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, 1997

[ ] 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 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)

                                 (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 1, 1997
-----------------------------                    -------------------------------
Common Stock, $0.01 par value                                6,584,480


<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 Flow...........................
                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. Consolidated Financial Statements

                  On Stage Entertainment, Inc. and Subsidiaries
                           Consolidated Balance Sheets
<TABLE>


                                                                                         September 30,
                                                                          December 31,       1997
                                                                              1996        (Unaudited)
                                                                          ------------   -------------
<S>                                                                       <C>            <C>   
                       Assets
Current assets
      Cash and cash equivalents .......................................   $   290,751    $ 3,593,277
      Accounts receivable .............................................       490,465        674,799
      Inventory .......................................................        67,853         90,861
      Deposits ........................................................       231,601        462,679
      Prepaid and other assets ........................................       236,295        533,023
      Pre-opening costs, net ..........................................       129,180        543,482
                                                                          -----------    -----------
               Total current assets ...................................     1,446,145      5,898,121
                                                                          -----------    -----------

Property, equipment and leasehold improvements ........................     3,725,941      4,804,832
Less:  Accumulated depreciation and amortization ......................    (1,937,718)    (2,407,141)
                                                                          -----------    -----------
Property, equipment and leasehold improvements, net ...................     1,788,223      2,397,691
                                                                          -----------    -----------

Cost in excess of net assets acquired, net of accumulated amortization
    of $1,053 and $5,791 ..............................................        62,123         57,385
Offering costs ........................................................       657,801             --
                                                                          -----------    -----------
                                                                          $ 3,954,292    $ 8,353,197
                                                                          ===========    ===========

                 Liabilities and Stockholder's Equity (Deficit)
Current liabilities
    Accounts payable and accrued expenses .............................   $   599,045    $   781,374
    Accrued payroll and other liabilities .............................       621,986        643,712
    Litigation settlement accrual .....................................       100,000             --
    Current maturities of long-term debt ..............................       228,510        346,534
                                                                          -----------    -----------
                 Total current liabilities ............................     1,549,541      1,771,620

DYDX LP Loan ..........................................................       750,000             --
Long-term debt, less current maturities ...............................     1,877,391        617,959

Commitments and contingencies

Stockholder's equity  (deficit)
     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; 4,002,044 and 6,584,480 shares issued and outstanding        40,020         66,375
Additional paid-in-capital ............................................       121,024      7,240,504
     Accumulated deficit ..............................................      (383,684)    (1,343,261)
                                                                          -----------    -----------
          Total stockholder's equity  (deficit) .......................      (222,640)     5,963,618
                                                                          -----------    -----------
                                                                          $ 3,954,292    $ 8,353,197
                                                                          ===========    ===========
</TABLE>
<PAGE>



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


                                                                     Three months ended
                                                                       September 30,
                                                                 --------------------------
                                                                     1996          1997
                                                                 (Unaudited)    (Unaudited)
                                                                 -----------    -----------
<S>                                                              <C>            <C> 
Net revenues .................................................   $ 4,591,738    $ 5,070,727
Direct production costs ......................................     1,630,146      2,288,531
Indirect production costs ....................................       649,541      1,182,281
                                                                 -----------    -----------
Gross profit .................................................     2,312,051      1,599,915
                                                                 -----------    -----------

Operating expenses
        Selling, general and administrative ..................       758,406      1,091,304
        Depreciation and amortization ........................       251,376        282,707
        Principal stockholder compensation ...................        62,500        284,021
                                                                 -----------    -----------
                   Total operating expenses ..................     1,072,282      1,658,032
                                                                 -----------    -----------

Operating income (loss) ......................................     1,239,769        (58,117)
Interest expense, net of interest income of $311 and $24,578 .        68,392        681,084
                                                                 -----------    -----------
Net income  (loss) before income taxes .......................     1,171,377       (739,201)
Income taxes .................................................         1,963          3,644
                                                                 -----------    -----------

Net income (loss) ............................................   $ 1,169,414    $  (742,845)
                                                                 ===========    ===========

Net income (loss) per share ..................................   $      0.29    $     (0.13)
                                                                 ===========    ===========

Weighted average number of common and common equivalent shares     4,112,643      5,675,235
                                                                 ===========    ===========
</TABLE>
<PAGE>


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

                                                                       Nine months ended
                                                                          September 30,
                                                                  ---------------------------
                                                                     1996             1997
                                                                  (Unaudited)     (Unaudited)
                                                                  ------------    -----------
<S>                                                               <C>             <C>  

Net revenues ..................................................   $ 11,204,673    $ 11,769,189
Direct production costs .......................................      4,577,019       5,593,058
Indirect production costs .....................................      1,716,521       2,350,506
                                                                  ------------    ------------
Gross profit ..................................................      4,911,133       3,825,625
                                                                  ------------    ------------

Operating expenses
        Selling, general and administrative ...................      2,066,683       2,913,307
        Depreciation and amortization .........................        545,244         601,816
        Principal stockholder compensation ....................        187,500         409,021
                                                                  ------------    ------------
                   Total operating expenses ...................      2,799,427       3,924,144
                                                                  ------------    ------------

