FORM 10-Q
                              SECURITIES AND EXCHANGE COMMISSION
                                   Washington, D.C. 20549


(Mark One)

[X]       QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

          For the quarterly period ended September 30, 1997

                                            OR

[  ]      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934

          For the Transition Period from _____ to ______
	

          Commission file number:  0-21327


                                 BLOWOUT ENTERTAINMENT, INC.
                   ------------------------------------------------------
                   (Exact name of registrant as specified in its charter)

               DELAWARE                                   87-0498950
               --------                                   ----------
  (State or other jurisdiction of                       (I.R.S. Employer 
  incorporation or organization)                        Identification no.)

          7700 NE Ambassador Place			
One Airport Center, 2nd Floor, Portland, Oregon            97220
-----------------------------------------------            -----
(Address of principal executive offices)                 (Zip Code)

      Registrant's telephone number, including area code: 503-331-2729

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

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 October 31, 1997, the Registrant had 2,433,330 shares of Common Stock 
($.01 par value) outstanding.


<PAGE>


                                  BLOWOUT ENTERTAINMENT, INC.
                                           INDEX

PART I.     FINANCIAL INFORMATION                             Page Number

      Item 1.     Financial Statements

Consolidated Balance Sheet
  September 30, 1997 (Unaudited) and December 31, 1996            1

Consolidated Statement of Operations 
  Three months ended September 30, 1997 (Unaudited)
  and September 30, 1996 (Unaudited)                              2

Consolidated Statement of Operations 
  Nine months ended September 30, 1997 (Unaudited)
  and September 30, 1996 (Unaudited)                              3

Consolidated Statement of Cash Flows 
  Nine months ended September 30, 1997 (Unaudited)
  and September 30, 1996 (Unaudited)                              4

Notes to Consolidated Financial Statements                        5

Item 2.     Management's Discussion and Analysis of Financial 
             Condition and Results of Operations                  6 - 14

PART II.	OTHER INFORMATION

Item 1.     Legal Proceedings                                     N/A

Item 2.     Changes in Securities                                 N/A

Item 3.     Defaults Upon Senior Securities                       N/A

Item 4.     Submission of Matters to a Vote of Security Holders   N/A

Item 5.     Other Information                                     N/A

Item 6.     Exhibits and Reports on Form 8-K                      15

<PAGE>


                             BLOWOUT ENTERTAINMENT, INC.
                             CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>                                       September 30,  December 31,
                                                    1997           1996
                                                -------------  ------------
                                                 (Unaudited)
          ASSETS
<S>                                             <C>             <C>
Current assets:
     Cash and cash equivalents                  $ 1,101,620     $ 1,379,018
     Miscellaneous receivables                       10,893         174,105
     Prepaid expenses                               135,260         118,605
     Merchandise videocassette inventory          2,015,297       2,139,259
     Other current assets                            24,588          13,977
                                                -----------     -----------
          Total current assets                    3,287,658       3,824,964

Rental videocassette inventory, net               9,401,594       7,793,416

Equipment and leasehold improvements, net         3,803,999       4,494,933

Other assets                                         77,484               -

Intangible assets, net                            4,106,173       4,459,820
                                                -----------     -----------
          Total assets                          $20,676,908     $20,573,133
                                                ===========     ===========

          LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
     Line of credit                             $ 3,273,290     $ 2,227,153
     Accounts payable                             2,679,384       4,342,395
     Accrued liabilities                          1,287,527         998,254
     Accrued payroll                                513,563         485,506
     Current portion of notes payable             1,608,129               -
     Current portion of long-term debt              506,520         414,451
                                                -----------     -----------
          Total current liabilities               9,868,413       8,467,759

Notes payable                                     4,002,793       3,263,575

Long-term debt                                    1,137,883       1,021,940
                                                -----------     -----------
          Total liabilities                      15,009,089      12,753,274
                                                -----------     -----------
Commitments and contingencies

Stockholders' equity:
     Preferred stock, par value $.01 per 
          share;1,000,000 shares authorized; 
          no shares issued and outstanding                -               -
     Common stock, par value $.01 per share;
          10,000,000 shares authorized; 
          2,433,330 issued and outstanding           24,336          24,336
     Additional paid-in capital                  21,947,864      21,947,864
     Accumulated deficit                        (16,304,381)    (14,152,341)
                                                -----------     -----------
          Total stockholders' equity              5,667,819       7,819,859
                                                -----------     -----------
          Total liabilities and stockholders'
           equity                               $20,676,908     $20,573,133
                                                ===========     ===========
</TABLE>
         See accompanying notes to consolidated financial statements.

