13

                SECURITIES AND EXCHANGE COMMISSION

                      Washington, D.C.  20549
                                 
                                 
                            FORM 10-QSB

(Mark one)
[ X ]  Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

          For the fiscal quarter ended September 30, 1996

Commission file No.  0-18866

                                OR

[   ]  Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934


                First National Entertainment Corp.
 (Exact name of small business issuer as specified in its charter)

Colorado                                    93-1004651
(State or other jurisdiction of            (I.R.S. Employer
incorporation or organization)              Identification No.)

                                 
    600 Enterprise Drive, Suite 109, Oak Brook, Illinois  60521
             (Address of principal executive offices)

                              (630)  573-8209
       (Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:  None

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

                     Common Stock $0.005 Par Value
                         (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  [  ]

As of  November 10 1996 the registrant had outstanding 16,898,458
shares of its $.005 par value Common Stock.

PART I - FINANCIAL INFORMATION
Item 1.  Financial Statements

First National Entertainment Corp.
CONSOLIDATED BALANCE SHEET
(unaudited)


September 30,                           1996              1995

ASSETS

Current Assets
  Cash                                 $38,967           $154,059
  Accounts receivable, 
   net of allowance for
   doubtful accounts of 
   $1,705,521 (1996) and 
   $567,246 (1995)                      26,945            332,963
  Film inventory                             0            405,987
  Other                                  9,514             24,514

Total Current Assets                    75,426            917,523


Property and equipment, net             41,470             32,343

Other Assets
  Film inventory, net of 
   accumulated amortization 
   of $7,913,891 (1996) and
   $6,737,062 (1995)                 2,648,210          3,825,039
  Intangible assets, net of 
   accumulated amortization 
   of $119,508 (1996)
   and $159,093 (1995) and other       132,570             398,115

Total Other Assets                   2,822,250           4,223,154

TOTAL ASSETS                        $2,897,676          $5,173,020


See accompanying notes to consolidated financial
statements.

First National Entertainment Corp.
CONSOLIDATED BALANCE SHEET
(unaudited)

September 30,                           1996             1995


LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
  Accounts payable                     $245,037        $262,084
  Accrued expenses                      235,410         156,759
  Obligations under 
   capital leases                        21,081           9,972

Total Current Liabilities               501,528         428,815

Shareholders' Equity
  Preferred stock, $.0001 par value,
  authorized 10,000,000 shares,
  no shares issued and outstanding           --             --

  Common stock, $.005 par value,
  authorized 100,000,000 shares,
  issued and outstanding:
  1996,16,898,458 shares, and
  1995,11,293,631 shares                 84,495          56,468

  Paid in capital                    26,090,608      23,285,049
  Accumulated deficit               (23,778,955)    (18,617,695)

Total Shareholders' Equity            2,396,148       4,723,822



TOTAL LIABILITIES AND
  SHAREHOLDERS' EQUITY               $2,897,676      $4,893,544


See accompanying notes to consolidated financial
statements.


First National Entertainment Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

For the three months ended September 30,   1996          1995

TOTAL REVENUES                         $103,579         $30,000
COST OF REVENUES
  Amortization of film costs             51,790          14,961

GROSS PROFIT (LOSS)                      51,789          15,039


 OPERATING EXPENSES
  Marketing, selling  & royalties        18,826           5,453
  General and administrative            198,098         202,388


TOTAL OPERATING EXPENSES                216,924         207,841


OPERATING LOSS                         (165,135)       (192,802)


OTHER INCOME                                 --         424,993


NET INCOME (LOSS)                     $(165,135)       $232,191


NET LOSS PER SHARE                       $ (.01)          $ .02


Weighted average shares outstanding   16,898,458     11,293,631

See accompanying notes to consolidated financial
statements.
                                                                   

                                                                   
First National Entertainment Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS


For the three months ended September 30,    1996          1995

CASH FLOWS FROM OPERATING ACTIVITIES:

    Net income (loss)                  $(165,135)      $232,191

    Adjustments to reconcile net loss to net
     cash provided by operating activities:

    Amortization of film costs            51,790         14,961
    Stock issued for services 
      and compensation, net                   --             --
    Other amortization, depreciation, 
      write-offs                         116,778         27,604

    Changes in operating assets 
      and liabilities, net              (121,458)      (299,472)


NET CASH (USED IN)
 OPERATING ACTIVITIES                   (118,025)       (24,716)

CASH FLOWS FROM INVESTING ACTIVITIES:

    Acquisition of property and equipment     --             --
    Disposition of property and equipment     --        103,527


NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES                          --        103,527
CASH FLOWS FROM FINANCING ACTIVITIES:

    Officer Advances/(Repayments)             --            --
    Notes Payable/(Repayments)                --            --
    Common Stock Issuance/(Cancellation)      --            --


NET CASH (USED IN) FINANCING ACTIVITIES       --            --

NET INCREASE/(DECREASE) IN CASH         (118,025)        78,811

CASH - BEGINNING OF PERIOD               156,993         75,248

CASH - END OF PERIOD                     $38,968       $154,059

See accompanying notes to consolidated financial
statements.

