<PAGE>

                       U.S. SECURITIES AND EXCHANGE COMMISSION
                                           
                                Washington, D.C. 20549
                                             
                               _________________________
     
                                     FORM 10-QSB

(Mark One)

/X/  Quarterly report under Section 13 or 15 (d) of the Securities Exchange Act
     of 1934

     For the quarterly period ended  September  30, 1997

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

     For the transition period from  _____________ to _____________

     Commission file number 0-17001

                                           
                          Choices Entertainment Corporation
________________________________________________________________________________
          (Exact Name of Small Business Issuer as Specified in Its Charter) 
                                           
         Delaware                                    52-1529536
_______________________________          _______________________________________
(State or Other Jurisdiction of          (I.R.S. Employer Identification No.)
Incorporation or Organization)

1930 E. Marlton Pike, Cherry Hill, New Jersey          08003
_____________________________________________         _________
(Address of Principal Executive Offices)              (Zip code)

Issuer's Telephone Number, Including Area Code         (609) 751-4148
                                                       ______________

           836 W. Trenton Avenue, Morrisville, Pennsylvania 19067
________________________________________________________________________________
(Former Name, Former Address and Former Fiscal Year, if Changed Since last 
  Report)

        Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days. 
                                           
Yes  X  No 
   _____  _____                                           
               
    State the number of shares outstanding of the issuer's Common Stock, as of
November 12, 1997: 22,004,395
                                           
    Transitional Small Business Disclosure Format (check one):

                                       Yes ____   No __X__

<PAGE>
Part I: FINANCIAL INFORMATION
Item 1. Financial Statements
 
                       CHOICES ENTERTAINMENT CORPORATION
                                 BALANCE SHEETS
 
<TABLE>
<CAPTION>
                                                                             SEPTEMBER 30, 1997  DECEMBER 31, 1996
                                                                             ------------------  -----------------
<S>                                                                          <C>                 <C>
                                                                                (UNAUDITED)          (AUDITED)
                                                                                                 -----------------
ASSETS
Current assets:
  Cash.....................................................................    $      203,073      $      66,739
  Cash held in escrow (Notes 3 and 4)......................................           162,000
  Accounts receivable......................................................            16,858
  Prepaid expenses.........................................................            17,630             20,842
  Other deferred costs.....................................................             1,077             30,453
                                                                             ------------------  -----------------
    Total current assets...................................................           400,638            118,034
Cash held in escrow (Notes 3 and 4)........................................            81,000
Equipment, net.............................................................             3,873
Other assets...............................................................               675              7,400
Net assets of discontinued business (Note 4)...............................                            1,054,425
                                                                             ------------------  -----------------
                                                                               $      486,186      $   1,179,859
                                                                             ------------------  -----------------
                                                                             ------------------  -----------------
LIABILITIES AND STOCKHOLDERS DEFICIT
Current liabilities:
  Notes payable............................................................                         $    854,000
  Accounts payable.........................................................    $       47,927             61,558
  Accrued merger and acquisition expenses..................................           353,799            425,299
  Accrued professional fees................................................           227,996            168,199
  Accrual for lease cancellation and litigation reserves...................                                1,250
  Accrued salaries.........................................................            11,960              7,500
  Other accrued expenses...................................................            10,800             80,307
  Net liabilities of discontinued business (Note 4)........................                              908,293
                                                                             ------------------  -----------------
    Total current liabilities..............................................           652,482          2,506,406
                                                                             ------------------  -----------------
Stockholders deficit:
  Preferred stock, par value $.01 per share: Authorized 5,000 shares: 109
    shares issued and outstanding in 1997 and 37.4 shares issued and
    outstanding in 1996....................................................                 1
  Common stock, par value $.01 per share: Authorized 50,000,000 shares:
    issued and outstanding 22,004,395 shares in 1997 and 1996..............           220,044            220,044
  Additional paid-in-capital...............................................        21,236,035         20,519,203
  Accumulated deficit......................................................       (21,622,376)       (22,065,794)
                                                                             ------------------  -----------------
    Total stockholders deficit.............................................          (166,296)        (1,326,547)
                                                                             ------------------  -----------------
                                                                               $      486,186      $   1,179,859
                                                                             ------------------  -----------------
                                                                             ------------------  -----------------
</TABLE>
 
                See accompanying notes to financial statements.
 

