouse
N. Myrtle Beach, SC (6) 15,000        Lease         12/04        Theater/Office
Myrtle Beach, SC (7)    16,171        Own           N/A          Theater/Office
Orlando, FL              3,640        Lease         06/02        Warehouse
Orlando, FL (8)         10,000        Lease         10/00        Office/Bar
Orlando, FL (9)         15,500        Own           N/A          Theater
Toronto, ON              9,410        Lease         02/03        Theater
Toronto, ON                627        Lease         Month-to-
                                                     Month       Office
--------------------- -------------- ------------ ---------- -----------------

(1) Consists of seven condominium units for use by the Company's performers when
they are  performing  in the  Company's  Legends  show at Bally's  Park Place in
Atlantic City,  New Jersey.  The Company leases these units from John W. Stuart,
the Chief Executive Officer of the Company, and his wife.

(2) The Company's wholly-owned  subsidiary,  On Stage Theaters,  Inc. ("On Stage
Theaters"),  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.

   
(3) This property is owned by Fort Liberty,  Inc., a wholly-owned  subsidiary of
Fort Liberty,  Inc.'s ownership is subject to a lien in favor of ICCMIC securing
a loan in the principal  amount of $2.7 million.  The terms of this loan provide
for monthly interest payments of $21,938, plus monthly principal amortization of
$7,500,  commencing  April 13, 1999.  The loan matures  March 16, 2008, at which
time the projected loan balance, assuming no prepayments,  of $2,676,199 million
will be due and  payable.  The  Company  has no  present  plans for the  further
development or  improvement of the property,  beyond  ordinary  maintenance. The




                                       23
<PAGE>

annual  real  property  taxes  on  the  property  are   approximately   $33,400.
Depreciation  with respect to the building at the property is taken at a rate of
$22,630 per year under the straight line method over a 30-year  estimated  life.
The  occupancy  of  this  mixed-use  retail  space  is  approximately  83% and a
restaurant tenant occupies  approximately 17% of the total square footage of the
property on a lease and providing for monthly  triple net rent of  approximately
$7,300. The following is a schedule of the lease expirations at the property for
each of the next 10 years (with none with terms beyond 2004:
    
                           Square Feet      Percent of
Year                       Expiring         Annual Rent       Total Rent

Month to
  Month  Leases
1999                       8,500             21.29            $ 100,420
2000                       4,840             14.52            $  68,520
2001                       3,750             11.26            $  53,120
2002                      11,658             37.27            $ 175,820
2003                         750              3.18            $  15,000
2004                       2,669              7.58            $  35,750
2005                       1,500              4.90            $  23,140

   
(4) This property is owned by Fort Liberty,  Inc., a wholly-owned  subsidiary of
On Stage  Theaters.  On Stage  Theaters  leases this property from Fort Liberty,
Inc.  The  lease is for a term of 11 years  and  provides  for  monthly  rent of
$89,117, plus taxes and utilities.  Fort Liberty, Inc.'s ownership is subject to
a lien in  favor of  ICCMIC  securing  a loan in the  principal  amount  of $3.9
million.  The  terms of this loan  provide  for  monthly  interest  payments  of
$31,688,  plus monthly principal  amortization of $10,833,  commencing April 13,
1999. The loan matures March 16, 2008, at which time the projected loan balance,
assuming no  prepayments,  of  $3,856,620  million will be due and payable.  The
Company has no present plans for the further  development  or improvement of the
property,  beyond  ordinary  maintenance.  The annual real property taxes on the
property are approximately $65,800. Depreciation with respect to the building at
the  property  is taken at a rate of $26,568  per year under the  straight  line
method over a 30-year estimated life.
    

(5) This lease may be  terminated at any time after August 31, 1999 by providing
written notice of such intention.

(6) This property is subleased to Eddie Miles Entertainment.

   
(7) This property is owned by On Stage  Theaters,  Inc. On Stage Theaters leases
this property from On Stage Theaters Surfside Beach, Inc.
    




                                       24
<PAGE>

(8) On Stage  Theaters  subleases  this  property from Blazing  Pianos,  Inc., a
wholly-owned  subsidiary of On Stage Theaters.  Blazing Pianos,  Inc. leases the
property from an unrelated third party.

   
(9) This property is owned by King Henry's,  Inc., a wholly-owned  subsidiary of
On Stage  Theaters.  On Stage  Theaters  leases this property from King Henry's,
Inc.  The  lease is for a term of 11 years  and  provides  for  monthly  rent of
$67,513, plus taxes and utilities.  King Henry's, Inc.'s ownership is subject to
a lien in favor of ICCMIC securing a loan in the principal amount of $5 million.
The terms of this loan provide for monthly  interest  payments of $40,625,  plus
monthly principal  amortization of $13,999,  commencing April 13, 1999. The loan
matures March 16, 2008, at which time the  projected  loan balance,  assuming no
prepayments,  of $4.33  million  will be due and  payable.  The  Company  has no
present plans for the further development or improvement of the property, beyond
ordinary  maintenance.  The  annual  real  property  taxes on the  property  are
approximately $89,850. Depreciation with respect to the building at the property
is taken at a rate of $44,201  under the  straight  line  method  over a 30-year
estimated life.
    