Operating income  (loss) ......................................      2,111,706         (98,519)
Interest expense, net of interest income of  $1,722 and $27,576        202,084         855,095
                                                                  ------------    ------------
Net income (loss) before income taxes .........................      1,909,622        (953,614)
Income taxes ..................................................          5,982           5,963
                                                                  ------------    ------------
Net income (loss) .............................................   $  1,903,640    $   (959,577)
                                                                  ============    ============

Net income (loss) per share ...................................   $       0.46    $      (0.20)
                                                                  ============    ============

Weighted average number of common and common equivalent shares       4,112,643       4,807,972
                                                                  ============    ============
</TABLE>
<PAGE>


       On Stage Entertainment, Inc. and Subsidiaries
           Consolidated Statements of Cash Flows

     Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
                                                                                     Nine months ended
                                                                                        September 30,
                                                                                  --------------------------
                                                                                     1996           1997
                                                                                  (Unaudited)    (Unaudited)
                                                                                  -----------    -----------
<S>                                                                               <C>            <C>  
Cash flows from operating activities
       Net income (loss) .......................................................   $1,903,640    $ (959,577)
                                                                                   ----------    ----------
       Adjustments to reconcile  net income (loss) to net cash provided by (used
             in) operating activities:
         Depreciation and amortization .........................................      488,020       511,990
         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 .................................     (137,906)     (184,334)
                           Inventory ...........................................      (28,294)      (23,008)
                           Offering costs ......................................     (354,263)         --
                           Deposits ............................................      (69,118)     (231,078)
                           Pre-opening costs ...................................      (33,052)     (452,131)
                           Prepaid and other assets ............................     (154,013)     (296,728)
                           Accounts payable and accrued expenses ...............       67,009       182,329
                           Accrued payroll and other liabilities ...............      312,901        21,726
                           Litigation settlement accrual .......................           --      (100,000)
                                                                                  -----------   -----------
         Total adjustments .....................................................       91,284       450,644
                                                                                  -----------   -----------
Net cash provided by (used in) operating activities ............................    1,994,924      (508,933)
                                                                                  -----------   -----------

Cash used in investing activities
                         Advances on note receivable from stockholder ..........     (420,039)     (221,521)
                         Capital expenditures ..................................   (1,052,254)     (506,235)
                                                                                  -----------   -----------
Net cash used in investing activities ..........................................   (1,472,293)     (727,756)
                                                                                  -----------   -----------

Cash used in financing activities
         Repayments under line of credit .......................................     (200,000)           --
         Proceeds from short-term borrowing ....................................      196,462            --
         Proceeds from long-term borrowing .....................................    1,000,000            --
         Repayments on long-term borrowing .....................................     (377,577)     (750,000)
         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 ......................................      618,885     4,539,215
                                                                                   ----------   -----------

Net increase  in cash and cash equivalents .....................................    1,141,516     3,302,526

Cash and cash equivalents at beginning of  period ..............................       20,098       290,751
                                                                                   ----------    ----------
Cash and cash equivalents at end of  period ....................................   $1,161,614    $3,593,277
                                                                                   ==========    ==========

Supplemental  disclosure  of cash flow  information  Cash paid during the period
for:
        Interest ...............................................................   $  221,664    $  218,879
                                   
        Taxes ..................................................................   $    5,982    $    5,963
</TABLE>
<PAGE>


Supplemental schedule of non-cash investing and financing activities

During the nine months ended September 30, 1996 and 1997,  $307,000 and $704,000
of lease assets and obligations were capitalized, respectively.

During the nine months ended September 30, 1997, On Stage Entertainment, Inc., a
Nevada  corporation  ,  borrowed  an  aggregate  of  $1,000,000  from 21 private
investors,  in return for which the Company issued to such  investors  unsecured
non-negotiable notes payable, which accrued interest at an annual rate of 9% and
which matured upon the  consummation  the initial  public  offering (the "Bridge
Notes"), Common Stock and warrants (collectively,  the "Bridge Financing").  The
Common  Stock  issued in  connection  with the  Bridge  Financing  was valued at
$440,000.  As no  consideration  was paid for the Common  Stock,  this amount is
considered an original  issue discount and amortized over the term of the Bridge
Notes.

During the nine months ended  September 30, 1997,  the Company  exchanged all of
its outstanding warrants for 440,755 shares of Common Stock, which had no effect
on the Company's earnings.
<PAGE>



                  ON STAGE ENTERTAINMENT, INC. AND SUBSIDIARIES
                   Notes to Consolidated Financial Statements
                                September 30,1997


