<PAGE>   1
                       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 MARCH 31, 1999

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.)


              477 E. BUTTERFIELD ROAD, SUITE 307, LOMBARD, IL 60148
              -----------------------------------------------------
                    (Address of principal executive offices)


                                 (630) 971-9924
              ----------------------------------------------------
              (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 March 31, 1999 the registrant had outstanding 18,637,458 shares of its
$.005 par value Common Stock.


<PAGE>   2


                                      INDEX



                         Part I - Financial Information

<TABLE>
<CAPTION>

                                                                                         Page

<S>               <C>                                                                    <C>
Item 1            Consolidated Balance Sheets.........................................    3

                  Consolidated Statements of Income...................................    5

                  Consolidated Statements of Cash Flow................................    6

                  Notes to Consolidated Financial Statements..........................    7

Item 2            Management's Discussion and Analysis of Financial Conditions
                  and Results of Operations...........................................   12


                   Part II - Other Information and Signatures


Item 5            Other Information...................................................   13

Item 6            Exhibits and Reports on Form 8-K....................................   13

</TABLE>



                                       2


<PAGE>   3



PART 1 - FINANCIAL INFORMATION
ITEM 1.  FINANCIAL STATEMENTS

FIRST NATIONAL ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------

March 31,                                       1999         1998

--------------------------------------------------------------------------------
<S>                                       <C>          <C>       
ASSETS

Current Assets
  Cash                                    $  190,720   $   49,158
  Cash Escrow Account                           --        500,000
  Accounts receivable, net of allowance      874,637       47,121
  Loans Receivable, net of allowance       3,146,267    1,610,631
  Interest Receivable                        128,237      226,596
  Inventories, net of allowance              132,333           --
  Other                                       40,639        4,881

--------------------------------------------------------------------------------
Total Current Assets                       4,512,833    2,438,387

--------------------------------------------------------------------------------

Real Estate held for development               9,000      550,000

Property and equipment, net                  194,471       76,761

Other Assets
  Film inventory                              10,000       10,000
  Intangible assets, net                       6,325            0
  Franchise Rights                              --            186
  Security Deposits                              900         --
  Licenses                                      --        150,000

--------------------------------------------------------------------------------

Total Other Assets                            17,225      160,186

--------------------------------------------------------------------------------


TOTAL ASSETS                              $4,733,529   $3,225,334

================================================================================

</TABLE>


See accompanying notes to consolidated financial statements.



                                       3
<PAGE>   4


FIRST NATIONAL ENTERTAINMENT CORP.AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------

March  31,                                          1999             1998

--------------------------------------------------------------------------------
<S>                                            <C>             <C>       
LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
  Short term debt                              $  2,650,623    $       --
  Accounts payable                                  164,504         276,732
  Note Payable                                            0               0
  Accrued expenses                                  496,929         681,641

--------------------------------------------------------------------------------

Total Current Liabilities                         3,312,056         958,373

--------------------------------------------------------------------------------

Minority interest in consolidated subsidiary      2,788,968       2,788,968

Shareholders' Equity
  Preferred stock, $.0001 par value,
  authorized 10,000,000 shares,
  no shares issued and outstanding                     --               186

  Common stock, $.005 par value,
  authorized 100,000,000 shares,
  issued and outstanding:
    1999,  18,637,458 shares
    1998,  18,672,458 shares                         92,690          93,365
  Dividends payable                                 (76,562)       (153,646)
  Paid in capital                                27,258,241      27,271,566
  Accumulated deficit                           (28,641,864)    (27,733,478)

--------------------------------------------------------------------------------
Total Shareholders' Equity                       (1,367,495)       (522,007)

================================================================================
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY                           $  4,733,529    $  3,225,334

================================================================================

</TABLE>

See accompanying notes to consolidated financial statements.



