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

(Mark One)
[X]  Quarterly  report under Section 13 or 15 (d)
     of the Securities  Exchange Act of 1934

For the quarterly period ended September 30, 1998

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

For the Transition period from ________ to __________

Commission file number  0-92402                                     

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

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

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

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

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

         Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the  Exchange Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

 Yes  [ X ]   No  [  ]


                      APPLICABLE ONLY TO CORPORATE ISSUERS

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

          Class                             Outstanding at November 2, 1998
-----------------------------               -------------------------------
Common Stock, $0.01 par value                         7,452,350
<PAGE>


                  ON STAGE ENTERTAINMENT, INC. and SUBSIDIARIES

                                TABLE OF CONTENTS



                                                                        PAGE NO.
Part I. Financial Information


       Item 1. Consolidated Financial Statements

                   Balance Sheets....................................
                   Statements of Operations..........................
                   Statements of Cash Flows..........................
                   Notes to Financial Statements.....................

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


Part II. Other Information


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

Signatures...........................................................





<PAGE>



PART I.   FINANCIAL INFORMATION
Item 1.  Financial Statements

                  On Stage Entertainment, Inc. and Subsidiaries
                           Consolidated Balance Sheets
<TABLE>
                                                                                 December 31,   September 30,
                                                                                      1997         1998    
                                                                                -----------------------------
                                                                                                 (Unaudited)
<S>                                                                             <C>             <C>  
                                    Assets
Current Assets
 Cash and cash equivalents ..................................................   $  2,323,559    $    783,370
  Accounts receivable .......................................................        455,340       1,194,241
 Inventory ..................................................................        118,700         227,731
   Deposits .................................................................        342,096         455,248
   Prepaid and other assets .................................................        271,338         458,686
    Pre-opening costs, net ..................................................           --         1,071,557
   Notes receivable from officers, net                                               136,194          53,612
                                                                                ------------   -------------
          Total current assets ..............................................      3,647,227       4,244,445 
                                                                                ------------   -------------

Property, equipment and leasehold  improvements (Note 5) ....................      5,008,835      24,152,219
Less:  Accumulated depreciation and amortization ............................     (2,553,347)     (3,256,717)
                                                                                ------------   -------------
Property, equipment and leasehold improvements, net .........................      2,455,488      20,895,502
                                                                                ------------   -------------
Cost in excess of net assets acquired, net of accumulated
  amortization of  $7,370 and  $18,083 ......................................        116,415         105,703
Direct acquisition costs ....................................................        258,133         235,474
Deferred financing costs, net of amortization of $49,121 (Note 5) ...........            - -       1,346,049
                                                                                ------------   -------------
                                                                                $  6,477,263   $  26,827,173
                                                                                ============   =============
Liabilities and Stockholders Equity
Current Liabilities
   Accounts payable and accrued expenses ....................................   $    880,286       2,058,374
   Accrued payroll and other liabilities ....................................        698,499       1,638,662
   Current maturities of long-term debt .....................................        271,918       1,434,440
                                                                                ------------   -------------
           Total current liabilities ........................................      1,850,703       5,131,476
                                                                                ------------   -------------

Long-term debt, less current maturities (Note 5) ............................        550,332      14,569,999
                                                                                ------------   -------------
        Total liabilities ...................................................      2,401,035      19,701,475
                                                                                ------------   -------------
Stockholder's equity
  Preferred Stock, par value $1 per share,  1,000,000 shares authorized; none
    issued and outstanding ..................................................             --              --
     Common Stock, par value $0.01 per share; authorized 25,000,000
           shares; 6,595,500 and  7,597,350 shares issued and outstanding ...         65,955          73,973
     Additional paid-in capital .............................................      7,340,013      11,200,307
     Accumulated deficit ....................................................     (3,329,740)     (4,148,582)
                                                                                ------------   -------------
        Total stockholder's equity ..........................................      4,076,228       7,125,698
                                                                                ------------   -------------
                                                                                $  6,477,263   $  26,827,173
                                                                                ============   =============
</TABLE>
<PAGE>




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




                                                         Three months ended
                                                            September 30,
                                                         1997           1998
--------------------------------------------------------------------------------
                                                     (Unaudited)    (Unaudited)

Net revenues ......................................  $ 5,070,727    $ 8,059,669
                                                                      
Cost of revenues ..................................    3,470,812      6,051,417
                                                     -----------    -----------

Gross profit ......................................    1,599,915      2,008,252

Selling , general and administrative ..............    1,375,325      1,271,355

Depreciation and amortization .....................      282,707        690,557
                                                     -----------    -----------

Operating income  loss ............................      (58,117)        46,340

Interest expense, net .............................      681,084        314,693

Other income ......................................         --           (1,383)

Net loss before income taxes ......................     (739,201)      (266,970)

Income taxes ......................................        3,644         10,058
                                                     -----------    -----------

Net loss ..........................................  $  (742,845)   $  (277,028)
                                                     ===========    ===========

Basic loss per share ..............................  $     (0.13)   $     (0.04)

Diluted net loss per share ........................        (0.13)         (0.04)

Basic average number of common shares outstanding .  $ 5,675,235    $ 7,397,350
                                                     ===========    ===========

Diluted average number of common shares outstanding  $ 5,675,235    $ 7,397,350
                                                     ===========    ===========

<PAGE>




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

<TABLE>
                                                                                     Nine months ended
                                                                                       September 30,
                                                                                   1997            1998
-----------------------------------------------------------------------------  -------------    ------------
                                                                                (Unaudited)     (Unaudited)
<S>                                                                             <C>             <C>  
Net revenues ................................................................   $ 11,769,189    $ 22,509,621

Cost of revenues ............................................................      7,943,564      16,973,103
                                                                                ------------    ------------

Gross profit ................................................................      3,825,625       5,536,518

Selling , general and administrative ........................................      3,322,328       4,092,430

Depreciation and amortization ...............................................        601,816       1,209,117
                                                                                ------------    ------------

Operating income (loss) .....................................................        (98,519)        234,971

Interest expense, net .......................................................        855,095         760,174

Other income ................................................................           --           (84,190)

Subsidiary income for period not owned ......................................           --           366,516

Net loss before income taxes ................................................       (953,614)       (807,529)