(1)  Basis of  Presentation

The  financial  statements  included  herein  include  the  accounts of On Stage
Entertainment,  Inc. ("the  Company") and its  subsidiaries,  Legends in Concert
Inc., a Nevada corporation; On Stage Marketing, Inc., a Nevada corporation;  and
Interactive Events, Inc., a Georgia corporation. 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  three  and  nine  months  ended
September 30, 1997,  are not  necessarily  indicative of those  expected for the
full year.  Certain  prior year amounts have been adjusted and  reclassified  to
conform to the 1997 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
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,  1996,  included  in  Amendment  No.  5  to  the  Company's
Registration  Statement on Form SB-2 (Registration No. 333-24681) filed with the
Securities  and  Exchange  Commission  on August 13, 1997  ("Amendment  No. 5").
Accordingly,  footnote  disclosures,  which would  substantially  duplicate  the
disclosures  contained in the  Company's  December 31, 1996,  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. Although the Company believes that the disclosures are adequate to
make the  information  presented  not  misleading,  it is  suggested  that these
unaudited interim consolidated  financial statements be read in conjunction with
the audited consolidated financial statements and the notes thereto for the year
ended December 31,1996, included in Amendment No. 5.

(2)   Initial Public Offering

On August 13,  1997,  the  Company  completed  an  initial  public  offering  of
1,400,000  shares of Common Stock at $5.00 per share and redeemable  warrants to
purchase  1,610,000 shares of Common Stock at $0.10 per Warrant (the "IPO"). The
net proceeds to the Company of the offering  after  underwriting  discounts  and
commissions, was approximately $6,270,070.

(3) Computation of Net Income (Loss) Per Common and Common Equivalent Share

Loss per share data is based upon the weighted  average  number of common shares
and dilutive common  equivalent  shares  outstanding.  Common  equivalent shares
result from the assumed exercise of outstanding  stock options and warrants that
have a dilutive  effect when applying the treasury  stock  method.  Common stock
issued by the Company at a price less than the  initial  public  offering  price
during  the  twelve  months  immediately  preceding  the  initial  filing of the
offering  together with common stock options and convertible  debt issued during
such  period  with an  exercise  price less than the IPO price,  are  treated as
outstanding  for all  periods  presented.  Except  where the  provisions  of the
Securities  and  Exchange  Commission's  Staff  Accounting  Bulletin  No. 83 are
applicable,  common share  equivalents have been excluded in all years presented
in the  Statements of  Operations  when the effect of their  inclusion  would be
anti-dilutive.

(4)  Commitments and Contingencies

On September 19, 1997, the Company  entered into an agreement for the lease of a
500-seat  dinner  theater  located  in the  Castillo  Del Mar  Resort  in Miami,
Florida, commencing on January 1, 1998 (the "Miami Lease"). The Miami Lease is a
triple net lease under which the Company will  operate its  flagship  Legends in
Concert(R)  production,  a live tribute show  featuring  recreations of past and
present music and motion  picture  superstars  through the use of  impersonators
("Legends").  The Legends  show will be  performed  under a  four-wall,  at-risk
financial  structure  (as  defined  below),  in  accordance  with the  Company's
business plan. The term of the Miami Lease is for five years, subject to certain
tenant  improvement costs and minimum attendance goals. The Miami Lease provides
for a monthly rent of approximately $12,000, which may be paid by means of "rent
credits"  whereby all  expenditures  the Company makes in renovating the theater
are offset against monthly rent payments on a dollar for dollar basis.
<PAGE>


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)  Subsequent Events

On October 17, 1997, the Company entered into a three year performance agreement
with the Sheraton Hotel in Valley Forge, Pennsylvania under which the Company is
to present a variety of its live theatrical productions.  The agreement provides
the Company with the option of taking a split of the gross proceeds derived from
the sale of tickets to its variety  shows or accepting a  guaranteed  weekly fee
arrangement.

In March 1997, the Company agreed with its underwriter, Whale Securities Co., LP
(the  "Underwriter"),  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 the date of the IPO,  without the  Underwriter's  prior written
consent.  On October 23, 1997, the Company  obtained the written  consent of the
Underwriter  to advance Mr.  Stuart the sum of $50,000  (the  "Advance"),  which
Advance  bears  interest  at a rate of 10% per annum,  matures one year from the
date of the Advance and is evidenced by a promissory note executed by Mr. Stuart
in favor of the Company.

(6) Capital Equipment Financing Commitment

On September 29, 1997,  First  Security  Leasing  Company,  a Utah  corporation,
approved for the Company a $1,000,000 lease line. Advances under the credit line
incur interest at rate of 9.75% per annum. The financing  commitment will expire
on  September  29,  1998.  As of  September  30,  1997,  there  were no  amounts
outstanding under the line.
<PAGE>


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 the Company's  utilization of tax benefits,  the seasonal  nature of
the Company's  business,  general  business  strategy,  the  introduction of new
theatrical   productions,   expansion  plans,   litigation  matters,   operating
performance and liquidity,  as well as information  contained  elsewhere in this
Quarterly  Report where  statements are preceded by,  followed by or include the
words "believes," "expects," "anticipates" or expressions of similar import. 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,  without  limitation and in addition to those discussed in
the various  documents  filed by the Company  with the  Securities  and Exchange
Commission,  the following: (i) the highly competitive nature of the leisure and
entertainment market, which includes the market for live theatrical productions,
in which the Company  competes  and the  ability of the Company to  successfully
compete in this market with other  production  companies for the most  desirable
commercial and tourist  venues;  (ii) the ability of the Company to successfully
implement its expansion strategy which contemplates the opening of approximately
nine additional "four wall" resident  productions over the next 24 months; (iii)
future capital needs and the uncertainty of additional  funding (whether through
financial markets,  collaborative or other arrangements with strategic partners,
or from other  sources);  (iv) the  outcome  of  litigation  matters;  (v) risks
associated  with  acquisition  strategy;  (vi)  the  Company's  working  capital
position ; (vii) the ability of the Company to utilize  certain  operating  loss
carryforwards;  and (viii) the Company's  ability to reproduce the  performance,
likeness and voice of various  celebrities  without  infringing on the publicity
rights of such celebrities or their estates.