<PAGE>
                       CHOICES ENTERTAINMENT CORPORATION
                          STATEMENTS OF INCOME (LOSS)
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                  FOR THE THREE MONTHS      FOR THE NINE MONTHS
                                                                  ENDED SEPTEMBER 30,       ENDED SEPTEMBER 30,
                                                                ------------------------  -----------------------
<S>                                                             <C>          <C>          <C>         <C>
                                                                   1997         1996         1997        1996
                                                                -----------  -----------  ----------  -----------
Operating costs and expenses:
 
  Selling and administrative expenses.........................  $    71,205  $    46,960  $  157,451  $   122,194
  Professional and consulting expenses........................      214,332       57,050     340,773      156,575
  Depreciation and amortization...............................        9,953        9,792      29,537       19,584
                                                                -----------  -----------  ----------  -----------
                                                                    295,490      113,802     527,761      298,353
                                                                -----------  -----------  ----------  -----------
Other expenses:
  Interest expense, net.......................................        2,591        9,591      37,081       37,297
                                                                -----------  -----------  ----------  -----------
Loss from continuing operations...............................     (298,081)    (123,393)   (564,842)    (335,650)
                                                                -----------  -----------  ----------  -----------
Discontinued operations--Note 4
  Loss from discontinued operations...........................                   (72,171)   (303,785)    (141,740)
  Gain on sale of discontinued operations, net of tax of
    $13,092...................................................                             1,312,045
                                                                -----------  -----------  ----------  -----------
Gain (loss) from discontinued operations......................                   (72,171)  1,008,260     (141,740)
                                                                -----------  -----------  ----------  -----------
Net income (loss).............................................  $  (298,081) $  (195,564) $  443,418  $  (477,390)
                                                                -----------  -----------  ----------  -----------
                                                                -----------  -----------  ----------  -----------
Net income (loss) per share of common stock--Note 2:
                                                                -----------  -----------  ----------  -----------
                                                                -----------  -----------  ----------  -----------
  Primary income (loss) per share:
  Continuing operations.......................................  $     (0.01) $     (0.01) $    (0.03) $     (0.02)
                                                                -----------  -----------  ----------  -----------
                                                                -----------  -----------  ----------  -----------
  Discontinued operations.....................................  $      0.00  $     (0.01) $     0.05  $     (0.01)
                                                                -----------  -----------  ----------  -----------
                                                                -----------  -----------  ----------  -----------
Fully diluted income (loss) per share:
  Continuing operations.......................................  $     (0.01) $     (0.01) $    (0.02) $     (0.02)
                                                                -----------  -----------  ----------  -----------
                                                                -----------  -----------  ----------  -----------
  Discontinued operations.....................................  $      0.00  $     (0.01) $     0.04  $     (0.01)
                                                                -----------  -----------  ----------  -----------
                                                                -----------  -----------  ----------  -----------
</TABLE>
 
                See accompanying notes to financial statements.
 
<PAGE>
                       CHOICES ENTERTAINMENT CORPORATION
                       STATEMENT OF STOCKHOLDERS DEFICIT
                  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
                                  (UNAUDITED)
<TABLE>
<CAPTION>
                                                PREFERRED STOCK      COMMON STOCK       ADDITIONAL
                                                ---------------  --------------------    PAID-IN    ACCUMULATED
                                                 SHARES AMOUNT    SHARES     AMOUNT      CAPITAL      DEFICIT        Total
                                                ------- -------  ---------  ---------  -----------  ------------  -----------
<S>                                              <C>   <C>       <C>        <C>        <C>          <C>           <C>
Balance at December 31, 1996...................    37            22,004,395 $ 220,044  $20,519,203  ($22,065,794) $(1,326,547)
Issuance of preferred stock to preferred stock
  note holders in lieu of cash payment for
  interest due on notes and to the conversion
  of 5% promissory notes into preferred stock      72    $1                                716,832                    716,833
Net income for the nine months ended September
  30, 1997.....................................                                                          443,418      443,418
                                                  --- --------   ---------- ---------  ----------- -------------  -----------
                                                  109    $1      22,004,395 $ 220,044  $21,236,035 ($21,622,376)  $  (166,296)
 
                                                  --- --------   ---------- ---------  ----------- -------------  -----------
                                                  --- --------   ---------- ---------  ----------- -------------  -----------
 
 
                See accompanying notes to financial statements.
 