The Company believes that its existing  facilities are suitable and adequate for
its current operations and are adequately .

ITEM 3.  Legal Proceedings

   
On September 25, 1998, the Company successfully defended a suit filed against it
in March 1997 by Benny R. Pittman, a shareholder of Grand Strand  Entertainment,
Inc. This suit arose out of a dispute relating to the termination of a licensing
agreement  between the Company and Mr.  Pittman and the control of the Company's
Legends in Concert  production  in Surfside  Beach,  South  Carolina.  While the
Company  prevailed  on all the counts  alleged  in the  complaint,  the  Company
stipulated  to allow an arbitrator  to resolve  plaintiffs  claim for damages in
quantum meruit.  The plaintiffs claim for damages quantum meruit was resolved by
the  arbitrator  in the  favor  of the  plaintiff  for a  total  of  $15,400  in
consideration  for  services  provided  to  the  Company  by  the  plaintiff  in
connection with the opening of the Legends production. While it is the Company's
position  that any claim Mr.  Pittman  may have  against  the  Company was fully
adjudicated by the arbitrator as mentioned  above, the Company has recently been
informed that Mr. Pittman intends to file a complaint in South Carolina  against
the Company  alleging a claim for loss of business  opportunities.  However,  no
formal claim has been filed against the Company to date.

On August 20, 1998, a complaint  was filed against the Company by the trustee of
the United States  Bankruptcy Court for the District of Nevada,  alleging Breach
of  Contract,  Monies Due and Owing and  Turnover of the Property to the Estate.
The basis of the  complaint  stems from the  purchase of certain  furniture by a
third party while purporting to be a representative of the Company.  The Company
believes  it  has  a  valid   defense  for  this  claim  based  upon  fraud  and
misrepresentation.  The case is currently in the  discovery  stage of litigation
and the matter has been set for trial on May 27, 1999.
    

On May 28, 1998, Silver State Property Management,  a Nevada corporation,  Roger
A. Bergmann  Enterprises,  a Nevada  corporation,  and R.E. Lyle Corp., a Nevada
corporation filed a complaint in the Second Judicial District Court of the State
of Nevada in and for the County of Washoe  alleging,  among other  things,  that
John W. Stuart,  acting as an agent,  Chairman of the Board and Chief  Executive
Officer of On Stage  Entertainment,  Inc., breached an alleged oral agreement to
purchase the Plaintiff's respective interests in the Legends in Concert


                                       25
<PAGE>
production in Hawaii for an aggregate purchase price of $1,000,000.  The case is
currently in the discovery  stage of litigation  and the matter has been set for
trial on September 20, 1999.

On April 21, 1998, the Company filed a Complaint for  Declaratory  Relief in the
United States  District Court for the District of Nevada (the "District  Court")
against  Hemisphere  Tour and Travel,  Inc.,  Richard  Winokur,  Media Corp.  of
America and Stephen Zadrick. The Company filed this Complaint in order to obtain
a declaration  by the District  Court that the  defendants  were not entitled to
commissions   claimed  by  the  defendants  in  connection  with  the  Company's
acquisition of Gedco USA, Inc. The defendants counterclaimed, alleging breach of
contract and demanding payment of the disputed commission.  This matter has been
stayed by the District Court pending settlement negotiations.

In July 1996,  an  impersonator  of Hank  Williams,  Sr. who  performed  for the
Company,  filed suit against the Company in the Circuit  Court of Taney  County,
Missouri. The plaintiff alleges that the Company misappropriated his name, image
and likeness  for  commercial  purposes by taking a  photograph  of him during a
performance,  reproducing  such  photograph  and  publishing  it  in  a  Company
brochure.  The plaintiff is claiming  damages in the amount of  $2,000,000.  The
Company  believes  that the  plaintiff's  claim is without  merit and intends to
vigorously   defend  this  action.   The  Company   believes  that  the  alleged
appropriation was de minimis and that the plaintiff  impliedly  consented to the
use of his image in the  Company's  brochure.  During  discovery,  the plaintiff
agreed to settle this dispute in favor of the Company and the Company  agreed to
hire the  plaintiff  as a consultant  for its Branson  show.  Plaintiff  has now
repudiated this settlment  agreement and the Company has made a motion to compel
settlement.  This motion is currently pending and trial for this matter has been
set for June 7, 1999.

Although the Company  believes that it has meritorious  defenses with respect to
all of the foregoing  matters which it will vigorously  pursue,  there can be no
assurance that the ultimate  outcome of such actions will be resolved  favorably
to the Company or that such  litigation  will not have an adverse  effect on the
Company's liquidity, financial condition and results of operation.

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

No matters were submitted to a vote of the Company's  stockholders,  through the
solicitation of proxies or otherwise, during the fourth quarter of 1998.



                                       26
<PAGE>

                                     PART II

ITEM 5.  Market for Common Equity and Related Stockholder Matters

The Common  Stock  trades on the  SmallCap  Market  segment of the Nasdaq  Stock
Market under the symbol "ONST." The following table sets forth,  for the periods
indicated, the high and low sales prices as quoted on the Nasdaq Stock Market.