Overview

The Company  derives the majority of its revenue from the sale of its theatrical
productions to audiences at venues in urban and resort tourist  locations and to
commercial clients, which include casinos, corporations,  theme parks and cruise
lines. In addition,  the Company generates revenue from the sale of merchandise,
food and  beverages  in certain of its venues,  and from time to time,  from the
sale of technical  equipment,  services to  commercial  clients,  and design and
fabrication of sets and props.

The Company  classifies  its  productions  (both its  resident  and  limited-run
engagements)  into two main  categories:  "at-risk" shows and "low-risk"  shows.
"At-risk"  shows are classified as any of the Company's  resident or longer term
limited-run  productions  where the amount of the  revenue to be obtained by the
Company in  connection  with the show is uncertain (as is typical in the case of
shows  produced by the Company at theaters  leased and or purchased  directly by
the Company in urban and resort  tourist  locations and of shows produced by the
Company  in  certain  casino  markets  like Las  Vegas).  "Low-risk"  shows  are
contracted  productions  in which the client  guarantees a fee (typical of shows
produced by the Company in certain smaller casino markets like Atlantic City and
for other  commercial  clients  such as  corporations,  theme  parks and  cruise
lines).
<PAGE>


Results of Operations

The  following  table sets forth certain  financial  data as a percentage of net
revenue of the Company for the periods presented:

<TABLE>
                                                         Three Months Ended   Nine Months Ended
                                                         ------------------   -----------------
                                                            September 30,       September 30,
                                                            1996      1997      1996     1997
                                                           ------    ------    ------   ------
<S>                                                        <C>       <C>       <C>      <C>   
Net revenue                                                100.0%    100.0%    100.0%   100.0%
Direct production costs                                     35.5      45.1      40.8     47.5
Indirect production costs                                   14.1      23.3      15.3     20.0
                                                           ------    ------    ------   ------
Gross profit                                                50.4      31.6      43.9     32.5
                                                           ------    ------    ------   ------
Operating expenses
       Selling, general and administrative                  16.5      21.5      18.4     24.8
       Depreciation and amortization                         5.5       5.6       4.9      5.1
       Principal stockholder compensation                    1.4       5.6       1.7      3.5
                                                           ------    ------    ------   ------
                      Total operating expenses              23.4      32.7      25.0     33.4
                                                           ------    ------    ------   ------

Operating income (loss)                                     27.0      (1.1)     18.9     (0.9)

Interest, net                                                1.5      13.4       1.8      7.3
                                                           ------    ------    ------   ------

Net income (loss) before income taxes                       25.5     (14.5)     17.1     (8.2)

Income tax                                                   0.4       0.1       0.1      0.1
                                                           ------    ------    ------   ------

Net income (loss)                                           25.1%    (14.6%)    17.0%    (8.3%)
                                                           ======    ======    ======   ======
</TABLE>

Quarter Ended September 30, 1996 versus Quarter Ended September 30, 1997

Net  Revenues.  Net  revenue  consists  of  sales  of the  Company's  theatrical
productions,  concession sales, photo sales, and income generated from equipment
rental.  Net revenue for the quarter  ended  September  30,  1997,  increased by
$479,000,  or 10.4%,  to  $5,071,000  from  $4,592,000  as compared to the third
quarter ended  September 30, 1996.  Contributing to this increase were increases
of  approximately:  (i) $642,000  attributable to the Legends show at the Osmond
Family Theater in Branson,  Missouri,  which ran in 1997, but not in 1996;  (ii)
$39,000  attributable  to a resident  Legends show at the Imperial Palace in Las
Vegas,  Nevada;  (iii) $5,000  attributable  to the Legends show at Bally's Park
Place in  Atlantic  City,  New Jersey;  (iv)  $366,000  attributable  to the new
Legends show in Daytona Beach,  Florida;  (v) $369,000  attributable  to limited
engagements  and corporate  events which  includes  limited  engagements  of the
Legends  show at Empress  Casino in Joliet,  Illinois  and the  Company's  joint
venture (Camouflage Aux Folles(R)) show at Trump's Taj Mahal Hotel and Casino in
Atlantic  City,  New Jersey,  which ran in 1997,  but not in 1996;  (vi) $76,000
attributable to other revenue; and (vii) $39,000 attributable to management fees
from the  Legends  show in Hawaii.  These  increases  were  partially  offset by
decreases of approximately: (a) $115,000 attributable to a resident Legends show
in Myrtle Beach, South Carolina;  (b) $909,000  attributable to the Legends show
at the Grand Palace in Branson,  Missouri,  which ran in 1996,  but not in 1997;
and (c) $33,000 attributable to the Legends shows on Premier Cruise Lines.