</TABLE>
 
<PAGE>
                       CHOICES ENTERTAINMENT CORPORATION
                            STATEMENTS OF CASH FLOWS
                                  (UNAUDITED)
 
<TABLE>
<CAPTION>
                                                                                         FOR THE NINE MONTHS
                                                                                                ENDED
                                                                                            SEPTEMBER 30,
                                                                                       ------------------------
                                                                                          1997         1996
                                                                                       -----------  -----------
<S>                                                                                    <C>          <C>
Cash flows from operating activities:
Net income (loss)....................................................................  $   443,418  $  (477,390)
                                                                                       -----------  -----------
Adjustments to reconcile net loss to net cash provided by (used in) operating
  activities:
  Depreciation and amortization......................................................      489,968      883,156
  Gain on sale of assets, net of tax (Note 4)........................................   (1,312,045)
  Cost of rental films sold..........................................................      121,342      326,222
  Loss on disposal of rental films...................................................       83,621      193,145
  Videocassette and inventory reserves...............................................        7,667       17,320
Change in assets and liabilities:
  Increase in cash held in escrow....................................................     (243,000)
  Increase in accounts receivable....................................................       (4,068)     (21,923)
  (Increase) decrease in merchandise inventories.....................................       62,584      (30,758)
  (Increase) decrease in prepaid expenses............................................       24,053      (32,087)
  Increase in other deferred costs...................................................        8,487         (204)
  Increase (decrease) in accounts payable............................................     (651,911)     265,810
  Decrease in accrued merger and acquisition expenses................................      (50,550)     (82,325)
  Increase (decrease) in accrued professional fees...................................      (40,203)      25,468
  Increase (decrease) in deferred revenue............................................      (27,797)      34,387
  Increase (decrease) in accrued salaries............................................      (43,774)      18,656
  Decrease in accrual for lease cancellation and litigation reserves.................       (1,250)     (11,250)
  Increase (decrease) in other accrued expenses......................................     (165,909)     145,344
                                                                                       -----------  -----------
Total adjustments....................................................................   (1,742,785)   1,730,961
                                                                                       -----------  -----------
Net cash provided by (used in) operating activities..................................   (1,299,367)   1,253,571
                                                                                       -----------  -----------
Cash flows from investing activities:
  Purchase of equipment, net.........................................................      (10,049)     (13,433)
  Purchase of videocassette rental films.............................................     (620,807)  (1,251,057)
  Net proceeds from sale of assets (Note 4)..........................................    2,411,507
                                                                                       -----------  -----------
Net cash provided by (used in) investing activities..................................    1,780,651   (1,264,490)
                                                                                       -----------  -----------
Cash flows from financing activities:
  Proceeds from notes payable........................................................       49,000
  Repayment of notes payable.........................................................     (393,950)      (8,530)
                                                                                       -----------  -----------
Net cash used in financing activities................................................     (344,950)      (8,530)
                                                                                       -----------  -----------
Net increase (decrease) in cash......................................................      136,334      (19,449)
Cash at beginning of period..........................................................       66,739       86,391
                                                                                       -----------  -----------
Cash at end of period................................................................  $   203,073  $    66,942
                                                                                       -----------  -----------
                                                                                       -----------  -----------
Supplementary disclosure of cash flow information:
  Cash paid during the year for interest.............................................  $    19,601  $    10,055
                                                                                       -----------  -----------
                                                                                       -----------  -----------
</TABLE>
 
                See accompanying notes to financial statements.
 


<PAGE>

                                           
                                           
                          CHOICES ENTERTAINMENT CORPORATION
                            NOTES TO FINANCIAL STATEMENTS
                                     (Unaudited)
                                           
Note 1 - Basis of Presentation And Significant Accounting Policies
                                           
         The financial information included herein for the three- month and 
nine-month periods ended September 30, 1997 and 1996 and as of September 
30,1997 are unaudited.  In addition, the financial information does not 
include all disclosures required under generally accepted accounting 
principles because certain note information has been omitted; however, such 
information reflects all adjustments which are, in the opinion of management, 
necessary for a fair statement of the results of the interim periods and such 
adjustments are of a normal recurring nature. The results of operations for 
the nine-month period ended September 30, 1997 are not necessarily indicative 
of the results to be expected for the full year.
                                           
         Reclassification of the 1996 financial statements has been made to 
conform with the presentation of the 1997 financial statements.
                                           
Note 2 - Net Income (Loss) Per Common Share
                                           
         Primary income per share for the nine-month period ended September 
30, 1997 was computed by dividing the net income by the weighted average 
number of common shares outstanding during the periods. 
                                           
         Primary  and fully diluted loss per share for the three-month and 
nine-month periods ended September 30, 1996 and for the three-month period 
ended September 30, 1997 was computed by dividing the net loss by the 
weighted average number of common shares outstanding during the period. No 
consideration was given to the conversion of preferred stock since the result 
of that calculation would be anti-dilutive. 
                                           
         Fully diluted income per share for the nine-month period ended 
September 30, 1997, was computed by dividing the net income by the weighted 
average number of common shares outstanding during the periods, as well as 
the number of common shares that would be outstanding as a result of the 
conversion of the Company's preferred stock. 

