<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K

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

         For the fiscal year ended December 31, 1997

                                       OR

          TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
       ---
          EXCHANGE ACT OF 1934 (No Fee Required)

                         Commission file number: 0-21327

                           BLOWOUT ENTERTAINMENT, INC.
             (Exact name of Registrant as specified in its Charter)

<TABLE>
<CAPTION>
<S>                                                                   <C>
                       Delaware                                                    87-0498950
             (State or other jurisdiction                             (I.R.S. employer identification no.)
           of incorporation or organization)

               7700 NE Ambassador Place
             One Airport Center, 2nd Floor
                Portland, Oregon 97220                                           (503) 331-2729
       (Address of principal executive offices,                          (Registrant's telephone number,
                  including zip code)                                         including area code)

</TABLE>

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

<TABLE>
<CAPTION>

                  Title of each class                      Title of each exchange on which registered
                  -------------------                      ------------------------------------------
                  <S>                                      <C>
                         None                                                 None

</TABLE>

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

                     Common Stock, par value $.01 per share
                                (Title of Class)

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

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

         The aggregate market value of the voting stock held by non-affiliates
of the registrant was approximately $1,452,796 based on the closing sale price
of $1.34 per share as quoted on the Nasdaq Stock Market on March 13, 1998.

         The number of shares of the registrant's Common Stock, $.01 par value,
outstanding as of March 13, 1998 was 2,433,330.

                       DOCUMENTS INCORPORATED BY REFERENCE

         Portions of the following documents of the registrant are incorporated
herein by reference:

<TABLE>
<CAPTION>

        Document                                               Part of Form 10-K
        --------                                               -----------------
<S>                                                            <C>
Proxy Statement for the 1998 annual meeting of stockholders           III

</TABLE>


<PAGE>

         As used in this report, the "Company" means BlowOut Entertainment,
Inc., its subsidiaries and their predecessors and subsidiaries.

         Statements made in this document that present information that is not
historic, including among other things, anticipated financial performance,
sources and extent of liquidity and capital, business prospects, new products
and markets, and anticipated store openings are "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements can be identified by the use of forward-looking terminology
such as "may," "will," "expect," "anticipate," "estimate" or "continue" or the
negative thereof or other variations thereon, or comparable terminology. There
are numerous risks and uncertainties that could cause actual results to differ
materially from those in such forward-looking statements.

                                     PART I

ITEM 1 - BUSINESS

GENERAL

         BlowOut Entertainment, Inc. (the "Company") operates retail "store
within a store" videocassette and video game outlets located in large mass
merchant supercenters and grocery chain stores throughout the United States. As
of December 31, 1997, the Company operated 184 retail video stores, including
148 stores located in Wal-Mart SuperCenters, 24 stores located in Super Kmart
Centers, six stores in Ralphs under the name "Videos & More", and six stores
located in Food 4 Less under the name "BlowOut Video." In January 1998, the
Company signed an agreement with Fred Meyer Stores, Inc. ("Fred Meyer") to open
video rental departments inside select Fred Meyer stores. Fred Meyer,
headquartered in Portland, Oregon, is a major western retailer that currently
operates 113 large, one-stop-shopping centers in six western states. During the
first quarter of fiscal 1998, the Company opened three stores in Fred Meyer
retail centers under the name "Videos & More."

         The Company's revenue consists of rental revenue and product sales.
Rental revenue includes rental of prerecorded videocassettes and video games.
Product sales are derived from the sale of new and previously viewed
videocassettes and video games and, to a lesser extent, ancillary items such as
blank tapes and candy.

         The Company was formed in 1992 as a subsidiary of Rentrak Corporation
("Rentrak"), and opened its first store within a store in January 1993. At
year-end 1993 and 1994, the Company operated seven stores. During these periods,
all of the Company's stores were located in grocery stores. During 1995, the
Company experienced accelerated growth in retail stores and revenue, primarily
through (i) the acquisition by Rentrak on May 26, 1995, of a controlling
interest in Entertainment One, Inc. ("E-1"), a company whose primary business
was the


                                       2
<PAGE>

operation of retail video outlets in Wal-Mart SuperCenters, (ii) the acquisition
by Rentrak on August 31, 1995, of certain assets and assumption of certain
liabilities which constituted SuperCenter Entertainment, Inc.'s retail video
business and consisted of retail video outlets in Wal-Marts, Wal-Mart
SuperCenters and Super Kmart Centers (the "SCE Business") and (iii) new store
openings in Wal-Mart SuperCenters and, to a lesser extent, in Super Kmart
Centers, Ralphs and Food 4 Less stores.

         As a result of the acquisitions of E-1 and the SCE business, the
Company recorded approximately $5.1 million in goodwill which is being amortized
over 10 to 15 years resulting in annual amortization of approximately $.5
million.

         Prior to November 25, 1996, Rentrak owned 1,698,942 shares
(approximately 70%) of the issued and outstanding common stock, par value $.01
per share, of the Company (the "Common Stock"). On November 25, 1996, pursuant
to the terms of a Distribution Agreement between Rentrak and the Company,
Rentrak distributed 1,457,343 shares of Common Stock to the holders of Rentrak
common stock in the form of a special dividend.

         The principal executive offices of the Company are located at 7700 NE
Ambassador Place, One Airport Center, Second Floor, Portland, Oregon 97220,
telephone (503) 331-2729.

BUSINESS

The Videocassette Retail Industry

         According to video industry trade publications, videocassette retail
industry revenues were approximately $16.8 billion in 1997. Of the total
videocassette retail industry revenues in 1997, videocassette rental revenues
were approximately $9.2 billion and videocassette sales revenues were
approximately $7.6 billion.

         The industry is characterized by a high degree of fragmentation, with
only nine chains in 1997 operating in excess of 100 video specialty stores and
the average chain operating fewer than 50 stores. The Company believes that in
recent years the videocassette retail industry has begun to consolidate as
regional chains and smaller video specialty store operations are acquired by
operators with greater access to capital.

         The Company believes that the home videocassette market has become the
single largest source of revenues for motion picture distributors, providing the
majority of total revenues in 1997. Due to the high production costs of films
today, the Company believes that without home video revenues, most films would
be unprofitable. Furthermore, in order to quickly recoup the large theatrical
marketing budgets that often exceed the film's production cost, most films are
released simultaneously in a large number of theaters. This broad exposure
usually results in most theaters only playing the film for a few weeks before
replacing it with another release.

                                       3
<PAGE>

         Movie studios seek to maximize their revenues in sequential release
date windows to various movie distribution channels. These distribution channels
currently include, in release date order, first and second tier movie theaters,
video specialty stores, Pay-Per-View, pay television, basic cable television,
and network and syndicated television. The Company believes that this method of
sequential release has allowed movie studios to increase their total revenues
with relatively little adverse effect on the revenue derived from previously
established channels and that movie studios will continue the practice of
sequential release as new distribution channels become available.

         In the Company's experience, the movie studios typically set the
initial wholesale price of prerecorded videos at between $60 and $75, which
encourages rental rather than sale. To maximize revenues to the studios, after
approximately six to twelve months the studios will often lower the selling
price of these same videocassettes to between $10 and $20. In addition, a
relatively small number of titles that are believed to have broader consumer
appeal, such as Jerry Maguire, Liar, Liar and Jurassic Park - Lost World, are
wholesaled initially by the studios at between $12 and $17 to encourage their
purchase rather than rental. While much of this type of product is heavily
promoted as "sell-through" titles by all types of mass market retailers, the
video specialty stores offer this product both for sale and rental and thus also
attract the customer who prefers to rent rather than buy despite a title's
relatively low purchase price.

         Video specialty stores typically purchase a majority of the films that
were released in theaters regardless of their success in attracting viewers. The
Company believes that many of its customers are predisposed to view a specific
film as a result of its marketing campaign, but due to its short playing time at
a local theater, they will often rent or purchase the prerecorded home video
version of that film. In addition, the Company believes consumers are more apt
to view films that were not box office hits on rented videos than on any other
medium because video specialty stores provide the opportunity to browse and make
an impulse choice among a very broad selection of film titles at a low price.
Therefore, video specialty stores represent a reliable revenue source for a
majority of the film output of the major movie studios.

         New technologies for releasing film titles for home viewing, including
a digital video disc format, have recently been introduced and others are
currently being developed and such technologies could ultimately result in a
competitive alternative to videocassettes.

Business Strategy

         The Company's current business strategy is based on three key
advantages management believes the Company enjoys: (i) its position in the
retail video rental industry with its "store within a store" concept; (ii) its
ability to "piggyback" on what management believes will be the continued success
of Wal-Mart SuperCenters, Super Kmart Centers, Ralphs and Food 4 Less grocery
stores, and Fred Meyer retail centers; and (iii) its existing relationship with
its host


                                       4
<PAGE>

vendors. In addition, it is the Company's strategy to seek to open video retail
outlets in other mass retail and grocery stores. To capitalize on these points,
the Company has taken or intends to take the following steps: (a) increase the
number of videocassettes each store sells; (b) increase the videocassette
inventory of new releases that each store carries; (c) change the mix of
inventory of each store to increase the number of video games and family and
children's movies available; (d) continue to utilize market research to improve
the inventory mix of videocassettes and games; (e) endeavor to hold down
marketing costs by using common advertising for all locations; (f) use its
centralized computer system to track overnight reporting of results from
individual stores; and (g) use a common store design to reduce construction
costs.

         The Company opened 11 new stores during fiscal 1997. The Company closed
12 stores in Super Kmart Centers and 15 in Wal-Mart Supercenters 1997. The
Company currently anticipates opening 13 additional stores in 1998, including
four in Fred Meyer, one in Ralph's and eight in Wal-Mart.

         The Company intends to implement expansion and growth strategies for
opening additional "store within a store" outlets in Wal-Mart SuperCenters, and,
to a lesser extent, in Fred Meyer and Ralphs. The Company typically is offered
store locations six months in advance of the target store opening date. The
actual number of store openings will depend upon a number of factors outside the
Company's control, including the expansion plans of Wal-Mart, Fred Meyer and
Ralphs, the number of store locations offered to the Company and the
opportunities to open stores in other mass retail and grocery stores. Thus, the
actual number of store openings could vary significantly from the plan.

         Capital outlays of approximately $100,000 are required to open each new
store. Continued losses and limited capital caused the Company to open new
stores at a very moderate rate during fiscal 1997. The Company believes that its
existing operating cash flow and credit facilities, including a new $1.5 million
credit facility being provided by Culture Convenience Club Co. Ltd. ("CCC"), the
Company's largest stockholder, will provide the capital necessary to open the
new stores that are planned to be opened during fiscal 1998. See Liquidity and
Capital Resources below for further details. If the Company decides to open more
than 13 new stores during fiscal 1998, the Company may have to obtain other debt
or equity financing or expand more slowly than desired. After 1998, additional
sources of debt and equity capital may be required to continue to meet the
Company's expansion strategy. There can be no assurance that the Company will be
able to obtain any such additional financing on reasonable terms. Failure to
meet the expansion schedule of the host stores could have a material adverse
effect on the Company. There can be no assurance that the Company will be able
to attract and retain a sufficient number of skilled store managers to implement
its growth strategy.



                                       5
<PAGE>



Supercenters

         Wal-Mart SuperCenters and Super Kmart Centers are large stores that
feature a full line of general merchandise and groceries as well as a variety of
ancillary services provided by independent third parties including video
rentals, dry cleaning, hair care, optical and floral shops, all intended to
provide customers with "one stop" shopping.

         Wal-Mart. According to Wal-Mart, Wal-Mart SuperCenters average 181,000
square feet in size. Wal-Mart opened its first SuperCenter in 1988. Wal-Mart was
operating 436 SuperCenters by December 31, 1997. The majority of the
SuperCenters are located in Texas, Tennessee, Georgia and Missouri, and the
Company expects Wal-Mart to continue to concentrate store openings in small
towns in the southeastern, southwestern, and midwestern United States. The
Company believes that it and Blockbuster Entertainment, Inc. are currently the
only two providers of "store within a store" retail video outlets to Wal-Mart.

         Kmart. According to Kmart, Super Kmart Centers range in size from
135,000 to 185,000 square feet. Kmart opened its first SuperCenter in 1991. The
Company believes that it is currently the sole provider of "store within a
store" retail video outlets to Kmart, although it believes that Kmart's strategy
is to have more than one such provider.

         Ralphs. Ralphs operates approximately 300 supermarkets, principally on
the west coast of the U.S. Through an agreement with Ralphs entered into on May
1, 1995, the Company is the exclusive operator of "store within a store" retail
video outlets for Ralphs.

         Fred Meyer. Fred Meyer Stores, Inc., headquartered in Portland, Oregon,
is a major western retailer that currently operates 113 large, one-stop shopping
centers in six western states. They are part of a larger Company which also
includes Smiths Food and Drug Centers, Quality Food Centers and Ralphs Grocery
Company. Together they form a $15 billion multi-regional supermarket chain. The
Company believes that it and Hollywood Entertainment Corporation are currently
the only two providers of "store within a store" retail video outlets to Fred
Meyer.

Stores

         At December 31, 1997, the Company operated a total of 184 stores,
consisting of 148 stores in Wal-Mart and Wal-Mart SuperCenters, 24 Stores in
Super Kmart Centers, six stores in Food 4 Less under the name "BlowOut Video"
and six additional stores in Ralphs under the name "Videos & More." In 1997, the
Company closed 27 under-performing stores, 12 in Kmart and 15 in Wal-Mart.
BlowOut Video stores in Wal-Mart stores and Wal-Mart SuperCenters range from 840
square feet to approximately 1,300 square feet in size. Stores within Super
Kmart Centers average approximately 1,000 square feet in size. Locations within
Ralphs occupy between 800 and 2,800 square feet. In all locations, stores do not
have separate outside entryways, but open within the store in which they are
located. The majority of the Company's


                                       6
<PAGE>

stores have "drop boxes" located outside the building so that customers may
return videocassettes without having to come into the store.

         The following table sets forth the store development activities of the
Company during the periods indicated:

<TABLE>
<CAPTION>

                                                          1997    1996    1995
                                                          ----    ----    ----

<S>                                                        <C>     <C>     <C>
Stores open beginning of period                            200     157       7
Stores opened or acquired in period                         11      70     154
Stores closed in period                                    (27)    (27)     (4)
                                                           ---     ---     ---
Stores open at end of period                               184     200     157

</TABLE>

         Wal-Mart, Kmart, and Ralphs each typically provides, at its expense,
semi-finished space, including walls, HVAC, utilities and paint, for BlowOut
Video stores. The Company then completes such stores, including installation of
carpeting, computers and other fixtures, at the Company's expense. BlowOut Video
stores use a common store design to control the Company's construction costs.
The Company contracts with third parties to build out BlowOut Video stores
across the United States. The cost to the Company to construct and open a
typical BlowOut Video store, including inventory, fixtures (including any
outside drop boxes), and computers averages approximately $100,000.

Operations

         General operations of the Company's business are administered by the
Vice President of Operations with the assistance of an Assistant Director of
Operations. The Vice President of Operations reports directly to the President.

         Individual BlowOut Video stores are organized into districts consisting
of approximately 16 stores and each district is, in turn, organized into areas
of four stores. One store manager in each area is appointed as Area Manager to
oversee his or her store and the other three stores in the area. One Area
Manager in the district is selected by the Company to serve as the District
Manager.

         While the typical Wal-Mart SuperCenter and Super Kmart Center operates
24 hours per day every day of the year except Christmas Day, BlowOut Video
stores are typically open from 9:00 a.m. to 11:00 p.m., with a total of 135
"employee hours" required on all but a few of the busiest weeks of the year.