Direct   Production   Costs.   Direct  production  costs  include  salaries  for
impersonators,   stars,  singers,  dancers,   musicians,   technical  operators,
choreographers,   wardrobe   personnel,   production   managers  and  concession
personnel,  license fees, electronic supplies,  lighting, sound, wardrobe, sets,
props,  and the costs of goods for  merchandise  and food and  beverage.  Direct
production  costs for the quarter ended September 30, 1997 increased by $658,000
or 40.4%, as compared to the quarter ended September 30, 1996. Direct production
costs  increased  to 45.1% of net revenue for the quarter  ended  September  30,
1997,  as compared to 35.5% for the  quarter  ended  September  30,  1996.  This
increase  was  primarily  attributable  to costs  associated  with  increases in
salaries,  electronic supplies, make-up and wardrobe. The increase was partially
offset by a decrease in costs associated with props and production supplies.
<PAGE>


Indirect  Production  Costs.  Indirect  production  costs  include  salaries for
operations,  box  office,  finance  and  marketing  personnel,  advertising  and
promotion,   insurance,   rent,  utilities,   property  taxes,  housing,  legal,
accounting and travel. Indirect production costs for the quarter ended September
30,  1997  increased  by $533,000  or 82.0%,  as  compared to the quarter  ended
September 30, 1996.  Indirect production costs increased to 23.3% of net revenue
for the quarter  ended  September 30, 1997, as compared to 14.1% for the quarter
ended  September 30, 1996. The increase was primarily  attributable  to a higher
level of indirect salaries, advertising, promotion and rent.

Selling,  General  and  Administrative.   Selling,  general  and  administrative
expenses include officers' salaries, finance, operations, development, marketing
and technical personnel  salaries,  office supplies,  rent,  utilities and legal
expenses.  Selling,  general and  administrative  expenses for the quarter ended
September 30, 1997 increased by $333,000,  or 43.8 %, as compared to the quarter
ended September 30, 1996.  Selling,  general and  administrative as a percent of
net revenues  increased to 21.5% for the quarter  ended  September  30, 1997, as
compared to 16.5% for the quarter  ended  September  30, 1996.  The increase was
primarily  due to  increases  in  salaries,  auto  expense,  rent,  commissions,
corporate   advertising   and  promotion  as  well  as  a  one  time  charge  of
approximately  $221,000 resulting from forgiveness of a note receivable from Mr.
Stuart.  As of August  12,  1997,  Mr.  Stuart  owed the  Company  a total  note
receivable,  together with principal and interest  received thereon (the "Stuart
Note"), which the Company forgave, in full, on said date. The Company has agreed
with the  Underwriter  not to loan or advance any further sums to Mr.  Stuart in
the  future,  without  the  prior  written  consent  of the  Underwriter.  These
increases were partially  offset by decreases in costs  associated  with travel,
entertainment, and professional fees.

Depreciation  and  Amortization.  Depreciation  and amortization for the quarter
ended  September  30,1997  increased  by $31,000,  or 12.5%,  as compared to the
quarter ended September 30, 1996. The increase was primarily due to increases in
depreciation and goodwill amortization.

Interest  Expense,  Net.  Interest  expense  is  currently  incurred  and/or was
incurred as a result of the following: (i) a term loan with First Security Bank,
approximately  $19,091 of which was  outstanding  as of September 30, 1997,  and
which  accrued  interest  at the annual rate of 11.5%;  (ii) a loan  between the
Company and DYDX Legends  Group,  L.P. in the amount of  approximately  $750,000
which  accrued  interest  at the annual  rate of 9.0% (the "DYDX  Loan");  (iii)
$1,714,064 in principal  amount  outstanding  under the Company's 8% amended and
restated  Convertible  Subordinated  Debentures  due in  January  of  1999  (the
"Debentures");  (iv) $250,000  line of credit with First  Security  Bank,  which
accrued  variable  interest at the rate of 1.5% over the First Security of Idaho
Index  (10%  per  year as of the date of the  facility's  inception),  is due on
demand, and which is scheduled to expire on May 19, 1998 (the "Line of Credit");
and (v) $1,000,000  Bridge Notes,  which accrued  interest at the annual rate of
9%.  Interest  expense for the quarter ended  September  30, 1997,  increased by
$613,000 or 895.9%,  as compared to the quarter ended  September  30, 1996.  The
increase  was  primarily  attributable  to a one time,  non-recurring,  interest
expense  charges in the amount of  $194,000  related  to the  conversion  of the
Debentures  and the original  issue  discount of $444,000  related to the Bridge
Financing. These increases were partially offset by interest income derived from
the investment of approximately 49% of the net proceeds of the IPO.