Income taxes ................................................................          5,963          11,313
                                                                                ------------    ------------

Net loss ....................................................................     $ (959,577)   $   (818,842)
                                                                                ============    ============
                                                                                                                   
Basic loss per share ........................................................   $      (0.20)   $      (0.12)

Diluted net loss per share ..................................................   $      (0.20)   $      (0.12)

Basic average number of common shares outstanding ...........................   $  4,807,972    $  7,100,870
                                                                                ============    ============

Diluted average number of common shares outstanding .........................   $  4,807,972    $  7,100,870
                                                                                ============    ============
</TABLE>

<PAGE>


                      Consolidated Statements of Cash Flows
                Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
                                                                                           Nine months ended
                                                                                              September 30,
                                                                                     ----------------------------
                                                                                         1997            1998
                                                                                      (Unaudited)     (Unaudited)
                                                                                     ------------    ------------
<S>                                                                                  <C>             <C>   
Cash flows from operating activities
    Net loss .....................................................................   $   (959,577)   $   (818,842)
                                                                                     ------------    ------------
    Adjustments to reconcile net loss to net cash provided by (used in)
      operating activities:
     Depreciation and amortization ...............................................        511,990         773,203
Interest paid in Common Stock ....................................................        194,228            --
Issuance of Common Stock to CFO ..................................................        162,129            --
     Non-cash interest ...........................................................        444,000            --
     Forgiveness of note receivable from stockholder .............................        221,521            --
     Increase (decrease) from changes in operating assets and  liabilities .......           --              --
     Accounts receivable .........................................................       (184,334)       (738,911)
     Inventory ...................................................................        (23,008)        (11,053)
     Deposits ....................................................................       (231,078)       (113,152)
     Pre-opening costs ...........................................................       (452,131)     (1,071,557)
     Prepaid and other assets ....................................................       (296,728)        (29,832)
     Accounts payable and accrued expenses .......................................        182,329          86,692
     Accrued Payroll and other liabilities .......................................         21,726         940,183
     Litigation settlement accrual ...............................................       (100,000)              -
                                                                                     ------------     -----------
   Total adjustments .............................................................        450,644        (139,231)
                                                                                     ------------    ------------ 
Net cash  used in operating activities ...........................................       (508,933)       (958,173)
                                                                                     ------------    ------------ 
Cash  investing activities
  Advances on note receivable from stockholder .................................         (221,521)         82,582
  Capital expenditures .........................................................         (506,235)       (886,424)
  Direct acquisition costs .......................................................           --           678,844
  Payment for acquisitions, less cash received ...................................           --       (14,602,829)
                                                                                     ------------    ------------
  Net cash  used in investing activities .........................................       (727,756)    (14,727,827)
                                                                                     ------------    ------------ 
Cash used in financing activities:
     Borrowing  under line of credit .............................................           --         1,000,000
Proceeds from long-term borrowing ................................................           --        13,727,237
     Repayments on long-term borrowing ...........................................       (750,000)       (581,426)
     Proceeds from bridge notes ..................................................        875,000            --
     Payments of bridge notes ....................................................       (875,000)           --
     Net proceeds from sale of common stock and warrants .........................      5,289,215            --
                                                                                     ------------    ------------
Net cash provided by financing activities ........................................      4,539,215      14,145,811
                                                                                     ------------    ------------

Net increase in cash and cash equivalents ........................................      3,302,526      (1,540,189)
                                                                                     ------------    ------------

Cash and cash equivalents at beginning of period .................................        290,751       2,323,559
                                                                                     ------------    ------------ 
Cash and cash equivalents at end of period .......................................      3,593,277         783,370
                                                                                     ============    ============

Supplemental  disclosure  of cash flow  information  Cash paid during the period
for:
       Interest .................................................................    $    218,879    $    675,984
       Taxes .....................................................................   $      5,963    $     11,313
                                                                                     ============    ============

</TABLE>
Supplemental schedule of non-cash investing and financing activities

         During the nine months ended September 30, 1997 and 1998,  $704,000 and
$1,082,236 of lease assets and other obligations, principally pre-opening costs,
were capitalized, respectively.

         In connection with mortgage  financing related to the Gedco Acquisition
(as  defined  in Note 5 of Part I),  the  Company  issued  575,000  warrants  to
purchase  the  Company's  Common  Stock to the  lender and an  affiliate  of the
lender,  which were valued at $500,000 and  accounted  for as an original  issue
discount.
<PAGE>

                  On Stage Entertainment, Inc. and Subsidiaries

                   Notes to Consolidated Financial Statements
                               September 30, 1998





(1) Basis of Presentation

         The financial  statements  included  herein  include the accounts of On
Stage  Entertainment,  Inc., a publicly traded Nevada corporation (the "Company"
or "OSE") and its subsidiaries,  Legends in Concert,  Inc., a Nevada corporation
("LIC"); On Stage Marketing, Inc., a Nevada corporation ("Marketing");  On Stage
Theaters, Inc., a Nevada corporation ("Theaters"); Wild Bill's California, Inc.,
a Nevada  corporation ("Wild Bills");  Fort Liberty,  Inc., a Nevada corporation
("Ft. Liberty");  Blazing Pianos, Inc., a Nevada corporation  ("Blazing");  King
Henry's Inc., a Nevada corporation ("King Henry's"); On Stage Merchandise, Inc.,
a  Nevada  corporation   ("Merchandise');   On  Stage  Events,  Inc.,  a  Nevada
corporation   ("Events");   On  Stage  Casino  Entertainment,   Inc.,  a  Nevada
corporation  ("Casino");  On  Stage  Productions,   Inc.,  a  Nevada  coporation
("Productions");   On  Stage  Theaters  North  Myrtle  Beach,   Inc.,  a  Nevada
corporation  ("North Myrtle");  On Stage Theaters Surfside Beach, Inc., a Nevada
corporation  ("Surfside");  and Interactive Events,  Inc., a Georgia corporation
(collectively, the "Subsidiaries").  In the opinion of the Company's management,
all adjustments  considered  necessary for fair presentation have been reflected
in the  financial  statements.  These  adjustments  are of a  normal,  recurring
nature.  Operating results for the nine months ended September 30, 1998, are not
necessarily indicative of those expected for the full year. Certain prior period
amounts  have  been  adjusted  and   reclassified  to  conform  to  this  period
presentation.