         All stores use a Ketec or Sensormatic anti-theft security system, with
all merchandise inventories labeled to deter pilferage. Stores record rental and
sale transactions on a personal computer which uses an off-the-shelf,
point-of-sale video inventory management system. Each


                                       7
<PAGE>

store has a telephone modem which is programmed to communicate rental and sales
information daily to the Company headquarters, where the data is processed to
provide inventory tracking, employee performance, and financial data to
management.

         Each BlowOut Video store has in inventory an average of 3,500
videocassettes held for rental. Rental rates are based upon a tiered system: (i)
"new releases" are rented at rates ranging from $2.78 to $3.00 for one to two
days, (ii) "catalogue" items are rented at a rate of $1.50 to $1.78 for five to
seven days, and (iii) "children's" videos are rented at rates ranging from $0.98
to $1.78 for five to seven days, subject to adjustment for local conditions.
After 60 days, some of the videocassettes may be made available for sale as
"previously viewed" at prices ranging from $1.88 to $9.88. The Company promotes
sales by advertising, principally through local newspapers and distribution of
flyers inside the host stores, and direct mail. Although the Company is affected
somewhat by seasonal fluctuations in the release of videocassette titles,
customer traffic patterns in host stores and weather conditions, the Company
does not believe that the video retail industry is seasonal in any material
respect.

Suppliers

         Orders for merchandise are placed to Star Video Entertainment L.P.
("Star Video"), for traditional rental and new sale videocassettes, and Rentrak
for Rentrak's "pay per transaction" system (the "PPT System") rental cassettes.
Used videocassettes and video games are purchased from a number of vendors. The
Company believes it could replace any of these suppliers, except Rentrak, with
suppliers whose pricing and availability would be comparable. The Company
directs virtually all of its suppliers of merchandise, supplies, and fixtures to
deliver the material directly to each of its retail locations. In the past and
currently, the Company has purchased videocassettes from various suppliers other
than Rentrak including Ingram, Funatics and Movies 4 Sale. The Company does not
have any long-term contracts with any videocassette suppliers other than Rentrak
and Star Video.

         On July 22, 1996, the Company entered into an agreement with Star Video
(the "Star Video Agreement") to provide the Company with videocassettes for
rental and sale and with video games for sale. Star Video paid off the balance
of a promissory note in the amount of $240,975 made by the Company to its
previous supplier. As a result, the Company executed a new promissory note to
Star Video, pursuant to which the Company is obligated to pay Star Video
$120,487 on each of May 27, 1997 and 1998. Under the Star Video Agreement, Star
Video became the Company's primary supplier of new videocassettes for rental and
sale, with the exception of PPT videocassettes purchased from Rentrak, until the
later of (i) July 21, 1997, or (ii) repayment of such promissory note.

         Under the PPT System, the Company leases videocassettes from Rentrak
under a revenue-sharing arrangement. Pursuant to this arrangement, the Company
pays a fixed "handling fee" for each videocassette leased from Rentrak and a
"transaction fee" each time a videocassette is rented.

                                       8
<PAGE>

         During fiscal 1997, BlowOut's two primary videocassette distributors
supplied 55.1% and 20.9% of BlowOut's total tape purchases. No other
distributors provided more than 10% of the total videocassette purchases for
fiscal 1997.

Dependence on Host Stores

         The Company is highly dependent on its relationships with its host
stores, particularly its relationships with Wal-Mart and Kmart, in whose stores
currently 93% of the Company's outlets are located. There can be no assurance
that the host stores will open additional stores in locations which are
commercially viable for retail video operations, or that the number of future
stores opened by the host stores will meet the Company's expansion plans. Any
host store could change its development or operation plans at any time. The
Company's management believes that the strategy of Wal-Mart, Kmart and Fred
Meyer is to have more than one vendor operating "store within a store" video
rental and sales outlets. For example, Wal-Mart has leased space in certain
Wal-Mart stores to Blockbuster Video and Fred Meyer has leased space in certain
of its stores to Hollywood Entertainment Corporation. The Company has an
exclusive arrangement to operate video retail outlets in Ralphs. There can be no
assurance that host stores will not operate their own video rental and sale
outlets.

         The Company is party to master leases with Wal-Mart and Kmart,
respectively, for its stores. The Wal-Mart master lease expires on November 18,
1999 and the Kmart master lease expires on September 20, 1999. Each of these
master leases provides for an initial five-year term for each new store, with an
additional five-year optional renewal term. Either party to the Wal-Mart and
Kmart leases can elect to close stores which fail to generate a minimum level of
revenues. Although there currently are stores operated by the Company in both
Wal-Mart and Kmart locations that are not performing at such minimum levels,
neither Wal-Mart nor Kmart has exercised its right to close such stores.
However, the Company elected to close 27 stores (consisting of 15 stores in
Wal-Marts and 12 stores in Kmart) in 1997. The Company closed an additional four
stores, three in Wal-Mart and one in Kmart, in early 1998. The Company has no
exclusive right to open stores in Wal-Mart and Kmart stores and no control over
the geographic area or market in which new stores will be located. The master
leases also allow Wal-Mart or Kmart, under certain conditions, to restrict the
ability of the Company to sell videocassette titles which are being sold in
particular Wal-Mart or Kmart stores, respectively. There can be no assurance
that the Company will be able to operate stores within either Wal-Mart or Kmart
stores for any period of time following the terms provided in the master leases.
Furthermore, although the Company has signed an agreement with Fred Meyer to
open a small number of stores and plans to seek to open video retail outlets in
other mass retail and grocery stores, if either Wal-Mart or Kmart terminates its
relationship with the Company, there can be no assurance that the Company could
find a suitable local, regional or national retail mass merchant with sufficient
stores to support its "store within a store" retail concept.

                                       9
<PAGE>

Competition

         The videocassette and video game rental and sales industry is highly
competitive, with numerous national, regional and local video store operators.
Competitors such as Blockbuster Video have substantially greater financial
resources and marketing capabilities than those of the Company. The Company
believes that Wal-Mart has entered into an agreement with Blockbuster Video to
operate video "store within a store" outlets in certain SuperCenters. Because a
majority of the Wal-Mart and Kmart stores in which the Company operates are
located in rural areas, the video operations also face competition from other
supermarket rental operations, a growing segment of the business. In addition,
the Company competes with a number of other leisure and retail entertainment
providers, including television, movie theaters, bowling alleys and sporting
events.

         In addition to the direct competition from video retailers described
above, the Company faces indirect competition from alternative delivery
technologies which are intended to provide video entertainment directly to the
consumer. These technologies include: (i) direct broadcast satellite
transmission systems, which broadcast movies in digital form direct from
satellites to small antennas in the home; (ii) cable systems, which may transmit
digital format movies to the home over cable systems employing fiber optic
technology; and (iii) pay cable television systems, which may employ digital
data compression techniques to increase the number of channels available and
hence the number of movies which can be transmitted. Another source of indirect
competition comes from program suppliers releasing titles intended for
"sell-through" rather than rental to consumers at prices of approximately $10 to
$30 per videocassette. To date, such "sell-through" pricing has generally been
limited to certain newly released hit titles with wide general family appeal. As
the Company's business is dependent upon the existence of a home video rental
market, a substantial shift in the video business to alternative technologies or
"sell-through" policies could have a material adverse effect on the Company's
future operations. Such growth in sell-through videocassettes has been
influenced, in part, by sales from discount merchants, including Wal-Mart.

Marketing and Advertising

         With advertising credits and market development funds that it receives
from its video suppliers and movie studios, the Company uses radio advertising,
direct mail, newspaper advertising, discount coupons and promotional materials
to promote new releases, its video stores and its tradename. Using copy prepared
by the Company and the respective movie studios, advertising is primarily placed
by the distributor. Expenditures for marketing and advertising above the amount
of the Company's advertising credits from its suppliers and movie studios have
been minimal. The Company anticipates that marketing and advertising
expenditures, net of credits from its suppliers and allowances from movie
studios, will remain minimal in fiscal 1998. The Company also benefits from the
advertising and marketing by studios and theatres in connection with their
efforts to promote films and increase box office revenues.

                                       10
<PAGE>

Government Regulation

         The Company is subject to various federal, state and local laws,
including the Federal Videotape Privacy Protection Act and similar state laws
that govern the disclosure and destruction of video rental records. The Company
also must comply with various regulations affecting its business, including
state and local licensing, zoning, land use, construction and environmental
regulations.

Employees

         As of December 31, 1997, the Company employed approximately 213 persons
full-time and 843 persons part-time. None of the Company's employees is covered
by a collective bargaining agreement with the exception of non-management
employees in three Ralphs locations. The Company does not have more than 13
employees subject to this agreement. The Company provides medical insurance and
other benefits for eligible employees. The Company generally considers its
relationships with its employees to be good.

         The Company's Board of Directors approved an Employee Stock Purchase
Plan in 1996. This plan authorizes up to 200,000 shares of common stock to be
issued to its full-time employees and directors. Under the terms of this plan,
employees can choose each year to have up to 10% of their annual total
compensation withheld to purchase the Company's common stock. The purchase price
of the stock is 85 percent of the prevailing market price. The effective date of
this plan was January 1, 1997. During 1997 a total of 10,650 shares were
purchased in the open market under this plan.

Executive Officers of the Registrant

         The executive officers of the Company are:
<TABLE>
<CAPTION>


                                                                                                    Officer of
               Name                        Age                Position with the Company         the Company Since
               ----                        ---                -------------------------         -----------------
<S>                                        <C>          <C>                                     <C>
Steve Berns                                 39          President                                      1992
Thomas D. Berkompas                         36          Chief Financial Officer                        1997
Harold Heyer                                38          Vice President of Operations                   1995

</TABLE>

         Steve Berns. Mr. Berns has been president of the Company since its
inception in July 1992, and has been a director of the Company since March 21,
1996. Mr. Berns was President of RKO Warner from 1986 to 1992, during which
period RKO Warner grew into the largest video retailer in the New York/New
Jersey market and one of the largest video retailers in the


                                       11
<PAGE>

United States. From 1979 until 1986, Mr. Berns held various positions with Video
Shack, eventually becoming its executive vice president of operations prior to
its acquisition by RKO Warner. From 1990 to 1992, Mr. Berns also served as a
member of the Board of Directors of the Video Software Dealers Association.

         Thomas D. Berkompas. Mr. Berkompas, a certified public accountant, has
served as Chief Financial Officer of the Company since April 23, 1997. Prior to
that he was employed as Vice President of Finance, Chief Financial Officer,
Secretary and Treasurer of Western Power & Equipment Corp. of Vancouver,
Washington, a corporation engaged in the sale, rental and servicing of light to
heavy construction equipment and related products. Prior to that, Mr. Berkompas
was a Senior Audit Manager with Price Waterhouse in San Jose, California and
Portland, Oregon. Mr. Berkompas earned his bachelor's degree in business
economics with an accounting emphasis from Calvin College in Grand Rapids,
Michigan in 1983.

         Harold Heyer. Mr. Heyer has served as Vice President of Operations of
the Company since September 1995. From 1994 through August 31, 1995, Mr. Heyer
served as vice president of sales and retail operations for SCE where he managed
the growth of SCE to 70 units inside Wal-Mart and Kmart. From 1982 until 1994,
Mr. Heyer served in a number of management positions with SuperClub, Blockbuster
and Major Video. Prior thereto, he served as general manager of Video 22, a
six-store video specialty chain.

         The Company entered into an amended and restated employment agreement
dated as of March 1, 1996 and amended as of November 4, 1996 (the "Berns
Agreement") with Steve Berns, pursuant to which Mr. Berns is to serve as
President of the Company until October 31, 1999, or until otherwise terminated
pursuant to the terms thereof. During the term of the Berns Agreement, Mr. Berns
is to receive a base annual salary of $150,000 (the "Berns Base Salary"). The
Berns Base Salary adjusts automatically each October 1 to give effect to changes
in the Consumer Price Index. The Berns Agreement provides that the Company may
pay Mr. Berns a bonus or other additional compensation above the Berns Base
Salary at its discretion. Under the Berns Agreement, the Company provides Mr.
Berns with vacation and holiday pay, medical and life insurance under the
Company's then-current terms, and a car allowance of $500 per month. The Berns
Agreement also requires the Company to pay Mr. Berns a severance payment of an
amount equal to the Berns Base Salary accrued through and including the date of
termination if Mr. Berns' employment is terminated due to his death or
disability. If, within two years after a Change of Control (as defined in the
Berns Agreement), termination is by the Company without cause or by Mr. Berns
for Good Reason (as defined in the Berns Agreement), the Company shall pay Mr.
Berns a lump sum payment in an amount equal to the greater of (i) the Berns Base
Salary through October 31, 1999, or (ii) twelve months' of the annual Berns Base
Salary. If termination is by the Company other than for cause or death or
disability of Mr. Berns, the Company will pay him an amount equal to the Berns
Base Salary through and including October 31, 1999 plus severance payments equal
to six months of the annual Berns Base Salary, subject to


                                       12
<PAGE>

demonstration by Mr. Berns that he is using his best efforts to find other
employment. The Agreement also contains a nonsolicitation covenant and agreement
not to disclose confidential information. On October 26, 1995, Mr. Berns and the
Company entered into a non-competition agreement, which was subsequently amended
on December 12, 1995. Under such agreement, during the period of his employment
with the Company, and for 24 months thereafter, Mr. Berns will not engage in any
business involving video store departments which are inside either mass market
or grocery retailers anywhere in the United States or other geographical area
where the Company conducts its business or sells or distributes its products or
services.

         Effective April 22, 1997, the Company entered into an employment
agreement with Thomas Berkompas, pursuant to which Mr. Berkompas serves as Chief
Financial Officer of the Company until April 30, 1999 or until otherwise
terminated pursuant to the terms thereof (the "Berkompas Agreement"). During the
term of the Berkompas Agreement, Mr. Berkompas is to receive a base annual
salary of $103,000 (the "Berkompas Base Salary"). The Berkompas Base Salary
adjusts automatically each May 1 to give effect to changes in the Consumer Price
Index. The Berkompas Agreement further provides that Mr. Berkompas will
participate in any bonus plan adopted by the Company, including any cash bonus
pools established by the Company from time to time for its corporate executives.
The Berkompas Agreement also requires the Company to pay Mr. Berkompas a
severance payment of an amount equal to the Berkompas Base Salary accrued
through and including the date of termination if Mr. Berkompas's employment is
terminated due to his death or disability. If, within two years after a Change
of Control (as defined in the Berkompas Agreement), termination is by the
Company without cause or by Mr. Berkompas for Good Reason (as defined in the
Berkompas Agreement), the Company shall pay Mr. Berkompas a lump sum payment in
an amount equal to the greater of (i) the Berkompas Base Salary through April
30, 1999 or (ii) six months' of the annual Berkompas Base Salary. If termination
is by the Company other than for cause or Mr. Berkompas's death or disability,
the Company will pay him severance payments in an amount equal to six months of
the annual Berkompas Base Salary, subject to the demonstration by Mr. Berkompas
that he is using his best efforts to find other employment. Pursuant to the
Berkompas Agreement, Mr. Berkompas and the Company entered into a
non-competition agreement pursuant to which during the period of his employment
with the Company, and for 24 months thereafter, Mr. Berkompas will not engage in
any business involving video store departments which are inside either mass
market or grocery retailers anywhere in the United States or other geographical
area where the Company conducts its business or sells or distributes its
products or services.