                                       4
<PAGE>   5


FIRST NATIONAL ENTERTAINMENT CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------

For the three months ended March 31,        1999            1998
--------------------------------------------------------------------------------
<S>                                    <C>             <C>         
TOTAL REVENUES                         $    673,287    $    166,325

COST OF REVENUES
  Video Rental Purchases & Wages            204,089               0
--------------------------------------------------------------------------------

GROSS PROFIT (LOSS)                         469,198         166,325
--------------------------------------------------------------------------------

 OPERATING EXPENSES
  Marketing, selling & royalties                  0               0
  General and administrative                574,963         122,229
--------------------------------------------------------------------------------

TOTAL OPERATING EXPENSES                    574,963         122,229

OPERATING INCOME (LOSS)                    (105,765)         44,096
--------------------------------------------------------------------------------
OTHER INCOME (EXPENSE)                        2,935           1,486
--------------------------------------------------------------------------------

NET INCOME (LOSS)                      $   (102,830)   $     45,582

================================================================================

NET GAIN (LOSS) PER SHARE              $       (.01)   $        .00

================================================================================

Weighted average shares outstanding      18,637,458      18,672,458

================================================================================
</TABLE>


See accompanying notes to consolidated financial statements.


                                       5
<PAGE>   6


--------------------------------------------------------------------------------
FIRST NATIONAL ENTERTAINMENT CORP.AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

--------------------------------------------------------------------------------

For the three months ended March 31,                        1999         1998

--------------------------------------------------------------------------------
<TABLE>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                      <C>          <C>      

    Net income (loss)                                    $(102,832)   $  45,582

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

    Other amortization, depreciation, write-offs            16,643          886
    Provision for loan losses                               28,669        6,000
    Changes in operating assets and liabilities, net       124,442      (68,462)
--------------------------------------------------------------------------------

NET CASH (USED IN) OPERATING ACTIVITIES                    169,754      (15,994)

CASH FLOWS FROM INVESTING ACTIVITIES:

    Acquisition of property, equipment
    and leasehold impr.                                    (89,958)        --
--------------------------------------------------------------------------------

NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES                                       (89,958)        --

CASH FLOWS FROM FINANCING ACTIVITIES:

    Loans (repayment) from/to shareholder                  116,713         --
    Principal payments on notes                            (68,740)        --
    Notes Receivable                                       (41,638)        --
    Proceeds from borrowings on notes                      100,000         --
    Dividends paid on preferred stock 
    of subsidiary                                          (76,562)    (153,646)

--------------------------------------------------------------------------------

NET CASH (USED IN) FINANCING ACTIVITIES                     29,773     (153,646)

NET INCREASE/(DECREASE) IN CASH                              6,737     (169,640)

CASH - BEGINNING OF PERIOD                                 183,983      218,798

--------------------------------------------------------------------------------

CASH - END OF PERIOD                                     $ 190,720    $  49,158
================================================================================
</TABLE>
See accompanying notes to consolidated financial statements.



                                       6
<PAGE>   7

FIRST NATIONAL ENTERTAINMENT CORP. AND SUBSIDIARIES
  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)\
  March 31, 1999



--------------------------------------------------------------------------------
NOTE 1  GENERAL

--------------------------------------------------------------------------------

In the opinion of the Company, the accompanying consolidated financial
statements contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position as of March 31,
1999 (unaudited) and the unaudited results of operations and cash flows for the
three months ended March 31, 1998. The financial statements have been prepared
in accordance with the requirements of Form 10-QSB and consequently do not
include all the disclosures normally made in an Annual Report on Form 10-KSB.
Accordingly, the consolidated financial statements included herein should be
reviewed in conjunction with the financial statements and the footnotes thereto
included in the Company's December 31, 1998 Annual Report on Form 10-KSB.

The results of operations for the three months ended March 31, 1999 and 1998 are
not necessarily indicative of the results to be expected for the full year.

--------------------------------------------------------------------------------

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

--------------------------------------------------------------------------------

Principles of Consolidation: The consolidated financial statements include the
accounts of First National Entertainment Corp. (a Colorado corporation) and its
subsidiaries, Equator Entertainment, First National Finance Corp., and First
National Video Corp. (collectively referred to as the "Company"). All
significant intercompany accounts and transactions have been eliminated in
consolidation.

The accompanying consolidated financial statements have been prepared in
conformity with generally accepted accounting principles. 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 date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

Fiscal Year Change: Effective January 1, 1998, the Company changed its fiscal
year-end of June 30 to a year-end of December 31. The six-month transition
period bridges the gap between the Company's old and new fiscal year end.