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  quarter  ended
September 30, 1997.  Income taxes for the quarters ended  September 30, 1996 and
1997,  relate to income taxes due in those states other than Nevada in which the
Company conducts business.
<PAGE>


Nine Months Ended September 30, 1996 versus Nine Months Ended September 30, 1997

Net Revenues. Net revenue for the nine months ended September 30, 1997 increased
by $564,000  or 5%, from  $11,205,000  to  $11,769,000,  as compared to the nine
months ended September 30, 1996. Contributing to this increase were increases of
approximately:  (i) $1,142,000 attributable to limited engagements and corporate
events which  includes  limited  engagements  of the Legends show at the Empress
Casino in Joliet,  Illinois and the Company's joint ventures ( An Evening at the
Improv(R)  Spectacular  and Camouflage Aux Folles(R)) at Trump's Taj Mahal Hotel
and Casino in Atlantic City,  New Jersey,  each of which ran in 1997, but not in
1996;  (ii) $379,000  attributable  to the new resident  Legends show in Daytona
Beach, Florida,  which ran in 1997, but not in 1996; (iii) $642,000 attributable
to the Legends show at the Osmond Family Theater in Branson, Missouri, which ran
in 1997, but not in 1996; (iv) $103,000 attributable to management fees from the
Legends show in Hawaii;  and (v) $72,000  attributable  to other revenue.  These
increases were partially offset by decreases of: (a) $1,519,000  attributable to
the  discontinuation  of the  Legends  show  at the  Grand  Palace  in  Branson,
Missouri;  (b) $65,000 attributable to the resident Legends show at the Imperial
Palace in Las Vegas,  Nevada;  (c) $12,000  attributable to the resident Legends
show  at  Bally's  Park  Place  in  Atlantic  City,  New  Jersey;  (d)  $142,000
attributable to the resident Legends show in Myrtle Beach,  South Carolina;  and
(e) $36,000 attributable to the Legends shows on Premier Cruise Lines.

Direct   Production   Costs.   Direct  production  costs  include  salaries  for
impersonators,   stars,  singers,  dancers,   musicians,   technical  operators,
choreographers,   wardrobe   personnel,   production   managers  and  concession
personnel,  license fees, electronic supplies,  lighting, sound, wardrobe, sets,
props,  and the cost of goods  for  merchandise  and food and  beverage.  Direct
production  costs for the nine months  ended  September  30, 1997  increased  by
$1,016,000,  or 22.2%,  as  compared  to the first nine  months of fiscal  1996.
Direct  production  costs  increased to 47.5% of net revenue for the nine months
ended  September  30,  1997,  as  compared to 40.8% for the first nine months of
fiscal 1996. The increase was primarily  attributable  to costs  associated with
increases in salaries,  electronic supplies,  make-up,  wardrobe,  and operating
supplies. These increases were partially offset by decreases in costs associated
with workers compensation, props and production supplies.

Indirect  Production  Costs.  Indirect  production  costs  include  salaries for
operations,  box office,  finance,  and  marketing  personnel,  advertising  and
promotion,   insurance,   rent,  utilities,   property  taxes,  housing,  legal,
accounting  and travel.  Indirect  production  costs for the nine  months  ended
September 30, 1997 increased by $634,000 or 36.9%, as compared to the first nine
months of fiscal  1996.  Indirect  production  costs  increased  to 20.0% of net
revenue for the nine months ended  September  30, 1997, as compared to 15.3% for
the  first  nine  months  of  fiscal  1996.   These   increases  were  primarily
attributable  to increases in salaries,  rent,  utilities and  insurance.  These
increases were offset partially by decreases in housing, storage and moving.

Selling,  General  and  Administrative.   Selling,  general  and  administrative
expenses include officers' salaries, finance, operations, development, marketing
and technical personnel  salaries,  office supplies,  rent,  utilities and legal
expenses. Selling, general and administrative expenses for the nine months ended
September  30, 1997  increased by $846,000,  or 40.9%,  as compared to the first
nine months of fiscal 1996.  Selling,  general and administrative  expenses as a
percent of net revenues were 24.8% for the nine months ended September  30,1997,
as compared to 18.4% for the first nine months of fiscal 1996.  The increase was
mainly  due to  increases  in costs  associated  with  salaries,  auto  expense,
freight,  shipping,  office  supplies,  telephone,   commissions,   advertising,
promotion,  and bad debts as well as one time charges of approximately  $163,000
and  $221,000,  resulting  from the issuance of 40,532 shares of Common Stock to
Kiran Sidhu, the Company's Chief Financial Officer and forgiveness of the Stuart
Note, respectively.  As of August 12, 1997, the Stuart Note, which together with
principal and interest totaled  $221,000,  was forgiven in full. The Company has
agreed  with the  Underwriter  not to loan or advance  any  further  sums to Mr.
Stuart,  without the prior written consent of the  Underwriter.  These increases
were partially offset by a decrease in costs associated with bonus accrual,  and
legal expenses.
<PAGE>


Depreciation and Amortization.  Depreciation and amortization for the first nine
months ended September 30, 1997,  increased by $57,000, or 10.4%, as compared to
the first nine months of fiscal 1996.  The increase was due primarily to capital
additions to existing and new shows.