                                    - 1 -
<PAGE>


                             BLOWOUT ENTERTAINMENT, INC.
                        CONSOLIDATED STATEMENT OF OPERATIONS
                                    (UNAUDITED)
<TABLE>
<CAPTION>
                                            Three Months Ended September 30,
                                            --------------------------------
                                                   1997              1996
                                              ------------      ------------
<S>                                             <C>              <C>
REVENUE:

     Rental revenue                             $5,993,482       $6,116,392
     Product sales                               1,766,610        1,817,868
                                                ----------      -----------
          Total revenue                          7,760,092        7,934,260
                                                ----------      -----------
OPERATING COSTS AND EXPENSES:

     Cost of sales                               3,066,678        3,300,289
     Operating expenses                          4,493,006        4,542,245
     Selling, general and administrative           777,155          757,971
                                                ----------      -----------
          Total operating costs and expenses     8,336,839        8,600,505
                                                ----------      -----------
LOSS FROM OPERATIONS                              (576,747)        (666,245)
                                                ----------      -----------
NONOPERATING (INCOME) EXPENSE:

     Interest expense                              234,648          132,999
     Other, net                                     25,008          940,107
                                                ----------      -----------
          Total nonoperating expense               259,656        1,073,106
                                                ----------      -----------
LOSS BEFORE INCOME TAXES                          (836,403)      (1,739,351)

INCOME TAX PROVISION                                   706                -
                                                ----------      -----------
NET LOSS                                        $ (837,109)     $(1,739,351)
                                                ==========      ===========
NET LOSS PER SHARE                              $    (0.34)     $     (0.86)
                                                ==========      ===========
WEIGHTED AVERAGE COMMON SHARES                   2,433,330        2,024,679
                                                ==========      ===========
</TABLE>

          See accompanying notes to consolidated financial statements.






                                    - 2 -
<PAGE>


                             BLOWOUT ENTERTAINMENT, INC.
                        CONSOLIDATED STATEMENT OF OPERATIONS
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                             Nine months Ended September 30,
                                             -------------------------------
                                                  1997              1996
                                               -----------       -----------
<S>                                            <C>               <C>
REVENUE:

     Rental revenue                            $17,688,396       $17,386,228
     Product sales                               5,333,637         4,698,913
                                               -----------       -----------
          Total revenue                         23,022,033        22,085,141
                                               -----------       -----------
OPERATING COSTS AND EXPENSES:

     Cost of sales                               8,790,549         9,774,161
     Operating expenses                         13,258,308        12,660,906
     Selling, general and administrative         2,433,430         2,752,309
                                               -----------       -----------
          Total operating costs and expenses    24,482,287        25,187,376
                                               -----------       -----------
LOSS FROM OPERATIONS                            (1,460,254)       (3,102,235)
                                               -----------       -----------
NONOPERATING (INCOME) EXPENSE:

     Interest expense                              707,834           337,870
     Other, net                                    (25,461)          893,443
                                               -----------       -----------
          Total nonoperating expense               682,373         1,231,313
                                               -----------       -----------
LOSS BEFORE INCOME TAXES                        (2,142,627)       (4,333,548)

INCOME TAX PROVISION                                 9,413            12,299
                                               -----------       -----------
NET LOSS                                       $(2,152,040)      $(4,345,847)
                                               ===========       ===========
NET LOSS PER SHARE                             $     (0.88)      $     (2.30)
                                               ===========       ===========
WEIGHTED AVERAGE COMMON SHARES                   2,433,330         1,893,266
                                               ===========       ===========
</TABLE>



           See accompanying notes to consolidated financial statements.