         Effective April 22, 1996 and amended as of November 4, 1996, the
Company entered into an employment agreement (the "Heyer Agreement") with Harold
Heyer, pursuant to which Mr. Heyer is to serve as Vice President of Operations
of the Company until August 30, 1999 or until otherwise terminated pursuant to
the terms thereof. During the term of the Heyer Agreement, Mr. Heyer receives an
annual base salary of $90,000 (the "Heyer Base Salary"). If Mr. Heyer's
employment is terminated due to Mr. Heyer's death or disability, the Company
will pay Mr. Heyer a lump sum severance payment in an amount equal to the Heyer
Base Salary


                                       13
<PAGE>

accrued through and including the date of termination. If, within two years
after a Change of Control (as defined in the Heyer Agreement), termination is by
the Company without cause or by Mr. Heyer for Good Reason (as defined in the
Heyer Agreement), the Company shall pay Mr. Heyer a lump sum payment in an
amount equal to the lesser of (i) the Heyer Base Salary through August 30, 1999,
or (ii) six-months of the Heyer Base Salary. If termination is by the Company
other than for cause or Mr. Heyer's death or disability, the Company will pay
him severance payments in an amount equal to six months of the annual Heyer Base
Salary, subject to the demonstration by Mr. Heyer that he is using his best
efforts to find other employment, and further subject to reduction by the amount
of remuneration in any form received from such other employment during such
six-month period. The Heyer Agreement also contains Mr. Heyer's agreement not to
disclose confidential information and a non-competition agreement, pursuant to
which, during the period of his employment with the Company and for 24 months
thereafter, Mr. Heyer will not engage in any business (i) involving the revenue
sharing method of wholesale distribution of home videocassettes, (ii) which is
substantially similar to leased store video operations, or (iii) which competes
with any business then engaged in by the Company or its affiliates any where in
the United States or other geographical area where the Company conducts its
business or sells or distributes its products or services.

ITEM 2 - PROPERTIES

Store Leases

         The Company leases space for each of its BlowOut Video stores pursuant
to various master leases. The following summaries set forth the material terms
of such master leases.

         Wal-Mart. In January 1993, the Company entered into a non-exclusive
master lease with Wal-Mart, which was amended on May 15, 1995 and May 14, 1996
(as amended, the "Wal-Mart Master Lease"), under which the Company, as it opens
each store, executes a standard lease with Wal-Mart. Each such lease is for a
five-year period, with one option to renew for an additional five-year period.
Rent is calculated as a percentage of revenues generated by the store. The
Company is also liable for its pro rata share of common area maintenance
expenses, insurance and real estate taxes. If the volume of gross sales from a
given store that has been opened at least 12 months is less than a predetermined
amount in any consecutive 12-month period, either the Company or Wal-Mart, on 60
days' written notice to the other, may terminate the standard lease with respect
to the store. The Company exercised its option to close 15 stores in Wal-Mart in
fiscal 1997 and eight stores in Wal-Mart in the first quarter of 1998 for
failure to achieve minimum sales volume. No stores have been closed at the
election of Wal-Mart.

         Kmart. Effective September 21, 1994, the Company entered into a
non-exclusive master sublease agreement with Kmart, which was amended on April
1, 1995, January 21, 1996 and November 7, 1996 (as amended, the "Kmart Master
Lease"), under which the Company, as it


                                       14
<PAGE>

opens each store, executes a rider for a specified term with Kmart. The Kmart
Master Lease has a term of five years, with one option to renew for an
additional five-year term. The Company pays an annual minimum rent of $3.75 per
square foot, and additional rent calculated as a percentage of gross revenues.
If the volume of annual gross revenues from a given store that has been open at
least 12 months is less than certain predetermined amounts, either the Company
or K-Mart may, on written notice to the other within 180 days following the
anniversary date of that store's rider, terminate the lease with respect to that
store. The Company opened one new store under the Kmart Master Lease in 1997.
The Company exercised its option to close twelve stores in Kmart in fiscal 1997
and six stores in Kmart in the first quarter of 1998 for failure to achieve
minimum sales volume, and gave Kmart notice of its intention to close two
additional under-performing stores in or before June 1998. No stores have been
closed at the election of Kmart. The Company has not yet determined whether or
not it will exercise its option to extend the Kmart Master Lease before it
expires in September 1999.

         Ralphs. The Company entered into a master license agreement with Ralphs
("Ralphs Master License") effective May 1, 1995, pursuant to which the Company
has the right to operate retail video sales and rental departments in Ralphs and
Food 4 Less locations to be agreed upon by both parties. The Ralphs Master
License has a term of four years with respect to each location commencing on the
date such location opens for business. The Agreement may be renewed for two
successive three-year periods for a given location provided that such location
realizes a predetermined level of revenues. The Company pays a license fee to
Ralphs calculated as a percentage of gross revenues received in a given
four-week period. The Company has agreed not to operate a video store in any
retail outlet (including Wal-Mart SuperCenters and Super Kmart Centers) within a
three-mile radius of a Ralphs store in which the Company is operating a video
department. The Company has a right of first refusal to operate a video store in
all Ralphs locations. Ralphs has the right, subject to the Company's right of
first refusal, to lease space to another video rental operation having a
separate entrance. Upon 60 days' written notice and payment to the Company of a
predetermined termination fee, Ralphs may terminate the Ralphs Master License
with respect to any location. Ralphs may also terminate the Ralphs Master
License for any location if the Company fails to meet minimum revenue levels for
such location. As of December 31, 1997, to the best of its knowledge, the
Company has met such minimum revenue levels for all locations. The Company may
terminate the Ralphs Master License for any location with 60 days' written
notice. There has been no such termination of the Ralphs Master License for any
location to date.

         Fred Meyer. In January 1998, the Company entered into separate lease
agreements for retail space in selected Fred Meyer retail centers in Oregon and
Washington. Each such lease is for an initial five-year term, with one option to
renew for an additional five-year period. Rent is calculated as a percentage of
revenues generated by the store. The Company is also responsible for its pro
rata share of common area maintenance expenses, insurance and real estate taxes.
The leases contain an option for either party to terminate the lease if Gross
Sales (as defined in the


                                       15
<PAGE>

lease agreement) during the second full lease year are less than a predetermined
amount. In the first quarter of 1998, the Company opened three stores in Fred
Meyer retail centers.

Executive Offices and Warehouse Space

         The Company subleases from Rentrak office space in Rentrak's
headquarters under a sublease having a 10-year term beginning December 1996 and
providing for rent of approximately $7,100 per month for the first five years,
and approximately $7,650 per month for the last five years. The Company's Board
of Directors believes these rental terms to be competitive with those in the
Portland, Oregon rental market.

         The Company currently subleases approximately 12,800 square feet of
warehouse space at Rentrak's Wilmington, Ohio warehouse for approximately $4,000
per month.

ITEM 3 - LEGAL PROCEEDINGS

         The Company is not a party to any material legal proceedings.

ITEM 4 - SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS

         No matters were submitted to a vote of security holders during the
quarter ended December 31, 1997.

                                     PART II

ITEM 5 - MARKET FOR REGISTRANTS' COMMON EQUITY AND RELATED STOCKHOLDERS
         MATTERS

Trading and Shareholder Information

         The Company's common stock has traded on the Nasdaq Stock Market under
the symbol "BLWT" since November 19, 1996. The high and low bids, as quoted on
the Nasdaq Stock Market, for the period from November 19, 1996 through December
31, 1997 were as shown in the table below. There can be no assurance that the
Company will continue to meet the listing requirements of the Nasdaq Stock
Market. Such quotations represent inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
The bid price per share quoted on the Nasdaq Stock Market on March 13, 1998 was
$1.34.

                                        16

<PAGE>

<TABLE>
<CAPTION>
                                                                                    HIGH               LOW
                                                                                    ----               ---
<S>                                                                               <C>               <C>
November 19, 1996 through December 31, 1996                                       $5.000            $1.875

Fiscal 1997:
-----------
1ST QUARTER - January 1, 1997 through March 31, 1997                              $3.000            $1.250
2ND QUARTER - April 1, 1997 through June 30, 1997                                 $2.125            $1.250
3rd QUARTER - July 1, 1997 through September 30, 1997                             $1.500            $1.000
4th QUARTER - October 1, 1997 through December 31, 1997                           $1.625            $0.500

</TABLE>

         At March 13, 1998, there were 2,433,330 shares of the Company's Common
Stock issued and outstanding which were held by 452 holders of record.

Dividends

         The Company's dividend policy will be established by the Company's
Board of Directors from time to time based on the results of operations and
financial condition of the Company, such other business considerations as the
Company's Board of Directors deems relevant, and the restrictions and
limitations imposed under financing documents binding upon the Company,
including a restriction on dividends contained in the CBC line of credit. See
"Management's Discussion and Analysis of Financial Conditions and Results of
Operations - Liquidity and Capital Resources." The Company currently intends to
retain earnings, if any, for use in the operation and expansion of its business
and, therefore, does not anticipate paying any dividends in the foreseeable
future.

Sales of Unregistered Securities

         On August 30, 1996, each of Mr. Bill LeVine and Culture Convenience
Club, Ltd. ("CCC") converted individually held $1.0 million principal amount
notes (the "Notes") made by the Company into 121,789 shares (or $8.21 per share)
of Common Stock. Mr. LeVine and Mr. Muneaki Masuda, Chairman and principal
shareholder of CCC, are directors of the Company and of Rentrak. The price per
share was arrived at through the Company's negotiations in March 1996 with Mr.
LeVine and CCC, and agreed upon by those parties in March and April 1996. The
converted Notes were originally issued in March and April 1996 to evidence sums
advanced to the Company by Mr. LeVine and CCC, accrued interest at the rate of
9% per annum, were convertible into shares of Common Stock, and had a maturity
date of August 31, 1997.

         On August 30, 1996, CCC purchased from the Company for $2.98 million a
total of 362,931 shares of Common Stock at a purchase price of approximately
$8.21 per share.

         None of the shares of Common Stock issued to Mr. LeVine and CCC, as
described in the preceding paragraphs, are registered and such shares are
subject to usual and customary restrictions on transferability. However, Mr.
LeVine and CCC have been granted rights to demand registration of the shares of
Common Stock owned by them.

                                       17
<PAGE>

                        ITEM 6 - SELECTED FINANCIAL DATA

         The financial and operating data set forth herein should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and the Financial Statements, including the Notes
thereto, and other financial data included elsewhere herein. On October 9, 1996,
the Board of Directors of the Company authorized a 1.01491-for-1 stock split of
the Company's Common Stock, effected as a stock dividend. Share and per share
data set forth on this Table give effect to such split.

<TABLE>
<CAPTION>

                                           As of and for the Year Ended December 31 (1)
                                    -------------------------------------------------------
                                      1997         1996        1995      1994       1993
                                    --------    --------     -------    -------    ------
<S>                                 <C>         <C>          <C>        <C>        <C>
STATEMENT OF OPERATIONS DATA
Revenues:
   Rental .......................   $ 23,807    $ 23,261     $ 7,689    $ 1,115    $  467
   Product Sales ................      7,855       7,088       3,030        178        69
                                    --------    --------     -------    -------    ------
     Total Revenue ..............     31,662      30,349      10,719      1,293       536
     Cost of Sales and Rental ...     12,251      14,291       5,220        563       281
                                    --------    --------     -------    -------    ------
   Gross Margin .................     19,411      16,058       5,499        730       255
   Operating Expenses ...........     17,638      17,618       6,275        852       632
   Selling and Administrative ...      3,280       3,637       3,278        309       329
   Other (Income) Expense .......        (55)      1,268         402        251       105
   Interest Expense, net ........      1,008         790         529        162        51
   Income Taxes .................         20        --          --         --        --
     Net Loss ...................   $ (2,480)   $ (7,255)    $(4,985)   $  (844)   $ (862)
   Net Loss Per Common share:
     Basic ......................   $  (1.02)   $  (3.60)    $ (3.41)   $ (0.93)   $(0.95)
     Diluted ....................   $  (1.02)   $  (3.60)    $ (3.41)   $ (0.93)   $(0.95)
   Weighted Average Shares
      Outstanding ...............      2,433       2,014       1,464        913       913
BALANCE SHEET DATA ..............                                                  Unaudited
                                                                                   ---------
   Working Capital (Deficit) (2)    $ (6,608)   $ (4,643)    $  (823)   $  (415)   $   97
   Total Assets .................     21,826      20,573      18,536        893     1,201
   Long-term Debt ...............      4,878       4,286       3,441      1,375     1,120
   Stockholders' Equity (Deficit)      5,340       7,820      10,095     (1,038)     (194)

</TABLE>


(1)      The selected data as of and for the years ended December 31, 1993,
         1994, 1995, 1996 and 1997 are derived from the audited financial
         statements of the Company. Results for such years are not comparable
         because of the Company's acquisitions and store expansions that
         occurred in 1995. See "Management's Discussion and Analysis of
         Financial Condition and Results of Operation" and "History of the
         Company."

(2)      See Liquidity and Capital Resources below for a discussion of the
         working capital deficit.

                                       18
<PAGE>

Quarterly Results of Operations (Unaudited)

The unaudited quarterly results for the years ended December 31, 1997
and 1996 are set forth in the following table:

<TABLE>
<CAPTION>

                                                       1997 by Quarter
                        ---------------------------------------------------------------------------
                            First          Second          Third           Fourth          Total
                        ------------    ------------    -----------      ----------     -----------
<S>                      <C>             <C>             <C>             <C>            <C>
Revenues                 $7,598,656      $7,663,285      $7,760,092      $8,640,074     $31,662,107
Loss from operations       (647,072)       (236,435)       (576,747)        (47,648)     (1,507,902)
EBITDA(1)                  (140,618)        194,653        (300,827)        374,019         127,227
Net loss                   (849,284)       (465,647)       (837,109)       (327,974)     (2,480,014)
Earnings Per Share:

 Basic                       $(0.35)         $(0.19)         $(0.34)         $(0.13)         $(1.02)
 Diluted                     $(0.35)         $(0.19)         $(0.34)         $(0.13)         $(1.02)

</TABLE>

<TABLE>
<CAPTION>

                                                       1996 by Quarter
                        ---------------------------------------------------------------------------
                           First           Second          Third           Fourth          Total
                        ------------    ------------    -----------      ----------     -----------
<S>                      <C>             <C>             <C>             <C>            <C>
Revenues                 $6,881,592      $7,269,289      $7,934,260      $8,264,043     $30,349,184
Loss from operations     (1,515,326)       (920,664)       (666,245)     (2,094,826)     (5,197,061)
EBITDA(1)                (1,100,515)       (483,314)     (1,161,927)     (1,830,086)     (4,575,842)
Net loss                 (1,593,549)     (1,012,947)     (1,739,351)     (2,908,957)     (7,254,804)
Earnings Per Share:
 Basic                       $(0.87)         $(0.55)         $(0.86)         $(1.32)         $(3.60)
 Diluted                     $(0.87)         $(0.55)         $(0.86)         $(1.32)         $(3.60)

</TABLE>
------------

(1) Earnings before interest, taxes, fixed asset depreciation and goodwill
amortization. Such data is not a measure of financial performance under
generally accepted accounting principles and should not be considered as an
alternative to net income or as an indicator of the Company's operating
performance or as an alternate to cash flows as a measure of liquidity.

ITEM 7 - MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
         RESULTS OF OPERATIONS

         The following discussion should be read in conjunction with the
Company's Financial Statements and the Notes thereto. The financial information
provided below has been rounded in order to simplify its presentation. However,
the ratios and percentages provided below are calculated using the detailed
financial information contained in the Financial Statements and the Notes
thereto.

Overview

         General. The Company operates retail "store within a store" video
outlets located in large discount and grocery chain stores throughout the United
States. The Company was formed in 1992, and opened its first store within a
store in January 1993. At year end 1993 and 1994,


                                       19
<PAGE>

respectively, the Company operated seven stores. During these periods, all of
the Company's stores were located in grocery stores.