Interest  Expense,  Net.  Interest  expense  for the nine  months of fiscal 1997
increased by $653,000, or 323.3%, as compared to the first nine months of fiscal
1996.  The  increase  was  primarily  attributable  to one time,  non-recurring,
interest expense charges of $194,000 related to the conversion of the Debentures
and an original  issue  discount of  $444,000  related to the Bridge  Financing.
These  increases  were  partially  offset by  interest  income  earned  from the
Company's investment of approximately 49% of the net proceeds generated from the
IPO.

Income Taxes.  At December 31, 1996,  and  September  30, 1997,  the Company had
federal  net  operating   loss   carryforwards   of  $657,214  and   $1,616,791,
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.  Income taxes
for the periods  ended  September  30,  1996 and 1997 relate to income  taxes in
those states other than Nevada in which the Company conducts business.

Seasonality and Quarterly Results

The Company's  business has been,  and is expected to remain,  highly  seasonal,
generating the majority of its revenues from April through October.  Part of the
Company's  business  strategy  is to  increase  sales in  tourist  markets  that
experience  their peak seasons from November to March.  The Company is exploring
opportunities  in  markets  such  as  Florida  and  Arizona,  domestically,  and
Australia,  Beirut, South Africa,  Singapore, New Zealand and Hong Kong, abroad.
The Company  believes that penetration of these markets could help mitigate this
seasonality.

The  following  table sets forth the  Company's net revenue for each of the last
eleven quarters ended September 30, 1997:

Net Revenues
                                        ($ in thousands)
                             ------------------------------------------------
                             March 31,  June 30,  September 30,  December 31,
                             ---------  --------  -------------  ------------

Fiscal 1995 ...............   $2,319     $2,747      $4,388         $3,321
Fiscal 1996 ...............   $2,347     $4,266      $4,591         $3,074
Fiscal 1997 ...............   $2,719     $3,979      $5,071    

Liquidity and Capital Resources

General

The Company has  historically  met its working capital and capital  requirements
through  a  combination  of  cash  flow  from  operations,  debt  offerings  and
traditional  bank  financing.  The Company  anticipates,  based on its currently
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 and cash  equivalent
balances and anticipated revenues from operations will be sufficient to fund its
current  expansion  strategy and contemplated  capital  requirements  (including
those associated with the opening of nine resident "four-wall"  productions) for
the next 24 months.  In the event the Company's plans or assumptions  change, or
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.

For the nine months ended  September  30, 1996,  the Company  generated net cash
from operations of approximately $1,995,000. The cash provided by operations was
primarily  attributable  to an increase in revenues and a decrease in direct and
indirect  production costs partially  offset by an increase in selling,  general
and  administrative  costs.  For the nine months ended  September 30, 1997,  the
Company had a net cash  deficit from  operations  of  $509,000.  This  operating
deficit  was  primarily  attributable  to  increases  in  selling,  general  and
administrative expenses made in anticipation of future growth.

The net cash used in investing  activities  for the nine months ended  September
30, 1996, and September 30, 1997, of $1,472,000 and $728,000,  respectively, was
primarily due to capital expenditures and advances to Mr. Stuart.
<PAGE>


Net cash provided by financing  activities  for the nine months ended  September
30, 1996 of $619,000 was  attributable to the DYDX Loan and bank financing.  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. This increase in net cash provided by financing  activities was partially
offset by the repayment of DYDX Loan.

At  September  30,  1997,  the  Company  had  working  capital of  approximately
$4,127,000,  which resulted,  primarily, from the proceeds of the sale of common
stock.  The  proceeds  from the sale of common  stock were  partially  offset by
increases in accounts receivable, inventory, deposits, prepaid, other assets and
pre-opening costs.

As of September 30, 1997,  the Company had a bank term loan  outstanding  in the
principal  amount of  $19,091,  which  accrued  interest  at a rate of 11.5% per
annum.  On October 10,  1997,  the Company  paid off, in full,  all  outstanding
principal and accrued interest.

On August 13, 1997,  the Company  converted  all of the  $1,714,064 of principal
amount currently  outstanding  under the Debentures into an aggregate of 505,649
shares of Common Stock. The aforementioned  conversion was based upon a ratio of
295 shares of Common Stock per each $1,000  principal  amount of Debenture.  The
conversion resulted in a one time, non-recurring, interest expense charge in the
amount  of  $194,228  (based  on an  imputed  value of $4.00 per share of Common
Stock).

On August 13,1997, the Company paid off, in full, all outstanding  principal and
accrued interest, $773,014, owed by the Company under the DYDX Loan.

On August 19,1997, the Company paid off, in full, all the outstanding  principal
and accrued  interest,  $223,228,  owed by the Company  under the line of credit
facility.

On August 13,1997, the Company paid off, in full, all outstanding  principal and
accrued interest, $1,036,746, owed by the Company under the Bridge Notes.
<PAGE>


PART II. OTHER INFORMATION

ITEM 1.    LEGAL PROCEEDINGS

There have been no material  developments in the legal matters  reported in Part
II,  Item 1 of the  Company's  Quarterly  Report on Form 10-Q for the  quarterly
period ended June 30, 1997.