         The accompanying  unaudited interim  consolidated  financial statements
have been prepared in accordance  with the  instructions  to Form 10-QSB and the
rules  and  regulations  of  the  Securities  and  Exchange  Commission.   These
consolidated  financial statements have been prepared under the presumption that
users of the unaudited interim  consolidated  financial  information have either
read or have access to the Company's audited financial  statements and footnotes
thereto for the year ended  December 31, 1997,  included in the  Company's  Form
10-KSB,   as  amended  filed  with  the  Securities  and  Exchange   Commission.
Accordingly,  footnote  disclosures,  which would  substantially  duplicate  the
disclosures  contained in the  Company's  December  31, 1997  audited  financial
statements,   have  been  omitted  from  these  interim  consolidated  financial
statements.  Certain information and footnote  disclosures  normally included in
consolidated financial statements prepared in accordance with generally accepted
accounting  principles,   have  been  condensed  or  omitted  pursuant  to  such
instructions,  rules  and  regulations.  These  unaudited  interim  consolidated
financial statements should be read in conjunction with the audited consolidated
financial  statements and the footnotes  thereto for the year ended December 31,
1997, included in the Company's Form 10-KSB as amended.

(2) Subsquent Events


Additional ICCMIC Financing

         On October 7, 1998,  the  Company's  first  mortgage  lender,  Imperial
Credit  Commercial  Mortgage  Investment Corp.  ("ICCMIC") loaned the Company an
additional  $550,000,  secured by a first deed of trust on the Company's Legends
in Concert  Theater in Surfside Beach,  South Carolina.  In connection with this
additional  financing,  the Company  modified the Common Stock purchase  warrant
that the  Company  issued to ICCMIC  on March  13,  1998 (and the  corresponding
warrant  agreement) by reducing the exercise price of ICCMIC's  325,000 warrants
to purchase  shares of the Company's  Common Stock from $4.44 per share to $1.00
per share.

DY/DX Corp. Common Stock Purchase Agreement

     On October 2, 1998,  the Company  entered into a stock  purchase  agreement
with DY/DX Corp., an Illinois  corporation,  to sell up to 500,000 shares of the
Company's  Common  Stock  at an  aggregate  purchase  price of  $500,000.  As of
November 4, 1998,  DY/DX Corp.  had  purchased  55,000  shares of the  Company's
Common Stock pursuant to this agreement.
<PAGE>


Election of Board Members

         On July 15, 1998, the Company's  Board of Directors  elected Mel Woods,
President  of Fox  Family  Worldwide,  as a director  on its board,  to fill the
vacancy  created by Nelson Foster's  resignation  from his post as a director of
the Company on June 26, 1998.

         On September 8, 1998, the Company's underwriter,  Whale Securities Co.,
LP ("Whale") exercised its right to appoint a designee to the Company's board of
directors.  In order to create a vacancy for Whale's  designee,  director  Jules
Haimovitz  resigned  his post as a director of the Company on September 8, 1998.
Whale named Matt Gohd as its designee, who was subsequently elected to the board
of directors on September 9, 1998

(3) Loss Per Share

      On March 3,  1997,  the FASB  issued  Statement  of  Financial  Accounting
Standard No. 128. Earnings per share (SFAS 128). This  pronouncement  provides a
different  method of  calculating  earnings per share than is currently  used in
accordance  with  APB  15,  Earnings  per  Share.  SFAS  128  provides  for  the
calculation  of Basic and Diluted  earnings per share.  Basic earnings per share
includes no dilution  and is computed  by dividing  income  available  to common
shareholders by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution of securities
that  could  share in the  earnings  of the  entity,  similar  to fully  diluted
earnings per share.  Except where the  provisions of the Securities and Exchange
Commission's Staff Accounting Bulletin No. 98 are applicable, potential dilutive
securities  have been  excluded  in all years  presented  in the  Statements  of
Operations when the effect of their inclusion would be anti-dilutive.

         For the nine  months  ended  September  30,  1997,  potential  dilutive
securities  representing  421,094  outstanding options and 2,077,000 outstanding
warrants are not included,  since their effect would be  anti-dilutive.  For the
nine months ended September 30, 1998, potential dilutive securities representing
773,853  outstanding  stock options and 4,480,956  outstanding  warrants are not
included, since their effect would be anti-dilutive.

(4) Commitments and Contingencies

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

(5) Business Acquisition

Gedco USA, Inc. Acquisition

         On March 13, 1998,  the Company  completed its  acquisition  of certain
assets  from  Gedco  USA,  Inc.  and its  affiliates  for a  purchase  price  of
$14,000,000,  consisting  of  $11,500,000  in cash and 595,238  shares of Common
Stock valued at $2,500,000 (the "Gedco Acquisition").

             Included in the Gedco  Acquisition  were  substantially  all of the
income producing  assets and associated real property of Orlando  Entertains and
LA Entertains,  consisting of King Henry's Feast,  Blazing Pianos piano bar, the
Fort Liberty shopping  complex that includes a Wild Bill's Dinner Theater,  each
of which is located in greater Orlando, Florida, and a second Wild Bill's Dinner
Theater located in Buena Park, California. Gerard O'Riordan,  President of Gedco
USA, Inc., joined the Company as President of On Stage Theaters,  Inc., a wholly
subsidiary  of the Company that manages the acquired  dinner  theaters and piano
bar as well as other selected theaters.