<TABLE>
                                               Three Months Ended       Nine Months Ended
                                                  September 30,            September 30,
                                                  -------------            -------------
                                                 1997        1996         1997         1996
                                             ----------   ----------   ----------   ---------

<S>                                         <C>           <C>         <C>          <C>
Number of shares used in calculation   
         Primary dilution                    22,004,000   22,004,000   22,004,000   22,004,000
                                           
          Full dilution                      22,004,000   22,004,000   23,700,000   22,004,000
                                           

</TABLE>

Note 3 - Liquidity
                                           
         As previously reported, on June 16, 1997, the Company sold 
substantially all of its assets and business to West Coast Entertainment 
Corporation, ("West Coast"). Notwithstanding the sale of its operating 
business, the Company's financial statements included herein  have been 
presented on the basis that the Company is a going concern, which 
contemplates the realization of assets and the satisfaction of liabilities in 
the normal course of business.  The Company has incurred net losses, 
aggregating $21,622,376 from inception through September 30, 1997, including 
a net loss of $868,627 for the nine months ended September 30, 1997, before a 
net gain of $1,312,045 from the sale of substantially all of the Company's 
assets to West Coast ( the "West Coast Transaction") (see Note 4 ). As of 
September 30, 1997, the Company had a net working capital deficiency of 
approximately $252,000.
                                           
         The West Coast Transaction provided $2,430,000 in cash, of which 
$243,000 remains in escrow with West Coast, and $203,000 remained available 
to the Company at September 30, 1997, after the payment of liabilities and 
other expenses. The cash available at time of closing the West Coast 
Transaction was less than anticipated because of delays in the closing of the 
West Coast Transaction during which time the Company continued to operate at 
a loss.

                                           
<PAGE>



                          CHOICES ENTERTAINMENT CORPORATION
                     NOTES TO FINANCIAL STATEMENTS - (continued)
                                     (Unaudited)
                                           
Note 3 - Liquidity - (continued)
                                           
Since September 30, 1997 and through the date of this report, the Company has 
used approximately $55,000 in cash to (i) satisfy certain liabilities, (ii) 
pay professional fees, which include those associated with existing 
litigation, (iii) maintain administrative functions (at present the Company 
only employs one person in finance and has entered into a consulting 
agreement with one other person (see below)) and (iv) identify and consider 
various alternative business opportunities. The Company expects it will 
continue in this manner for the foreseeable future. Furthermore, certain 
liabilities remain which, if paid, and certain claims against the Company 
exist which, if successfully asserted, could result in there being no cash 
remaining with which to seek alternative business opportunities. These claims 
and liabilities include but are not limited to:
                                           
Professional Fees. In connection with its now discontinued acquisition 
program, the Company incurred substantial professional fees. Of the amount 
billed, $353,799 remains unpaid to law firm retained in that connection . 
Previously, in 1994, JD Store Equipment, Inc. ("JD Store Equipment") agreed 
that, in the event its merger with the Company (the "JD Merger") was not 
consummated, JD Store Equipment would pay to the Company legal fees billed to 
the Company by the above law firm. That law firm resigned as counsel to the 
Company shortly after JD Store Equipment notified the Company that it was 
terminating the JD Merger in September 1995. Subsequently, the Company  made 
a demand for payment upon JD Store Equipment for all fees and disbursements 
in the amount of $793,281 billed to it by the law firm, of which $439,482 has 
to date been paid by the Company. To avoid the uncertainties associated with 
litigation and with collecting any judgment that may be obtained, the Company 
attempted to reach a settlement with JD Store Equipment. However, there are 
no ongoing discussions at present regarding a settlement and there is no 
assurance that any settlement will be concluded.
                                           
Shareholder Litigation.  As previously reported, on April 9, 1996, a lawsuit 
was filed against the Company and certain others, including the members of 
the then Board of Directors, in the Superior Court of California, by certain 
individuals who allegedly purchased or purchased and sold securities of the 
Company, entitled Gary N. Gibbs et al. v. Choices Entertainment Corporation 
et al., in which plaintiffs seek monetary damages against the Company and 
other defendants in the amount of $303,470, plus attorney's fees, costs of 
suit and such other relief as the Court deems just. The Company is presently 
involved in settlement negotiations with the plaintiffs. Unless the Company 
is able to conclude a settlement, as to which no assurance can be given, the 
Company intends to continue to contest the lawsuit vigorously.(See Part II 
Item 1. Legal Proceedings). Even if the Company is successful in defending 
this lawsuit or in concluding a settlement, the cost alone in professional 
fees will be substantial and material in amount. In addition, the continuing 
uncertainty associated with this lawsuit has made it difficult for the 
Company to find other business opportunities.
                                           