                                    - 3 -
<PAGE>


                             BLOWOUT ENTERTAINMENT, INC.
                       CONSOLIDATED STATEMENT OF CASH FLOWS
                                    (UNAUDITED)
<TABLE>
<CAPTION>
                                             Nine months Ended September 30,
                                             -------------------------------
                                                  1997              1996
                                              ------------       -----------
<S>                                            <C>              <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
     Net loss                                  $(2,152,040)     $(4,345,847)
     Adjustments to reconcile net loss to 
      net cash provided by operating 
      activities:
          (Gain) Loss on disposal of assets         (1,233)         124,943
          Amortization of videocassette 
           rental inventory                      3,460,863        3,758,480
          Depreciation                             834,354          839,523
          Amortization of intangible and 
           other assets                            353,647          400,817
     Changes in current assets and 
      liabilities:
          Receivables                              163,212          229,461
          Merchandise videocassette inventory      123,962       (1,366,586)
          Prepaids and other current assets        (27,266)          13,636
          Accounts payable                      (1,663,011)       1,473,507
          Accrued liabilities                      289,273         (429,599)
          Accrued payroll                           28,057          272,542
                                               -----------       ----------
     Net cash provided by operating activities   1,409,818          970,877
                                               -----------       ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchases of videocassette tapes, net      (5,069,041)      (6,053,788)
     Capital expenditures, net                    (142,187)      (2,062,923)
     Other assets                                  (77,484)               -
                                               -----------       ----------
     Net cash used in investing activities      (5,288,712)      (8,116,711)
                                               -----------       ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
     Proceeds from sale of common stock                           2,980,000
     Line of credit, net                         1,046,137                -
     Additional borrowings                       3,000,697        5,565,309
     Repayment of long-term debt                  (445,338)               -
                                               -----------       ----------
     Net cash provided by financing 
      activities                                 3,601,496        8,545,309
                                               -----------       ----------
NET (DECREASE) INCREASE IN CASH AND EQUIVALENTS   (277,398)       1,399,475
CASH AND EQUIVALENTS, beginning of period        1,379,018        2,606,838
                                               -----------       ----------
CASH AND EQUIVALENTS, end of period            $ 1,101,620       $4,006,313
                                               ===========       ==========
</TABLE>
           See accompanying notes to consolidated financial statements.

                                    - 4 -
<PAGE>

                        BLOWOUT ENTERTAINMENT, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                (UNAUDITED)



NOTE 1:     Basis of Presentation

The accompanying consolidated financial statements of BlowOut Entertainment, 
Inc. and subsidiaries ("BlowOut" or the "Company") for the three-month and 
nine-month periods ended September 30, 1997 and September 30, 1996 are unaudited
and, in the opinion of management, contain all adjustments that are of a normal 
and recurring nature necessary to present fairly the financial position and 
results of operations for such periods.  The consolidated financial statements 
should be read in conjunction with the consolidated financial statements and 
related notes contained in the Company's annual report on Form 10-K for the 
year ended December 31, 1996 filed with the Securities and Exchange Commission.
The results of operations for the three and nine-month periods ended September 
30, 1997 are not necessarily indicative of the results expected for the full 
year.


NOTE 2:     Impact of Recent Accounting Developments

In February 1997, the Financial Accounting Standards Board (FASB) issued 
Statement of Financial Standards number 128, "Earnings Per Share" and 
Statement of Financials Standards number 129, "Disclosure of Information 
About Capital Structure", which are effective for fiscal years ending after 
December 31, 1997.  In June 1997, FASB issued Statement of Financial 
Accounting Standards No. 130, "Reporting Comprehensive Income" and Statement 
of Financial Accounting Standards No. 131, "Disclosures About Segments of and 
Enterprise and Related Information" which are effective for fiscal years 
beginning after December 15, 1997.  The Company believes the implementation 
of these statements will not have a material effect on its results of 
operations or financial statement disclosures.