         During 1995, the Company experienced accelerated growth in retail
stores and revenue, primarily through (i) the Company's acquisition on May 26,
1995, of a controlling interest in E-1, a company whose primary business was the
operation of retail video outlets in Wal-Mart SuperCenters, (ii) the Company's
acquisition on August 31, 1995 of the SCE Business, and (iii) new store openings
in Wal-Mart SuperCenters and, to a lesser extent, in Super Kmart Centers and
Ralphs. Because of acquisitions and store openings, comparisons among the years
ended December 31, 1994, 1995 and 1996 are not meaningful. At year end 1997, the
Company's store within a store retail video operations consisted of a total of
184 stores including 148 stores located in Wal-Mart and Wal-Mart SuperCenters,
24 stores located in Super Kmart Centers, six stores located in Ralphs grocery
stores, and six stores located in Food 4 Less.

         The Company's revenue consists of rental revenue and product sales.
Rental revenue includes rental of pre-recorded videocassettes, and video games.
Product sales are derived from sale of new prerecorded videocassettes,
previously viewed excess rental inventory, and video games.

         The following table sets forth the number of stores open for at least
12 months and average revenue for such stores for each of the fiscal years ended
December 31, 1995 through 1997.

<TABLE>
<CAPTION>
                                                                  Fiscal Year Ended December 31,
                                                            -----------------------------------------
                                                              1997             1996            1995
                                                            --------         --------        --------
           <S>                                              <C>              <C>             <C>
           No. of stores open 12 months                          162              130               3
           Average rental revenue                           $127,056         $129,440        $206,387
           Average product sales                             $41,484          $39,442         $61,648
           Average total revenue                            $168,540         $168,882        $268,035
</TABLE>

         Average total revenue was level for the year ended December 31, 1997
compared to the year ended December 31, 1996 as gains in average per store
revenues realized from the closure of underperforming stores were offset by
weakness in the video retail industry as a whole throughout the first nine
months of 1997.

         The Company acquires videocassettes, which includes video games, using
two types of supplier arrangements: purchase and revenue-sharing under the PPT
System. Videocassette rental inventory purchased for base stock is stated at
cost and amortized, beginning on the date the videocassettes are placed into
service, to a salvage value of $6 per videocassette over an estimated useful
life of 36 months. All copies of new release videocassettes are amortized on an
accelerated basis during their first four months to an average net book value of
$22 and then on a straight-line basis to their salvage value of $6 over the next
32 months.

                                       20
<PAGE>

         Since 1993, the Company has obtained a significant amount of its new
release titles through Rentrak under the PPT System. Under this system, Rentrak
provides the Company with videocassettes released by certain studios. The
Company pays and capitalizes a handling fee of $8 to $10 for each videocassette.
During the revenue-sharing period, which does not exceed two years, the studio
owns the videocassette, and the rental revenue is shared by the studio, Rentrak
and the Company on a predetermined basis. The Company may also sell excess
copies of a video title and share the sale proceeds with Rentrak and the studio
on a predetermined basis. At the end of the revenue-sharing period for a title,
the Company may purchase remaining copies of that title in the Company's
inventory, generally for less than $5 per videocassette. The handling fee and
end-of-term purchase fee are amortized to $6 during the first nine months.
Revenue-sharing payments are expensed when incurred.

         As a result of the acquisitions of E-1 and the SCE Business, the
Company recorded approximately $5.1 million in intangibles which are being
amortized over 10 to 15 years. The amortization expense is expected to be
approximately $.5 million per year.

         Results of Operations. The following table sets forth for the period
indicated (i) statement of operations data expressed as a percentage of total
revenue, (ii) the percentage change from the prior period in this data and (iii)
the number of stores open at the end of each period.

<TABLE>
<CAPTION>
                                                                                       Percentage       Percentage
                                                                                        Change in        Change in
                                                                                      Dollar Amount    Dollar Amount
                                            Year Ended    Year Ended    Year Ended    from 1996 to      from 1995 to
                                              12/31/97     12/31/96       12/31/95        1997              1996
                                            ----------    ----------    ----------    -------------    -------------
<S>                                          <C>          <C>           <C>           <C>              <C>
Rental revenue                                 75.2%         76.6%         71.7%            2.3%            202.5%
Product sales                                  24.8          23.4          28.3            10.8             134.0
                                              -----         -----         -----           -----             -----
         Total revenue                        100.0         100.0         100.0             4.3             183.1
Cost of product sales and rental revenue       38.7          47.1          48.7           (14.3)            173.8
Operating expenses                             55.7          58.0          58.6             0.1             180.8
Selling, general and administrative            10.4          12.0          30.6            (9.8)             11.0
                                              -----          ----          ----          ------             -----
Loss from operations                           (4.8)%       (17.1)%       (37.8)%         (71.0)%           (28.2)%
                                              =====        ======        ======          ======            ======

Number of stores open at end of period          184           200           157             --                --

</TABLE>

Year Ended December 31, 1997 Compared to Year Ended December 31, 1996

         The audited consolidated financial statements of the Company included
elsewhere in this Form 10-K include the results of operations of the Company for
each of the three years ended December 31, 1997. The Company opened its first
"store within a store" outlet in January 1993. For the year ended December 31,
1996, the operations were included for the entire year plus the opening of 70
new stores and the closing of 27 under-performing stores.

                                       21
<PAGE>

         Revenue. Total Revenue for fiscal year 1997 increased $1.3 million, or
4.3%, to $31.7 million from $30.3 million for fiscal 1996. The increase resulted
from an increase in product sales and number of video rentals per store as the
184 stores in operation at the end of 1997 was 16 less than the 200 in operation
at the end of 1996. During fiscal 1997, the Company opened 11 stores and closed
27 under-performing locations. As a percentage of revenues, product sales
increased from 23.4% in 1996 to 24.8% in 1997 primarily as a result of a
significant increase in the sale of video games in 1997 compared to 1996. It is
expected that the mix of product rental to product sales will remain relatively
constant in fiscal 1998.

         Cost of Product Sales and Rental Revenue. Cost of product sales and
rental revenue decreased from 47.1% of revenue for fiscal 1996 to 38.7% of
revenue for fiscal 1997, while cost measured in dollars decreased from $14.3
million to $12.3 million. The decrease resulted primarily from a decrease in
product costs and the full realization in fiscal 1997 of the efficiencies in
buying created by the combination of the buying departments of the Company, E-1
and SCE in late fiscal 1996.

         Operating Expense. As a percentage of revenue, operating expenses
decreased from 58.0% in fiscal 1996 to 55.7% in fiscal 1997 and were level in
absolute dollar terms at $17.6 million. The reduction in percentage terms was
the result of the achievement of greater efficiencies in operation on a per
store basis in 1997. The primary components of operating expenses include
employee compensation, occupancy, fixed asset depreciation, supplies, shipping
and communications.

         Selling, General and Administrative Expenses. Despite significant costs
associated with being a public company incurred in fiscal 1997 but not in fiscal
1996, selling, general and administrative expenses decreased from $3.6 million,
or 12.0% of revenue, for fiscal 1996, to $3.3 million, or 10.4% of revenue, for
fiscal 1997. The decrease was primarily due to efficiencies gained in the
consolidation of functions of the separate corporate staffs of the Company, E-1,
and SCE in late fiscal 1996.

         Nonoperating Expenses, Net. Nonoperating expenses, net decreased from
$2.1 million, or 6.8% of revenue, for fiscal 1996, to $1.0 million, or 3.1% of
revenue, for fiscal 1997. The improvement reflects the $1.0 million of expenses
in fiscal 1996 related to the spin-off from Rentrak.

Year Ended December 31, 1996 Compared to Year Ended December 31, 1995

         For the year ended December 31, 1995, the Company's results of
operations included (i) the operations of the Company's retail video outlets in
grocery stores, (ii) the operations of E-1 for the seven-month period ended
December 31, 1995 and (iii) the SCE Business for the four-month period ended
December 31, 1995. Because of acquisitions and store openings, comparisons among
the years ended December 31, 1995 and 1996 are not meaningful.

                                       22
<PAGE>

         Revenue. Revenue for fiscal 1996 increased $19.6 million, or 183.3%, to
$30.3 million from $10.7 million for fiscal 1995. The increase resulted from an
increase in the number of stores in operation, from 157 at December 31, 1995 to
200 at December 31, 1996, as well as a full year of operations for stores
acquired or opened in 1995. During fiscal 1996, the Company opened 70 stores and
closed 27 under-performing locations. As a percentage of revenues, product sales
decreased from 28.3% in 1995 to 23.4% in 1996.

         Cost of Product Sales and Rental Revenue ("Cost of Sales"). Cost of
sales decreased from 48.7% of revenue for fiscal 1995 to 47.1% of revenue for
fiscal 1996, a 1.6% improvement, while cost measured in dollars increased from
$5.2 million to $14.3 million. The variation resulted primarily from the
significant increase in the number of stores in operation as well as a full year
of operations for stores acquired or opened in 1995.

         Operating Expense. As a percentage of revenue, operating expenses
remained relatively level in fiscal 1996 in comparison to fiscal 1995. Operating
expenses increased from $6.3 million, or 58.6% of revenue, for fiscal 1995, to
$17.6 million, or 58.0% of revenue, for fiscal 1996. The primary components of
operating expenses include employee compensation, occupancy, fixed asset
depreciation, supplies, shipping and communications.

         Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased from $3.3 million, or 30.6% of revenue, for
fiscal year 1995, to $3.6 million, or 12.0% of revenue, for fiscal year 1996.
The decrease in selling, general and administrative expenses as a percentage of
revenue was primarily due to the consolidation of functions of the separate
corporate staffs of the Company, E-1, and SCE. The corporate functions were
consolidated in Portland, Oregon by March 31, 1996 with all duplicate functions
eliminated by June 30, 1996. The decrease as a percentage of revenue is also
attributable to revenue growing at a much faster pace than overhead.

          Nonoperating Expenses, net. Nonoperating expenses, net increased from
$0.9 million, or 8.7% of revenue, for fiscal year 1995, to $2.1 million, or 6.8%
of revenue, for fiscal year 1996. The increase is primarily attributable to
incurring significant nonrecurring costs related to the spin-off of the Company
from Rentrak and an increase in interest expense resulting from increased debt
incurred by the Company to finance its growth and operations.

Liquidity and Capital Resources

         The Company's principal capital needs are for the opening of new
stores. To date, the Company has funded its operations primarily through cash
from operations, advances from Rentrak, as more fully described below,
borrowings from and sales of stock to Directors and their affiliates, trade
credit from suppliers and financing arrangements with asset based lenders.

                                       23
<PAGE>

         In March and April 1996, the Company sold $1.0 million in convertible
subordinated notes to each of Mr. Bill LeVine and Culture Convenience Club, Ltd.
("CCC"), a Japanese corporation of which Mr. Muneaki Masuda is Chairman (the
"Notes"). Messrs. LeVine and Masuda are Directors of the Company. On August 30,
1996, each of Mr. LeVine and CCC converted their Notes into 121,789 shares of
BlowOut Common Stock. Also on August 30, 1996, CCC purchased from the Company
for $2.98 million a total of 362,931 shares of BlowOut Common Stock at a
purchase price of approximately $8.21 per share.

         In August 1996, Phoenix Leasing, Inc. ("Phoenix") agreed to provide
asset based financing in an aggregate principal amount of $2.0 million. Amounts
outstanding under the Phoenix facility bear interest at a fixed rate per annum
equal to 14.525% and are payable in monthly principal and interest installments
over a five-year term. The Phoenix facility may be used to finance the
construction and opening of (including acquisition of inventory) new Company
stores in Wal-Mart Stores and Wal-Mart SuperCenters. The Phoenix facility is
secured by (i) a continuing guaranty of Rentrak (which Phoenix, in its sole
discretion, may release once at least 36 payments of amounts outstanding under
the Phoenix Facility have been made or the Company's financial condition is, in
Phoenix's sole opinion, sufficient to justify such release), and (ii) the
Company's grant of a first continuing security interest in all assets at each
location to be financed with funds from the Phoenix facility. Under the Phoenix
facility, the Company cannot borrow more than $100,000 per store location, with
a minimum draw of $30,000 per store location. As of February 28, 1998, the
Company had drawn down the entire $2.0 million facility and had $1,620,680
outstanding under the Phoenix facility with maturity dates extending to
September 2002.

         On September 12, 1996, Coast Business Credit ("CBC") entered into an
agreement with the Company to provide a revolving line of credit ("CBC Line of
Credit") in the maximum principal amount at one time outstanding of $5.0
million. Under the CBC Line of Credit, the Company may draw only up to 80% of
the Orderly Liquidation Value (as defined by the CBC Line of Credit) of eligible
new and used videocassette inventory. As of February 28, 1998, 80% of the
Orderly Liquidation Value of the Company's inventory was approximately
$3,812,434. Advances under the CBC Line of Credit bear interest at a floating
rate per annum equal to the prime rate plus 2.75%. The term of the CBC Line of
Credit is three years. Rentrak has agreed, under certain circumstances in the
event of a default under the CBC Line of Credit, to repurchase BlowOut's
videocassette inventory at specified amounts. As of February 28, 1998, the
Company had $3,160,157 outstanding under the CBC Line of Credit.

         On July 22, 1996, the Company entered into an agreement with Star Video
to provide the Company with videocassettes for rental and sale and with video
games for sale ("Star Video Agreement"). Star Video paid off the balance of a
promissory note in the amount of $240,975 made by the Company to its previous
supplier. As a result, the Company executed a new promissory note to Star Video,
pursuant to which the Company became obligated to pay Star Video $120,487 on
each of May 27, 1997 and 1998. Under the Star Video Agreement, Star


                                       24
<PAGE>

Video became the Company's exclusive supplier of new videocassettes for rental
and sale not purchased from Rentrak until the later of (i) July 21, 1997, or
(ii) repayment of such promissory note. This promissory note is secured by a
guaranty of Rentrak. At February 28, 1998, a balance of $120,487 remained
outstanding under this promissory note.

         During the first quarter of 1997 the Company entered into an agreement
with Rentrak whereby payables resulting from the Company's use of the Rentrak
PPT system during the first six months of fiscal 1997 were deferred until
January 1998, at which time such amounts totaling $2.1 million became due and
payable in twelve, equal, interest-free, monthly installments. The Company also
has a note payable due Rentrak in the amount of $3.01 million arising from
transactions which occurred prior to the spin-off from Rentrak. This note
together with accrued interest at 9% per annum was due and payable on March 31,
1999.

         On February 22, 1998, the Company, CCC and Rentrak signed an agreement
(the "Tri-Party Agreement") under which CCC agreed to provide the Company with
$1.5 million to fund projected 1998 expansion plans and additional working
capital. The new financing accrues interest at 7% per annum and the principal
plus accrued interest is payable over a 60 month term beginning in January 2000.
Up to $484,167 of the loan may be converted into shares of BlowOut common stock
at $1.00 per share, the bid price on the Nasdaq Stock Market at the time of the
signing of the Tri-Party Agreement. Under the terms of the Tri-Party Agreement,
Rentrak agreed to defer principal and interest payments on their notes until
December 31, 2004 during which deferment period no interest accrues. Rentrak
also agreed to the forgiveness of all or a portion of the Rentrak notes as the
Company lowers Rentrak's contingent obligations under their guaranties of the
Phoenix and CBC lines of credit discussed above. The Company has agreed not to
draw down in excess of $4.0 million under the CBC line, which limitation, when
combined with the reduction in Rentrak's contingent liability under the Phoenix
line of credit due to principal payments made to date by the Company, under the
terms of the Tri-Party Agreement triggered the immediate forgiveness of
$1,044,487 in Rentrak debt.