         The Company's 5% unsecured promissory notes (the "Notes"), in the 
principal amount of $680,000, matured on September 11, 1997, leaving the 
holders thereof with the sole remedy of converting such notes into shares of 
the Company's Series C Preferred Stock (valued at $.25 per share of Common 
Stock). The holders of $670,000 in Notes have, in accordance with the terms 
of the Notes, converted such Notes into 67 shares of the Company's Series C 
Preferred Stock. In addition, the Company elected to issue 3.6833 shares of 
its Series C Preferred Stock to the holders of the Notes, in payment of 
$36,833 of accrued interest due such noteholders in September 1997, in 
accordance with the terms of such Notes.
                                             
         Ronald W. Martignoni, the Company's President and Chief Executive 
Officer, has taken a position with an unrelated company, effective October 6, 
1997. Mr. Martignoni continues as the Company's Chairman, President and Chief 
Executive Officer, under a consulting agreement. His compensation has been 
reduced accordingly.
                                           
         The Company's viability for the foreseeable future is and will 
continue to be dependent upon its ability to successfully conclude existing 
litigation, to find other business opportunities and to secure needed 
capital. No assurance can be given that the Company will be successful in 
that regard. In the event the Company is not successful, it is unlikely that 
there would be any amounts available for distribution to the Company's 
stockholders.

<PAGE>


               
                                             
                          CHOICES ENTERTAINMENT CORPORATION
                     NOTES TO FINANCIAL STATEMENTS - (continued)
                                     (Unaudited)
                                           
                                           
Note 4 - West Coast Transaction and Discontinued Operations
                                           
         As previously reported, the Company consummated the previously 
announced sale of substantially all of its assets to West Coast on June 16, 
1997. The consideration for the assets sold consisted entirely of cash in the 
amount of $2,430,000. A substantial portion of the proceeds was used to 
reduce a portion of the Company's liabilities at closing. In addition, 
$243,000 of the proceeds was escrowed with West Coast pursuant to the terms 
of the Asset Purchase Agreement between the Company and West Coast. The 
escrowed funds will be released to the Company in three installments of 
$81,000 (plus interest) every six months over a period of eighteen months, 
subject to amounts withheld pursuant to any claims made by West Coast under 
the terms of the Escrow Agreement between the Company and West Coast.
                                           
         The Company recognized a net gain on the sale of its assets of 
approximately $1,312,000, which has been reported in discontinued operations 
on the Statements of Income (Loss)  for the nine-month period ended September 
30, 1997. Revenues for the discontinued business for the nine-month period 
ended September 30, 1997, was $2,116,000, compared to revenues for the 
discontinued business for the three-month and nine-month periods ended 
September 30, 1996, of $1,305,000 and $3,877,000, respectively.
                                             
         The assets sold in the West Coast Transaction,  net of applicable 
liabilities, have been reclassified as noncurrent assets and current 
liabilities of the discontinued business on the 1996 Balance Sheet. At 
December 31, 1996, approximately $1,054,000 related to net noncurrent assets, 
and approximately $908,000  related to net current liabilities of  the 
discontinued business. 
                                           
<PAGE>

Item 2.  Management's Discussion and Analysis of Financial Condition and Results
of Operations
                                         
         The following is Management's discussion and analysis of certain
significant factors which have affected the Company's financial condition,
changes in financial condition, and results of operations. The discussion also
includes the Company's liquidity and capital resources at September 30, 1997 and
later dated information, where practicable.
                                           
Financial Condition, Liquidity and Capital Resources
                                           
         As previously reported, on June 16, 1997, the Company sold 
substantially all of its assets and business to West Coast Entertainment 
Corporation, ("West Coast"). Notwithstanding the sale of its operating 
business, the Company's financial statements included herein  have been 
presented on the basis that the Company is a going concern, which 
contemplates the realization of assets and the satisfaction of liabilities in 
the normal course of business.  The Company has incurred net losses, 
aggregating $21,622,376 from inception through September 30, 1997, including 
a net loss of $868,627  for the nine months ended September 30, 1997, before 
a net gain of $1,312,045 from the sale of substantially all of the Company's 
assets to West Coast ( the "West Coast Transaction") (see Note 4 ). As of 
September 30, 1997, the Company had a net working capital deficiency of 
approximately $252,000.
                                           
         The West Coast Transaction provided $2,430,000 in cash, of which 
$243,000 remains in escrow with West Coast, and $203,000 remained available 
to the Company at September 30, 1997, after the payment of liabilities and 
other expenses. The cash available at time of closing the West Coast 
Transaction was less than anticipated because of delays in the closing of the 
West Coast Transaction during which time the Company continued to operate at 
a loss. Since September 30, 1997 and through the date of this report, the 
Company has used approximately $55,000 in cash to (i) satisfy certain 
liabilities, (ii) pay professional fees, which include those associated with 
existing litigation, (iii) maintain administrative functions (at present the 
Company only employs one person, in finance and has entered into a consulting 
agreement with one other person (See below)), and (iv) identify and consider 
various alternative business opportunities. The Company expects it will 
continue in this manner for the foreseeable future. Furthermore, certain 
liabilities remain which, if paid, and certain claims against the Company 
exist which, if successfully asserted, could result in there being no cash 
remaining with which to seek alternative business opportunities. These claims 
and liabilities include but are not limited to:
                                           
