FIRST ENTERTAINMENT INC, 10KSB, 1996-04-15

FIRST ENTERTAINMENT INC
10KSB, 1996-04-15
AMUSEMENT & RECREATION SERVICES

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form 10-KSB

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

For the Fiscal Year ended:

December 31, 1995

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
[NO FEE REQUIRED]
Commission File No. 0-15435

FIRST ENTERTAINMENT, INC.
(Name of Small Business Issuer as Specified in its Charter)

Colorado 84-0974303
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)

1380 Lawrence Street, Suite 1400
Denver, Colorado 80204
(Address of Principal Executive Offices, Including Zip Code)

Registrant's telephone number, including area code: (303) 592-1235

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

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

Common Stock, $.008 Par Value
(Title of Class)

Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.

Yes X No

Check if there are no disclosure of delinquent filers in response to Items
405 of Regulation S-B in this form, and no disclosure will be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference n Part III of this Form 10-KSB or any
amendments to this Form 10-KSB. [ ]

State issuer's revenues for its most recent fiscal year. $1,816,860

As of February 29, 1996, there were 2,621,669 shares of common stock (the
Registrant's only class of voting stock) outstanding. The aggregate market
value of the 2,297,696 shares of common stock of the Registrant held by
nonaffiliates on February 29, 1996 was approximately $4,595,392 (based on
the mean of the closing bid and asked prices).

Documents incorporated by reference: None

INDEX TO FORM 10-KSB

PART I

Item 1 Description of Business

Item 2 Description of Property

Item 3 Legal Proceedings

Item 4 Submission of Matters to a Vote of
Security Holders

PART II

Item 5 Market for Common Stock and Related
Stockholder Matters

Item 6 Management's Discussion and Analysis or
Plan of Operation

Item 7 Financial Statements

Item 8 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure

PART III

Item 9 Directors, Executive Officers, Promoters and
Control Persons

Item 10 Executive Compensation

Item 11 Security Ownership of Certain Beneficial Owners
and Management

Item 12 Certain Relationships and Related Transactions

PART IV

Item 13 Exhibits, Lists and Reports on Form 8K
A) Exhibits
B) Reports on Form 8-K

PART I

Item 1. Business

First Entertainment, Inc. (the "Company" or "FTET") was incorporated under
the laws of Colorado on January 17, 1985. Currently, the Company is a
multi-media entertainment conglomerate, holding controlling interests in
four distinct segments. The four segments, which are overviewed by the
parent company, FTET, are known as "Video," "Radio," "Film," and "Live
Entertainment". In November 1995, the Company determined to discontinue
the operations of its copyrighted properties segment. Initially, the
Company's business consisted of the production of pre-recorded travel
guides and special interest videos. In 1987, the Company entered the
radio broadcasting business by acquiring Quality Communications, Inc., a
Wyoming corporation pursuant to which the Company operates the radio
segment of its business. In 1992, the Company acquired a controlling
interest in First Films, Inc., a publicly held Colorado corporation, under
which its film and live entertainment operations are undertaken and in
1994, acquired a controlling interest in Image Marketing Group, Inc., an
art publisher.

Video

Initially, the Company entered the pre-recorded videocassette product
market through the design, production and distribution of pre-recorded
videocassette travel guides and later expanded into production and
distribution of special interest videocassette productions. In June 1986,
the Company entered into a trademark licensing agreement with Rand
McNally, providing the Company the right to use the Rand McNally name
worldwide for its Video Trip product.

In 1993, the Company negotiated the termination of its relationship with
Rand McNally. In July 1993, the Company entered into a new agreement,
entitling it to use the KODAK trademark of Eastman Kodak Company for
video through its exclusive U.S. distributor, Woodknapp and Company, Inc.
This agreement allowed Woodknapp and Company, Inc. to become the exclusive
domestic distributor for the Company's Video Trip product and allows the
Company to receive sponsorship assistance from Eastman Kodak Company.
This agreement allowed the Company to pass through some of the costs of
packaging, marketing and distribution to Woodknapp, who is one of the
largest distributors of special interest video in the United States. The
Company bore the expense of editing the Rand McNally trademarks from the
programs. This editing was completed in December 1993 and shortly
thereafter, Woodknapp released, domestically, the first of five release
groups created from the Video Trip library. In January 1995, the Company
was informed that Woodknapp and Company, Inc. had ceased operations and
would not be able to honor its contract as the Company's exclusive U.S.
distributor of Video Trips. The Company feels that because of cash flow
problems of Woodknapp they were not able to effectively market their Video
Trips in 1994.