         During fiscal 1997, the Company opened 11 stores, primarily in Wal-Mart
SuperCenters, and remodeled two older stores which resulted in significant
increases in the revenues of the remodeled stores. The Company is evaluating
stores that might benefit from a remodel and expects to perform several remodels
in fiscal 1998. The Company does not know the number of new Wal-Mart
SuperCenters, or Ralphs grocery store locations which will be made available to
the Company for the opening of video stores in fiscal 1998. The Company is aware
of one other retailer, Blockbuster Video, which operates "store within a store"
video outlets in Wal-Mart stores. The Company expects to open at least four
outlets in Fred Meyer stores in fiscal 1998. The Company currently does not
believe that it will be opening a significant number of stores in Ralphs in
fiscal 1998.

         During fiscal 1997, the Company closed 27 stores that did not meet
certain performance levels (consisting of 15 stores in Wal-Mart and 12 stores in
Kmart). Since December 31, 1997,


                                       25
<PAGE>

the Company has closed an additional eight Wal-Mart stores and six Kmart stores
that did not meet performance levels. In addition, the Company has notified
Kmart of its intention to close six additional underperforming stores by March
1998.

         The Company had cash and cash equivalents of $1.7 million at December
31, 1997 and $.9 million at February 28, 1998. The Company expects to meet its
short-term liquidity requirements through net cash provided by operations, cash
on hand, the $1.5 million CCC financing described above, and advances under the
CBC Line of Credit. Management believes that these sources of cash will be
sufficient to meet its operating needs through March 1999. There can be no
assurance that funds will be available in sufficient amounts to finance the
acquisition or opening of enough video outlets to sustain the Company's recent
rates of growth or that funds will be available to satisfy the Company's
liquidity needs after March 1999.

         At December 31, 1997, the Company had a working capital deficit of $6.6
million. Videocassette rental inventories are treated as noncurrent assets under
generally accepted accounting principles because they are not assets which are
reasonably expected to be completely realized in cash or sold in the normal
business cycle. Although the rental of this inventory generates a substantial
portion of the Company's revenue, the classification of these assets as
noncurrent excludes them from the computation of working capital. The
acquisition cost of videocassette rental inventories, however, is reported as a
current liability until paid and, accordingly, included in the computation of
working capital. Consequently, the Company believes working capital is not as
significant a measure of financial condition for companies in the video retail
industry as it is for companies in other industries because of the accounting
treatment of videocassette rental inventory as a noncurrent asset. The Company
expects to operate with a working capital deficit as it expands its store base.

Impact of the Year 2000 Issue

         The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions or
engage in similar normal business activities.

         Based on a recent assessment, the Company has determined that it will
be required to modify or replace portions of its software so that its computer
systems will properly utilize dates beyond December 31, 1999. The Company
presently believes that with modifications to existing software and conversions
to new versions of software that are Year 2000 compliant, the potential problems
arising from the Year 2000 Issue can be mitigated. However, if such
modifications and conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of the Company.

                                       26
<PAGE>

         The Company has initiated formal communications with all of its
significant suppliers and software vendors to determine the extent to which the
Company is vulnerable to those third parties' failure to remediate the Year 2000
Issue. The Company's total Year 2000 project cost and estimates to complete
include the estimated costs and time associated with the impact of a third
party's Year 2000 Issue, and are based on presently available information.
However, there can be no guarantee that the systems of other companies on which
the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company. The
Company has determined it has no exposure to contingencies related to the Year
2000 Issue for the products it has sold.

         The Company will utilize both internal and external resources to
reprogram or replace and test the software for Year 2000 modifications. The
Company plans to complete the Year 2000 project within one year, or not later
than December 31, 1998. The total cost of the Year 2000 project is estimated at
approximately $50,000 and will be funded through operating cash flows. To date,
the Company has incurred no significant costs related to the assessment of, and
preliminary efforts in connection with, its Year 2000 project and the
development of a remediation plan.

         The costs of the project and the date on which the Company plans to
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third party modification plans and
other factors. However, there can be no guarantee that these estimates will be
achieved and actual results could differ materially from those plans. Specific
factors that might cause such material differences include, but are not limited
to, the availability and cost of personnel trained in this area, the ability to
locate and correct all computer codes, and similar uncertainties.

Financial Instruments and Market Risk

         A financial instrument is cash or a contract that imposes or conveys, a
contractual obligation or right, to deliver, or receive, cash or another
financial instrument. The Company's financial instruments are its CBC line of
credit and its notes payable to Phoenix and Rentrak. The fair value of all these
financial instruments approximated their carrying values at December 31, 1997
and 1996 given such instruments include a variable rate interest factor or a
fixed interest factor at a competitive rate.



                                       27
<PAGE>


Impact of New Accounting Standards

         In June 1997, FASB issued Statement of Financial Accounting Standards
No. 130, "Reporting Comprehensive Income" and Statement of Financial Accounting
Standards No. 131, "Disclosures About Segments of and Enterprise and Related
Information," which are effective for fiscal years beginning after December 15,
1997. The Company believes the implementation of these statements will not have
a material effect on its results of operations or financial statement
disclosures.

ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

         The Company's consolidated financial statements and report of
independent auditors are set forth under Item 14 hereto.

ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

         On December 18, 1996, the Company dismissed its independent
accountants, Arthur Andersen LLP ("Arthur Andersen") upon the recommendation of
the Company's Audit Committee. The decision to change accountants was made to
ensure independence, both in appearance and in fact, from Rentrak, the Company's
former parent, whose independent accountants are Arthur Andersen.

         Arthur Andersen's reports on the financial statements of the Company
for Rentrak for the last two years did not contain adverse opinions or a
disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope, or accounting principles. There were no disagreements with Arthur
Andersen on any matters of accounting principles or practices, financial
statement disclosure or auditing scope or procedure during Rentrak's and the
Company's two most recent fiscal years and any subsequent interim period
preceding the dismissal.

         The Audit Committee of the Board of Directors recommended, the Board
approved, and the stockholders ratified the appointment of Price Waterhouse LLP
as the Company's new accountants and independent auditors effective December 18,
1996.



                                       28
<PAGE>


                                    PART III

ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

         Information with respect to directors of the Company is incorporated
herein by reference to the information under the captions entitled "Board of
Directors--Members and Nominees for Election" and "Section 16(a) Beneficial
Ownership Reporting Compliance" in the Company's Proxy Statement for the 1998
Annual Meeting of Stockholders.

         Information with respect to executive officers of the Company is
included in Item 1, Part I hereof under the caption "Executive Officers of the
Registrant."

ITEM 11 - EXECUTIVE COMPENSATION

         Information with respect to executive compensation is incorporated
herein by reference to the information under the captions "Executive
Compensation" and "Board of Directors--Compensation of Directors" in the
Company's Proxy Statement for the 1998 Annual Meeting of Stockholders.

ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         Information with respect to security ownership of certain beneficial
owners and management of the Company is incorporated herein by reference to the
information under the caption "Principal Stockholders" in the Company's Proxy
Statement for the 1998 Annual Meeting of Stockholders.

ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         Information with respect to certain relationships and transactions is
incorporated herein by reference to the information under the caption "Related
Party Transactions" in the Company's Proxy Statement for the 1998 Annual Meeting
of the Stockholders.



                                       29
<PAGE>


                                    PART IV

ITEM 14 - EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)(1)   The response to this section of Item 14 is submitted as a separate
         section of this report on pages F-1 through F-18.

(a)(2)   None.

(a)(3)   The exhibits, as listed in the Exhibit Index set forth on pages E-1
         through E-4, are submitted as a separate section of this report.

(b)      None.

(c)      See Item 14(a)(3) above.

(d)      None.



                                       30
<PAGE>



                           ANNUAL REPORT ON FORM 10-K
                                  ITEM 14(a)(1)

                              FINANCIAL STATEMENTS

                          YEAR ENDED DECEMBER 31, 1997

                           BLOWOUT ENTERTAINMENT, INC.



                                      F-1
<PAGE>


                        Report of Independent Accountants

To the Board of Directors and Stockholders
of BlowOut Entertainment, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in stockholders' equity and of
cash flows present fairly, in all material respects, the financial position of
BlowOut Entertainment, Inc. at December 31, 1997 and 1996, and the results of
their operations and their cash flows for each of the two years in the period
ended December 31, 1997, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

PRICE WATERHOUSE LLP
Portland, Oregon
February 9, 1998, except as to Note 11, which is as of
February 22, 1998



                                      F-2
<PAGE>


                    REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS


To BlowOut Entertainment, Inc.:

We have audited the accompanying consolidated statements of operations, changes
in stockholders' equity (deficit) and cash flows of BlowOut Entertainment, Inc.
(a Delaware corporation) and subsidiaries for the year ended December 31, 1995.
These consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations, changes in
stockholders' equity (deficit) and cash flows of BlowOut Entertainment, Inc. and
subsidiaries for the year ended December 31, 1995 in conformity with generally
accepted accounting principles.

                                                     ARTHUR ANDERSEN LLP

Portland, Oregon,
         May 28, 1996 (except with respect
         to the stock dividend discussed
         in Note 8, as to which the date
         is October 9, 1996)



                                      F-3
<PAGE>

                           BLOWOUT ENTERTAINMENT, INC.

                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                     December 31,
                                                                     ------------
                                                                1997             1996
                                                           --------------       --------
ASSETS
------

<S>                                                          <C>             <C>
CURRENT ASSETS:
         Cash and cash equivalents                           $  1,710,868    $  1,379,018
         Trade receivables                                        142,386          62,183
         Other receivables                                         77,458         111,922
         Merchandise inventory                                  2,975,630       2,139,259
         Other current assets                                      93,720         132,582
                                                             ------------    ------------
             Total current assets                               5,000,062       3,824,964

RENTAL INVENTORY, net                                           9,158,819       7,793,416

EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net                       3,678,593       4,494,933

INTANGIBLE ASSETS, net of accumulated amortization
 of $1,218,009 and $746,480 respectively                        3,988,291       4,459,820
                                                             ------------    ------------

             Total assets                                    $ 21,825,765    $ 20,573,133
                                                             ============    ============

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------

CURRENT LIABILITIES:
         Line of credit                                      $  3,020,366    $  2,227,153
         Accounts payable                                       3,796,213       4,342,395
         Accrued liabilities                                    1,488,566         998,254
         Accrued payroll                                          582,474         485,506
         Current portion of long-term debt                        576,583         414,451
                                                             ------------    ------------
             Total current liabilities                          9,464,202       8,467,759

LONG-TERM DEBT                                                  1,343,073       1,021,940

NOTES PAYABLE                                                   5,678,647       3,263,575
                                                             ------------    ------------

             Total liabilities                                 16,485,922      12,753,274
                                                               ----------      ----------

COMMITMENTS AND CONTINGENCIES (NOTE 6)

STOCKHOLDERS' EQUITY:
         Preferred stock ($.01 par value; 1,000,000 shares
           authorized; no shares issued and outstanding)
         Common stock ($.01 par value; 10,000,000 shares
           authorized; 2,433,330 shares issued and
           outstanding                                             24,336          24,336
         Additional paid-in capital                            21,947,864      21,947,864
         Accumulated deficit                                  (16,632,357)    (14,152,341)
                                                              -----------     -----------

             Total stockholders' equity                         5,339,843       7,819,859
                                                                ---------       ---------

             Total liabilities and stockholders' equity      $ 21,825,765    $ 20,573,133
                                                             ============    ============

</TABLE>

The accompanying notes are an integral part of this consolidated financial
statement.


                                      F-4
<PAGE>


                           BLOWOUT ENTERTAINMENT, INC.

                      CONSOLIDATED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
                                                               YEAR ENDED DECEMBER 31,
                                                               -----------------------
                                                      1997              1996              1995
                                                      ----              ----              ----
<S>                                               <C>               <C>               <C>
REVENUE:
     Rental revenue                               $  23,807,163     $ 23,261,214      $  7,689,018
     Product and other sales                          7,854,944        7,087,970         3,029,471
                                                  -------------     ------------      ------------

                                                     31,662,107       30,349,184        10,718,489

OPERATING COSTS AND EXPENSES:
     Cost of rental revenue                           7,440,816        9,649,879         3,268,629
     Cost of product and other sales                  4,810,447        4,641,417         1,951,132
     Operating expenses                              17,638,373       17,617,705         6,274,661
    Selling, general and administrative               3,280,373        3,637,244         3,277,818
                                                  -------------     ------------      ------------

                                                     33,170,009       35,546,245        14,772,240
                                                  -------------     ------------      ------------

LOSS FROM OPERATIONS:                                (1,507,902)      (5,197,061)       (4,053,751)
                                                  -------------     ------------      ------------

OTHER INCOME (EXPENSE):
     Interest income                                        983           17,115             3,540
     Interest expense                                (1,008,804)        (806,849)         (532,836)
     Other income (expense), net                         55,605       (1,268,009)         (401,627)
                                                  -------------     ------------      ------------

                                                       (952,216)      (2,057,743)         (930,923)
                                                  -------------     ------------      ------------

LOSS BEFORE INCOME TAXES                             (2,460,118)      (7,254,804)       (4,984,674)

INCOME TAXES                                             19,898                -                -
                                                  -------------     ------------      -----------

NET LOSS                                          $  (2,480,016)    $ (7,254,804)     $ (4,984,674)
                                                  =============     ============      ============

NET LOSS PER SHARE:

     Basic                                        $       (1.02)    $      (3.60)     $      (3.41)
                                                  =============     ============      ============
     Diluted                                      $       (1.02)    $      (3.60)     $      (3.41)
                                                  =============     ============      ============

</TABLE>


The accompanying notes are an integral part of this consolidated financial
statement.





                                      F-5
<PAGE>


                           BLOWOUT ENTERTAINMENT, INC.

            CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

<TABLE>
<CAPTION>
                                                                                                                Total
                                                Common Stock         Additional                             Stockholders'
                                         ----------------------        Paid-In          Accumulated             Equity
                                         Shares          Amount        Capital            Deficit             (Deficit)
                                         ------          ------        -------            -------             -----------

<S>                                     <C>              <C>           <C>               <C>                  <C>
BALANCE, December 31, 1994              900,000           $9,000          $866,000       $(1,912,863)         $(1,037,863)

Capital contributed for

  Entertainment One,
  Inc. acquisition                      900,000            9,000         4,369,260                 -            4,378,260

Capital contributed for
  Supercenter
  Entertainment
  Corporation acquisition                     -                -         5,213,125                 -            5,213,125

Conversion of borrowings and
  Accrued interest due to parent
to equity                                     -                -         6,525,815                 -            6,525,815

Net loss                                      -                -                 -        (4,984,674)          (4,984,674)
                                  --------------     ------------  ----------------   -----------------    -----------------

BALANCE, December 31, 1995            1,800,000           18,000        16,974,200        (6,897,537)          10,094,663

Issuance of common stock                357,600            3,576         2,976,424                 -            2,980,000

Conversion of debt                      240,000            2,400         1,997,600                 -            2,000,000

Stock distribution                       35,730              360             (360)                 -                    -

Net loss                                      -                -                 -        (7,254,804)          (7,254,804)
                                  --------------     ------------  ----------------   -----------------    -----------------

BALANCE, December 31, 1996            2,433,330           24,336        21,947,864       (14,152,341)           7,819,859

Net loss                                      -                -                 -        (2,480,016)          (2,480,016)
                                  --------------     ------------  ----------------   -----------------    -----------------

BALANCE, December 31, 1997            2,433,330          $24,336       $21,947,864      $(16,632,357)          $5,339,843
                                  ==============     ============  ================   =================    =================

</TABLE>


The accompanying notes are an integral part of this consolidated financial
statement.




                                      F-6
<PAGE>


                           BLOWOUT ENTERTAINMENT, INC.