Professional Fees. In connection with its now discontinued acquisition 
program, the Company incurred substantial professional fees. Of the amount 
billed, $353,799 remains unpaid to law firm retained in that connection . 
Previously, in 1994, JD Store Equipment, Inc. ("JD Store Equipment") agreed 
that, in the event its merger with the Company (the "JD Merger") was not 
consummated, JD Store Equipment would pay to the Company legal fees billed to 
the Company by the above law firm. That law firm resigned as counsel to the 
Company shortly after JD Store Equipment notified the Company that it was 
terminating the JD Merger in September 1995. Subsequently, the Company  made 
a demand for payment upon JD Store Equipment for all fees and disbursements 
in the amount of $793,281 billed to it by the law firm, of which $439,482 has 
to date been paid by the Company. To avoid the uncertainties associated with 
litigation and with collecting any judgment that may be obtained, the Company 
attempted to reach a settlement with JD Store Equipment. However, there are 
no ongoing discussions at present regarding a settlement and there is no 
assurance that any settlement will be concluded.
                                           
Shareholder Litigation.  As previously reported, on April 9, 1996, a lawsuit 
was filed against the Company and certain others, including the members of 
the then Board of Directors, in the Superior Court of California, by certain 
individuals who allegedly purchased or purchased and sold securities of the 
Company, entitled Gary N. Gibbs et al. v. Choices Entertainment Corporation 
et al., in which plaintiffs seek monetary damages against the Company and 
other defendants in the amount of $303,470, plus attorney's fees, costs of 
suit and such other relief as the Court deems just. The Company is presently 
involved in settlement negotiations with the plaintiffs. Unless the Company 
is able to conclude a settlement, as to which no assurance can be given,  the 
Company intends to continue to contest the lawsuit vigorously.(See Part II 
Item 1. Legal Proceedings). Even if the Company is successful in defending 
this lawsuit or in concluding a settlement, the cost alone in professional 
fees will be substantial and material in amount. In addition, the continuing 
uncertainty associated with this lawsuit has made it difficult for the 
Company to find other business opportunities.

                                           
<PAGE>
                                           
         The Company's 5% unsecured promissory notes (the "Notes"), in the 
principal amount of $680,000, matured on September 11, 1997, leaving the 
holders thereof with the sole remedy of converting such notes into shares of 
the Company's Series C Preferred Stock (valued at $.25 per share of Common 
Stock). The holders of $670,000 in Notes have, in accordance with the terms 
of the Notes, converted such Notes into 67 shares of the Company's Series C 
Preferred Stock. In addition, the Company elected to issue 3.6833 shares of 
its Series C Preferred Stock to the holders of the Notes, in payment of 
$36,833 of accrued interest due such noteholders in September 1997, in 
accordance with the terms of such Notes.
                                           
         Ronald W. Martignoni, the Company's President and Chief Executive 
Officer, has taken a position with an unrelated company, effective October 6, 
1997. Mr. Martignoni continues as the Company's Chairman, President and Chief 
Executive Officer, under a consulting agreement. His compensation has been 
reduced accordingly.
                                             
         The Company's viability for the foreseeable future is and will 
continue to be dependent upon its ability to successfully conclude existing 
litigation, to find other business opportunities and to secure needed 
capital. No assurance can be given that the Company will be successful in 
that regard. In the event the Company is not successful, it is unlikely that 
there would be any amounts available for distribution to the Company's 
stockholders.
                                             
         This Quarterly Report on Form 10-QSB contains forward looking 
information with respect to, among other things, plans, future events or 
future performance of the Company, the occurrence of which involve certain 
risks and uncertainties that could cause actual results or future events to 
differ materially from those expressed in any forward looking statements. 
These risks and uncertainties include, but are not limited to, the risks and 
uncertainties associated with adverse litigation, the ability to identify and 
conclude alternative business opportunities, and those risks and 
uncertainties detailed in the Company's filings with the Securities and 
Exchange Commission. Where any forward looking statement includes a statement 
of the assumptions or bases believed to be reasonable and are made in good 
faith, assumed facts or bases almost always vary from actual results, and the 
differences between assumed facts or bases and actual results can be 
material, depending upon the circumstances. Where, in any forward looking 
statement, the Company expresses an expectation or belief as to plans or 
future results or events, such expectation or belief is expressed in good 
faith and believed to have a reasonable basis, but there can be no assurance 
that the statement of expectation or belief will result or be achieved or 
accomplished. The words "believe", "expect" and "anticipate" and similar 
expressions identify forward looking statements.
                                             