Period                                       High                Low

Fiscal 1998:
     First Quarter                           5.4375              3.50
     Second Quarter                          5.125               3.625
     Third Quarter                           4.75                1.75
     Fourth Quarter                          2.25                1.18

Fiscal 1997:

     Third Quarter                           5.625               4.50
     Fourth Quarter                          6.50                3.825

As of April 9, 1999 there were 85  holders  of record on the  Common  Stock.  On
April 12,  1999,  the closing  sale price of the Common Stock as reported by the
Nasdaq stock market was $1.19.

The Company has never  declared or paid any cash dividends on its capital stock.
The Company  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

   
The information appearing in the section captioned "Management's  Discussion and
Analysis of Financial  Condition and Results of Operations" from the portions of
the Company's 1998 Annual Report to Stockholders,  filed as Exhibit 10.10 to the
Form 10-KSB, is incorporated  herein by reference.
    

ITEM 7.  Financial Statements and Supplementary Data

The information  appearing in the section captioned "Financial  Statements" from
the  portions of the  Company's  1998  Annual  Report to  Stockholders  filed as
Exhibit 10.10 to this Form 10-KSB,  are  incorporated  herein by reference.  See
"List of Financial Statements" beginning on page F-1.

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

None.


                                       27
<PAGE>

                                    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
director  and  executive  officers who served  during 1998 or who are  presently
serving in such capacities.

Name                            Age    Position                           

John W. Stuart...............   56     Chairman and Chief Executive Officer
David Hope...................   40     President and Chief Operating Officer
Kiranjit S. Sidhu............   34     Senior Vice President, Chief
                                       Financial Officer and Treasurer
Christopher R. Grobl.........   31     General Counsel and Secretary
James L. Nederlander.........   38     Director
Mark Tratos..................   46     Director
Mel Woods....................   47     Director
Matthew Gohd.................   43     Director

John W. Stuart has served as the  Chairman  and Chief  Executive  Officer of the
Company  since April 1996 and also was the President of the Company from October
1985 through March 1996. He founded the Company 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.

David  Hope has  served  as the  President,  Chief  Operating  Officer  and as a
director of the Company since  joining the Company in April 1996.  For ten years
prior to that time,  Mr.  Hope  served in  various  capacities,  including  most
recently as  Executive  Vice  President  and Chief  Operating  Officer,  for ITC
Entertainment  Group  ("ITC"),  a  major  independent   producer  and  worldwide
distributor of feature films, television movies and mini-series and a subsidiary
of Polygram N.V.,  where,  as Chief  Operating  Officer,  he was responsible for
day-to-day  operations,  as well as  strategic  and  corporate  development  and
acquisitions.  Prior to that  time,  Mr.  Hope  was a  production  manager  with
Hinchcliffe  Productions,  a United  Kingdom-based  producer and  distributor of
documentaries  and motor sport events.  Mr. Hope received a degree in Management
Science in 1981 from the Loughborough University in England.

Kiranjit S. Sidhu has been the Company's Senior Vice President,  Chief Financial
Officer and Treasurer since joining On Stage in August 1995. Prior to joining On
Stage, Mr. Sidhu served as Chief Financial  Officer and Corporate  Secretary for
Aspen Technologies,  a computer peripheral manufacturer,  from July 1994 to July
1995.  From  January 1993 to June 1994,  Mr.  Sidhu  served as  President  and a
director for Aspen Peripherals,  a computer peripheral  reseller.  From February
1992 to June 1993,  Mr.  Sidhu  served as a financial  consultant  to ITC.  From
January 1992 to July 1993,  Mr. Sidhu served as Vice  President of Finance and a
director for Nuvo Holdings of America, a computer peripheral  manufacturer.  Mr.
Sidhu holds a Masters of  Business  Administration  from the  Wharton  School of
Business and a Bachelor of Arts in Computer Science from Brown University.

On April 16,  1999,  Mr.  Sidhu  agreed to  restructure  his current  employment
agreement with On Stage in an attempt to assist On Stage with  facilitating  its
restructuring plan. Pursuant to the terms of his employment  restructuring,  Mr.
Sidhu and On Stage entered a new employment  agreement under which he will be an
"at-will" consultant.

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.

James L.  Nederlander  has been a director of On Stage since August 1996. He has
also been the  Chairman  of the  Nederlander  Producing  Company of  America,  a
producer of live entertainment  shows, since August 1996 and prior to such time,
commencing in 1980, he was Executive Vice President of such organization.

                                       28
<PAGE>

Mark Tratos has been a director of On Stage  since  March 1997.  Mr.  Tratos has
been the  managing  partner of the law firm Quirk & Tratos of Las Vegas,  Nevada
since 1983. He received his J.D. from Lewis and Clark Law School in 1979.  Since
1982,  Mr.  Tratos  has also  served as a member of the  adjunct  faculty of the
University  of Nevada Las Vegas  teaching a variety of  subjects in the areas of
fine and performing arts and entertainment and business law.

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

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

Directors Resigning During 1998 and 1999

Four directors resigned during 1998 and 1999, Kenneth Berg, Nelson Foster, Jules
Haimovitz and Mark S. Karlan.  Mr. Berg resigned on January 21, 1998, Mr. Foster
resigned on June 26, 1998, Mr.  Haimovitz  resigned on September 8, 1998 and Mr.
Karlan resigned on April 16, 1999. Mr. Karlan is the President,  Chief Executive
Officer and a director of Imperial Credit Commercial  Mortgage Investment Corp.,
a publicly  traded real estate  investment  trust  since July 1997.  Mr.  Karlan
resigned following On Stage's default in its loans from Imperial Credit.