In 1995, the Company signed a three year distribution agreement with Fox
Lorber, whereby Fox Lorber will test the distribution of 12 video trip
titles in North America. The Company received an advance royalty of
$25,000 and will receive royalties of 7.5% of gross sales. Fox Lorber
will have the right to acquire the remaining 28 video trip titles and
extend the term of the agreement from three years to seven years with an
additional advance royalty payment of $58,000.

Fox Lorber has distribution rights for sales of video trips outside the
United States.

For all tapes, the Company provides scripting, editing and post-production
services. The Company utilizes independent contractors for the on-line
phase to edit, sound record, and generate graphics. All work performed by
independent contractors was under the direct supervision of the Company's
in-house producer.

The Company holds several special interest titles, including three titles
on the motorcycle rally in Sturgis, South Dakota. The Company is
attempting to market these tapes through its established distributor
network.

Radio

In October 1987, the Company entered the radio broadcasting business
through the acquisition of Quality Communications, Inc. ("Quality
Communications"), a Wyoming corporation. At that time, Quality
Communications owned and operated three radio stations, which serve
markets in Northeast Wyoming and central Iowa. In August 1989, the
Company sold two radio stations in Boone, Iowa.

The Company, through Quality Communications, operates a radio station,
100.7, The Fox, located in Gillette, Wyoming.

In November 1993, the Company changed the music format of the radio
station formerly known as KGWY, or Y-100, from a top-40 station to a
format known as the "Heart of Rock." In February, 1995 the format was
changed again to contemporary country. The changes have had a positive
effect on its market share and gross revenues. Independent market surveys
show the radio station has approximately 44% of the market in Gillette,
Wyoming.

Film

On February 22, 1991, the Company entered into a Letter of Intent to
combine with First Films, Inc. ("FFI") of Denver, Colorado. In December
1992, the Company exchanged 600,107 shares of its common stock in exchange
for 400,885,600 shares of the outstanding common stock of FFI held by FFI
principal shareholders. This represented approximately 80.1 percent, or
controlling interest in this publicly held company. FFI was incorporated
under the laws of the state of Colorado on April 29, 1986 and is in the
business of developing, financing, and producing low-budget motion
pictures for the domestic and foreign theatrical distribution and other
licensing on pay-cable network and syndicated television on video cassette
and discs, and other media. In 1987 and 1988, its wholly-owned
subsidiary, Flash Features Corporation, produced three low-budget films
for the direct-to-video marketplace and for licensing to television and
other media throughout the world.

FFI produced one film for theatrical release in 1989, "The Amityville
Curse" produced in association with Allegro Films of Montreal, Canada.
The film has been licensed to The Image Organization, Inc. of Los Angeles,
California, for foreign distribution and to Vidmark, Inc. of Santa Monica,
California for domestic distribution.

In October 1991, FFI, through Flash Features Corporation, formed a
partnership with Postcard Pictures for the purpose of producing a movie
titled, "Almost Blue." The film was completed in early 1992. The film's
production cost was approximately $700,000, with Flash Features
corporation contributing services as well as $25,000 in cash. Flash
Features Corporation is entitled to approximately 37.5 percent of the
film's net revenues to the producer after repayment of the investor's
deferred payment participation.

The picture was released for video distribution in August 1993. While the
film received positive reviews from certain film critics, to date the film
has had limited commercial success. Flash Features Corporation does not
anticipate that the revenues the partnership may receive will be
sufficient to retire the existing indebtedness of the partnership.

FFI has not produced any films since 1992 but continues to evaluate
opportunities as they become available.

Live Entertainment

FFI owned and operated two comedy clubs, one located in Denver, Colorado
and one in Tampa, Florida. The Tampa, Florida, club was closed on January
29, 1995 due to less than expected attendance.