Capital Expenditures
                                           

         During the nine-month period ended September 30, 1997, the Company's 
capital expenditures, relating to the purchase of videocassette rental films 
and furniture and fixtures, were approximately $621,000 and $10,000, 
respectively, compared to $1,251,000 and $13,000, during the same period in 
1996. The Company does not anticipate any capital expenditures for the 
remainder of the current year.
                                           
Material Changes in Financial Condition
                                           
Assets:
                                           
         Total assets decreased by approximately $694,000 between December 
31, 1996 and September 30, 1997, as the result of: (1) an increase in assets 
from the sale of substantially all of the Company's assets to West Coast (see 
Note 4 to the Financial Statements), (2) a decrease in assets consumed by the 
operating loss for the period, and (3) a decrease in assets due to payment of 
a substantial portion of the Company' liabilities from a substantial portion 
of the proceeds received from the West Coast Transaction.
                                           
Liabilities:
                                           
         Total liabilities decreased by approximately $1,854,000 between 
December 31, 1996 and September 30, 1997, primarily due to the payment of a 
substantial portion of the Company's liabilities from a substantial portion 
of the proceeds received from the West Coast Transaction and to the 
conversion of $670,000 of the Company's 5% unsecured promissory notes payable 
along with accrued interest thereon into approximately 72 shares of the 
Company's Series C Preferred Stock.
                                           
                                           
<PAGE>


Stockholders' Deficit:
                                           
         Between December 31, 1996 and September 30, 1997, the decrease in 
stockholders' deficit was due to the net income of approximately $443,000 for 
the nine-month period ended June 30, 1997 and to the issuance of 
approximately 72 shares of the Company's Series C Preferred Stock (see 
Liabilities: above). Included in net income was a net gain of approximately 
$1,312,000 which related to the sale of substantially all of the Company's 
assets to West Coast (See Note 4 to the Financial Statements).
                                           
Material Changes in Results of Operations 
                                           
Continuing Operations:
                                           
         Losses from continuing operations were approximately $298,000 and 
$564,000 during the three-month and nine-month periods ended September 30, 
1997, compared to losses of approximately $123,000 and $336,000 during the 
comparative periods in 1996. The increases of approximately $175,000 and 
$228,000 during the three-months and nine-months periods ended September 30, 
1997, respectively were primarily related to the continuing professional fees 
and costs associated with existing litigation.(See Part II Item 1.),  to 
increased selling and administrative expenses primarily related to the 
expense associated with officers and directors liability insurance in effect 
during the 1997 period, and to increases in penalty and late charges incurred 
as a result of the Company's severely distressed  financial condition, which 
were incurred prior to the sale of substantially all of the Company's assets 
to West Coast. 
                                           
Discontinued Operations:
                                           
         The loss from discontinued operations, before the gain of 
approximately $1,312,000 from the sale of substantially all of the Company's 
assets to West Coast, was approximately $305,000 for the nine-month period 
ended June 30, 1997, compared to losses of approximately $72,000 and $142,000 
for the three-month and nine-month periods in 1996. The increased losses 
during the nine-month comparative periods are primarily related to less 
favorable rental-weather conditions, the adverse affect of  the lack of 
strong rental titles, and, to a lesser extent, competition during the 1997 
periods. In addition, during the nine-month 1997 comparative period, cost of 
movie rentals resulting from a pay per transaction arrangement with a 
supplier of videocassette rental films were approximately $188,000.(The 
Company had no such arrangement with this supplier during the 1996 
comparative period). Additionally, the Company had ten stores in operation 
during the 1996 periods compared with nine stores in operation during 1997.
                                           
Net Loss:      
                                           
         As a result of the foregoing, the Company incurred a net loss of 
approximately $298,000 and $869,000 during the three-month and nine-month 
periods ended September 30, 1997, respectively, before a gain of 
approximately $1,312,000, net of tax, for the nine-month period, on the sale 
of substantially all of the Company's assets to West Coast (See Note 4 to the 
Financial Statements) . 
                                           
                                           
<PAGE>
                                           
                                           

PART II - OTHER INFORMATION
                                           
Item 1. Legal Proceedings 
                                           
         The following is a description of material pending legal proceedings 
to which the Company is a party or of which any of its property is the 
subject:
                                           