NOTE 3:     Reclassifications

Certain amounts in the September 30, 1996 and December 31, 1996 consolidated 
financial statements have been reclassified to be consistent with the September 
30, 1997 presentation.  These reclassifications had no effect on previously 
reported net loss or stockholders' equity.











                                         - 5 -
<PAGE>


ITEM 2.     MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
            RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the Financial 
Statements and Notes thereto appearing elsewhere in this report.  

General

The Company operates retail "store within a store" video outlets located in 
large mass merchant supercenters and grocery chain stores throughout the 
United States.  The Company was formed in 1992 as a subsidiary of Rentrak 
Corporation, and opened its first store within a store in January 1993.   At 
year-end 1993 and 1994, the Company operated seven stores.  During these 
periods, all of the Company's stores were located in grocery stores.

During 1995, the Company experienced accelerated growth in retail stores and 
revenue, primarily through (i) the acquisition by Rentrak on May 26, 1995, of 
a controlling interest in Entertainment One, Inc. ("E-1"), a company whose 
primary business was the operation of retail video outlets in Wal-Mart 
SuperCenters, (ii) the acquisition by Rentrak on August 31, 1995, of certain 
assets and assumption of certain liabilities which constituted SuperCenter 
Entertainment, Inc.'s retail video business and consisted of retail video 
outlets in Wal-Marts, Wal-Mart SuperCenters and Super Kmart Centers (the "SCE 
Business") and (iii) new store openings in Wal-Mart SuperCenters and, to a 
lesser extent, in Super Kmart Centers, Ralphs and Food 4 Less stores. During 
1996, and through September 30, 1997, the Company continued to open stores, and 
as of September 30, 1997, the Company operated 188 retail video stores, 
including 150 stores located in Wal-Mart and Wal-Mart SuperCenters, 26 stores 
located in Super Kmart Centers and 12 stores located in Ralphs and Food 4 Less 
grocery stores.  

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

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

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

                                     - 6 -
<PAGE>

The Company acquires videocassettes using two types of supplier arrangements: 
outright purchases of tapes from distributors, and revenue sharing under the 
Rentrak Pay Per Transaction ("PPT") System (see below).  Videocassettes 
purchased for basic stock rental are stated at cost and amortized over 36 
months with a provision for a $6 salvage value.  New release videocassettes 
purchased are amortized using methods reflecting the anticipated revenue 
stream to a $6 salvage value.

Since 1993, the Company has obtained a significant amount of its new release 
titles through Rentrak under the PPT System.  Under this system, Rentrak 
provides to the Company videocassettes released by certain studios.  The 
Company pays a handling fee ($8 to $10) for each videocassette.  During the 
revenue sharing period, which does not exceed two years, the studio owns the 
videocassette, and the rental revenue is shared by the studio, Rentrak and 
the Company on a predetermined basis.  The Company may also sell excess 
copies of a video title and share the sale proceeds with Rentrak and the 
studio on a predetermined basis.  At the end of the revenue sharing period 
for a title, the Company may purchase remaining copies of that title in the 
Company's inventory, generally for less than $5 per videocassette. The 
handling fee per videocassette is amortized on a straight-line basis over 36 
months to a $6 salvage value. Revenue sharing costs are expensed when incurred.


Results of Operations

Three Months Ended September 30, 1997 Compared to Three Months Ended September 
30, 1996

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

<TABLE>
<CAPTION>
                                                                   Percentage
                                                             Change in Dollar
                             Three Months Ended September 30,     Amount From
                                      1997              1996     1996 to 1997
                                     -----             -----     ------------
<S>                                <C>              <C>              <C>
Rental revenue                        77.2%             77.1%          (2.0%)
Product sales                         22.8%             22.9%          (2.8%)
     Total revenue                   100.0%            100.0%          (2.2%)
Cost of rental revenue and 
  product sales                       39.5%             41.6%          (7.1%)
Operating expenses                    57.9%             57.2%          (1.1%)
Selling, general and administrative   10.0%              9.6%           2.5%
Nonoperating expenses                  3.3%             13.5%         (75.8%)

Net loss                             (10.8%)           (21.9%)        (51.9%)