The goal of this division is to produce first-rate shows in the theater
environment. Revenues are generated through both ticket sales at the door
and beverage and food sales at tables. Clubs are open to the public only
for shows, which last from 1 to 2 hours each, and number as many as three
per night. Non-show times are devoted to preparing and producing a show
that changes completely each week, in promoting and marketing the
nightclub.

FFI acquired 100 percent of the outstanding stock of Comedy Works, Inc., a
Colorado corporation, on September 13, 1990 in an exchange for 200,000,000
shares of common stock. Comedy Works was incorporated in 1982 and has
operated from its Larimer Square, Denver, Colorado location since that
time. Comedy Works Larimer Square typically has ten shows per week and
has averaged over 2,000 customers per week for the past eleven years.

FFI acquired 100 percent of Comedy Core, Inc., a Colorado corporation, in
September 1990. Comedy Core had provided the management and consulting
services, as well as booking talent and providing promotional services to
the above-mentioned nightclubs but since 1994 has been inactive as these
services are provided by FTET, the parent Company.

Other Business Development

Balzac

On April 11, 1996 the Company acquired certain assets from Balzac, Inc., a
private company which manufactures and distributes toys, including a
product line of toy balls. The assets and rights acquired consist of the
following: inventory of Balzac toys, the exclusive license of Balzac for
Australia, Atlanta Distributorship for the Olympics, Jason Carson
Employment Agreement, Joseph Gabriel Secrets of Magic, distributor of
Balzac in Japan, World of Balzac TV Show, five additional Balzac venues to
be determined by Balzac over the next 18 months.

The exclusive license agreement for Australia was acquired for $800,000
and is payable within five years based upon a formula of 60% of net
profits from the sale of Balzac products in Australia. The other assets
and rights were acquired by issuing 1,100,000 shares of the Company's
restricted common stock valued at $1.6 million. In addition, the Company
granted a stock option to Balzac to purchase 750,000 shares of common
stock at $11 a share, and an option to purchase an additional 750,000 at
$19 a share. The options will expire in five years. Additionally, the
Company and Balzac agreed to negotiate options for an additional 1,500,000
at such time and upon such terms and conditions as the parties may
mutually agree.

The Company considers the acquisition of the rights and assets from Balzac
an opportunity to substantially increase revenues and ultimately achieve
profitability. Balzac toys are sold in theme parks in the United States
such as Walt Disney World and Universal Studios in Orlando Florida and
Paramount Parks. In addition, Balzac toys are sold in retail stores such
as Toys-R-Us and FAO Schwartz.

Since its introduction in Australia in 1990, when it was named the Outdoor
Toy of the year, millions of Balzac products have been sold. In 1996,
working with Funtastic, a major Australian Toy Distributor, Balzac
Boutiques are planned for over 20 stores as well as general distribution
in the mass marketplace. Funtastic is also working to secure a position
in the Warner Park in Australia, one of the largest amusement parks on the
continent.

The Company also acquired Balzac's agreement with Mitsui and Company, Ltd.
to distribute the product in Japan. Mitsui's distributor agreement is for
a period of two years and commenced January, 1996. Mitsui is one of
Japan's largest trading companies with 1995 revenues of $195 billion.
Mitsui will distribute the Balzac products throughout all of Japan,
including toy stores, boutiques, theme parks, etc.

Balzac has joined forces with Second City Television, the legendary comedy
group who gave the world such comedic stars as John Belushi, Martin Short,
and John Candy, to develop a new breed of children's television. Plans
are underway to produce a series of programs including a weekly show
called the "World of Balzac". The Company acquired the merchandising
rights for the characters in the "World of Balzac". In addition the
Company will assist in the production of the World of Balzac series.

The TV series will bring Balzac to a new level of awareness and
merchandising. The new public awareness and demand of Balzac products
will assist the Company in obtaining additional venues for the sale of
Balzac products in other major theme parks such as Six Flags over Texas,
and Busch Gardens.

The Company has also acquired the video "Secrets of Magic" by Joseph
Gabriel and will arrange with distributors to have the video distributed
domestically and internationally. The video is currently in post
production and the initial phase of packaging has been completed. The
Company will receive a royalty of 7% of wholesale price for domestic sales
and the difference between Balzac's cost and the wholesale price to the
distributors for foreign sales.