Gibbs Litigation.    As previously reported, on April 9, 1996, a lawsuit was
filed against the Company in the Superior Court of California, entitled Gary N.
Gibbs et al. v. Choices Entertainment Corporation et al., No. BC147815, by
certain individuals who allegedly purchased or purchased and sold securities of
the Company. Also named as defendants in the lawsuit were the members of the
then Board of Directors, a former director and certain others. It is alleged
that the Company made false and misleading statements and omitted to state
certain material facts in public communications and in reports filed with the
Securities and Exchange Commission with regard to a possible merger with JD
Store Equipment, Inc. ("JD Store"), which was terminated by JD Store in
September 1995, and with regard to the Company's related acquisition program.  
                                           
         On July 12, 1996, Demurrers to the Complaint filed on behalf of the 
Company and the other defendants were sustained. On July 29, 1996, a Second 
Amended Complaint was filed, in which plaintiffs seek monetary damages 
against the Company and the other defendants in the amount of $303,470, plus 
attorney's fees, costs of suit and such other relief as the court deems just. 
The plaintiffs are principally the same individuals who filed the prior 
Complaint, which contains substantially the same allegations as now set forth 
in the Second Amended Complaint. On August 28, 1996, the Company filed an 
answer to the Complaint, denying plaintiffs allegations with regard to all 
claims.  On October 22, 1996, the Company also filed a motion for summary 
judgment, which was denied on November 26, 1996, and on May 27, 1997, the 
plaintiffs filed a motion for summary judgment, which was denied on June 27, 
1997. 
                                           
         Following discovery, the Company filed a new motion for summary 
judgment on August 25, 1997, and on August 27, 1997, the plaintiffs also 
filed a new motion for summary judgment. On October 6, 1997, all motions for 
summary judgment were denied, except that one count against one former 
director was dismissed. The Company is presently involved in settlement 
negotiations with the plaintiffs. Unless the Company is able to conclude a 
settlement, as to which no assurance can be given, the Company intends to 
continue to contest the lawsuit vigorously. No firm date for trial has been 
scheduled.
                                           
Syrstad Litigation.  On September 8, 1997, a lawsuit was filed by the Company
against R. Mark Syrstad, a former officer, in the Superior Court of California,
entitled Choices Entertainment Corporation v. R. Mark Syrstad, No. BC 177446, in
which the Company is seeking repayment of a loan of $62,000 made by the Company
to Mr. Syrstad in 1995, together with interest.
                                           
Item 6. Exhibits and Reports on Form 8-K
                                           
(a)  Exhibits
                                           
         The exhibits listed in the Index to Exhibits appearing on Page E-1 are
included as part of this report.
                                           
(b)  Reports on Form 8-K   
                                             
         None.


                                           
<PAGE>

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


                                         CHOICES ENTERTAINMENT CORPORATION



Date:   November 12, 1997                By:   /s/ Ronald W. Martignoni
                                            ____________________________
                                            Ronald W. Martignoni
                                            Chief Executive Officer



Date:   November 12, 1997                By:  /s/ Lorraine E. Cannon       
                                            ____________________________
                                            Lorraine E. Cannon
                                            Chief Financial Officer


                                           
<PAGE>



                                  INDEX TO EXHIBITS
                                           
Exhibit
  No.               Description of Exhibit
_______             ______________________

3 (a)               Certificate of Incorporation, as amended (1)
  (b)               Certificate of Designations of Series C Preferred Stock, 
                    as amended (2)
  (c)               By-Laws, as amended (3)
4 (a)               Form of Certificate Evidencing Shares of Common Stock (4)
  (b)               Form of 5% Promissory Note (5)
10(a)               Consulting Agreement between Registrant and Ronald W.
                    Martignoni(6) 
27(a)               Financial Data Schedule (6)
________________________________________________________________________________
(1)                 Filed as an Exhibit to Registrant's Registration Statement 
                    on Form S-8 (File No. 33-87016) and incorporated herein by
                    reference.
(2)                 Filed as an Exhibit to Registrant's Annual Report on Form 
                    10-KSB, for the year ended December 31,1996 and incorporated
                    herein by reference.
(3)                 Filed as an Exhibit to Registrant's Annual Report on Form 
                    10-K for the year ended December 31, 1992 and incorporated 
                    herein by reference.
(4)                 Filed as an Exhibit to Registrant's Registration Statement 
                    on Form S-1, inclusive of Post-Effective Amendment No.1 
                    thereto (File No.: 33-198983) and incorporated herein by  
                    reference.
(5)                 Filed as an Exhibit to Registrant's Quarterly Report on 
                    Form 10-QSB for the quarter ended September 30, 1995 and 
                    incorporated herein by reference.
(6)                 Filed herewith.

                                         E-1