Number of stores open at end 
  of period                            188               192       
</TABLE>
                                       - 7 -
<PAGE>

Revenue
Revenue for the three months ended September 30, 1997 decreased $174,168, or 
2.2%, to $7,760,092 from $7,934,260 for the comparable three months of 1996. 
The number of stores in operation decreased from 192 at September 30, 1996 to 
188 at September 30, 1997 as the net result of the opening of 22 stores and the
closing of 26 underperforming stores during this period. The better revenue 
performance achieved by the newly opened stores as compared to the stores that 
were closed during the period was not sufficient to overcome the relatively 
weak videocassette release schedule experienced during the quarter.

The following table sets forth the number of stores open for at least 12 
months as of the end of the period and average rental and product sale 
revenue for such stores for the last three years and the three-month periods 
ended September 30, 1996 and 1997.

<TABLE>
<CAPTION>
                                                               Three Months
                          Fiscal Year Ended December 31,   Ended September 30,  
                           1996        1995        1994       1997       1996
                       --------    --------    --------   --------   --------
<S>                    <C>         <C>         <C>        <C>        <C>
No. of stores open 
  12 months                 130           3           4        159        159
Average rental revenue $129,440    $206,387    $114,640   $ 32,341   $ 33,113
Average product sales  $ 39,442    $ 61,648    $ 17,505   $  9,492   $  9,946
Average total revenue  $168,882    $268,035    $132,145   $ 41,833   $ 43,059

The decrease in average rental revenue for the three-month period ended 
September 30, 1997 compared to the three-month period ended September 30, 1996 
is attributed to a video release schedule that featured fewer popular movie 
titles in the current year period compared to the prior year, which is believed 
to have adversely affected the video rental industry as a whole. Average 
product sales for the three-month period ended September 30, 1997 decreased 
slightly from the three-month period ended September 30, 1996 reflecting the 
impact of decreased rental activity on product sales.


Operating Costs and Expenses

Cost of Sales
Cost of sales decreased from $3,300,289, or 41.6% of revenue for the three 
months ended September 30, 1996, to $3,066,678, or 39.5% of revenue, for the 
three months ended September 30, 1997.  The decrease in cost of sales in both 
absolute dollars and percentage terms resulted from a decrease in product 
acquisition costs and efficiencies in buying created by the combination of the 
buying departments of the Company, E-1 and SCE during 1996.

                                       - 8 -
<PAGE>


Operating Expenses
Operating expenses increased slightly as a percentage of revenue from 57.2% for 
the three months ended September 30, 1996, to 57.9% for the three months ended 
September 30, 1997.  Although sales levels were down slightly in the 1997 
period compared to the 1996 period, costs associated with the closing stores in
the 1997 period resulted in operating expenses that decreased at a slower rate 
than sales. The primary components of operating expenses are employee 
compensation, occupancy, fixed asset depreciation, supplies and communications.


Selling, General and Administrative Expenses

Selling, general and administrative expenses increased only slightly in 
absolute dollars from $757,971 for the three months ended September 30, 1996, 
to $777,155 for the three months ended September 30, 1997.  The significant 
costs associated with being a public company offset cost savings resulting from 
management's successful focus on operational efficiency.  The slight increase 
in selling, general and administrative expense as a percentage of revenues from
9.6% for the 1996 period to 10.0% for the 1997 period was a result of SG&A 
costs being spread over a slightly lower revenue base.
 

Nonoperating Expenses

Nonoperating expenses decreased from $1,073,106, or 13.5% of revenue, for the 
three months ended September 30, 1996, to $259,656, or 3.3% of revenue, for the 
three months ended September 30, 1997.  The 1996 period was unfavorably 
impacted by charges of approximately $950,000 related to the spin-off from 
Rentrak.  Taking this into account, nonoperating expenses actually increased 
approximately $137,000, which is attributable to the increase in interest 
bearing debt incurred by the Company to finance its growth and operations.