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                              YEAR ENDED DECEMBER 31,
                                                                                   -----------------------------------------
                                                                                       1997            1996          1995
                                                                                   ------------   ------------   -----------
<S>                                                                                <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
    Net loss                                                                       $(2,480,016)   $(7,254,804)   $(4,984,674)
    Adjustments to reconcile net loss to net cash provided
     (used) in operating activities:

      Amortization of video rental inventory                                         4,865,667      5,514,147      1,528,640
      Depreciation and amortization of equipment and leasehold
        improvements                                                                 1,107,012      1,169,906        456,293
      Amortization and write off of intangible and other assets                        471,529        702,207        272,921
      Loss from sale of assets                                                           1,233         29,926           --
    Changes in assets and liabilities accounts, net of effect
     of acquisitions of businesses:

      Restricted cash                                                                     --          113,297       (113,297)
      Receivables, net                                                                 (45,739)       167,804       (270,007)
      Merchandise inventory                                                           (836,371)    (1,154,365)      (886,546)
      Other current assets                                                              38,862        (73,605)      (176,660)
      Accounts payable                                                                (546,182)     1,063,842      1,247,835
      Accrued liabilities                                                              490,312       (219,639)     1,129,831
      Accrued payroll                                                                   96,968        307,196         68,833
                                                                                   -----------    -----------    -----------
      Net cash provided by (used) in operating activities                            3,163,275        365,912     (1,726,831)
                                                                                   -----------    -----------    -----------

CASH FLOWS FROM INVESTING ACTIVITIES:

    Purchases of videocassettes and video games, net of
      videocassettes and video games acquired in acquisitions                       (7,457,370)    (9,967,198)    (4,322,348)
    Capital expenditures, net of acquisitions                                         (609,193)    (2,272,214)    (1,012,631)
    Disposals of rental inventory                                                    1,226,300      2,374,728        564,450
    Disposals of equipment and leasehold improvements                                  317,288         88,683        290,554
    Proceeds from the sale of assets held for investment                                  --          155,523           --
    Cash acquired in Entertainment One, Inc. acquisition                                  --             --           64,235
    Proceeds from disposal of assets acquired in

     Entertainment One, Inc. acquisition                                                  --             --        1,099,714

                                                                                   -----------    -----------    -----------
    Net cash used in investing activities                                           (6,522,975)    (9,620,478)    (3,316,026)
                                                                                   -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

    Repayments of long-term debt                                                      (516,080)      (523,295)          --
    Proceeds from issuance of debt and notes payable                                 3,414,417      1,456,185      7,470,236
    Proceeds from line of credit, net                                                  793,213      2,227,153           --
    Proceeds from issuance of convertible debt                                            --        2,000,000           --
    Proceeds from the issuance of common stock                                            --        2,980,000           --
                                                                                   -----------    -----------    -----------

Net cash provided by financing activities                                            3,691,550      8,140,043      7,470,236
                                                                                   -----------    -----------    -----------

INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                       331,850     (1,114,523)     2,427,379

CASH AND CASH EQUIVALENTS, beginning of year                                         1,379,018      2,493,541         66,162
                                                                                   -----------    -----------    -----------

CASH AND CASH EQUIVALENTS, end of year                                              $1,710,868     $1,379,018     $2,493,541
                                                                                   ===========    ===========    ===========

</TABLE>

The accompanying notes are an integral part of this consolidated financial
statement.



                                      F-7
<PAGE>

                           BLOWOUT ENTERTAINMENT, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. NATURE OF BUSINESS, FORMATION OF COMPANY AND SIGNIFICANT ACCOUNTING POLICIES:

Nature of Business

BlowOut Entertainment, Inc. and subsidiaries (the Company), are engaged in the
business of operating "store within a store" retail video outlets which rent and
sell motion picture videocassettes, video games and computer games in
traditional Wal-Mart's, Wal-Mart SuperCenters, Super Kmart Centers, Food 4 Less
and Ralph's grocery stores pursuant to individual leases with each retailer. As
of December 31, 1997, the Company operated a total of 184 stores including 148
stores in Wal-Mart and Wal-Mart SuperCenters, 24 stores in Super Kmart Centers,
six stores in Food 4 Less under the name "BlowOut Video" and six stores in
Ralph's grocery stores under the name "Videos and More."

Formation of Company

On November 25, 1996, Rentrak Corporation (Rentrak), distributed 1,457,343
shares of BlowOut Entertainment, Inc. stock to holders of Rentrak common stock
(the Distribution). Prior to the Distribution, Rentrak held approximately 70% of
the Company's stock. The Company expensed the cost of the Distribution as no
proceeds were obtained from such Distribution. The Distribution costs
approximated $980,000 and are included in other expense per the accompanying
consolidated statement of operations.

In the spring of 1996, Rentrak consolidated the businesses and operations of
three direct or indirect wholly owned subsidiaries to form the Company. Prior
thereto, Rentrak operated its wholly owned "store within a store" retail video
outlets through those subsidiaries.

In July 1992, Rentrak formed SVI, Inc. (SVI) to operate "store within a store"
retail video outlets. On August 31, 1995, Rentrak formed W-One Incorporated
(W-1) and K-One Incorporated (K-1) to facilitate the acquisition of Supercenter
Entertainment Corporation (SCE). On the same date, Rentrak acquired the Wal-Mart
and Kmart "store within a store" retail video operations from SCE. As part of
the acquisition, the leases, pursuant to which SCE operated the Wal-Mart and
Kmart stores, were assigned to W-1 and K-1, respectively. Effective September 1,
1995, Rentrak assigned to W-1, as a capital contribution, all of the former SCE
assets and liabilities related to the operations of its Wal-Mart stores, and
Rentrak assigned to K-1, as a capital contribution, all of the former SCE assets
and liabilities related to the operation of its Kmart stores.

To effect the consolidation of the Company, in the spring of 1996 Rentrak
contributed all of the outstanding capital stock of W-1 and K-1 to a wholly
owned subsidiary of Rentrak, which then contributed the stock of W-1 and K-1 to
SVI as a capital contribution. W-1 and K-1 then became wholly owned subsidiaries
of SVI. Following this contribution, SVI changed its name to BlowOut
Entertainment, Inc. and increased the authorized capital stock to 11,000,000
shares, of which 10,000,000 shares were authorized for issuance as common stock
and 1,000,000 shares were authorized for issuance as preferred stock.

Between July 1994 and December 1995, Rentrak and two wholly owned subsidiaries
acquired 92.6 percent of the issued and outstanding common stock of
Entertainment One, Inc. (E-1), with the remaining 7.4 percent of E-1's common
stock being held by persons unrelated to Rentrak.

In May 1996, the Company acquired all of E-1's tangible and intangible assets
and assumed all of its liabilities in exchange for shares of its common stock.
Following such sale of assets, E-1 dissolved and liquidated its assets pursuant
to a Plan of Liquidation that provided for the distribution of the Company
shares to Rentrak and the remaining stockholders on a basis such that, as a
result, Rentrak and the remaining stockholders, as a group, own 93 percent and 7
percent, respectively, of the issued and outstanding common stock of the
Company.

The above reorganization was accounted for as a reorganization of entities under
common control, restating the Company's financial statements similar to
accounting for a pooling of interests and reflecting the elimination of all
intercompany transactions (see Note 2).

Certain Risks and Uncertainties

The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the


                                      F-8
<PAGE>

date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Cash and Cash Equivalents

Cash and cash equivalents are defined as short-term highly liquid investments
with original maturities of three months or less. The carrying amount of cash
and cash equivalents approximate fair value because of the short-term maturity
of those instruments.

Financial Instruments

A financial instrument is cash or a contract that imposes or conveys, a
contractual obligation or right, to deliver, or receive, cash or another
financial instrument. The fair value of all material financial instruments
approximated their carrying values at December 31, 1997 and 1996 given such
instruments include a variable rate interest factor or a fixed interest factor
at a competitive rate.

Merchandise Inventory

Merchandise inventories, consisting primarily of previously viewed
videocassettes, are stated at the lower of cost or market. Cost is determined
using a rolling average of purchases which approximates the first-in, first-out
method.

Rental Inventory

The Company acquires videocassettes, which includes video games, using two types
of supplier arrangements: purchase and revenue-sharing under the PPT System.
Videocassette rental inventory purchased for base stock is stated at cost and
amortized, beginning on the date the videocassettes are placed into service, to
a salvage value of $6 per videocassette over an estimated useful life of 36
months. All copies of new release videocassettes are amortized on an accelerated
basis during their first four months to an average net book value of $22 and
then on a straight-line basis to their salvage value of $6 over the next 32
months.

Since 1993, the Company has obtained a significant amount of its new release
titles through Rentrak under the PPT System. Under this system, Rentrak provides
the Company with videocassettes released by certain studios. The Company pays
and capitalizes a handling fee of $8 to $10 for each videocassette. During the
revenue-sharing period, which does not exceed two years, the studio owns the
videocassette, and the rental revenue is shared by the studio, Rentrak and the
Company on a predetermined basis. The Company may also sell excess copies of a
video title and share the sale proceeds with Rentrak and the studio on a
predetermined basis. At the end of the revenue-sharing period for a title, the
Company may purchase remaining copies of that title in the Company's inventory,
generally for less than $5 per videocassette. The handling fee and end-of-term
purchase fee are amortized to $6 during the first nine months. Revenue-sharing
payments are expensed when incurred.

As of January 1, 1997, the Company changed the estimates used to amortize rental
inventory. Prior to January 1, 1997, the Company amortized new release
videocassettes purchased for more than $20 to a value of $15 over the first four
months, then to a $6 salvage value over the next 32 months. New release
videocassettes purchased for less than $20 were depreciated to $8 over the first
four months, then to a $6 salvage value over the next 32 months. The overall
effect of this change in estimate for the year ended December 31, 1997 was to
reduce the net loss by approximately $1,470,000.

At December 31, 1997 and 1996, the Company's video rental inventory consisted
of:

<TABLE>
<CAPTION>
                                                                         1997                1996
                                                                  ------------------   ----------
<S>                                                               <C>                <C>
         Cost                                                     $   16,284,617     $ 13,629,350
         Less accumulated amortization                                (7,125,798)      (5,835,934)
                                                                  --------------     ------------
         Video rental inventory, net                              $    9,158,819     $  7,793,416
                                                                  ==============     ============

</TABLE>

Amortization expense related to video rental inventory was $4,865,667,
$5,514,147 and $1,528,640 in 1997, 1996 and 1995, respectively, and is included
in operating costs and expenses.

As video rental inventory is sold or retired, the applicable cost and
accumulated amortization are eliminated from the accounts and any related gain
or loss is recognized through cost of rental and product sales.

                                      F-9
<PAGE>

Equipment and Leasehold Improvements

Equipment and leasehold improvements are stated at cost. Depreciation is
provided on a straight-line basis over the estimated useful life of such assets.
The following table represents the estimated useful life of each category of
fixed asset:

<TABLE>
<CAPTION>
<S>                                                                    <C>
                           Leasehold improvements                      5-10 years
                           Furniture and fixtures                      3-5 years

</TABLE>

Expenditures for repairs and maintenance are charged to current operations, and
costs related to renewals and improvements that add significantly to the useful
life of an asset are capitalized. When depreciable properties are retired or
otherwise disposed of, the cost and related depreciation are removed from the
accounts and the resulting gain or loss is reflected in income.

Intangible Assets

As a result of the SCE and E-1 acquisitions, the Company has recorded intangible
assets consisting of goodwill and favorable lease contracts. The goodwill of
$1,656,300 is amortized by the straight-line basis over 15 years. The Company
believes this useful life is appropriate based on the factors influencing
acquisition decisions. These factors include location of stores, profitability
and general industry outlook. The favorable lease contract of approximately
$3,500,000 is being amortized over the term of the lease, 10 years.

The Company reviews its intangible assets for asset impairment at the end of
each quarter, or more frequently when events or changes in circumstances
indicate that the carrying amount of intangibles may not be recoverable. To
perform that review, the Company estimates the sum of expected future
undiscounted cash flows from operating activities. If the estimated net cash
flows are less than the carrying amount of intangibles, the Company recognizes
an impairment loss in an amount necessary to write the intangibles down to fair
value as determined from expected discounted future cash flows.

Income Taxes

The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standard No. 109. Accordingly, deferred income taxes are
provided at the current statutory rates for the difference between financial
statement and tax basis of assets and liabilities and are classified in the
consolidated balance sheet as current or long-term, consistent with the
classification of the related asset or liability giving rise to the deferred
income taxes.

Revenue Recognition

Revenue is recognized at the time of rental or sale of the videocassettes and
video games.

Advertising Expense

Advertising expense, net of cooperative advertising reimbursements, is expensed
when incurred and totaled $361,064, $571,945 and $432,627 for the years ended
December 31, 1997, 1996 and 1995, respectively.

Store Opening Costs

Store opening costs, which consist of payroll, advertising and supplies are
expensed as incurred.

                                      F-10
<PAGE>

Per Share Data

The Company calculates loss per share in accordance with Statement of Financial
Accounting Standards No. 128, "Earnings Per Share." Accordingly, basic net loss
per share is computed by dividing loss available to common stockholders by the
weighted average number of common shares outstanding for the period. Diluted net
loss per share reflects potential dilution that could occur if securities or
other contracts to issue common stock were exercised or converted into common
stock. The following table reconciles basic and diluted weighted average shares:

<TABLE>
<CAPTION>
                                                                         Year Ended December 31,
                                                                1997             1996              1995
                                                            -----------      ------------      --------
<S>                                                           <C>              <C>               <C>
         Weighted Average Shares (basic)                      2,433,330        2,014,134         1,463,973
         Effect of Dilutive Stock Options                             -                -                 -
                                                              ---------        ---------         ---------
         Weighted Average Shares (diluted)                    2,433,330        2,014,134         1,463,973
                                                              =========        =========         =========
</TABLE>

Options to purchase 119,375 shares of common stock were outstanding at December
31, 1997 but were excluded from the computation of diluted weighted average
shares since the exercise price of the options was greater than the average
market price of common shares during 1997.

Statement of Cash Flows

The Company made the following cash payments for the years ended December 31:

<TABLE>
<CAPTION>

                                                       1997           1996         1995
                                                       ----           ----         ----

<S>                                                <C>             <C>          <C>
     Interest                                      $   737,904     $  229,342   $   44,316
                                                   ===========     ==========   ==========
     Taxes                                         $    18,900     $        -   $        -
                                                   ===========     ==========   ==========

</TABLE>

Non-cash investing and financing activities are as follows:

<TABLE>
<CAPTION>
<S>                                               <C>              <C>          <C>
Acquisition of E-1 as contribution from Rentrak   $         --     $     --     $4,378,260
Acquisition of SCE as contribution from Rentrak             --           --      5,213,125
Conversion of borrowings and accrued
 interest due to Rentrak to equity                          --           --      6,525,815
Conversion of convertible debt to equity                    --      2,000,000         --

</TABLE>

Impact of Recent Accounting Developments

In June 1997, FASB issued Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" and Statement of Financial Accounting Standards
No. 131, "Disclosures About Segments of and Enterprise and Related Information,"
which are effective for fiscal years beginning after December 15, 1997. The
Company believes the implementation of these statements will not have a material
effect on its results of operations or financial statement disclosures.

2.       ACQUISITIONS:

As noted in Note 1, the Company consolidated the businesses and operations of
SVI, SCE, and E-1. This reorganization was accounted for as entities under
common control, restating the Company's financial statements similar to
accounting for a pooling of interests. Accordingly, the acquisitions of E-1 and
SCE by the Company, as described below, are reflected in these financial
statements.