Inventories: Inventories, consisting primarily of prerecorded videocassettes,
concessions, and other accessories held for resale, are stated at the lower of
cost or market. Cost of sales is determined on a first-in, first-out basis
("FIFO"). Videocassette rental inventory, which includes video games, is stated
at cost and amortized over its estimated useful life to a $4 per videocassette
salvage value. See Note 4 for discussion of the amortization policy applied to
videocassette rental inventory.

Cash and Cash Equivalents: For purposes of the statement of cash flows, the
Company considers all investments with maturities of three months or less, when
purchased, to be cash equivalents.

Loans Receivable: Loans are stated net of the allowance for loan losses and
unearned discount. Interest on loans is included in operating revenues over the
term of the loan based upon the principal balance outstanding. Where serious
doubt exists as to the collectibility of a loan, the accrual of interest in
discontinued. Loan fees and direct loan origination costs are deferred and
amortized over the term of the loan as a yield adjustment.



                                       7
<PAGE>   8

The Company has a reserve for unfunded restoration costs which it holds in
escrow. Payments are made from time to time as work is completed and
documentation is presented to a title company for approval. Funds are disbursed
upon a directive from the title company.

Allowance for Loan Losses: An allowance for loan losses has been established to
provide for those loans which may not be repaid in their entirety. The allowance
is increased by provisions for loan losses charged to expense and decreased by
charge-offs, net of recoveries. Although a loan is charged off by management
when deemed uncollectible, collection efforts may continue and future recoveries
may occur.

The allowance is maintained by management at a level considered adequate to
cover losses that are currently anticipated based on past loss experience,
general economic conditions, information about specific borrower situations
(including their financial position and collateral values) and other factors and
estimates which are subject to change over time. Estimating the risk of loss and
the amount of loss on any loan is necessarily subjective and ultimate losses may
vary from current estimates. These estimates are reviewed periodically, and as
adjustments become necessary, they are reported in earnings in the periods in
which they become known.

Loans are considered impaired if full principal or interest payments are not
anticipated. Each impaired loan is carried at the present value of expected cash
flows discounted at the loan's effective interest rate or at the fair value of
the collateral if the loan is collateral dependent. A portion of the allowance
for loan losses is allocated to an impaired loan if the present value of cash
flows or collateral value indicate the need for an allowance.

For impaired loans and other loans, accrual of interest is discontinued on a
loan when management believes, after considering collection efforts and other
factors, that the borrower's financial condition is such that collection of
interest is doubtful. Cash collections on impaired loans are credited to the
loan receivable balance, and no interest income is recognized on those loans
until the principal balance has been collected.

Property, Plant, and Equipment: Property, plant, and equipment are recorded at
cost. Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, generally 3 to 7 years.

Financial Instruments: The Company's financial instruments consist principally
of loans receivable and notes payable and are carried at amounts which
approximate fair value.

Stock-Based Compensation: On October 23, 1995, the Financial Accounting
Standards Board (the "FASB") issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 encourages, but does not require, the recognition of
compensation expense for grants of stock, stock options, and other equity
instruments to employees based on a fair value method of accounting. Companies
are permitted to continue to apply the existing accounting rules contained in
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees" ("APBO No. 25"); however, companies that choose to retain this method
of accounting are required to provide expanded disclosures of pro forma net
income and earnings per share in the notes to financial statements as if the new
fair value method of accounting had been adopted. The Company has elected to
continue to apply the accounting principles contained in APBO No. 25.

Income Taxes: The Company accounts for income taxes using the deferred asset and
liability method as required by SFAS No. 109, "Accounting for Income Taxes."
Deferred income taxes are provided as temporary differences arise between the
basis of asset and liabilities for financial reporting and income tax reporting.

Earnings/(Loss) Per Share: Earnings per common share (EPS) is computed under the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings Per
Share," which was adopted retroactively by the Company at December 31, 1997.
Basic earnings/(loss) per common share is computed by dividing net income/(loss)
available to common shareholders by the weighted average number of common shares
outstanding during the period. Since the Company has experienced net operating
losses, the outstanding options and warrants to purchase common stock have an
anti-dilutive effect. Therefore, options and warrants were not included in
computing dilutive earnings/(loss) per share.