ITEM 2.  CHANGES IN SECURITIES.

Use of Proceeds from the Company's Initial Public Offering

The following  information is being provided in accordance  with Rule 463 of the
Securities  Act of 1933 (the  "Securities  Act") and Item 701 of Regulation  S-B
under the Securities  Act. On August 13, 1997, the Company  completed an initial
public offering of 1,400,000 shares of its Common Stock and Warrants to purchase
1,610,000 shares of its Common Stock (the "Offering").

The  effective  date  of the  Company's  Registration  Statement  on  Form  SB-2
(Registration No. 333-24681) (the "Registration Statement") was August 13, 1997.

The net proceeds to the Company of the Offering were $6,270,070.

From the effective date of the Registration Statement to September 30, 1997, the
Company  incurred for its account  approximately:  (i) $714,000 for underwriting
discounts and  commissions,  (ii) $214,200 for expenses paid to the Underwriter,
and (iii)  $492,000  for  other  expenses  related  to the  offering.  The total
expenses  incurred by the Company in connection with the IPO were  approximately
$706,000,  excluding amounts incurred for the Company's account for underwriting
discounts  and  commissions.  None of such  payments  were  made to a  director,
officer,  person owning 10% or more of the Common Stock,  or an affiliate of the
Company.

From the effective date of the Registration Statement to September 30, 1997, the
approximate  amount of the net offering proceeds to the Company used for various
purposes is set forth below:

                   Application                                          Amount
--------------------------------------------------------------        ----------

Repayment of indebtedness ....................................        $2,032,988
Short-term investment (Certificate of Deposit) ...............         1,000,000
Short-term investment (Money Market) .........................         2,471,597
Working capital and general corporate purposes* ..............           765,485
                                                                      ----------
         Total amount applied ................................        $6,270,070
                                                                      ==========

* Includes the payment of fees for professional  services rendered in connection
  with the IPO.

None of the amounts listed above were paid to a director, officer, person owning
10% or more of the Common Stock, or an affiliate of the Company.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

        NONE.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        NONE.

ITEM 5. OTHER INFORMATION.

        NONE.
<PAGE>


ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

        Exhibits

The following is a list of exhibits  filed as part of this  quarterly  report on
Form 10-QSB. Where so indicated by footnote, exhibits that were previously filed
are incorporated by reference.  Unless otherwise indicated,  the location of the
exhibit in the previous filing is the same number as listed below.

 Exhibit
 Number                                    Description

   3.1    Articles of Incorporation of the Registrant. (1)
   3.2    Bylaws of the Registrant. (4)
   4.1    Specimen Stock Certificate Representing the Common Stock. (4)
   4.2    Specimen Warrant Certificate Representing the Warrants. (4)
   4.3    Form of Public Warrant Agreement. (4)
   4.4    Form of Underwriter's Warrant Agreement. (4)
  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    Lease between the  Registrant  and Great  American  Entertainment
            Company. (3)
 10.14    Entertainment   Production   Agreement  between  the  Registrant,
            Imperial Palace,  Inc. and John W. Stuart dated December 8, 1995.
            (4)
 10.15    Agreement  between the  Registrant  and Bally's Park Place,  Inc.
            dated September 1, 1994 and Subsequent Renewal Letter. (4)
 10.16    Agreement between Registrant and Improv West, Inc. (2)
 10.17    Amended and Restated Loan Agreement  between  Registrant and DYDX
            Legends Group, L.P. (2)
 10.18    Common  Stock   Purchase   Agreement   between   Registrant   and
            Interactive Events, Inc. (2)
 10.19    Show  Production   Agreement  between  the  Registrant  and  Kurz
            Management. (4)
 10.20    Lease between the  Registrant and Burgoyne  Properties,  Limited. (4)
  27.1    Financial Data Schedule. *

*  Filed herewith

Filed as an exhibit to the Company's  Registration  Statement on Form SB-2 dated
April 7, 1997 (Registration No. 333-24681)

Filed as an exhibit to Amendment No. 1 to the Company's  Registration  Statement
on Form SB-2 dated September 3, 1997 (Registration No. 333-24681).

Filed as an exhibit to Amendment No. 2 to the Company's  Registration  Statement
on Form SB-2 dated September 30, 1997 (Registration No. 333-24681).

Filed as an exhibit to Amendment No. 3 to the Company's  Registration  Statement
on Form SB-2 dated August 6, 1997 (Registration No. 333-24681).

(b) Form 8-K - None
<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 12, 1997                         /s/ John W. Stuart
                                                --------------------------------
                                                John W Stuart, Chairman
                                                  and Chief Executive
                                                  Officer









Date: November  12, 1997                        /s/ Kiranjit S. Sidhu
                                                --------------------------------
                                                Kiranjit S. Sidhu, Senior
                                                  Vice President, Finance and 
                                                  Administration, and
                                                  Chief Financial Officer