Section 16(a) Beneficial Ownership Reporting Compliance

Based  solely on its  review of the  copies of Forms 3, 4 and 5  received  by On
Stage or of written  representations from officers,  directors and other persons
required to report under  Section 16(a) of the  Securities  Exchange Act of 1934
initial or changes in beneficial  ownership of On Stage common stock, we believe
that all the reporting persons complied with the applicable filing  requirements
of Section 16(a) for 1998.

Executive Bonus Plan

In March 1997, On Stage implemented a three-year  executive bonus plan, which is
administered by the compensation  committee.  Under the executive bonus plan, an
annual  bonus pool of up to 5% of On Stage's  audited  pre-tax  earnings,  after
non-recurring  charges,  such  as  original  issue  discount,  compensation  and
interest expense charges and excluding  extraordinary  items, may be established
for  distribution  at the  discretion of the board of  directors,  to On Stage's
executive officers (other than Mr. Stuart, who is not eligible for bonuses under
the plan) in 1999 and 2000,  provided  that On Stage  achieves at least  minimum
pre-tax  earnings as calculated  under the for the respective  preceding  fiscal
year as follows:

                       Year              Minimum Pre-Tax Earnings
                      -------     -----------------------------------
                        1998                $5,000,000
                        1999                $8,700,000
 
The terms of the executive bonus plan,  including the minimum  pre-tax  earnings
requirements set forth above,  were determined by negotiations  between On Stage
and the underwriter of our initial public offering,  and should not be construed
to imply or predict any future earnings.

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 such 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  first three
scheduled meetings and the remainder of the option grant will vest at 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 1998,  On Stage
granted  each   Director   10,000  stock   options  at  $1.50  strike  price  as
consideration  for the  excessive  time and  energy  the board  spent on company
issues during 1998.

    


                                       29
<PAGE>

ITEM 10.  Executive Compensation
   
<TABLE>
<CAPTION>                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
---------------------------   ----    -------  ------ -------------  ----------    ------------

John W. Stuart.............   1998   $250,000     -       35,869(1)     75,000            -          
 Chairman and Chief           1997   $259,615     -       38,321(2)        -          239,398(3)
 Executive Officer       

David Hope.................   1998   $207,308     -       19,578(4)     50,000            -
 President and Chief          1997   $221,461  $37,865    19,578(5)        -              -
 Operating Officer

Kiran Sidhu................   1998   $157,385     -       14,993(6)     30,000            -
 Senior Vice President        1997   $161,596 $162,129(8) 17,215(7)     85,000            -
 Chief Finanical Officer
 and Treasurer

Gerard O' Riordan..........   1998   $106,664     -        14,424(9)       -              -
 President-On Stage Theaters  1997       -        -           -            -              -

Richard Kanfer.............   1998   $109,154     -        14,791(10)   15,165            -
 Vice President- Sales        1997   $115,769     -        10,560(11)      -              -

Gary Panter................   1998   $102,370     -        13,627(12)   21,439         10,595(14)
 Senior Vice President        1997   $101,400     -        13,909(13)   10,389            -
 Operations
</TABLE>

(1) Represents  $11,971 unused vacation time accrued but not paid, and $23,898 
    of car and health  allowances  accrued of which $14,895 was paid in 1998.  
    Does not include $149,686 of rent accrued for the Warwick Leases of which 
    $76,028 was paid in 1998.

(2) Represents  $14,423 unused vacation time accrued but not paid,and $23,898 of
    car and health  allowances paid in 1997.  Does not include $150,686 of rent 
    for the Warwick Leases paid in 1997.

(3) Includes  $221,500 in  compensation  as a result of  forgivness  of certain
    indebtedness  owed by Mr.  Stuart to On Stage and payment of $17,898 of 
    unused vacation time carried forward from prior years.

(4) Represents  $6,346 unused vacation time accrued but not paid, and $13,232 of
    car and health allowances accrued of which $9,732 was paid in 1998.


                                       30
<PAGE>

(5) Represents  $6,346 unused vacation time accrued but not paid, and $13,232 of
    car and health allowances accrued paid in 1997.

(6) Represents  $5,393  unused vacation time accrued but not paid, and $9,600 of
    car and health allowances accrued of which $6,100 was paid in 1998.

(7) Represents $7,615 unused vacation time accrued but not paid, and $9,600 of 
    car and health allowances paid in 1997.

(8) Represents  the fair market value of the issuance  of 40,532  shares of 
    common  stock as  incentive compensation pursuant to his employment 
    agreement.

(9) Represents $14,424 of car and health allowances paid in 1998.

(10)Represents  $4,231 unused vacation time accrued but not paid, and $10,560 of
    car and health allowances accrued of which $7,560 was paid in 1998.

(11)Represents  $10,560 of car and health allowances paid in 1997.

(12)Represents $3,238 unused vacation time accrued but not paid, and $10,389 of 
    car and health allowances accrued of which $8,639 was paid in 1998 and 
    $11,050 of housing allowance payments.