First National Entertainment Corp.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)\
September 30, 1996


NOTE 1  BASIS OF PRESENTATION


The  accompanying unaudited consolidated financial statements  have
been  prepared  in  accordance with generally  accepted  accounting
principles   for  interim  financial  information  and   with   the
instructions to Form 10-QSB. Accordingly, they do not  include  all
of  the  information  and footnotes required by generally  accepted
accounting  principles for complete financial  statements.  In  the
opinion of management, all adjustments considered necessary  for  a
fair  presentation  of the interim financial statements  have  been
included.   Operating  results  for the  three-month  period  ended
September  30, 1996 are not necessarily indicative of  the  results
that may be expected for the year ending June 30, 1997. For further
information,  refer  to the consolidated financial  statements  and
footnotes thereto included in the Company's annual report  on  Form
10-KSB for the year ended June 30, 1996.


NOTE 2  SUBSEQUENT EVENTS

On  October  6, 1996 the Company's Board of Directors approved  and
issued  an Extension and Optional New Pricing Offer to the  holders
of  Warrants  from  its  Private  Placement  of  1,260,000  of  the
Company's common stock in December 1995.  These 1,260,000  Warrants
originally  entitled  the holders to purchase an  additional  share
each  of the Company's common stock at a price of $1.00 through  an
expiration  date of December 15, 1997.  The Extension and  Optional
New  Pricing  Offer  allows an extension at the  same  price  until
December  31, 1998 for no additional consideration OR an  extension
until  December  31, 1999 at a share price of $.15  for  additional
consideration  of $.05 per Warrant OR an extension  until  December
31,  2000 at a share price of $.05 for additional consideration  of
$.10 per Warrant.


NOTE 34  CONTINGENCIES

The  Company  received  notice from the Screen  Actors  Guild  that
supplemental residuals of 4.5% of the first $1,000,000 and 5.4%  of
all  remaining gross producer receipts are due them.  The Company's
entertainment counsel is researching the matter to determine if the
Company has a liability related to this matter.  As of the date  of
this  filing  there  has  been  no determination  and  the  Company
believes  that  if  any  residuals  are  due  they  should  be  the
responsibility of Lou Scheimer and Filmation (the original producer
of the film).

On  May  18,  1995, the Company received notice from  Della  Miles,
Stylus  Record's feature artist, that Stylus was in material breach
of  its  contract with her.  After several meetings with Ms.  Miles
and  her  counsel,  the Company placed the entire advanced  royalty
receivable  amount  relating to this contract in  its  reserve  for
doubtful accounts.

The Founders' Agreement of Stylus Records calls for certain actions
by  the Company if the Company's common stock price is not equal to
$5  or greater on March 31, 1996 (the stock price on April 1,  1996
was  $.25).   These actions relate to 60,000 shares of a  total  of
160,000  issued  in  April 1994 in exchange for the  Company's  80%
interest  in Stylus Records.  Per the Agreement, the Company  would
be  required to make up any shortfall in value, either in  cash  or
via  the  issuance of additional shares.  The Company has submitted
the  Agreement to its legal counsel to determine if  it  is  indeed
obligated to take such actions.