                                       8
<PAGE>   9

Reclassification: Certain amounts in the financial statements for the six-month
period ended December 31, 1997 and the year ended June 30, 1997 have been
reclassified to conform to the 1998 presentation.


--------------------------------------------------------------------------------

NOTE 3  NOTES RECEIVABLE

--------------------------------------------------------------------------------

<TABLE>
<CAPTION>
                                                                  March  31,
                                                            --------------------
                                                              1999       1998
                                                            --------   ---------
<S>                                                         <C>        <C>     
Advances to a factoring company, which are convertible to
an equity interest in 1999. The note is collaterized by
the assignment of certain accounts receivable under a
factoring agreement                                         $623,637   $     --

10% note due January 1, 2000, convertible to a 21%
ownership in a travel company at the option of the
Company's management                                         125,000         --

10% note due November 1, 1999.  Note is secured by real
estate.                                                      126,000         --
                                                            --------   ---------

                                                            $874,637   $     --
</TABLE>


--------------------------------------------------------------------------------

NOTE 4  VIDEOCASSETTE RENTAL INVENTORY

--------------------------------------------------------------------------------

The Company amortizes its videocassette rental inventory on an accelerated
method. Under this method, videocassette rental inventory, which includes video
games, is stated at cost and amortized, beginning on the date the videocassettes
are placed into service, to its salvage value ($4 per videocassette) over an
estimated useful life of 36 months. All copies of new release videocassettes are
amortized on an accelerated bases during their first three months to an average
net book value of $8 and then on a straight-line basis to their salvage value of
$4 over the next 33 months.


--------------------------------------------------------------------------------

NOTE 5  AMORTIZATION OF FILM INVENTORY

--------------------------------------------------------------------------------

The Company's film inventory consists of the unamortized film costs for Happily
Ever After allocated to the secondary market.

Amortization of capitalized film property costs is computed using the
individual-film-forecast computation method as promulgated under SFAS No. 53,
"Financial Reporting by Producers and Distributors of Motion Picture Films". At
June 30, 1996, the Company intended to amortize the remaining unamortized film
costs for its Happily Ever After property over the next five years, subject to
future market conditions altering this accounting estimate. The Company's
computation of net realizable value as of June 30, 1997 resulted in a
significant change in the amount of unamortized costs permitted to be charged to
future operations. Accordingly, a charge of $2,200,000 is reflected in the
statement of operations for the year ended June 30, 1997 to reflect the
writedown of film property costs to their estimated net



                                       9
<PAGE>   10

realizable value. At December 31, 1997, an additional review and analysis of the
film's net realizable value resulted in a charge to income of $490,000.


--------------------------------------------------------------------------------

NOTE 6  LEASEHOLD IMPROVEMENTS AND EQUIPMENT

--------------------------------------------------------------------------------


Leasehold improvements and equipment consisted of the following at March 31,
1999 and 1998:


<TABLE>
<CAPTION>
                                        1999       1998
                                      --------   --------
<S>                                   <C>        <C>   
Leasehold improvements                $ 79,439   $   --
 Office equipment                      138,551     32,434
 Furniture and fixtures                 27,377     13,680
 Automobile                               --       38,425
                                      --------   --------
                                       245,367     84,539
      Less accumulated depreciation     50,896      7,778
                                      --------   --------
       Net property and equipment     $194,471   $ 76,761
                                      ========   ========
</TABLE>


--------------------------------------------------------------------------------

NOTE 7  SHAREHOLDERS' EQUITY

--------------------------------------------------------------------------------

Preferred Stock: The Company has authorized the issuance of 10,000,000 shares of
$.0001 par value preferred stock. At December 31, 1998, the Company had not
issued any preferred shares.

Common Stock: During the periods ended December 31, 1998 and 1997, respectively,
the Company issued 600,000 and 274,000 shares for employee compensation and
professional fees valued at $6,000 and $5,480.