(13)Represents  $3,520 unused  vacation time accrued but not paid, and $10,389 
    of car and health  allowances was paid in 1997.

(14)Represents $10,595 non-recurring relocation-related expenses.


Option Grants. There were no grants of stock options to the persons named in the
Summary Compensation Table during the year ended December 31, 1998

<TABLE>
<CAPTION>                Option Grant in Last Fiscal Year

<S>                              <C>        <C>             <C>       <C>            <C>
                                         Percent                                        Value at 
                                           of                                           Assumed Annual
                                        Options/SARS                                    Rates of Stock
                                          Granted                                      Price Application
Name and Principal             Options  to Employees       Exercise  Expire   Potential    Value 
Position                       Granted  in Fiscal Year      Price     Date    5%           10%
--------------------           -------- --------------      --------  ------  -------     --------
John W. Stuart................  75,000      21%             $ 4.38     6/03   $418,780    $528,449
 Chairman and Chief
 Executive Officer   

David Hope...................   50,000      14%             $1.50      6/03   $95,721     $120,788
 President and Chief
 Operating Officer

Kiran Sidhu..................   30,000(2)    9%             $1.50      9/03   $57,433     $ 72,473   
 Senior Vice President
 Chief Financial Officer
 and Treasurer

Gerard O' Riordan............      -(1)      0%               -          -       -             -
 President, On Stage
 Theaters 

Richard Kanfer...............   15,165       4%             $1.50       9/03  $29,032     $ 36,635
 Vice President-Sales

Gary Panter..................   12,500       4%             $1.50       9/03  $23,930     $ 30,197
 Senior Vice President of
 Operations

Barbara Lindquist............   28,000       8%             $1.50       9/03  $53,604     $ 67,641
 Vice President Merchandising
</TABLE>

(1) Excludes 180,000 warrants granted in connection with the Gedco Acquisition.
(2) Mr. Sidhu's options were subsequently cancelled.


                                       31
<PAGE>


Option  Exercise  and  Fiscal  Year-End  Option  Values.   The  following  table
summarizes  option  exercises  during 1998 and the value of vested and  unvested
in-the-money  options for the persons named in the Summary Compensation Table at
December  31, 1998.  Year-end  values are based upon a price of $1.50 per share,
which was the closing  market  price of a share of common  stock on December 31,
1998.

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

<S>                      <C>            <C>                  <C>                             <C>
                                                                                      Value of Unexercised
                                                     Number of Unexercised            In-the-Money Options
                                                  Options at December 31, 1998        at December 31, 1998  
                                                  ----------------------------       ------------------------  
                    Shares Acquired   Value       
Name                on Exercise       Realized    Exercisable    Unexercisable       Exercisable    Unexercisable
--------------      --------------   ----------   ------------   -------------      -------------   ------------- 
John W. Stuart.....      -              -             -           75,000             $    -         $     -

David Hope.........      -              -          361,300          -                $    -         $     -

Kiran Sidhu........      -              -          139,794          -                $    -         $     -
</TABLE>
    

ITEM 11.  Security Ownership of Certain Beneficial Owners and Management

   
The following table sets forth certain  information as of April 30, 1999 (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  included  elsewhere  in this  proxy
statement and (4) by all current executive officers and directors as a group.

                               Number of Shares           Percentage of
Name and Address (1)        Beneficially Owned (2)          Class(2)
----------------------      ----------------------        -------------

John W. Stuart (3)..............  3,678,755                    48.6%
David Hope (4)..................    377,300                    5.0%
Kiranjit S. Sidhu (5)...........    147,000                    1.9%
James L. Nederlander (6)........     30,000                     *
Mark Tratos (7).................     30,000                     *
Mel Woods (8)...................     20,000                     *
Matt Gohd (9)...................    367,500                    4.8%
Hanover Restaurants, Inc........    595,238                    7.9%
Imperial Credit Industries, 
 Inc (10).......................    575,000                    7.6%
All executive officers and 
 directors as a group  
 (9 persons) (11)...............  5,820,793                   76.8%
-------------------------
*Less than one percent

(1) Unless otherwise  indicated,  the address for each named individual or group
    is in care of On Stage at 4625 West Nevso, Las Vegas, NV 89103.

(2) 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 such  person  within 60 days
    from  April  30,  1999  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 such person (but not those held by any
    other  person)  and which are  exercisable  within 60 days of April 30, 1999
    have been exercised. Percentages herein assume a base of 7,572,046 shares of
    common stock outstanding as of April 30, 1999.

 


                                       32
<PAGE>

(3) Includes: (i) 382,790 shares of common stock issuable by Mr. Stuart to third
    parties upon the exercise of options  granted by him to such  persons;  (ii)
    300,000  of  common  stock   issuable  upon  the  exercise  of   immediately
    exercisable  warrants.  Does not  include  75,000  shares  of  common  stock
    issuable  upon  the  exercise  of  stock  options  that  are  not  currently
    exercisable.

(4) Includes:  (i) 361,300  shares of common stock issuable upon the exercise of
    immediately  exercisable  stock options;  (ii) 8,500 shares of common stock;
    and (iii)  7,500  shares of  common  stock  issuable  upon the  exercise  of
    immediately exercisable warrants.