E-1 Acquisition

On August 31, 1994, the Company acquired 169,230 newly issued shares of common
stock of E-1 valued at $338,460 in lieu of a financing fee associated with
$1,700,000 of financing provided by the Company to E-1. On December 1, 1994, the
Company acquired 500,000 newly issued shares of common stock in E-1 at $2.00 per
share. Following the acquisition, the Company owned approximately 9.6 percent of
the outstanding shares of E-1. On May 26, 1995, the Company purchased 3,200,000
shares of common stock of E-1 from an E-1 stockholder at $.004 per share.
Following the acquisition, the Company owned approximately 57 percent of the
outstanding shares of E-1.


                                      F-11
<PAGE>

In connection with this acquisition, the five "stand-alone" video stores owned
by E-1 were sold in June 1995 for approximately $1,100,000. These assets were
valued at their net realizable value when allocating the purchase price to the
assets acquired and liabilities assumed.

On October 20, 1995, the Company purchased from E-1 $985,591 principal amount of
convertible debentures, all of which were converted into 13,798,275 shares of
common stock of E-1 on December 15, 1995. Also on December 15, 1995, the Company
converted a $2 million line of credit that it had provided to E-1 into
28,000,000 shares of common stock of E-1. Following these transactions, the
Company owned 93 percent of the outstanding shares of E-1.

The results of operations of the acquired stores have been included in the
results of operations of the Company for the seven-month period ended December
31, 1995.

SCE Acquisition

On August 31, 1995, the Company acquired certain assets and assumed certain
liabilities of SCE which constituted the Wal-Mart and K-Mart "store within a
store" video retail operations of SCE.

The total cost of the SCE acquisition of $5.2 million was provided by issuing
878,000 shares of Rentrak common stock with an aggregate market value of
approximately $5.2 million.

The results of operations of the acquired stores are included in the results of
operations of the Company for the four-month period ended December 31, 1995.

The purchase method of accounting was used to record both the E-1 and SCE
acquisitions.

The following table presents the unaudited pro forma results of operations for
the year ended December 31, 1995 as if the E-1 acquisition and the SCE
acquisition had occurred at the beginning of the period. These pro forma results
have been prepared for comparative purposes only and do not purport to be
indicative of what would have occurred had the acquisitions been made at the
beginning of the respective periods or of results which may occur in the future.

<TABLE>
<CAPTION>

<S>                                                                  <C>
         Revenue                                                     $17,727,476
         Net loss                                                     (8,255,722)
         Net loss per common share:
                  Basic                                                    (4.52)
                  Diluted                                                  (4.52)

</TABLE>

3.         EQUIPMENT AND LEASEHOLD IMPROVEMENTS:

Equipment and leasehold improvements as of December 31, 1997 and 1996, consist
of:

<TABLE>
<CAPTION>
                                                                        1997              1996
                                                                  --------------    ----------
<S>                                                               <C>               <C>
         Leasehold improvements                                   $      155,042    $     209,553
         Furniture, fixtures and computers                             6,030,202        5,846,781
                                                                  --------------    -------------
                                                                       6,185,244        6,056,334

         Less accumulated depreciation                               ( 2,506,651)      (1,561,401)
                                                                  --------------    -------------

         Equipment and leasehold improvements, net                $    3,678,593    $   4,494,933
                                                                  ==============    =============
</TABLE>


Maintenance and repair expenditures are expensed as incurred. Depreciation
and amortization expense related to property and equipment was $1,107,012,
$1,169,906 and $456,293 in 1997, 1996 and 1995, respectively.


                                      F-12
<PAGE>

4.         LINE OF CREDIT

At December 31, 1997, the Company had a $5,000,000 line of credit with Coast
Business Credit. Borrowings under the line are due on demand, bear interest
monthly at prime plus 2.75% (11.25% and 11.00% at December 31, 1997 and 1996,
respectively), and are collateralized by rental inventory. Pursuant to the line
of credit, the Company is required to comply with certain financial covenants.
At December 31, 1997 and 1996 there were $3.0 million and $2.2 million
outstanding, respectively, under this line.

5.       LONG-TERM DEBT AND NOTES PAYABLE:

         Long-term debt and notes payable consists of:

<TABLE>
<CAPTION>
                                                                         1997             1996
                                                                  ------------------  -----------
<S>                                                               <C>               <C>
         Notes payable to Phoenix Leasing, due August 2001 to
           September 2002, bearing interest at 14.525%            $    1,673,248    $     927,966
         Notes payable to various vendors, due May 1998,
           imputed interest at 11%                                       230,369          418,605
         Notes payable to various vendors, due June 1997,
           imputed interest at 11%                                             -           62,895
         Notes payable to Rentrak, due December 2004                   5,678,647        3,263,575
         Other, payable monthly, plus interest at
           approximately 10%                                              16,039           26,925
                                                                  --------------    -------------
                                                                       7,598,303        4,699,966
         Current portion of long-term debt                               576,583          414,451
                                                                  --------------    -------------
         Long-term debt, less current portion                     $    7,021,720    $   4,285,515
                                                                  ==============    =============

</TABLE>

In 1996, Phoenix Leasing Incorporated ("Phoenix") agreed to provide the Company
with a credit facility (the "Phoenix Facility") in an aggregate principal amount
of $2.0 million for a five-year term. Amounts outstanding under the Phoenix
Facility bear interest at a fixed rate per annum equal to 14.525%. The proceeds
of the Phoenix Facility are to be used to construct and open (including
acquisition of inventory) new BlowOut Video stores in Wal-Mart Stores and
Wal-Mart SuperCenters. The Phoenix Facility is secured by (i) a continuing
guaranty of Rentrak (which Phoenix, in its sole discretion, may release once at
least 36 payments of amounts outstanding under the Phoenix Facility have been
made or the Company's financial condition is, in Phoenix's sole opinion,
sufficient to justify such release), and (ii) the Company's grant of a first
continuing security interest in all assets at each location to be financed with
funds from the Phoenix Facility. Under the Phoenix Facility, the Company cannot
borrow more than $100,000 per store location, with a minimum draw of $30,000 per
store location. As of December 31, 1997, the Company had drawn down the entire
$2.0 million Phoenix Facility and had an outstanding balance of $1,673,248.

See also Note 11 regarding a subsequent event involving a debt transaction.

Principal payments on long-term debt as of December 31, 1997 are as follows:

<TABLE>
<CAPTION>
                                    Year Ending
                                    -----------
                                    <S>                        <C>
                                    1998                       $576,583
                                    1999                        392,393
                                    2000                        447,481
                                    2001                        408,358
                                    2002                         94,841
                                    Thereafter                5,678,647
                                                           ------------
                                                           $  7,598,303
                                                           ------------
                                                           ------------

</TABLE>

                                      F-13
<PAGE>


6.         COMMITMENTS AND CONTINGENCIES:

The Company leases its office and retail facilities under operating leases, the
majority of which contain renewal and termination options. The Company's office
and warehouse facilities are operated under operating leases. The Company
entered into an eleven-year lease agreement with Rentrak. Through December 31,
1996, rental payments under this agreement were calculated as 3.71 percent of
all of Rentrak's expenses of occupying their facility. Beginning January 1,
1997, the lease was amended so that the Company has a fixed monthly payment.
Future minimum lease payments required under leases as of December 31, 1997,
including the agreement with Rentrak as described above, are as follows:

<TABLE>
<CAPTION>
                                    Year Ending
                                    -----------
                                    <S>                       <C>
                                    1998                      $ 144,081
                                    1999                         95,338
                                    2000                         87,168
                                    2001                         85,671
                                    2002                         91,908
                                    Thereafter                  375,291
                                                             ----------
                                    Total lease payments      $ 879,457
                                                              =========

</TABLE>

As discussed in Note 1, the majority of the Company's retail facilities are
operated under master lease agreements with Wal-Mart and Kmart. Each of these
master leases provides for an initial five-year term for each new store, with an
additional five-year optional renewal term.

Rental expense for the Wal-Mart, Kmart and Ralph's locations is computed as a
percentage of retail store revenue plus additional charges for maintenance,
property taxes and other common area charges.

Occupancy expense was $3,736,725, $3,653,680 and $1,167,827 and included
$3,557,314, $3,560,024 and $1,071,032 of rents based on retail store revenues
for the years ended December 31, 1997, 1996 and 1995, respectively.

Under the Wal-Mart lease, either the Company or Wal-Mart can elect to terminate
the lease with respect to stores which fail to generate a minimum level of
revenues. Currently, substantially all of the Company's stores are operating in
excess of the minimum revenue requirement.

7.         INCOME TAXES:

The reconciliation of the statutory federal income tax rate to the Company's
effective income tax rate is as follows:

<TABLE>
<CAPTION>
                                        1997     1996     1995
                                        ----     ----     ----
<S>                                    <C>      <C>      <C>
Benefit computed at statutory rates    (34.0)%  (34.0)%  (34.0)%
Loss benefit accruing to Rentrak          --     29.9       --
Change in valuation allowance           33.9      3.6     33.8
Other                                     .1       .5       .2
                                        ----     ----     ----
                                          -- %     -- %     -- %
                                        ----     ----     ----
                                        ----     ----     ----
</TABLE>

For periods prior to the date of the Distribution, the Company is included in
the consolidated tax return of Rentrak. Net operating losses incurred prior to
the date of the Distribution are allocated and utilized in the consolidated tax
return of Rentrak. The deferred tax asset at December 31, 1996 related to net
operating losses and was allocated entirely to Rentrak as provided in the Tax
Sharing Agreement between Rentrak and the Company. As such, the entire amount of
the deferred tax asset at December 31, 1997 and 1996 for net operating losses
relates to losses incurred subsequent to the date of the Distribution.


                                      F-14
<PAGE>

Provision (benefit) for income taxes:

<TABLE>
<CAPTION>
                                                 1997          1996          1995
                                                 ----          ----          ----

<S>                                          <C>            <C>            <C>
Currently payable
         Federal                             $      --      $      --      $      --
         State
                                                  19,898           --             --
                                             -----------    -----------    -----------
Deferred
         Federal                                (837,958)       414,333     (1,455,548)
         State                                   (98,583)        48,745       (171,241)
                                             -----------    -----------    -----------

                                                (936,541)       463,078     (1,626,789)

Increase (decrease) in valuation allowance       936,541       (463,078)     1,626,789
                                             -----------    -----------    -----------

         Total provision                         $19,898    $      --      $      --
                                             ===========    ===========    ===========
</TABLE>


Deferred tax assets (liabilities) are comprised of the following components:

<TABLE>
<CAPTION>
                                                    1997           1996
                                                -----------    -----------
<S>                                             <C>            <C>
Current:
         Vacation accrual                           $27,656        $45,742
                                                -----------    -----------

Noncurrent:
         Depreciation                                 7,603        355,018
         Charitable contribution carryforward           950           --
         Amortization on intangible assets          181,736        943,703
         Net operating loss carryforwards         2,600,019        536,960
                                                -----------    -----------

         Total noncurrent deferred tax assets     2,790,308      1,835,681
                                                -----------    -----------

Gross deferred tax asset                          2,817,964      1,881,423
Deferred tax asset valuation allowance           (2,817,964)    (1,881,423)
                                                -----------    -----------

Net deferred tax asset                          $      --      $      --
                                                ===========    ===========

</TABLE>

Due to the uncertainty of future income, the Company has provided a valuation
allowance for the entire amount of the deferred tax asset.

At December 31, 1997, for federal tax return reporting purposes, the Company has
approximately $2,600,019 of tax loss carryovers that expire at various dates
through 2012.

8.         STOCKHOLDERS' EQUITY:

Convertible Debentures

In March and April 1996, the Company issued $1.0 million in convertible
subordinated notes to each of Mr. Bill LeVine and to Culture Convenience Club,
Ltd. ("CCC"), a Japanese corporation of which Mr. Muneaki Masuda is Chairman
(the "Notes"). Messrs. LeVine and Masuda are Directors of the Company. These
Notes were guaranteed by Rentrak, accrued interest at a rate of 9.0% per annum,
and had a maturity date of August 31, 1997. On August 30, 1996, each of Mr.
LeVine and CCC converted their Notes into 121,789 shares of BlowOut Common
Stock.

1996 Equity Participation Plan

During 1996, the Board of Directors approved the issuance of stock options to
certain employees, contractors and directors per the 1996 Equity Participation
Plan (the Plan), which Plan was then amended and restated later in 1996. As of
December 31, 1996, there were no options exercisable. Generally, options granted
under the Plan terminate in 10 years from the date of grant and vest ratably
over 4 years. The Plan is being administered by the Compensation Committee of
the Board of Directors, which has the authority to approve the issuance of
nonqualified and incentive stock options subject to the requirements of the
Plan.



                                      F-15
<PAGE>


Activity in the Company's stock options is as follows:

<TABLE>
<CAPTION>
                                                                                Per Share
                                                                 Shares         Option Price
                                                                 ------         ------------
<S>                                                              <C>            <C>
         Outstanding at December 31, 1996                        80,000         $2.325 - 3.625
           Granted                                               54,375         $1.625 - 2.000
           Exercised                                                  -
           Canceled                                             (15,000)        $2.500 - 3.625
                                                               --------
         Outstanding at December 31, 1997                       119,375         $1.625 - 3.625
                                                                =======
</TABLE>

The weighted average fair value of options granted during the year was $1.862.

The following table summarizes information about fixed stock options at December
31, 1997:

<TABLE>
<CAPTION>
                                   Options Outstanding                                              Options Exercisable
          -----------------------------------------------------------------------    -----------------------------------------------
                                 Number
                               Outstanding               Weighted - Average           Number Exercisable       Weighted - Average
            Exercise Price     at 12/31/97           Remaining Contractual Life          at 12/31/97             Exercise Price
            --------------     -----------           --------------------------       ------------------       -------------------
            <S>                <C>                   <C>                              <C>                      <C>
                $2.375               15,000                     8.9                          4,125                   $2.375
                $2.500               35,000                     8.8                         10,500                   $2.500
                $3.625               15,000                     8.9                          4,125                   $3.625
                $2.000               34,375                     0.9                         34,375                   $2.000
                $1.625               20,000                     9.3                          3,500                   $1.625
                                    -------                                               --------
                                    119,375                                                 56,625
                                    =======                                               ========
</TABLE>

The Company applies APB Opinion 25 and related interpretations in accounting for
its Plan. Accordingly, no compensation was recognized for its options granted.
The Company has determined that the pro forma effects of applying FAS 123 would
not have a material effect on the results of operations for 1997 and 1996. This
determination was made using the Black-Scholes option pricing model with the
following assumptions for 1997: risk-free interest rate of 5.145%; dividend
yield of zero; expected life of 10 years; and expected volatility of 65.35%.

Employee Stock Purchase Plan

The Company's Board of Directors approved an Employee Stock Purchase Plan. This
plan authorizes up to 200,000 shares of common stock to be issued to its full
time employees and directors. Under the terms of this plan, employees can choose
each year to have up to 10% of their annual total compensation withheld to
purchase the Company's common stock. The purchase price of the stock is 85
percent of the prevailing market price. The effective date of this plan was
January 1, 1997. The Company purchases stock on the open market to contribute to
this plan. Therefore, the difference between the cost to the Company and the
proceeds from employees is charged to selling, general, and administrative
expenses. During 1997, the Company purchased 10,650 shares and recorded related
expenses of $2,200.

Stock Dividend

On October 9, 1996, the Company's board of directors approved a 1.01491-for-1
stock dividend for all stockholders of record as of October 9, 1996. All per
share amounts for all periods in the Company's financial statements have been
retroactively adjusted for the effect of the stock dividend.