Nine Months Ended September 30, 1997 Compared to Nine Months Ended September 
30, 1996

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


</TABLE>
<TABLE>
<CAPTION>
                                                                   Percentage
                                                             Change in Dollar
                              Nine Months Ended September 30,     Amount From
                                      1997              1996     1996 to 1997
                                   --------           -------    ------------
<S>                                <C>                <C>           <C>
Rental revenue                        76.8%             78.7%           1.7%
Product sales                         23.2%             21.3%          13.5%
     Total revenue                   100.0%            100.0%           4.2%
Cost of rental revenue and 
  product sales                       38.2%             44.3%         (10.1%)
Operating expenses                    57.6%             57.3%           4.7%
Selling, general and administrative   10.6%             12.5%         (11.6%)
Nonoperating expenses                  3.0%              5.6%         (44.6%)

Net loss                              (9.3%)           (19.7%)        (50.5%)

Number of stores open at end 
  of period                            188               192

</TABLE>

                                           - 9 -
<PAGE>

Revenue
Revenue for the nine months ended September 30, 1997 increased $936,892, or 
4.2%, to $23,022,033 from $22,085,141 for the comparable nine months of 1996. 
Although the number of stores in operation decreased from 192 at September 30, 
1996 to 188 at September 30, 1997, total revenues increased as the 26 
underperforming stores closed during this period were replaced by 22 newly 
opened stores with higher average revenues. 

The following table sets forth the number of stores open for at least 12 
months as of the end of the period and average rental and product sale 
revenue for such stores for the last three years and the nine-month periods 
ended September 30, 1996 and 1997.

<TABLE>
<CAPTION>
                                                                Nine Months
                           Fiscal Year Ended December 31,   Ended September 30,
                             1996        1995        1994       1997       1996
                         --------    --------    --------   --------   --------
<S>                      <C>         <C>         <C>        <C>        <C>
No. of stores open 
  12 months                   130           3           4        159        159
Average rental revenue   $129,440    $206,387    $114,640   $ 95,389   $102,313
Average product sales    $ 39,442    $ 61,648    $ 17,505   $ 28,757   $ 27,757
Average total revenue    $168,882    $268,035    $132,145   $124,146   $130,070

</TABLE>

Average rental revenue for the nine-month period ended September 30, 1997 
decreased from the nine-month period ended September 30, 1996 as a result of a 
video release schedule that featured fewer popular movie titles in the current 
year period compared to the prior year, which is believed to have adversely 
affected the video rental industry as a whole, as well as unseasonably warm 
weather for the first three months of 1997 in regions of the country where the 
Company operates. Average product sales for the nine-month period ended 
September 30, 1997 increased from the nine-month period ended September 30, 
1996.  The Company has pursued a more aggressive strategy in the marketing of 
sell-through videocassette inventory to take advantage of the high traffic 
volume in most of its locations and this emphasis has paid off in higher sales 
of videocassettes.


Operating Costs and Expenses

Cost of Sales
Cost of sales decreased from $9,774,161, or 44.3% of revenue for the nine
months of 1996, to $8,790,549, or 38.2% of revenue, for the nine months of 
1997.  The decrease in cost of sales in both absolute dollars and percentage 
terms resulted from a decrease in product acquisition costs and efficiencies 
in buying created by the combination of the buying departments of the 
Company, E-1 and SCE during 1996.

                                   - 10 -
<PAGE>

Operating Expenses
Operating expenses increased in absolute dollars from $12,660,906, or 57.3% of 
revenue, for the nine months ended September 30, 1996 to $13,258,308, or 57.6% 
of revenue, for the nine months ended September 30, 1997. The higher sales 
levels achieved in the 1997 period resulted in higher occupancy costs since the 
rent paid for each location is based on a percentage of revenues.  In addition, 
costs associated with the closing of stores in the 1997 were higher than in the 
comparable 1996 period.  Recurring non-occupancy operating expenses on a per 
store basis were down in the 1997 period due to greater efficiencies in 
operation.  The primary components of operating expenses are employee 
compensation, occupancy, fixed asset depreciation, supplies and communications.