(5) Includes:  (i) 140,000  shares of common stock issuable upon the exercise of
    immediately  exercisable stock options;  (ii) 4,500 shares of common stock;
    and (iii)  2,500  shares of  common  stock  issuable  upon the  exercise  of
    immediately exercisable warrants.

(6) Includes  30,000  shares of  common  stock  issuable  upon the  exercise  of
    immediately  exercisable  stock  options.  Does not include 20,000 shares of
    common  stock  issuable  upon the  exercise  of stock  options  that are not
    currently exercisable.

(7) Includes  30,000  shares of common  stock  issuable  upon the  exercise  of
    immediately exercisable stock options.

(8) Includes  20,000  shares of  common  stock  issuable  upon the  exercise  of
    immediately  exercisable  stock  options.  Does not include 20,000 shares of
    common  stock  issuable  upon the  exercise  of stock  options  that are not
    currently exercisable.

(9) Includes 17,500 shares of common stock issuable upon the exercise of  
    immediately  exercisable  stock  options,  150,000  shares of common stock 
    and 200,000 shares of common stock issuable upon the exercise of immediately
    exercisable  warrants.  Does not include 5,000 shares of common stock  
    issuable upon the exercise of stock options that are not currently 
    exercisable.

(10)Includes  325,000  shares of common stock  issuable  upon the exercise of an
    immediately  exercisable  warrant  granted to  ICCMIC.  ICCMIC is managed by
    Imperial Credit Commercial Asset Management  Corporation,  which is a wholly
    owned  subsidiary  of  Imperial  Credit  Industries,  Inc.  Imperial  Credit
    Industries,   Inc.  also  beneficially  owns   approximately   8.9%  of  the
    outstanding  common stock of ICCMIC.  Also includes 250,000 shares of common
    stock  issuable  upon the  exercise of an  immediately  exercisable  warrant
    granted to Imperial Capital Group, LLC. Imperial Credit Industries, Inc. has
    a 60% interest in Imperial Capital Group.  Imperial Credit Industries,  Inc.
    disclaims  the  beneficial  ownership  of the shares of common stock held by
    Imperial  Capital Group.  All  information  provided in this footnote 11 was
    derived from a Schedule 13G filed by Imperial Credit  Industries,  Inc. with
    the Securities and Exchange Commission on April 3, 1998.

(11)Includes (i) 464,973  shares of common stock  issuable  upon the exercise of
    immediately  exercisable  stock  options and (ii)  339,375  shares of common
    stock issuable upon the exercise of immediately  exercisable warrants.  Does
    not include  65,345  shares of common  stock  issuable  upon the exercise of
    stock  options,  including  40,000 shares of common stock subject to options
    granted  to  non-employee  directors  of On  Stage,  that are not  currently
    exercisable.
    

                                       33
<PAGE>

ITEM 12.  Certain Relationships and Related Transactions

Subsequent Events

   
DY/DX Corporation Common Stock Purchase Agreement

On October 2, 1998, On Stage entered into a stock purchase  agreement with DY/DX
Corporation, an Illinois corporation, to sell up to 500,000 shares of On Stage's
common stock at an aggregate purchase price of $500,000. As of November 4, 1998,
DY/DX  Corporation  had  purchased  55,000  shares of On  Stage's  common  stock
pursuant to this agreement.

Common Stock Purchase Agreement with Whale Securities Company, L.P.

On or about January 28, 1999, On Stage entered into a Stock  Purchase  Agreement
with its underwriter Whale Securities Company, L.P. ("Whale"), pursuant to which
On Stage  agreed to sell  150,000  shares of its'  common  stock to  certain  of
Whale's customers for an aggregate purchase price of $100,000.
    
Notes Payable to Principal Stockholder

   
On April 5, 1999, On Stage entered into an agreement with Mr.  Stuart,  pursuant
to which On Stage agreed to accept a bridge loan from Mr. Stuart in an amount of
up to $500,000 in return for a one year promissory note bearing 12% interest,  a
5% origination  fee and a warrant to purchase one share of common stock for each
$1.00  invested  provided  that On Stage did not repay Stuart within thirty (30)
days.  As of April 20,  1999,  On Stage has accepted  $200,000 of the  potential
$500,000 from Mr. Stuart.

On March 4, 1999,  the Board of  Directors  authorized  a loan in the  principal
amount of  $100,000  from from John W.  Stuart  the  Company's  Chairman,  Chief
Executive Officer and Principal Stockholder (the "Stuart Loan"). The Stuart Loan
is evidenced by a one year  promissory  note bearing an interest  rate of twelve
percent (12%) per annum, due on March 3, 2000. In  consideration  for the Stuart
Loan,  the Board of  Directors  approved  the  issuance  of warrants to purchase
100,000 shares of the Company's  common stock at a price of $1.00 per share, the

market price on the closing date of the Stuart Loan.  Additionally,  the Company
agreed  to pay  legal  fees  incurred  by Mr.  Stuart  in  connection  with this
transaction,  as well as an  additional  $12,500  for  previous  legal bills Mr.
Stuart personally incurred for company related matters.