            The  Company  funded  the cash  portion  of the  purchase  price and
transaction  fees and expenses  with $12.5  million of mortgage  financing  from
Imperial Credit  Commercial  Mortgage  Investment Corp.  ("ICCMIC").  ICCMIC has
committed a total of  $20,000,000,  of which  $7,500,000 is remaining to finance
the Company's  future real estate related  acquisitions.  In connection with the
loan  agreement  entered  into  between the Company and ICCMIC on March 13, 1998
(the "Loan  Agreement"),  the  Company  granted  ICCMIC the right to provide the
Company with up to an additional $30 million of similar mortgage  financing.  In
connection  with the financing,  the Company issued ICCMIC and Imperial  Capital
Group LLC (an affiliate of ICCMIC), an aggregate of 575,000 warrants immediately
exercisable  into shares of Common  Stock at an exercise  price of $4.44,  which
price was adjusted on October 7, 1998. See "Additional ICCMIC Financing" in Note
2 above. In addition,  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.
<PAGE>


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

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

Cash paid for the  purchase  of Gedco,  USA,  Inc.  Net of cash  received  is as
  follows:

Cash paid to sellers ................................              $ 11,500,000
Acquisition costs ...................................                 1,645,874
                                                                   ------------
                                                                     13,145,874
Less cash received ..................................                  (383,444)
                                                                   ------------
                                                                   $ 12,762,430
                                                                   ============

     The  costs  of  acquisition  increased  primarily  relates  to the  lenders
origination fee of $750,000, legal fees of $240,000, financing fees of $100,000,
recording fees of $100,000, and accounting fees of $125,000.

      The  acquisition  was accounted for as a purchase and the assets  acquired
were  recorded at a fair market  value.  The  building and  equipment  are being
depreciated over twenty and three years,  respectively,  under the straight-line
method.  The costs of  acquisition  incurred  primarily  relates to the  lenders
origination fee of $750,000, legal fees of $240,000, financing fees of $100,000,
recording fees of $100,000,  and accounting fees of $125,000.  The allocation of
the purchase price was as follows:


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

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

         The Company has elected to  consolidate  the  operations  of the assets
acquired in the Gedco Acquisition  retroactively to January 1, 1998.  Therefore,
the  pre-acquisition  gain  of  $366,516  has  been  added  to the  consolidated
statement of operations for the nine months ended September 30, 1998. The effect
of this  consolidation of operations prior to acquisition was an increase in net
sales of approximately $3,099,071.

Calvin Gilmore Productions, Inc.

         On June 30, 1998,  the Company  completed  its  acquisition  of certain
assets from Calvin Gilmore Productions, Inc. ("CGP"), an affiliate of Fox Family
Worldwide,  for a purchase  price of  $1,000,000  in cash and 206,612  shares of
Common Stock valued at $723,142 (the "Fox Acquisition").

         Included in the Fox Acquisition were  substantially all of CGP's income
producing assets and associated real and personal property in the greater Myrtle
Beach,  South  Carolina  area,  consisting  of the fee  simple  purchase  of The
Surfside  Beach  Theater,  which  the  Company  had  leased  from  CGP  for  its
presentation  of its flagship  Legends in Concert  production  since 1995, and a
leasehold  interest  in The Eddie  Miles  Theater.  In  connection  with the Fox
Acquisition, Mel Woods, the Chief Operating Officer of Fox Family Worldwide, was
subsequently elected as a member of the Company's Board of Directors,  filling a
vacancy created by the resignation of Nelson Foster.

         The  Company  funded  the  cash  portion  of  the  purchase  price  and
transaction fees and expenses with $1,100,000 million of mortgage financing from
ICCMIC.
<PAGE>


                  On Stage Entertainment, Inc. and Subsidiaries


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

         This document  contains  certain  forward-looking  statements  that are
subject to risks and uncertainties.  Forward-looking  statements include certain
information  relating to 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.   Such   statements  use
forward-looking  terminology  such  as  "believes",  "expects",  "may",  "will",
"should", "seeks", "pro forma", "anticipates", "intends", or the negative of any
therof,  or  of  other  variations  thereon  or  comparable  terminology,  or by
discussion of strategy or intentions.  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, those  identified in pages _____ of Amendment No. 5 to the Company's
Registration  Statement on Form SB-2 filed with the  Commission on June 12, 1998
(Registration  No.  333-56785),  as  amended as well as the  following:  (i) the
Company's dependence on its flagship productions Legends in Concert, Wild Bill's
Dinner  Extravaganza,  Blazing  Pianos,  King  Henry's  Feast 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 obtain  financing  on
commercially  reasonable  terms;  (v)  the  Company's  ability  to  service  its
substantial  indebtedness;  (vi)  the  competitive  nature  of the  leisure  and
entertainment industry and the ability of the Company to continue to distinguish
its services;  (vii) fluctuations in quarterly  operating results and the highly
seasonal nature of the Company's business;  (viii) 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; (ix) the ability of
the Company to  successfully  manage the  litigation  pending  against it and to
avoid  future  litigation;  and (x) 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.
<PAGE>

Results of Operations

The following table sets forth, the results of operations by the Company for the
period indicated:
<TABLE>

                                                           Three months ended September 30, 1997
                           --------------------------------------------------------------------------------------------------------
                                                                               Sub-Total
                                                                               Operating                                 Total
                             Casinos       Events    Merchandise   Theaters   Corporations  Production      OSE       Consolidated
-------------------------- -----------  -----------  -----------  ----------- ------------  -----------   ----------- -------------
<S>                        <C>          <C>          <C>          <C>         <C>           <C>           <C>         <C>
Net revenues ...........   $ 1,736,111  $   568,899  $   165,761  $ 2,599,956  $ 5,070,727  $        --   $      --    $ 5,070,727
                                                                                                                      
Cost of  revenues ......     1,073,185      284,816       43,008    2,028,898    3,429,907       40,905          --      3,470,812
                           -----------  -----------  -----------  -----------  -----------  -----------   -----------  -----------
Gross profit ...........       662,926      284,083      122,753      571,058    1,640,820      (40,905)         --      1,599,915
Selling, general
  & administrative .....        86,391      142,448          665      127,524      357,028       15,751     1,002,546    1,375,325
Depreciation &
  amortization .........        33,844          597         --        118,596      153,037         --         129,670      282,707
                           -----------  -----------  -----------  -----------  -----------  -----------   -----------  -----------
Operating income (loss)        542,691      141,038      122,088      324,938    1,130,755      (56,656)   (1,132,216)     (58,117)
  Interest expense, net           --            (31)        --           --            (31)        --         681,115      681,084
                           -----------  -----------  -----------  -----------  -----------  -----------   -----------  -----------
Net income (loss) before
  income taxes .........       542,691      141,069      122,088      324,938    1,130,786      (56,656)   (1,813,331)    (739,201)
Income taxes ...........          --          1,306         --           --          1,306         --           2,338        3,644
                           ===========  ===========  ===========  ===========  ===========  ===========   ===========  ===========