NOTE 4  ACCOUNTS RECEIVABLE

On  August  16,  1994 the Company received an accounting  statement
from  Republic  Pictures ("Republic"), its film  distributor,  that
reported video sales and collection results for Happily Ever  After
through  June  30, 1994. This statement reflected a lower  producer
royalty payment than the Company had anticipated because of certain
assumptions, used by Republic in the accounting statement, that the
Company  believes were inconsistent with its distribution agreement
with  Republic.  The Company communicated these issues to  Republic
and  conducted  a comprehensive third-party special  audit  of  all
reported video results. Republic subsequently agreed to revise  the
August  16,  1994  accounting statement for the  number  of  videos
shipped, and on September 26, 1994 delivered payment to the Company
for  this  revised  accounting statement, plus  interest.  However,
according  to  the  special  auditor's report,  Republic  owes  the
Company  a  producer's bonus of 5% of the first one  million  units
sold, which approximates $256,000, in addition to amounts owed  the
Company  for foreign currency adjustments and excess units held  in
reserve  of  $184,000.  In the fiscal year ending  June  30,  1996,
Republic  reported  units sold of 389,000  units  but,  because  of
certain  cost  assumptions  used  by  Republic  in  submitting  its
accounting  for  these sold units, informed the Company  that  they
have  no  liability  for  producer royalty payments.   The  Company
maintains  that  under the terms of the Distributor Agreement  they
are   entitled  to  a  specific  amount  for  each  unit  sold   or
approximately  $1,150,000  for  1996.   The  Company   intends   to
vigorously  pursue  collection  efforts  with  respect   to   these
receivables, however, due to the uncertainty of the results of  the
collection efforts, the Company has provided an allowance  for  the
entire  outstanding amount due at June 30, 1996.  On  November  14,
1996,  Republic  submitted its final accounting statement  (covered
under  the  three year distribution agreement commenced  in  1993),
reporting  a  total of approximately 35,000 units sold  during  the
Company's first fiscal quarter ending September 30, 1996.  Like its
year end report, Republic continues to deny any financial liability
to  the Company.  Based on this, the Company has again provided for
an  allowance for the entire amount of its calculated revenues from
Republic  for  the  quarter in its financial  statements  for  this
period.

During  the third quarter of fiscal 1995 the Company shared in  the
net  profits  from  the sale of approximately 15,000  Happily  Ever
After   video  games  manufactured  and  distributed  by   American
Softworks  Corporation ("ASC"). The Company recorded  a  receivable
from  ASC  for  $175,000 (less the amount paid by ASC) representing
advances  made  to ASC for the developing of the video  game.   ASC
disputed  amounts  owed  under  the contract.  The  amount  of  net
receivables (after costs of collection) due from American Softworks
Corporation  at  September  30, 1996, in  the  amount  of  $26,945,
represents the agreed upon settlement between the parties, and  has
been received by the Company subsequent to September 30, 1996.
                                                                   

NOTE 5  CONTINUING OPERATIONS

The Company has historically incurred operating losses, and to date
has  an accumulated deficit of approximately $23.8 million.   Since
new  management was installed at the end of fiscal year  1995,  the
Company  has  substantially  reduced  its  operating  overhead   by
reducing  full  time  staff  from 14  permanent  and  15  temporary
employees to 3 full time professional staff at the end of September
1996.  Additionally, the Company's move from over 7,000 square feet
of  office  facility in Austin to under 1,000 square  feet  in  the
Chicago  area  has  substantially  reduced  administrative   costs.
Settlement of the SEC investigation with no financial penalties  at
the  end of fiscal year 1995 and the shareholder class action  suit
for  primarily  Company  issued equity in fiscal  1996  leaves  the
Company with no litigation pending as of this report.

In   August   1995,  the  Company  announced  plans  to   begin   a
diversification plan into the retail video store industry.  Several
acquisition  transactions  were closed during  the  first  half  of
fiscal  year  1996, however, these acquisitions were later  unwound
due  to the unavailability of debt financing during the second half
of fiscal year 1996.

The  Company still intends to enter the retail video store industry
and continues to hold discussions with video store chain owners who
desire to work with the Company to build a new publicly held chain.
The  Company is reevaluating its pricing model as well  as  seeking
alternative  financing  for  its  acquisition  plans,  taking  into
account  the current conditions in the retail video store industry.
The  Company is currently in negotiations to acquire a new platform
video  store  chain  to  serve  as  a  base  for  its  video  store
operations.   Of  course,  no assurance can  be  given  as  to  the
ultimate  acceptance  of  the Company's  acquisition  strategy  and
financing structure by the market place.

The   Company's  distribution  agreement  with  Republic   Pictures
covering  Happily  Ever After (HEA) expired in October  1996.   The
television  distribution agreement of HEA previously reported  with
Seagull Entertainment was canceled as of June 30, 1996 for lack  of
performance.  The Company is currently in negotiations with another
distributor  for  both  TV  and  video  rights  of  this  property.
Additionally, the Company is currently in negotiations  to  produce
several  new animated features similar to HEA for direct  to  video
release.   However, these productions will call for the Company  to
raise  significant  additional capital, the availability  of  which
cannot be assured.

In  September  1996, the Company announced that it had  exclusively
optioned  the screenplay "Chicago Blues" from a local screenwriter.
Financing  for  this live action feature is budgeted at  $1,000,000
and  will  be  offered via the formation of Windy City Pictures  I,
LLC.   The  Company will serve as executive producer of this  movie
and  intends  to produce two to three such productions  a  year  in
Chicago.   However, no assurance can be given that the funding  for
this project or additional movies will be available.