In March 1997, On Stage agreed with its underwriter, Whale Securities Co., L.P.,
that it would  neither loan nor advance any sums to or on behalf of Mr.  Stuart,
other than those sums  advanced to Mr.  Stuart from  December  31, 1996  through
August 13,  1997,  the  effective  date of On Stage's  initial  public  offering
without Whale's prior written consent.  Whale authorized on October 23, 1997 and
November 17, 1997,  with Whale's  consent,  On Stage  advanced  $105,483.  Whale
authorized On Stage on March 25, 1998 to advance an  additional  $150,000 to Mr.
Stuart for settlement of litigation related to his involvement in the Legends in
Concert show in Hawaii. As of June 30, 1998, On Stage had advanced Mr. Stuart an
aggregate of $136,194,  evidenced by a promissory note. The funds advanced by On
Stage accrued  interest at the rate of ten percent (10%) per annum.  The advance
to Mr.  Stuart  became  due and  payable  one year from the date of which it was
made. On July 6, 1998, Mr. Stuart paid the advance in full.

In February 1997, Mr. Stuart granted to Senna Venture Capital Holdings, Inc., an
affiliate of DYDX Legends  Group L.P.  (and a lender to On Stage),  an option to
purchase 142,292 of his shares of common stock at an exercise price of $5.00 per
share, in  consideration  for (i) DYDX waiving a technical  default under a loan
agreement  entered into  between DYDX and On Stage and (ii) DYDX's  agreement in
connection with a waiver to allow  $1,780,424 in debt  forgiveness to Mr. Stuart
in 1997. That option is exercisable  for a period of two years  commencing as of
February 9, 1998.

On Stage leases from Mr. Stuart seven  condominium  units in Atlantic  City, New
Jersey for use by On Stage's  performers  (the  "Warwick  Leases").  The current
lease term expires on June 30, 1999.  The total lease payment to Mr. Stuart from
On Stage is currently $7,833 per month, which amount we believe approximates the
fair market value for the use of these properties. In addition, commencing as of
January 1, 1997, On Stage began paying directly the association dues, insurance,
taxes,  maintenance and utilities on those  apartments.  On Stage paid aggregate
rent to Mr.  Stuart for those  apartments of $94,000 for each of the years ended
December 31, 1996, 1997 and 1998.

    


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<PAGE>

Note Receivable from Chief Financial Officer

On April 13, 1999,  the Company  loaned  $63,213 to Kiran Sidhu,  the  Company's
Senior Vice  President  and Chief  Financial  Officer,  to assist Mr. Sidhu with
satisfying  personal income taxes incurred as a result of the issuance of 40,532
shares of the Company's Common Stock in accordance with the terms of Mr. Sidhu's
employment  agreement with the Company (the "Sidhu Note"). The Sidhu Note, which
recently  matured on April 12, 1999, is secured by Mr.  Sidhu's 40,532 shares of
the Company's  Common Stock.  Mr. Sidhu has recently  requested that the Company
extend the maturity  date of the Sidhu Note  through to December  31, 1999,  due
primarily  to the fact that he does not have the money to repay the Sidhu  Note,
coupled with the fact that the Common Stock which  secures the  repayment of the
Sidhu Note is not enough to satisfy the outstanding  debt since the Common Stock
has declined in value from $5.00 per share when issued,  to approximately  $1.00
per share as of the maturity date.

   
Under the terms of the employment  agreement  between On Stage and Mr. Sidhu, on
April 13, 1998, On Stage  advanced to Mr. Sidhu  $63,213 to satisfy Mr.  Sidhu's
income tax liability  incurred in connection with the grant from On Stage to Mr.
Sidhu of 40,532 shares of common stock.  Mr. Sidhu executed a promissory note in
favor of On Stage in connection with the this loan. The promissory note provides
for interest on the loan to accrue at 8% per annum,  is secured by 40,532 shares
of On Stage  common  stock owned by Mr. Sidhu and becomes due on April 12, 1999.
On April 16, 1999,  Mr. Sidhu sold Mr. Stuart 40,532 shares of On Stage's common
stock.  In exchange,  Mr.  Stuart agreed to assume Mr.  Sidhu's  $60,798 note in
favor of On Stage,  with  recourse  only to the  40,532  shares of common  stock
purchased  from Mr.  Sidhu.  Mr.  Sidhu  executed a new  promissory  note in the
principal  amount of  $7,472,  which was  subsequently  forgiven  as part of Mr.
Sidhu's employment restructuring.

Chief Financial Officer Employment Restructuring

On April 16,  1999,  Mr.  Sidhu  agreed to  restructure  his current  employment
agreement  with On Stage in an attempt to assist On Stage with its  facilitating
its' restructuring plan. Pursuant to the terms of his employment  restructuring,
Mr.  Sidhu  agreed to forego any rights he had to his  employment,  option,  and
confidentiality  agreements,  in return for the following:  (i) a new employment
agreement with On Stage which he will be an "at-will"  consultant at a flat rate
of $50.00 per hour;  (ii) a new option  agreement which affords him the right to
purchase  140,000  shares of On Stage's  Common Stock at a strike price of $1.50
per share; (iii) a reimbursement of $25,000 for unpaid insurance, car allowances
and  expenses;  (iv) $17,887 for all accrued,  but unused  vacation pay; (v) all
earned,  but  unpaid  salary  under  his  old  employment  agreement;  and  (vi)
forgiveness  of a  promissory  note in the  amount of  $7,472  held by On Stage.
Additionally,  On Stage agreed to pay Mr. Sidhu $25,000  within ninety (90) days
of this  restructuring,  in  consideration  for Mr.  Sidhu's  execution of a new
confidentiality and non-competition agreement with On Stage.