Net income (loss) ......   $   542,691  $   139,763  $   122,088  $   324,938  $ 1,129,480  $   (56,656)  $(1,815,669) $  (742,845)
                           ===========  ===========  ===========  ===========  ===========  ===========   ===========  ===========

</TABLE>

<TABLE>
                                                            Three months ended September 30, 1998
                         ----------------------------------------------------------------------------------------------------------
                                                                              Sub-Total
                                                                              Operating                                   Total
                           Casinos      Events    Merchandise    Theaters   Corporations  Production        OSE       Consolidated
------------------------ -----------  ----------  -----------  -----------  ------------  -----------   ------------ --------------
<S>                      <C>          <C>         <C>          <C>          <C>           <C>           <C>          <C>         
Net revenues ........... $ 1,355,908  $   774,688  $  785,830  $ 5,143,243   $ 8,059,669   $      --     $      --      $ 8,059,669
Cost of  revenues ......     908,706      529,616     467,911    4,095,460     6,001,693        49,724          --        6,051,417
                         -----------  ----------- -----------  -----------   -----------   -----------   -----------    -----------
Gross profit ...........     447,202      245,072     317,919    1,047,783     2,057,976       (49,724)         --        2,008,252
Selling, general &
  administrative .......      40,506      216,655        --        327,932       585,093       112,736       573,526      1,271,355
Depreciation & .........
  amortization .........      90,507       12,646       1,565      517,461       622,179        22,265        46,113        690,557
                         -----------  ----------- -----------  -----------   -----------   -----------   -----------    -----------
Operating income (loss)      316,189       15,771     316,354      202,390       850,704      (184,725)     (619,639)        46,340
Interest expense, net ..        --             (3)         75      255,655       255,727          --          58,966        314,693
                         -----------  ----------- -----------  -----------    -----------  -----------   -----------    -----------
Other income ...........                                            (1,383)       (1,383)                                    (1,383)
Net income (loss) before
    income taxes .......     316,189       15,774     316,279      (51,882)      596,360      (184,725)     (678,605)      (266,970)
Income taxes ...........        --           --          --           --            --            --          10,058         10,058
                         ===========  =========== ===========  ===========   ===========   ===========   ===========    ===========
Net income (loss) ...... $   316,189  $    15,774 $   316,279  $   (51,882)  $  (596,360)  $  (184,725)  $  (688,663)  $  (277,028)
                         ===========  =========== ===========  ===========   ===========   ===========   ===========    ===========

</TABLE>

<PAGE>


Results of Operations

The following tables set forth, the results of operations by the Company for the
period indicated:
<TABLE>

                                                              Nine months ended September 30, 1997
                         -----------------------------------------------------------------------------------------------------------
                                                                                Sub-Total
                                                                                Operating                                  Total
                              Casinos   Events       Merchandise   Theaters   Corporations   Production       OSE      Consolidated
------------------------ ------------ ------------  ------------ ------------ ------------  ------------  ------------ -------------
<S>                      <C>          <C>           <C>          <C>          <C>           <C>           <C>          <C> 
Net revenues ........... $  5,068,327 $  1,707,262  $    319,672 $  4,673,928 $ 11,769,189  $       --    $       --   $ 11,769,189
Cost of  revenues ......    3,058,872    1,047,288        82,986    3,653,376    7,842,522       101,042          --      7,943,564
                         ------------ ------------  ------------ ------------ ------------  ------------  ------------ ------------
Gross profit ...........    2,009,455      659,974       236,686    1,020,552    3,926,667      (101,042)         --      3,825,625
Selling, general &
  administrative .......      228,681      447,893           665      226,379      903,618        51,780     2,366,930    3,322,328
Depreciation & ......... 
  amortization .........      102,133          745          --        132,560      235,438          --         366,378      601,816
                         ------------ ------------  ------------ ------------ ------------  ------------  ------------ ------------
Operating income (loss)     1,678,641      211,336       236,021      661,613    2,787,611      (152,822)   (2,733,308)     (98,519)
Interest expense, net ..         --           (277)         --           --           (277)         --         855,372      855,095
                         ------------ ------------  ------------ ------------ ------------  ------------  ------------ ------------
Net income (loss) before
    income taxes .......    1,678,641      211,613       236,021      661,613    2,787,888      (152,822)   (3,588,680)    (953,614)
Income taxes ...........         --          3,029          --           --          3,029          --           2,934        5,963
                         ============ ============  ============ ============ ============  ============  ============ ============
Net income (loss) ...... $  1,678,641 $    208,584  $    236,021 $    661,613 $  2,784,859  $   (152,822) $(3,591,614) $   (959,577)
                         ============ ============  ============ ============ ============  ============  ============ ============
</TABLE>

<TABLE>
                                                              Nine months ended September 30, 1998
                            --------------------------------------------------------------------------------------------------------
                                                                                 Sub-Total
                                                                                 Operating                                 Total
                            Casinos       Events    Merchandise    Theaters    Corporations  Production       OSE      Consolidated
------------------------- -----------  -----------  ------------  -----------  ------------ ------------  ------------ -------------
<S>                       <C>          <C>          <C>           <C>          <C>          <C>           <C>          <C>   
Net revenues ............ $ 4,415,580  $ 2,184,450  $  1,001,519  $14,908,072  $22,509,621  $       --    $       --   $ 22,509,621
Cost of  revenues .......   2,913,506    1,434,141       541,171   11,908,301   16,797,119       175,984          --     16,973,103
                          -----------  -----------  ------------  -----------  -----------  ------------  ------------ ------------
Gross profit ............   1,502,074      750,309       460,348    2,999,771    5,712,502      (175,984)         --      5,536,518
Selling, general &
  administrative ........     138,336      633,795         4,702    1,370,436    2,147,269       121,144     1,824,017    4,092,430
Depreciation & 
  amortization ..........     172,174       27,027         3,809      772,355      975,365        22,324       211,428    1,209,117
                          -----------  -----------  ------------  -----------  -----------  ------------  ------------ ------------
Operating income (loss) .   1,191,564       89,487       451,837      856,980    2,589,868      (319,452)   (2,035,445)     234,971
Interest expense, net ...        --            (36)           75      594,826      594,865          --          81,119      675,984
                          -----------  -----------  ------------  -----------  -----------  ------------  ------------ ------------
Other income
Subsidiary operations for
  period not owned ......                                             366,516      366,516                                  366,516
Net income (loss) before
  income taxes ..........   1,191,564       89,523       451,762     (104,362)   1,628,487      (319,452)   (2,116,564)    (807,529)
                                 --           --            --            --           --                       11,313      11,313
                          ===========  ===========  ============  ===========   ==========  ============  ============  ===========
Net income (loss) ....... $ 1,191,564  $    89,523  $    451,762  $  (104,362)  $1,628,487  $   (319,452) $ (2,127,877) $  (818,842)
                          ===========  ===========  ============  ===========   ==========  ============  ============  ===========
</TABLE>