By acquiring a substantial amount of Balzac inventory for stock the
Company has reduced its cash investment needed for this deal. The
additional cash realized from the sale of Balzac products will allow the
Company to expand existing lines of business and other opportunities as
they become available.

Although the Company expects to be profitable by the end of 1996, as a
result of these new opportunities, there can be no assurance that it will
achieve profitability.

After many years of operating losses the Company hopes to build
shareholder value through profitability in future years.

DCC Compact Classics

The Company acquired 33 percent of the outstanding common stock of DCC
Compact Classics, a publicly held Colorado corporation, in late 1992. DCC
Compact Classics was a producer and distributor of music that is a
compilation of classic rock, jazz and contemporary artists that are
released on compact discs. In fiscal 1993, the Company and DCC were
involved in litigation (see Item 3) and in October 1993, an agreement was
entered into between the Company and DCC's principal shareholder and CEO,
Marshall Blonstein. Pursuant to this agreement, the Company issued an
option to Mr. Blonstein to repurchase the common stock acquired by the
Company for $0.41 per share. The option was for 15 months, expiring in
January 1995. Mr. Blonstein paid the Company $10,000 to secure this
option. During 1994, Mr. Blonstein exercised his option purchasing the 33
percent interest from the Company for $504,000.

Interactive Video Technologies

In May 1992, the Company purchased five percent, or 130,150 shares, of
Interactive Video Technologies ("IVT"). IVT was in the business of
providing on line interactive products to cable system operators. In,
October, 1995 IVT terminated its operations and the Company wrote off its
investment of $125,000.

Polton Records

On May 10, 1994 the Company purchased an 80 percent interest in the Polton
Corporation, by issuing 75,000 shares of its restricted common stock. In
addition, the Company advanced Polton $200,000 for working capital.
Through a subsidiary, Polton has the exclusive rights in Poland to make
and distribute compact discs and cassettes for Warner Music labels,
including Warner Brothers, Elektra, Atlantic, and East West. Warner
Brothers has a 22 percent worldwide market share for pre-recorded music.

In September 1994, a dispute arose with Mr. Gary Firth, the President of
Polton, regarding the Company's acquisition of 80 percent of the
outstanding common stock of the Polton Corporation. Because the Company
did not have the ability to exercise significant influence over operating
and financial policies, Polton was accounted for using the cost method and
the results of its operations are not included in the consolidated results
of operations of the Company.

In November, 1995 Polton and the Company entered into an agreement whereby
Polton would return the 75,000 shares of the Company's common stock and
the Company would return its shares of Polton common stock and Polton
agreed to pay $100,000 of the $200,000 working capital advance. Polton
had 60 days to sign the agreement and on January 16, 1996 Polton signed
the agreement, returned the 75,000 shares of common stock and paid
$100,000 in settlement of their $200,000 outstanding payable to the
Company.

Image Marketing Group

On September 6, 1994, the Company acquired an 84 percent interest in Image
Marketing Group, Inc. ("Image"). The Company issued 248,297 shares of its
restricted common stock in exchange for 1,986,374 issued and outstanding
shares of Image. In addition, the Company issued 231,976 shares of its
Class B preferred stock in exchange for all the issued and outstanding
preferred stock of Image and approximately $420,000 of related party debt.

Building on a forty year experience as a leading art publisher, Image had
expanded its business activity to include the development and exploitation
of copyrighted properties in multi-media marketing formats. In 1994,
Image obtained the rights to both create the Harley-Davidson Fine Art
Collection and the Harley-Davidson Fine Art Show. Last year was Norman
Rockwell's 100th anniversary and Image had licensing agreements with
Curtis Archives to publish all of Rockwell's Saturday Evening Post covers.