Imperial Credit Commercial Mortgage Investment Corporation Related Transactions

On March 13, 1998, Imperial Credit Commercial  Mortgage  Investment  Corporation
("ICCMIC")  signed  an  agreement  with On  Stage to fund up to  $20,000,000  of
mortgate  financing.  On the same day, On Stage used $12,500,000 of the facility
to fund the cash portion of the  acquisition  of assets On Stage  purchased from


                                       35
<PAGE>

Gedco USA,  Inc. and related fees. On June 30, 1998, On Stage used an additional
$1,100,000 to fund the cash portion of purchase of a fee simple  interest in the
Legends  Theater in  Surfside  Beach,  South  Carolina,  and the  purchase  of a
leasehold  interest  in the Eddie Miles  Theater in North  Myrtle  Beach,  South
Carolina.  On October 7, 1998, On Stage used an additional  $550,000 for working
capital purposes.  The initial $12,500,000 loan and the subsequent $1,650,000 in
loans  extended  by ICCMIC to On Stage  under the  mortgage  financing  facility
currently  bear  interest  at the  rate of  9.06%  and  9.9%,  respectively.  In
addition,  On Stage granted ICCMIC and a related entity  warrants to purchase an
aggregate of 575,000  shares of common  stock at an exercise  price of $4.44 per
share. This transaction is discussed in Item 11 entitled "Security  Ownership of
Certain  Beneficial  Owners and  Management." Mr. Karlan, a director of On Stage
until April 20, 1999, is the President,  Chief Executive  Officer and a Director
of ICCMIC.

    

Re-Purchase of Common Stock and Resale Interactive Events, Inc.

   
On February 23, 1999, the Company entered into a Common Stock Purchase Agreement
(the "Agreement") with Richard S. Kanfer, the Company's former Vice President of
Sales  ("Kanfer"),  pursuant to which the parties  agreed to unwind the November
1996  acquisition  by  the  Company  of  Interactive  Events,  Inc.,  a  Georgia
corporation ("Interactive Events") owned by Kanfer. Pursuant to the terms of the
Agreement,  the Company reconveyed all of the assets of Interactive Events, Inc.
to Kanfer,  in consideration  for the reconveyance by Kanfer of 30,304 shares of
the  Company's  Common  Stock valued at $1.125 per share,  a non-plan  option to
purchase 15,000 shares of the Company's Common Stock and incentive stock options
to purchase 19,835 shares of the Company's  Common Stock at a price of $5.00 per
share.  In addition,  the parties agreed to release one other from any liability
arising out of the November 1996 acquisition of Interactive Events, Inc. and any
claim relating to Kanfer's subsequent  employment with the Company.  The Company
and Kanfer also entered into a exclusive  right of  representation  agreement in
February  1999,  pursuant  to 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 thereby.

    
Information  with respect to this Item will be contained in the Proxy Statement,
which is hereby incorporated herein by reference.

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.


                                       36
<PAGE>

Exhibit
Number   Description

   
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 to Contribution 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) (Exhibit No. 10.18)
10.17    (a)  Show Production Agreement between the Registrant and Kurz 
         Management (3) (Exhibit No. 10.19)
10.18    Portions of 1998 Annual Report to  Stockholders+  
10.19    Promissory Note to John Stuart  dated April 5, 1999+ 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)
13       Management's Discussion and Analysis of Financial Condition and Results
         of Operations; Report on Audited Consolidated Financial Statements For 
         the Years Ended December 31, 1997 and 1998+
21       Subsidiaries of the Registrant(5)
27       Financial Data Schedule(5)
------------------
+    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.
    

Reports on Form 8-K were filed by the Company on October 6, 1998 and on November
16, 1998.  The reports  contained  information  regarding the Company's  Country
Tonight and Proforma Gedco,  respectively and contained the following  financial
statements:


                                       36
<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.
                                    (Registrant)


Dated: April 30, 1999               By: /s/ John W. Stuart 
                                        -----------------------------
                                        John W. Stuart, Chairman of the Board 
                                        and Chief Executive Officer




                                       37
<PAGE>

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.


      Signature                    Title                            Date
     -----------                   -------                         --------
   

/s/ John W. Stuart       Chairman and Chief Executive         April 30, 1999
---------------------    Officer and Director 
John W. Stuart           (principal executive officer)


/s/ David Hope           President, Chief Operating           April 30, 1999
---------------------    Officer and Director
David Hope


/s/ Kiranjit S. Sidhu    Chief Financial Officer (principal   April 30, 1999
---------------------    financial and accounting officer)
Kiranjit S. Sidhu        and Treasurer


/s/ Mel Woods            Director                             April 30, 1999
---------------------
Mel Woods


/s/ Matthew Gohd         Director                             April 30, 1999
---------------------
Matthew Gohd


/s/ James L. Nederlander Director                             April 30, 1999
-----------------------
James L. Nederlander


/s/ Mark Tratos          Director                             
----------------------
Mark Tratos
    




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<PAGE>