<PAGE>


Three Months Ended  September  30, 1997 versus Three Months Ended  September 30,
1998

        Net Revenues.  Revenues  increased by 58.9% to $8,060,000  for the three
months ended  September  30, 1998  compared to  $5,071,000  for the three months
ended  September 30, 1997. The Company's  revenue is derived from four principal
operating corporations: Casinos, Events, Merchandise and Theaters.

         Casinos  revenues were  approximately  $1,356,000  for the three months
ended  September  30, 1998  compared to  $1,736,000  for the three  months ended
September 30, 1997, a decrease of $380,000, or 21.9%. The decrease was primarily
attributable to decrease in revenue  generated from limited run casino shows and
the Legends's show at the Imperial Palace Hotel and Casino.

         Events  revenues were $775,000 for the three months ended September 30,
1998  compared to $569,000  for the three months ended  September  30, 1997,  an
increase of $206,000 or 36.2%. This increase was mainly attributable to increase
in business.

         Merchandise  revenues were approximately  $786,000 for the three months
ended  September  30,  1998  compared  to $166,000  for the three  months  ended
September 30, 1997, an increase of $621,000 or 374.1% . This increase was mainly
attributable  to  an  increase  in  photo  sales  and  the  inclusion  of  Gedco
Acquisition properties.

         Theaters  revenues were  approximately  $5,143,000 for the three months
ended  September  30, 1998  compared to  $2,600,000  for the three  months ended
September  30,  1997,  an increase of  $2,543,000,  or 97.8%.  This  increase in
revenues was primarily attributed to new show openings in Branson, Missouri, and
Toronto, Canada and the inclusion of Gedco Acquisition properties.

         Costs of  Revenues.  Total costs of revenues  were  $6,051,000  for the
three  months ended  September  30, 1998  compared to $ 3,471,000  for the three
months ended September 30, 1997, an increase of $2,580,000,  or 74.4%.  Costs of
revenues increased to 75.1% of net revenues for the three months ended September
30, 1998,  as compared to 68.4% for the three months ended  September  30, 1997.
This  increase  in  cost  of  revenues  as a % of  net  revenues  was  primarily
attributable  to a change in the mix of the Company's  revenues  from  primarily
theater shows to theater and dinner theater shows.

               Selling,   General  and  Administrative.   Selling,  general  and
administrative  costs were  approximately  $1,271,000 for the three months ended
September  30,  1998 as  compared  to  $1,375,000  for the  three  months  ended
September  30,  1997,  a decrease of  $104,000,  or 7.6%.  Selling,  general and
administrative  costs  decreased  to 15.8% of net  revenues for the three months
ended  September  30,  1998,  as  compared to 27.1% for the three  months  ended
September 30, 1997, which was primarily attributable to staff reductions.

               Operating   Income.   The   Company's    operating   income   was
approximately $46,000 for the three months ended September 30, 1998, compared to
an operating  loss of $58,000 for the three months ended  September 30, 1997, an
increase of $104,000.

         Depreciation  and  Amortization.  Depreciation  and  amortization  were
$576,000 for the three months ended  September 30, 1998 increased by $408,000 or
144.3%,  as compared to the three months ended  September 30, 1997, and increase
of $293,000 or 103.6%.  The increase was primarily  due to capital  additions to
current  shows,  new shows,  and an  increase in assets as a result of the Gedco
Acquisition.

         Interest  Expense,  Net.  Interest  expense was  $427,000 for the three
months ended September 30, 1998 decreased by $391,000,  or 55.4%, as compared to
$681,000 for the three months ended September 30, 1997, a decrease of $279,00 or
39.4%.  The decrease was primarily due to one-time  interest  expense related to
the  conversion  of  debentures  and the original  issue  discount of the bridge
financing, which was incurred in 1997, but not in 1998.
<PAGE>


Three Months Ended  September  30, 1997 versus Three Months Ended  September 30,
1998

        Other Income. Other income for the three months ended September 30, 1998
was attributable to a sign-on bonus received from a new supplier.

         Income Taxes.  The Company is a Nevada  corporation  with a substantial
portion of revenue  and  income  derived in Nevada.  There are no state or local
income taxes in Nevada.  The Company accrued no federal income tax for the three
months ended  September  30, 1998 three months ended 1997.  Income taxes for the
three months ended  September  30, 1997 and 1998,  relate to income taxes due in
those  states  other than  Nevada in which the  Company  conducts  business.  At
September  30,  1997 and 1998,  the  Company  had  federal  net  operating  loss
carryforwards of approximately  $1,616,791 and $3,958,386,  respectively.  Under
Section  382 of the  Internal  Revenue  Code,  certain  significant  changes  in
ownership  that the Company is  currently  undertaking  may  restrict the future
utilization of these tax loss carryforwards.  The net deferred tax assets have a
100% valuation  allowance,  as management  cannot determine if it is more likely
than not that the deferred tax assets will be realized.

Nine months Ended September 30, 1997 versus Nine months Ended September 30, 1998

         Net Revenues.  Revenues  increased by 91.3% to $22,510,000 for the nine
months ended  September  30, 1998  compared to  $11,769,000  for the nine months
ended September 30, 1997.

         Theaters  revenues were  approximately  $14,908,000 for the nine months
ended June,  1998 compared to $4,674,000 for the nine months ended September 30,
1997, an increase of $10,234,000,  or 219.9%.  The increase was  attributable to
the inclusion of Gedco USA acquisition.