In the second quarter of 1996, the Company initiated an equity restructuring
program in which the Company issued 1,260,000 shares of its common stock (par
value $.005) along with warrants to purchase an additional 1,260,000 shares of
its common stock (par value $.005) at $1 share. Total proceeds from the offering
amounted to $830,000. On October 6, 1996, the Company's Board of Directors
approved and issued an Extension and Optional New Pricing Offer to the holders
of these warrants. 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
through an expiration date of December 15, 1997. The Extension and Optional New
Pricing Offer allows 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. During the year ended June 30, 1997, warrants for 800,000 shares
were extended to December 31, 1999 and warrants for 200,000 shares were extended
to December 31, 2000. Additional paid-in capital of $60,000 was received from
these transactions for the period ended June 30, 1997. During 1998, certain
warrants previously issued in the six-month period ended December 31, 1998 were
canceled and cash of $20,000 was returned. During 1998, 100,000 warrants were
issued as part of a compensation agreement. The warrants are convertible to
common stock at twenty-five cents a share. There were 13,660,000 warrants
outstanding at December 31, 1998.

Rentrak, Inc. of Portland, Oregon is a large distributor of videocassettes on a
pay-per-view basis nationally. On December 22, 1995, the Company and Rentrak
entered into a ten-year agreement whereby Rentrak purchased 357,143 



                                       10
<PAGE>   11

shares of common stock for $200,000. Rentrak has also agreed to acquire an
additional $10,000 of common stock for each new non-Rentrak video store acquired
by the Company. No new stores have been acquired as of December 31, 1998.

Stock Options: On May 21, 1993, shareholders approved an incentive stock plan
which reserved 3,500,000 shares of the Company's common stock for issuance under
the 1993 Incentive Stock Option Plan ("ISO") and the 1993 Non-Qualified Stock
Option Plan ("NQSO") (collectively referred to as the "1993 Plan"). The 1993
Plan provides incentives to officers, directors, employees, consultants, and
advisors in the form of stock options, subject to certain restrictions. The
Company's Board of Directors determines the granting of options under the 1993
Plan, including the exercise period, contingencies, vesting periods, and
employee qualifications. Options to be issued under the ISO are intended to
qualify as "incentive stock options" under Section 422 of the 1986 Internal
Revenue Code (the "Code"), as amended. Options granted under the NQSO are
subject to fewer restrictions than the ISO and are considered "Non-Statutory
Stock Options" as defined in the Code. As of December 31, 1997, 25,000 options
had been issued under the 1993 Plan. These options were issued in August 1993 at
the exercise price of $1.53 per share. All of the outstanding options were
exercisable at December 31, 1998. No options were exercised during the year
ended December 31, 1998, the six months ended December 31, 1997, or the year
ended June 30, 1997.

Employee Stock Purchase Plan: The Company implemented an Employee Stock Purchase
Plan in 1994 which permits substantially all employees to acquire Company common
stock. Participating employees may acquire stock at the end of each six-month
period (June 30 and December 31 of each year) at a purchase price of 85% of the
lower of fair market value at the beginning or end of the period. Employees may
designate up to 10% of their base compensation for the purchase of stock under
this plan. There are no charges to income in connection with this plan.


--------------------------------------------------------------------------------

NOTE 8  LEASES

--------------------------------------------------------------------------------

The Company occupies certain office facilities and video stores under operating
lease arrangements. Under terms of the leases, the Company is responsible for
real estate taxes, insurance, and maintenance costs on the facilities. Total
rent expense under such arrangements was approximately $278,000, $35,000, and
$17,000 for the year ended December 31, 1998, the six months ended December 31,
1997, and the year ended June 30, 1997, respectively. The leases expire from
1999 through 2003.

Future minimum payments under noncancelable leases as of December 31, 1998 are
as follows:


<TABLE>
<S>                     <C>         
      1999              $    308,870
      2000                   264,751
      2001                   251,142
      2002                   214,440
      2003                   180,870
                        ------------

                        $  1,220,073
                        ============

</TABLE>




                                       11
<PAGE>   12



                                     ITEM 2.
               FIRST NATIONAL ENTERTAINMENT CORP.AND SUBSIDIARIES
               MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
                       OPERATIONS AND FINANCIAL CONDITION

OVERVIEW

The Corporation's revenues were obtained during the quarter from First National
Finance Corp. ("FNFC") and its subsidiary Prairie Business Credit, Inc. ("PBCI")
and Windy City Video stores. The significant increase was due to the purchase of
the video stores in the second quarter of 1998.