9.         RELATED PARTY TRANSACTIONS:

Culture Convenience Club/Masuda Muneaki:

Culture Convenience Club Co. Ltd. ("CCC") owns 605,102 shares of the Company as
of December 31, 1997, or 24.9% of the total outstanding shares. Muneaki Masuda,
Chairman of CCC, and Yoshinori Ogida, a Managing Director of CCC, are members of
the Board of Directors of the Company. In April 1996, CCC purchased a $1 million
convertible note from the Company which was subsequently converted into 121,789
shares of the Company on August 31, 1996. Mr. Masuda also serves on the Board of
Directors of Rentrak Corporation where he owns 1,004,000 shares of Rentrak as of
December 31, 1997, or 9.30% of the total outstanding shares. He was paid Board
fees of $4,833 and $5,666 in 1997 and 1996, respectively. In addition, Muneaki
Masuda received 5,000 options to purchase shares of the Company at $3.625 on
November 25, 1996. These options vest 25% per year and expire on November 24,
2006.



                                      F-16
<PAGE>


On August 30, 1996 CCC purchased from the Company for $2.98 million a total of
362,931 shares of common stock at a purchase price of approximately $8.21 per
share.

See also Note 11 for information regarding a subsequent event involving CCC.

Rentrak Corporation

Rentrak Corporation (Rentrak) owns 241,599 shares of the Company as of December
31, 1997, or 9.9% of the total outstanding shares. Prior to the Distribution on
November 25, 1996, Rentrak owned 1,698,942 of the Company, or 69.8% of the total
outstanding shares. Rentrak distributed 1,457,343 of the Company's shares to its
shareholders on a basis of 1 Company share for every 8.34 shares of Rentrak. The
Company leases its corporate offices and warehouse from Rentrak. The corporate
office lease is a 10 year lease commitment beginning January 1997 and the
warehouse is on a 1 year lease beginning January 1997. Total rent payments to
Rentrak for the office and warehouse space in 1997, 1996 and 1995 were $133,104,
$72,473 and $138,593, respectively. The Company also has a license arrangement
with Rentrak for use of the Company name. The Company is to pay a 1.667% royalty
on aggregate net revenue, but not to exceed 20% of net income. The license
agreement is for 20 years beginning March 1996. If the Company does not have
pre-tax income, as calculated in accordance with generally accepted accounting
principles, there is no royalty payment accruable or payable to Rentrak.
Accordingly, no royalties have been paid through December 31, 1997. The Company
is also obligated to purchase enough merchandise from Rentrak such that the fees
payable by the Company under the Pay Per Transaction (PPT) Agreement are at
least 11% of the Company's annual gross retail rental revenue. The PPT Agreement
is for 20 years beginning March 1996. Total PPT fees for 1997, 1996 and 1995
were $2.6 million, $3 million and $2.7 million respectively. Rentrak also has a
note payable for $3.01 million plus accrued interest at a 9% rate, originally
due and payable on March 31, 1999. Accrued interest at December 31, 1997, 1996
and 1995 was $734.475, $463,575 and $433,189, respectively. Finally, Rentrak has
guaranteed certain liabilities of the Company, including, the Coast Business
Credit's line of credit, Phoenix Financial notes, and five vendor notes. The
Company pays a fee to Rentrak of .02% per week on the outstanding balance on the
guarantee liabilities. In 1997 and 1996 the Company paid Rentrak $50,684 and
$18,694, respectively for this guarantee. See also Note 11 for information
regarding a subsequent event involving the Rentrak debt.

In December 1995, Rentrak contributed intercompany payables and accrued interest
due from the Company to Rentrak of $6,525,815 as a capital contribution to the
Company.

Bill LeVine:

Bill LeVine is a member of the Board of Directors of the Company and owns
212,647 shares of the Company as of December 31, 1997, or 8.74% of the total
outstanding shares. In April 1996, Bill LeVine purchased a $1 million
convertible note from the Company which was subsequently converted into 121,789
shares of the Company on August 31, 1996. Bill LeVine also serves on the Rentrak
Board of Directors. He owns 430,827 shares of Rentrak at December 31, 1996, or
3.5% of the total outstanding shares. He was paid Board fees of $4,833 and
$5,666 in 1997 and 1996, respectively. In addition, Bill LeVine received 5,000
options to purchase shares of the Company at $3.625 on November 25, 1996. These
options vest 25% per year and expire on November 24, 2006.

R&G Communications:

In 1996, the Company purchased $90,960 of master videocassettes for tape
duplications from R&G Communications. R&G Communications is partially owned by
Gene Giaquinto who is the Company's Chairman of the Board.

Skura Intercontinental Trading Company:

In 1996, the Company purchased $52,000 of videocassettes from SITC which is
partially owned by Gene Giaquinto, the Company's Chairman of the Board.

Prism:

In 1996, the Company purchased $400,210 of videocassettes from Prism. Prism was
partially owned by Rentrak at the time of the sale.

10.        LITIGATION:

The Company has several legal actions pending incidental to the ordinary course
of business. In the opinion of management, the expected outcome of these matters
in the aggregate will not have a material adverse effect on the financial
position or results of operations of the Company.



                                      F-17
<PAGE>


11.      SUBSEQUENT EVENT:

On February 22, 1998, the Company, CCC and Rentrak signed an agreement (the
"Tri-Party Agreement") under which CCC agreed to provide the Company with $1.5
million in debt financing to fund projected 1998 expansion plans and additional
working capital. The new financing accrues interest at 7% per annum and the
principal plus accrued interest is payable over a 60 month term beginning in
January 2000. Up to $484,167 of the loan may be converted into shares of BlowOut
common stock at $1.00 per share, the bid price on the Nasdaq Stock Market at the
time of the signing of the Tri-Party Agreement. Under the terms of the Tri-Party
Agreement, Rentrak agreed to defer principal and interest payments on its notes
payable by the Company until December 31, 2004 during which deferment period no
interest accrues. Rentrak also agreed to the forgiveness of all or a portion of
the Rentrak notes as the Company is able to lower Rentrak's contingent
obligations under its guaranties of the Phoenix and CBC lines of credit
discussed above (See Note 5). The Company has agreed not to draw down in excess
of $4.0 million under the CBC line, which limitation, when combined with the
reduction in Rentrak's contingent liability under the Phoenix line of credit due
to principal payments made to date by the Company, under the terms of the
Tri-Party Agreement triggered the immediate forgiveness of $1,044,487 in Rentrak
debt. Rentrak has also agreed to reduce the minimum amount of fees the Company
is required to pay for 1998 under the Pay Per Transaction Agreement from 11% to
7% of the Company's 1998 gross retail rental revenue.



                                      F-18
<PAGE>

                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.

Dated:  March 30, 1998                     BLOWOUT ENTERTAINMENT, INC.


                                            By: /s/ Steve Berns
                                                ----------------------------
                                                Steve Berns
                                                President

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

<TABLE>
<CAPTION>

               Signature                                Title                                  Date
               ---------                                -----                                  ----
<S>                                      <C>                                              <C>
Steve Berns*                             President and Director (Principal                March 30, 1998
                                         Executive Officer)

Eugene F. Giaquinto*                     Chairman of the Board of Directors               March 30, 1998

Bill LeVine*                             Director                                         March 30, 1998

Muneaki Masuda*                          Director                                         March 30, 1998

Yoshinori Ogida*                         Director                                         March 30, 1998

Seth A. Reames*                          Director                                         March 30, 1998

Thomas D. Berkompas*                     Chief Financial Officer (Principal               March 30, 1998
                                         Financial and Accounting Officer)

*By: /s/ Steve Berns                     Individually and as Attorney-in-Fact             March 30, 1998
    ------------------------
       Steve Berns

</TABLE>


                                      F-19
<PAGE>

                                  EXHIBIT INDEX
<TABLE>
<CAPTION>

Exhibit No.                  Description
-----------                  -------------
<S>            <C>
    3.1        Amended and Restated Certificate of Incorporation
               [Incorporated by reference to Exhibit 3.1 to Registration
               Statement No. 0-21327]

    3.2        Amended and Restated Bylaws [Incorporated by reference to
               Exhibit 3.2 to Registration Statement No. 0-21327]

    4.1        Specimen Common Stock Certificate [Incorporated by reference
               to Exhibit 4.1 to Registration Statement No. 0-21327]

   10.1        Amended and Restated 1996 Equity Participation Plan of BlowOut
               Entertainment, Inc. dated November 25, 1996 [Incorporated by
               reference to Exhibit 10.1 of Form 10-K for the fiscal year ended
               December 31, 1996]

   10.2        National Account Agreement between BlowOut Entertainment,
               Inc., and Rentrak Corporation dated March 15, 1996 and First
               Addendum thereto dated March 16, 1996 [Incorporated by
               reference to Exhibit 10.2 to Registration Statement No.
               0-21327]

    10.3.1     Amended and Restated Employment Agreement between BlowOut
               Entertainment, Inc. and Steve Berns, dated as of March 1, 1996
               [Incorporated by reference to Exhibit 10.3.1 to Registration
               Statement No. 0-21327]

    10.3.2     Employment Agreement between BlowOut Entertainment, Inc. and
               Thomas D. Berkompas, dated April 22, 1997*

    10.3.3     Amended and Restated Employment Agreement between BlowOut
               Entertainment, Inc. and Harold Heyer, dated April 22, 1996
               [Incorporated by reference to Exhibit 10.3.3 to Registration
               Statement No. 0-21327]

    10.3.4     Summary of Amendments dated November 4, 1996 to Amended and
               Restated Employment Agreements of Steve Berns, and Harold
               Heyer [Incorporated by reference to Exhibit 10.3.4 to
               Registration Statement No. 0-21327]

    10.4       Agreement dated July 22, 1996 between Star Video Entertainment
               L.P. and BlowOut Entertainment, Inc. [Incorporated by
               reference to Exhibit 10.4 to Registration Statement No.
               0-21327]

    10.5       Guarantee Agreement dated June 26, 1996 between Rentrak
               Corporation and BlowOut Entertainment, Inc. [Incorporated by
               reference to Exhibit 10.5 to Registration Statement No.
               0-21327]
</TABLE>
-------------------
*    Filed herewith.
                                      E-1
<PAGE>

<TABLE>
<CAPTION>

Exhibit No.                  Description
-----------                  -------------
<S>          <C>
    10.6     Senior Loan and Surety Agreement dated July 23, 1996 between
             BlowOut Entertainment, Inc. and Phoenix Leasing Incorporated.
             [Incorporated by reference to Exhibit 10.6 to Registration
             Statement No. 0-21327]

    10.7     Combination Commercial Sublease dated January 1, 1996 among
             Rentrak Corporation, BlowOut Entertainment, Inc., Skyport
             Industrial Park Partnership and Airport Partners, L.L.C.
             [Incorporated by reference to Exhibit 10.7 to Registration
             Statement No. 0-21327]

    10.8     Loan and Security Agreement dated September 12, 1996 between
             BlowOut Entertainment, Inc. and Coast Business Credit
             [Incorporated by reference to Exhibit 10.7 to Registration
             Statement No. 0-21327]

    10.9     Registration Rights Agreement dated as of May 28, 1996 by and
             among BlowOut Entertainment, Inc., Rentrak Corporation
             Streamlined Solutions, Inc., Mortco Inc. and the other persons
             named therein [Incorporated by reference to Exhibit 10.9 of
             Form 10-K for the fiscal year ended December 31, 1996]

    10.10    Intercompany Note dated as of December 31, 1995 executed by
             BlowOut Entertainment, Inc. as Maker and Rentrak Corporation
             as Payee [Incorporated by reference to Exhibit 10.10 to
             Registration Statement No. 0-21327]

    10.11    Form of Indemnity Agreement [Incorporated by reference to
             Exhibit 10.11 to Registration Statement No. 0-21327]

    10.12    Master Sublease Agreement dated September 21, 1994 between
             Kmart Corporation and SuperCenter Entertainment Corporation
             and First Amendment thereto dated April 1, 1995 and Second
             Amendment thereto dated January 21, 1996 [Incorporated by
             reference to Exhibit 10.12 to Registration Statement No.
             0-21327]

    10.13    Agreement dated May 1, 1995 between Ralphs Grocery Company and
             SVI, Inc. and First Amendment thereto dated May 1, 1995
             [Incorporated by reference to Exhibit 10.13 to Registration
             Statement No. 0-21327]

    10.14    Master Shopping Center Lease Agreement dated as of November
             19, 1994 between Wal-Mart Stores, Inc. and SuperCenter
             Entertainment, Inc. and First Amendment thereto dated May 15,
             1995 and Second Amendment thereto dated May 14, 1996
             [Incorporated by reference to Exhibit 10.14 to Registration
             Statement No. 0-21327]

    10.15    License Agreement dated March 15, 1996 between Rentrak
             Corporation and BlowOut Entertainment, Inc. and First
             Amendment thereto dated June 25, 1996 [Incorporated by
             reference to Exhibit 10.15 to

</TABLE>
-------------------
*    Filed herewith.

                                      E-2
<PAGE>

<TABLE>
<CAPTION>

Exhibit No.                  Description
-----------                  -------------
<S>          <C>
             Registration Statement No. 0-21327]

    10.16    Subscription Agreement dated as of August 28, 1996 between
             Culture Convenience Club Ltd. and BlowOut Entertainment, Inc.
             [Incorporated by reference to Exhibit 10.16 to Registration
             Statement No. 0-21327] 10.17 Note Conversion Agreement dated
             as of August 28, 1996 between Bill LeVine and BlowOut
             Entertainment, Inc. [Incorporated by reference to Exhibit
             10.17 to Registration Statement No. 0-21327]

    10.18    Note Conversion Agreement dated as of August 28, 1996 between
             Culture Convenience Club Ltd. and BlowOut Entertainment, Inc.
             [Incorporated by reference to Exhibit 10.18 to Registration
             Statement No. 0-21327]

    10.19    Registration Rights Agreement dated as of August 28, 1996
             between Culture Convenience Club Ltd., Bill LeVine and BlowOut
             Entertainment, Inc. [Incorporated by reference to Exhibit
             10.19 to Registration Statement No. 0-21327]

    10.20    Distribution Agreement dated November 11, 1996 between BlowOut
             Entertainment, Inc. and Rentrak Corporation and principal
             exhibits thereto [Incorporated by reference to Exhibit 2.1 to
             Registration Statement 0-21327]

    10.21    Servicing, Warehousing and Distribution Agreement dated as of
             January 1, 1997 between Streamlined Solutions Inc. and BlowOut
             Entertainment, Inc. [Incorporated by reference to Exhibit 10.9
             of Form 10-K for the fiscal year ended December 31, 1996]

    10.22    Employee Stock Purchase Plan of BlowOut Entertainment, Inc.
             dated as of December 18, 1996 [Incorporated by reference to
             Exhibit 10.9 of Form 10-K for the fiscal year ended December
             31, 1996]

    10.23    Promissory Note issued by BlowOut Entertainment, Inc. to
             Rentrak Corporation dated August 11, 1997*

    10.24    Tri-Party Agreement between BlowOut Entertainment, Inc.,
             Culture Convenience Club Co. Ltd. And Rentrak Corporation
             dated as of February 22, 1998*

    10.25    Convertible Promissory Note issued by BlowOut Entertainment,
             Inc. to Culture Convenience Club Co. Ltd. dated February 22,
             1998*

    21.1     List of Subsidiaries [Incorporated by reference to Exhibit
             21.1 to Registration Statement No. 0-21327]

    24.1     Power of Attorney*
</TABLE>
-------------------
*    Filed herewith.

                                      E-3
<PAGE>


<TABLE>
<CAPTION>

 Exhibit No.                  Description
 -----------                  -------------
 <S>           <C>

         27.1     Financial Data Schedule*
</TABLE>
-------------------
*    Filed herewith.
                                      E-4