         Events revenues were $2,184,000 for the nine months ended September 30,
1998  compared to  $1,707,000  for the nine months ended  September 30, 1997, an
increase of $477,000 or 28.0%.  This increase was attributable to an increase in
business as a result of an increase in sales people.

         Merchandise revenues were approximately  $1,002,000 for the nine months
ended  September  30,  1998  compared  to  $320,000  for the nine  months  ended
September  30,  1997,  an  increase of $682,000  or 213.3%.  This  increase  was
attributable  to an  increase  in  business  and  the  inclusion  of  the  Gedco
Acquisition.

         Casino revenues were approximately $4,415,000 for the nine months ended
September 30, 1998 compared to  $6,068,000  for the nine months ended  September
30,  1997,  an decrease of  $663,000,  or 12.9 % . The  decrease  was  primarily
attributable to a reduction in revenue generated from limited run casino shows.

         Costs of Revenues.  Total costs of revenues  were  $16,973,000  for the
nine months ended  September 30, 1998 compared to $7,944,000 for the nine months
ended  September  30,  1997,  an increase  of  $9,030,000,  or 113.7%.  Costs of
revenues  increased to 75.4% of net revenues for the nine months ended September
30,  1998,  as compared to 67.5% for the nine months ended  September  30, 1997.
This  increase  in cost  of  sales  as  percentage  of  revenues  was  primarily
attributable  to a change in the mix of the Company's  revenues  from  primarily
theater shows to theater and dinner theater shows.

         Selling,    General   and   Administrative.    Selling,   general   and
administrative  costs were  approximately  $4,092,000  for the nine months ended
September 30, 1998 as compared to $3,322,000 for the nine months ended September
30, 1997, an increase of $770,000 or 23.2%. Selling,  general and administrative
costs decreased to 18.2% of net revenues for the nine months ended September 30,
1998,  as compared to 28.2% for the nine months ended  September  30, 1997.  The
decrease in total cost is primarily the result of head cost reductions.

               Operating   Income.   The   Company's    operating   income   was
approximately $235,000 for the nine months ended September 30, 1998, compared to
an operating  loss of $98,000 for the nine months ended  September  30, 1997, an
increase of $333,000.
<PAGE>


         Depreciation  and  Amortization.  Depreciation and amortization for the
nine months  ended  September  30, 1998  increased by  $607,000,  or 100.9%,  as
compared to the nine months ended September 30, 1997. The increase was primarily
due to capital  additions to current shows, new shows, and an increase in assets
as a result of the Gedco Acquisition.

Interest Expense,  Net. Interest expense for the nine months ended September 30,
1998  decreased  by  $120,000,  or 13.6%,  as compared to the nine months  ended
September 30, 1997. The decrease was primarily due to one-time  interest expense
related to the  conversion of debentures  and the original issue discount of the
bridge financing, which was incurred in 1997, but not 1998.

        Other Income.  Other income for the nine months ended September 30, 1998
was attributable to a sign-on bonus received from a new supplier.

         Income Taxes.  The Company is a Nevada  corporation  with a substantial
portion of revenue  and  income  derived in Nevada.  There are no state or local
income taxes in Nevada.  The Company  accrued no federal income tax for the nine
months  ended  September  30,  1998.  Income  taxes  for the nine  months  ended
September  30, 1997 and 1998,  relate to income  taxes due in those states other
than Nevada in which the Company  conducts  business.  At September 30, 1997 and
1998, the Company had federal net operating loss  carryforwards of approximately
$1,616,791  and  $3,958,386  respectively.  Under  Section  382 of the  Internal
Revenue  Code,  certain  significant  changes in  ownership  that the Company is
currently  undertaking  may  restrict the future  utilization  of these tax loss
carryforwards.  The net deferred tax assets have a 100% valuation allowance,  as
management  cannot determine if it is more likely than not that the deferred tax
assets will be realized.

Liquidity and Capital Resources

General

        The  Company  has  historically  met its  working  capital  requirements
through a combination  of cash flow from  operations,  equity and debt offerings
and traditional bank financing.  The Company anticipates,  based on its proposed
plans  and  assumptions  relating  to  its  operations  (including   assumptions
regarding  the  anticipated  timetable  of its new show  openings  and the costs
associated  therewith),   that  the  Company's  current  cash,  cash  equivalent
balances,  anticipated revenue from operations and its working capital line will
be  sufficient  to  fund  its  current   operations  and  contemplated   capital
requirements  through  December 31, 1998.  However,  the  Company's  acquisition
strategy also will require additional debt and/or equity financing. In the event
the Company's plans or assumptions change, prove to be incorrect, or if balances
and/or  anticipated  revenues  otherwise prove to be  insufficient,  the Company
would need to revise its expansion  strategy  (which  revision could include the
curtailment,  delay or elimination of certain of its anticipated  productions or
the funding of such productions through  arrangements with third parties,  which
would require it to relinquish rights to a substantial  portion of its revenues)
and/or seek additional financing prior to the end of such period. The Company is
currently seeking private equity financing and has hired Imperial Capital, LLC.

        For the nine months ended September 30, 1997, the Company had a net cash
deficit from operations of $509,000 in operations. As of September 30, 1997, the
Company had approximately $3,593,000 in cash and cash equivalents.  For the nine
months  ended  September  30,  1998,  the  Company had a net cash  deficit  from
operations of $958,000  in  operations.  As  of September 30, 1998,  the Company
had  $784,000 in cash and cash  equivalents.  The  operating  deficits  for both
periods were primarily  attributable  to business  seasonality  and  pre-opening
costs for new shows.

        The net cash used in  investing  activities  for the nine  months  ended
September 30, 1997 of $728,000.  The net cash used in investing  activities  for
the quarter ended September 30, 1998 of $14,728,000,  was primarily attributable
to direct acquisition costs related to acquisitions.

        Net cash  provided by  financing  activities  for the nine months  ended
September 30, 1997 of $4,539,000  was  primarily  attributable  to proceeds from
sale of common  stock.  Net cash provided by financing  activities  for the nine
months ended  September 30, 1998 of $14,146,000,  was primarily  attributable to
ICCMIC's funding of $12,500,000 for the Gedco Acquisition and $1,100,000 million
for the Fox Acquisition.