The Corporation expects PBCI revenues to increase during the second half of the
year as funding will be in place to support an expansion of its Accounts
Receivable factoring business.

Newly formed Equator Entertainment had no revenue and does not anticipate a
revenue stream until late 1999.

LIQUIDITY AND CAPITAL RESOURCES

At March 31, 1999 the Corporation had cash of $190,720 as compared to $49,158
for the same period in 1998. Due to timing on certain loan fees and interest
loans were obtained from a shareholder and officer in the amount of $116,713. At
the same time the bank term loan was increased by $100,000. Accounts Receivable
primarily in factoring decreased to $874,637 and loans receivable increased to
$3,146,267 due to increased business loan activity of FNFC.

Net Cash flow from operating activities increased over the prior year by
$185,748. Added to net cash provided by Investing and Financing activities
resulted in an increase of $6,737 of cash for the period versus ($169,640) for
the same period in the prior year.

FINANCING ACTIVITIES

Management believes its working capital and existing credit availability will be
adequate to meet its operating requirements for the foreseeable future. The
Corporation is attempting to establish a line of credit to optimize growth
opportunities in it's PBCI subsidiary.


RESULTS OF OPERATIONS - Three months Ended March 31, 1999 compared to Three
Months Ended March 31, 1998.

Revenues increased to $673,287 with increased activity in business loans, video
store rentals and sales and factoring activity. This amount compared to the 1998
amount of $166,325.

Cost of Revenues relating to the video stores amounted to $204,089 in 1999
versus $-0- in 1998.

Operating Costs and Expenses. Operating expenses amounted to $574,963 compared
to $122,229. The significant increase was attributable to Equator with
additional key personnel and video and PBCI.

Net (loss) of ($102,830) can be attributed to certain timing on repayment of
business loans and start up costs in Equator Entertainment. Earnings per share
were dilutive.

TAXES ON INCOME

Taxes on income are zero due to the cumulative net operating loss carryforwards
of approximately $28.0 million at March 31, 1999, for federal tax reporting
purposes. The net operating loss carryforwards expire in varying amounts
beginning in the year 2000.





                                       12
<PAGE>   13

"Forward looking statements" as defined in the Private Securities Litigation
Reform Act of 1995 may be included in this report. A variety of factors could
cause the Corporation's actual results to differ from the reported results
expressed in such forward looking statements. Investors are referred to the
Corporations' most recent 10K.


                           PART II - OTHER INFORMATION

                           ITEM 5 - OTHER INFORMATION

                                      NONE

                    ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)      Exhibits

         (27)     Financial Data Schedule

(b)      Reports on Form 8-K

        During the Quarter ended March 31, 1999 the company filed an 8K dated
February 4, 1999 which, under Item 2 the Board of First National Entertainment
Corp. approved the acquisition of the assets and name of Prairie Business
Credit, Inc.

        This company will be a subsidiary of First National Finance Corp. Mr.
Trevor Morgan was appointed President and will lead the company in the business
of accounts receivable financing.

        Also, the Board of FNAT created a new wholly owned subsidiary of FNAT,
Equator Entertainment, Inc. ("EEI") and it in turn acquired the assets of PK
Productions located in the Los Angeles area.

        Mr. Peter Keefe was installed as President of EEI. Joining Mr. Keefe is
Mr. Regis Brown as Senior Vice President of Worldwide Marketing.

       Equator Entertainment is in the business of creating, producing and
distributing world class quality children's television program series. Equator
also anticipates to be involved in market related licensing applications from
toys to books

       Item 6. Mr. Peter Keefe received Board approval to become a director of
First National Entertainment Corp. retroactive to July 1, 1998.



                                       13
<PAGE>   14
                                    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:  May 14, 1999                       /s/ Charles E. Nootens 
      ----------------                     -----------------------
                                           Charles E. Nootens
                                           President



                                       14