The Company continues to aggressively seek additional opportunities
in the animation, live action movies and retail video store arenas.

                                                                   

                              Item 2.
                First National Entertainment Corp.
        MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
                OPERATIONS AND FINANCIAL CONDITION

Overview

       First  National  Film  Corp.  was  founded  to  pursue   the
acquisition,   distribution,  and   marketing   of   high   quality
entertainment properties targeted at the family market in all forms
of  media.  The Company left the development stage and entered  the
operational  stage in 1993 concurrent with the national  theatrical
release  of its animated motion picture Happily Ever After and  the
resultant generation of revenues.

      The  Company initiates the recognition of revenues  from  its
entertainment properties when it releases them for sale into  their
primary   and/or  secondary  markets.  Revenue  recognition   often
precedes  revenue collection due to substantial collection  cycles,
which   are   common  for  the  entertainment  industry.   Extended
collection  periods could adversely affect the Company's liquidity.
Revenues and results of operations for any period are significantly
dependent upon the public acceptance of the Company's entertainment
properties  and  products, and, as such, may  materially  fluctuate
from  period  to period, and may not be indicative  of  results  in
future periods.

      For  theatrical, video, merchandising, television, and  other
film-related   revenues,  the  Company  uses  the  individual-film-
forecast  computation  method  as promulgated  under  Statement  of
Financial  Accounting  Standards No.  53,  Financial  Reporting  by
Producers  and  Distributors of Motion Picture  Films.  Under  this
method,  film costs for each period are amortized in proportion  to
the  revenue earned in the current period, relative to management's
estimate of the total revenue to be realized from all markets for a
given film over its commercial life. Film costs include acquisition
costs, distribution costs, print and certain advertising costs, and
all  other related exploitation costs which benefit future periods.
Management  reviews  its  total  revenue  estimates  for  its  film
properties  on  a  regular basis, which may result  in  changes  of
projections of film revenues, costs, and rate of cost amortization.
Net  income  for  any  period  may therefore  be  affected  by  the
Company's revenue projections and amortization of film costs.

      The  Company's unamortized film costs associated with Happily
Ever  After  totaled approximately $2.65 million at  September  30,
1996.   To  date, the Company has amortized over 75% of  its  total
capitalized  costs for this film, the majority of which  have  been
matched  against  home  video producer royalties  earned  from  the
Company's Republic contract.

     For future album, soundtrack, merchandising, publishing, music
video, and mechanical revenues, the Company will use the accounting
standards  provided  for  in FAS 50.  Under  these  standards,  the
Company  will  recognize  license fee  revenues  when  the  earning
process is complete and minimum guaranteed revenues are earned. The
Company  will  record  advance royalty payments  to  its  recording
artists  as  an  asset  when paid and as an expense  when  actually
earned by the artists, provided it is reasonable to consider  these
costs will be recoupable by the Company. The cost of record masters
which are reasonably considered to be recoupable will be treated as
an asset of the Company.

Results of Operations

The  Company  recorded revenues of $103,579 from operations  during
its  first  fiscal  quarter of 1996 ended September  30,  1996,  as
compared  to  $30,000 in the comparable period of the prior  fiscal
year.   Both  current year and prior year sales were  derived  from
sales  of  the  Company's home video version of  its  feature  film
property  Happily  Ever After.  Current year and prior  sales  were
estimated  based on information from Republic Pictures.   Since  no
accounting  statements were furnished to the Company from  Republic
Pictures  for  the  prior  year (as required  by  the  distribution
agreement),  the  Company has had to make its  estimates  based  on
verbal  conversations  with  Republic  Pictures.   Current  quarter
revenue  figures are based only on the units sold reports  provided
by Republic (See Note 4 - Accounts Receivable.)

Amortized  film  costs and marketing, selling and  royalty  expense
associated  with  the  first quarter's revenues  were  $51,790  and
$18,826 respectively as compared to $14,961 and $5,453 respectively
in  the  comparable  period  of fiscal 1995.  Amortized  costs  are
related  to the aforementioned revenues earned in the first  fiscal
quarter of 1996 and 1995 of the home video release of Happily  Ever
After.   To  date,  the  Company has amortized  approximately  $7.9
million  or  75%  of its total capitalized costs  of  Happily  Ever
After.

Operating  expenses totaled $216,924 during the first  quarter,  as
compared to $207,841 in the comparable quarter of the prior  fiscal
year.  General  and  administrative  (G&A)  expenses  decreased  to
$198,098  in  the current quarter from $202,388 in  the  comparable
quarter  of  the  prior fiscal year. The majority  of  the  current
quarter's  G&A expenses were due to a full provision  for  doubtful
accounts  of  the  entire  amount of  the  period's  revenue.   The
previous year's quarterly G&A expenses consisted mostly of  payroll
costs, legal fees and other professional fees.