        At September 30, 1997, the Company had working capital of  approximately
$4,127,000, primarily attributable from proceeds of the sale of common stock. At
September 30, 1998, the Company had a working capital  deficit of  approximately
$887,031, primarily attributable to the pre-opening costs of new shows.
<PAGE>


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.  On March
28,  1998,  First  Security  increased  the  line of  credit  from  $250,000  to
$1,000,000 and extended the expiration date of the line to March 25, 1999. As of
September 30, 1998, the Company had drawn $1,000,000 on the line of credit.

Mortgage Financing Commitment

           On March 13, 1998,  the Company  entered into the Loan Agreement with
ICCMIC  pursuant  to which  ICCMIC  agreed to  provide  the  Company  with up to
$20,000,000  of  mortgage  financing.  On  March  28,  1998,  the  Company  used
$12,500,000  of said facility to fund the cash portion of the Gedco  Acquisition
and related fees  subsequently used $1,100,000 on June 30, 1998 to fund the cash
portion  of the Fox  Acquisition  and  $550,000  on  October 7, 1998 to help the
Company with it's working  capital needs. In connection with the Loan Agreement,
the Company  provided ICCMIC with the right to provide the Company with up to an
additional  $30,000,000 of mortgage related  financing.  In addition  concurrent
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.

New Accounting Pronouncements

Reporting on the Costs of Start-up Activities

           Statement  of  Position  98-5,  "Reporting  on the Costs of  Start-up
Activities,"  (SOP 98-5)  issued by the American  Institute of Certified  Public
Accountants is effective for financial  statements  beginning after December 15,
1998.  SOP 98-5  requires  that  the  costs of  start-up  activities,  including
organization  costs,  be expensed as incurred.  Start-up  activities are defined
broadly  as  those  one-time  activities  related  to  opening  a new  facility,
introducing a new product or service,  conducting  business in a new  territory,
conducting  business with a new class of customers  (excluding  ongoing customer
acquisition  costs, such as policy acquisition costs and loan origination costs)
or beneficiary,  initiating a new process in an existing facility, or commencing
some new operation. The adoption of SOP 98-5 will require the Company to expense
all capitalized  pre-opening  costs. Such costs were $1,071,557 at September 30,
1998.

Diclosure About Segments of an Enterprise and Related Information

Statement of Financial  Accounting Standards No. 131, "Disclosure About Segments
Of An Enterprise and Related  Information," (SFAS No. 131) issued by the FASB is
effective for financial  statemetns  with fiscal years  beginning after December
15, 1997.  Earlier  application is permitted.  SFAS No. 131 requires that public
companies  report  certain  information  about  operating  segments,   products,
services and geographical areas in which they operate and their major customers.
The Company  adopted  SFAS 131 as of January 1, 1998 and it had no effect on its
financial position or results of operations.

Accounting for Derivative Instruments and Hedging Activities

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


<PAGE>


PART II .  OTHER INFORMATION



Item 1.  Legal Proceedings.


         On  May  28,  1998,   Silver  State  Property   Management,   a  Nevada
corporation,  Roger A. Bergmann Enterprises, a Nevada corporation, and R.E. Lyle
Corp., a Nevada  corporation  filed a complaint in the Second Judicial  District
Court of the  State of Nevada 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  production in Hawaii for an aggregate  purchase price of $1,000,000.
The Company has filed an answer to this complaint.
This suit is currently in the discovery stage of litigation.

         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 an  unauthorized  third party who  purchased  the  furniture  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 Company
has recently filed its Answer to this Complaint.

         On September  25,  1998,  the Company  successfully  defended all three
counts of the complaint  filed in March 1997 by Benny R. Pittman,  a shareholder
of Grand Strand Entertainment, Inc. This suit arose out of dispute as to whether
the Company wrongfully terminated a licensing agreement with Mr. Pittman for the
control of the Company's Legend 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 the arbitrator to resolve an equity
claim of  quantum  meruit,  so as to avoid  the  possibility  of the suit  being
re-filed against the Company alleging this cause of action,  among others, which
claim was resolved by the  arbitrator  in the favor of the plaintiff for a total
of $15,400 in  consideration  for the  substantial  amount of work the plaintiff
provided on behalf of the Company to open the Legends production.

Item 2.  Changes in Securities
         Not applicable

Item 3.  Defaults upon Senior Securities
         Not applicable

Item 4.  Submission of Matters to a vote of Security Holders
         Not applicable

Item 5.  Other Information

         Country Tonite Acquisition

         (a)   On  September  21,  1998,  the  Company  signed an  agreement  to
               purchase certain assets from Casino Resource  Corporation and its
               affiliates,  for a purchase price of  $13,800,000,  consisting of
               $12,500,000  in  cash  and  a  $1,300,000  promissory  note  (the
               "Country  Tonite  Acquisition").  Included in the Country  Tonite
               Acquisition are all of the income producing assets of the Country
               Tonite dinner theater business, as well as the Branson Theater in
               Branson,  Missouri.  The Country Tonite Acquisition is subject to
               the various  conditions,  including the Company's  procurement of
               financing  and the  approval  of  Casino  Resource  Corporation's
               stockholders.

         (b)   Please see Note 2 to consolidated financial statements regarding
               DXDX Common Stock Purchase Agreement


<PAGE>


         (c)   Letter of Agreement with Imperial  Capital,  LLC On September 10,
               1998, the Company engaged Imperial Capital,  LLC, a Beverly Hills
               based  investment  bank,  to  advise  the  Company  on  potential
               strategic  financing  alternative.  On Stage's board of directors
               has formed a special  committee to work with Imperial  Capital in
               this regard.


Item 6.  Exhibits & Reports on Form 8-K

         (a)   Exhibits

         (b)   Reports on Form 8-K. The  Registrant was not required to file any
               reports  on Form 8-K for the three  months  ended  September  30,
               1998.


<PAGE>






                                   SIGNATURES


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


                                   ON STAGE ENTERTAINMENT, INC.




Date: November 16, 1998            /s/ John W. Stuart  
                                   ---------------------------------------------
                                   John W Stuart, Chairman and
                                   Chief Executive Officer









Date: November 16, 1998            /s/ Kiranjit S. Sidhu
      -----------------            ---------------------------------------------
                                   Kiranjit S. Sidhu, Senior Vice President
                                   Finance and Administration, and
                                   Chief Financial Officer