Image had a substantial amount of working capital invested in inventory
items that were not selling therefore it was unable to recover its
investment in inventory or reinvest in new images from the sale of
existing inventory. FTET invested approximately $700,000 in Image in an
effort to generate sales through introduction of new image to customers.
Image was unable to generate enough sales or liquidate its inventory to
generate working capital to support continued operations. Since 1993,
Image has had losses from operations and at the time it was acquired by
the Company was in need of working capital to finance inventory growth.
Even with a working capital infusion of approximately $700,000 Image
continued to incur losses as a result of declining sales. In November,
1995 it was determined that additional working capital would not be
advanced to Image and that the Company would terminate operations and seek
a buyer for Image. The discontinuance of operations of Image resulted in
a loss of approximately $2.2 million for the year ended December 31, 1995
of which $1.6 million represents the write down of assets to their net
realizable value.

The results of operations of Image for the year ended December 31,1995 and
1994 are disclosed in the accompanying statements of operations as
discontinued operations.

Indian Licensing

In February 1995, the Company signed a series of agreements giving it a
five-year exclusive worldwide licensing and merchandising rights for the
Indian Motor Company, which included a three-year option, as well as the
exclusive rights to develop, operate, and franchise the Indian Motor
Company Diners or Cafes. These rights required the approval of the
bankruptcy court and would take effect when the Company assisted in its
commitment to help the various Indian companies come out of bankruptcy.

In a bankruptcy settlement, Australian businessman Maurits Hayim-Langridge
and his associates agreed to pay a maximum of $2.31 million to creditors
of several Indian Motorcycle Companies. In connection with this Plan of
Reorganization, the Company had offered to guarantee payments of the $2.31
million, in exchange for exclusive worldwide licensing rights. The
Bankruptcy Court has still not approved a plan of reorganization with
Hayim-Langridge.

In October, 1995 in a hearing in Worcester, Massachusetts, Indian
Motorcycle Manufacturing Company, Inc., the grantor of the exclusive
licensing agreements, was converted to a Chapter 7 bankruptcy and all of
its assets including the trademark, were transferred to the property of
the Chapter 7 estate. The effect of this decision was to put into
question the validity of the Company's licensing agreements entered into
in February, 1995, since they were never approved by the bankruptcy court.
There can be no assurance that the Company's rights under these prior
agreements can be preserved.

In January, 1996, in the Massachusetts Bankruptcy Court, the trustee for
Indian Motorcycle Company, Inc., Indian Motorcycle Apparel and Accessories
Co., Inc. and Indian Motorcycle Manufacturing Company, Inc. (collectively
referred to as the "Chapter 7 debtors") and the receiver for Indian
Motorcycle Manufacturing Company, Inc.("IMMCI"), agreed to a plan for the
coordinated sale of The Indian Trademark and other trademark related
assets. The Plan is intended to unite in a single entity, a newly formed
entity, all of the claims of the Trademark owned by IMMCI and the Chapter
7 debtors. The Trustee for the Chapter 7 debtors and the Receiver for
IMMCI will solicit bids from prospective purchasers of the newly formed
entity. Bids will specify the percentage ownership of the new entity
which the purchaser desires to acquire, as well as the proposal purchase
price. The new plan of reorganization currently before the court
supersedes the previous plan submitted by Maurits Hayim-Langridge.

The Company intends to assemble a group which will submit a bid to
purchase a controlling interest in the new formed entity although there
can be no assurance that the Company will be successful in acquiring an
interest in the new entity.

Competition

Video

The production and marketing of pre-recorded video cassettes is a highly
competitive business. The Company vies with many companies and
individuals that have substantial experience in acquiring, producing and
distributing such products. Most have resources substantially greater
than those of the Company. These competitors include both large and small
independent production companies, television and film studios, and others.
The Company knows of numerous other videocassette travel guide series
(including International Video Network's Video Visits, Travelview, Laura
McKenzie's Travel Guide and Fodor's Travel Video); however, the Company
believes that the Kodak name and the quality of its programs set it apart
from its competitors.

Radio

100.7, "The Fox" competes with seven other signals available in the area.
Two of these radio signals originate from Gillette, Wyoming. The Company
presently enjoys the largest share of the market, estimated to be 44
percent.

Film

Competition is intense within the motion picture industry and between that
industry and other entertainment media. First Films was in competition
with major studios, as well as independent motion picture companies for
the acquisition of creative and technical personnel. First Films also
competed for distribution arrangements and for the public's interest in
the creative properties. Most of the organizations with which First Films
was in competition have far greater financial and creative resources and
larger staffs.