Selling, General and Administrative Expenses

Despite significant costs associated with being a public company incurred in 
the 1997 period but not in the 1996 period, selling, general and 
administrative expenses decreased from $2,752,309, or 12.5% of revenue, for 
the nine months ended September 30, 1996, to $2,433,430, or 10.6% of revenue, 
for the nine months ended September 30, 1997.  The decrease was primarily the 
result of efficiencies gained by combining the accounting and administrative 
departments of the Company, E-1 and SCE in 1996.  


Nonoperating Expenses, Net

Nonoperating expenses, net decreased from $1,231,313, or 5.6% of revenue, for 
the nine months ended September 30, 1996, to $682,373, or 3.0% of revenue, for 
the nine months ended September 30, 1997.  The decrease is attributable to the 
lack in the 1997 period of approximately $950,000 in expenses incurred in the 
1996 period related to the spin-off from Rentrak, partially offset by an 
increase in interest costs related to increased debt incurred by the Company to 
finance its growth and operations.


Liquidity and Capital Resources

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

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

                                         - 11 -
<PAGE>

In August 1996, Phoenix Leasing, Inc. ("Phoenix") agreed to provide asset based 
financing in an aggregate principal amount of $2.0 million.  Amounts 
outstanding under the Phoenix facility bear interest at a fixed rate per annum 
equal to 14.525% and are payable in monthly principal and interest 
installments over a five-year term.  The Phoenix facility may be used to 
finance the construction and opening of (including acquisition of inventory) 
new Company stores in Wal-Mart Stores and Wal-Mart SuperCenters.  The Phoenix 
facility is secured by (i) a continuing guaranty of Rentrak (which Phoenix, 
in its sole discretion, may release once at least 36 payments of amounts 
outstanding under the Phoenix Facility have been made or the Company's 
financial condition is, in Phoenix's sole opinion, sufficient to justify such 
release), and (ii) the Company's grant of a first continuing security 
interest in all assets at each location to be financed with funds from the 
Phoenix facility.  Under the Phoenix facility, the Company cannot borrow more 
than $100,000 per store location, with a minimum draw of $30,000 per store 
location. As of October 31, 1997, the Company had $1,387,181 outstanding under 
the Phoenix facility.

On September 12, 1996, Coast Business Credit ("CBC") entered into an 
agreement with the Company to provide a revolving line of credit ("CBC Line 
of Credit") in the maximum principal amount at one time outstanding of $5.0 
million.  Under the CBC Line of Credit, the Company may draw only up to 80% 
of the Orderly Liquidation Value (as defined by the CBC Line of Credit) of 
eligible new and used videocassette inventory.  As of October 31, 1997, 80% of 
the Orderly Liquidation Value of the Company's inventory was approximately 
$4,008,546.  Advances under the CBC Line of Credit bear interest at a 
floating rate per annum equal to the Bank of America Reference Rate plus 
2.75%.  The term of the CBC Line of Credit is three years. Rentrak has agreed, 
under certain circumstances in the event of a default under the CBC Line of 
Credit, to repurchase BlowOut's videocassette inventory at specified amounts.  
See "Rentrak Guarantee." As of October 31, 1997, the Company had $2,835,877 
outstanding under the CBC Line of Credit. 

On July 22, 1996, the Company entered into an agreement with Star Video to 
provide the Company with videocassettes for rental and sale and with video 
games for sale ("Star Video Agreement").  Star Video paid off the balance of 
a promissory note in the amount of $240,975 made by the Company to its 
previous supplier.  As a result, the Company executed a new promissory note 
to Star Video, pursuant to which the Company became obligated to pay Star Video 
$120,487 on each of May 27, 1997 and 1998.  Under the Star Video Agreement, 
Star Video became the Company's exclusive supplier of new videocassettes for 
rental and sale not purchased from Rentrak until the later of (i) July 21, 
1997, or (ii) repayment of such promissory note.  This promissory note is 
secured by a guaranty of Rentrak.  

In addition, to secure all amounts owed under the Star Video Agreement, the 
Company has granted to Star Video a first priority security interest in all 
of the Company's existing inventory, which security interest Star Video will 
release, in exchange for a subordinated security interest on such inventory 
upon (i) consummation of any secured financing, and (ii) the Company being 
current in its payments to Star Video under the Star Video Agreement at such 
time.