The Company had a net loss of ($165,135) or ($.01) per share during
the  first  quarter ended September 30, 1996, as  compared  to  net
income of $ 232,191 or $.02 per share in the comparable quarter  of
the  previous fiscal year.  However, during the comparable  quarter
of  the prior year, the Company had sold its office furnishings and
fixtures as well as its office equipment to a former officer of the
Company  for  $550,000  and  recognized  a  gain  on  the  sale  of
approximately $450,000.

Liquidity and Capital Resources

At September 30, 1996, the Company had cash and cash equivalents of
$38,967   and   net  accounts  receivable  of  $26,945.    Accounts
receivable  are  comprised of amounts due from  American  Softworks
Corporation for Happily Ever After video game sales.   The  Company
had  additional accounts receivable of $1,705,521 which are totally
reserved for by an allowance for doubtful accounts related  to  its
distribution  agreement  with Republic.  (See  Note  4  -  Accounts
Receivable.)

The  Company had $2,897,676 in total assets and $501,528  in  total
liabilities  at the end of its first fiscal quarter  of  1996.  The
majority  of  the  Company's assets are  comprised  of  capitalized
inventory  costs  for  Happily Ever After.  The  Company  plans  to
amortize  its  capitalized inventory costs against future  revenues
from  this  property, although there can be no assurance  that  the
Company will be able to generate sufficient revenues to realize its
complete investment in this property.

On  October  6, 1996 the Company's Board of Directors approved  and
issued  an Extension and Optional New Pricing Offer to the  holders
of  Warrants  from  its  Private  Placement  of  1,260,000  of  the
Company's common stock in December 1995.  These 1,260,000  Warrants
originally  entitled  the holders to purchase an  additional  share
each  of the Company's common stock at a price of $1.00 through  an
expiration  date of December 15, 1997.  The Extension and  Optional
New  Pricing  Offer  allows an extension at the  same  price  until
December  31, 1998 for no additional consideration OR an  extension
until  December  31, 1999 at a share price of $.15  for  additional
consideration  of $.05 per Warrant OR an extension  until  December
31,  2000 at a share price of $.05 for additional consideration  of
$.10 per Warrant.

The Company contiues to seek additional funding in order to provide
for its operating expenses as well as capital needed for the
various projects it is pursuing (See Note 5 - Continuing
Operations.)



                    Part II - OTHER INFORMATION
                                 
             Item 6.  Exhibits and Reports on Form 8-K

(a)  Exhibits

     (27) Financial Data Schedule

(b)  Reports on Form 8-K

     No reports on Form 8-K were filed by the Company during the
quarter ended September 30, 1996.
                              Item 6.
                            Exhibit 27
                      Financial Data Schedule
                        September 30, 1996
                                 
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
 FIRST NATIONAL ENTERTAINMENT CORP'S., BALANCE SHEET AT SEPTEMBER
   30, 1996 AND STATEMENTS OF OPERATIONS FOR THREE MONTHS ENDED
                        SEPTEMBER 30, 1996.

                          Three Months
                          (Unaudited)

Article                     5
Period-Type                 3 mos.
Fiscal-Year-End             Jun-30-1997
Period-End                  Sep-30-1996
Cash                        38,967
Securities                  ---
Receivables                 26,945
Allowances                  ---
Inventory                   ---
Current-Assets              75,426
PP&E                        41,470
Depreciation                594
Total-Assets                2,822,250
Current Liabilities         501,528
Bonds                       ---
Preferred-Mandatory         ---
Preferred                   ---
Common                      84,495
Other-Securities            ---
Total Liabilities and       2,897,676
Equity
Sales                       103,579
Total Revenue               103,579
CGS                         51,790
Total Costs                 268,714
Other-Expenses              ---
Loss Provision              ---
Interest-Expense            ---
Income-Pretax               ---
Income-Tax                  ---
Income-Continuing           ---
Discontinued                ---
Extraordinary               ---
Changes                     ---
Net Income                  (165,135)
EPS-Primary                 (.01)
EPS-Diluted                 (.01)
                            





                                 SIGNATURE


Pursuant  to  the  requirements 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.


                              First National Entertainment Corp.




Dated: November 22, 1996


                              /s/ Stephen J. Denari
                              Stephen J. Denari
                              President




                            SIGNATURE


Pursuant  to  the  requirements 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.


                              First National Entertainment Corp.



Dated:  November 22, 1996      By:


                               _____________________________
                               Stephen J. Denari
                               President