                                       - 12 -
<PAGE>

During the first quarter of 1997 the Company entered into an agreement with 
Rentrak whereby payables resulting from the Company's use of the Rentrak PPT 
system during the first six months of 1997 are being deferred until January 
1998 at which time such amounts totaling approximately $2.1 million will 
become due and payable in twelve equal, interest-free, monthly installments.

During the first nine months of 1997, the Company opened 11 stores, primarily 
in Wal-Mart SuperCenters. The Company does not expect to open a significant 
number of additional stores during the remainder of 1997. The Company is aware 
of one other retailer, Blockbuster, which operates store within a store video 
outlets in Wal-Mart stores.   

Also, during the first nine months of 1997, the Company closed 23 stores that 
did not meet certain performance levels (consisting of 13 stores in Wal-Mart 
and 10 stores in Kmart). Since September 30, 1997, the Company has closed an 
additional 5 Kmart stores that did not meet performance levels.  In addition, 
the Company has notified Kmart of its intention to close 7 additional 
underperforming stores by March 1998.

During the nine months ended September 30, 1997, cash and cash equivalents 
decreased by $277,398 due to net losses incurred during the period, the 
purchase of $5,069,041 in videocassette inventory and a $142,187 net investment 
in capital items which was partially offset by a deferral of Rentrak payables 
and additional borrowings under the CBC line of credit totaling $3,601,496.  
The Company had cash and cash equivalents of $1,101,620 at September 30, 1997. 
The Company expects to meet its short-term liquidity requirements through net 
cash provided by operations, cash on hand and advances under the Phoenix 
facility and CBC Line of Credit.  Management believes that these sources of 
cash will be sufficient to meet its operating needs at least through February 
1998.  There can be no assurance that funds will be available in sufficient 
amounts to finance the acquisition or opening of additional video outlets to 
sustain the Company's growth or that funds will be available to satisfy the 
Company's liquidity needs beyond February 1998.

At September 30, 1997, the Company had a working capital deficit of $6,580,755.
Videocassette rental inventories are treated as noncurrent assets under 
generally accepted accounting principles because they are not assets that are 
reasonably expected to be completely realized in cash or sold in the normal 
business cycle.  Although the rental of this inventory generates a 
substantial portion of the Company's revenue, the classification of these 
assets as noncurrent excludes them from the computation of working capital.  
The acquisition cost of videocassette rental inventories, however, is 
reported as a current liability until paid and, accordingly, is included in  
the computation of working capital.  Consequently, the Company believes 
working capital is not as significant a measure of financial condition for 
companies in the video retail industry as it is for companies in other 
industries.  The Company expects to operate with a working capital deficit as 
it expands its store base.

                                       - 13 -
<PAGE>

Statements made in this document that present information that is not historic, 
including among other things, anticipated financial performance, sources and 
extent of liquidity and capital, business prospects, new products 
and markets, and anticipated store openings are "forward-looking statements" 
within the meaning of the Private Securities Litigation Reform Act of 1995.  
These statements can be identified by the use of forward-looking terminology 
such as "may", "will", "expect", "anticipate", "estimate" or "continue" or 
the negative thereof or other variations thereon, or comparable terminology.  
There are numerous risks and uncertainties that could cause actual results to 
differ materially from those in such forward-looking statements.  Reference 
is made to the Company's Registration Statement on Form 10 and the Company's 
Annual Report on Form 10-K as filed with the Securities and Exchange 
Commission for a discussion of such risk factors and uncertainties.




                                       - 14 -
<PAGE>

PART II     OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K
               
            Exhibit 27 - Financial Data Schedule



                                       - 15 -

<PAGE>


                                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.


     BLOWOUT ENTERTAINMENT, INC.

     November 13, 1997 



     By:     /s/Thomas D. Berkompas
             ------------------------------------
             Thomas D. Berkompas
             Vice President, Chief Accounting and 
             Chief Financial Officer