These organizations have longer operating histories, which may be a
significant factor in attracting properties, personnel, distribution
agreements, and third-party financing.

Live Entertainment

Competition is intense in the comedy and music night club entertainment
industries. On a national level, the Live Division competes for
entertainers with companies that are better capitalized, highly visible
and have longer operating histories and larger staffs in their respective
locations. None of the national comedy clubs have locations in Denver,
Colorado. Comedy Works Larimer Square has been in business in Denver,
Colorado for 13 years and the Company believes it to be the highest
revenue-producing comedy club in the area. The Company believes that
Comedy Works Larimer Square provides higher-quality acts than its local
competitors, reflected in the fact that it charges approximately twice the
admission price of its local competitors. The two main competitors of
Comedy Works Larimer Square are both individually-owned and located in
shopping centers in the suburbs, while Comedy Works is located in the
downtown Denver area.

In January 1995, the Company decided to close the Tampa, Florida, Comedy
Works due to declining attendance. The club competed with two locally
owned clubs which were located in a shopping center and a hotel. The
Company determined the Tampa market could not sustain three comedy clubs.

Licenses

The Federal Communications Commission (FCC) issues radio broadcasters a
license to operate within their assigned frequency for seven years. These
licenses upon application are renewable for additional seven year periods.
The FCC issued KGWY its original license on October 1, 1983, to operate at
a frequency of 100.7 MHz, 24 hours a day, at 100,000 watts of effective
radiated power. It was subsequently reissued in October of 1990. It will
be up for renewal again on October 1, 1997. During the renewal process
the public has an opportunity to express its opinion of how well the
particular station is servicing its broadcast area. Extreme public
negativity during this period can hold up the reissuance process. In
addition, frequent violations of FCC rules and regulations can be cause
for the denial of the station's license renewal.

The FCC allots a certain number of frequencies for each broadcast area,
based upon community need, population factors and the determination of the
economic viability of another station in the designated region. Currently
there are no other licenses available in the Gillette area. It is
possible to request the FCC reconsider opening up further frequencies
through its rule making body, but this can be a time consuming process.
All sales of stations and subsequent transfers of licenses must be
approved by the FCC.

Seasonality

Video

Although revenues are spread over the entire calendar year, historically
the third quarter generally reflected the highest revenues for each year
due to increase in wholesale buying for the holiday season.

Radio

Although revenues are spread over the entire calendar year, the first
quarter generally reflects the lowest and the fourth quarter generally
reflects the highest revenues for each year. The increase in retail
advertising each fall in preparation for the holiday season, combined with
political advertising, tends to increase fourth quarter revenues.

Film

Seasonality has almost no effect, other than to decide when the release of
a specific product may come; therefore, delaying revenues would be the
only significant seasonal trend.

Live Entertainment

The Company has found that its highest-revenue months are from July 15 to
October 15 of each year. From approximately May 15 to July 15 of each
year, business is typically down 30 percent over average, primarily
because customers prefer outdoor activities at that time of year. During
the holiday season, management has found a slight increase due to once-a-
year customers, on vacation or hosting visiting friends or relatives.

Employees

First Entertainment, Inc.

Currently, FTET, the holding company, employs one executive. The holding
company contracts the accounting and administrative function to a company
owned by the former president.

Video

The Company does not have any video employees, but rather relies upon its
distribution for video sales.

Radio

The Company employs approximately five full-time employees and eight part-
time employees. Of the full-time employees, they are engaged mainly in
the administrative radio operations and sales. The part-time employees
are engaged in the on-air activities as on-air personalities.

Film

Currently, the Company is not in production. This division is overseen by
the administrative staff in the parent company.

Live Entertainment

This division has three full-time employees and approximately 20 part-time
employees. Full-time employees are management staff and part-time
employees are waitresses, bartenders, and door personnel.

Copyrighted Properties

Image had employed two executives, 10 full time employees and 3 part time
employees, until it terminated all employees in April, 1996.

Item 2. Properties

First Entertainment, Inc.

The Company's executive offices are located at 1380 Lawrence Street, Suite
1400, Denver, Colorado and are leased under the terms of a 66-month lease,
which terminates in March 1997. Monthly rental is approximately $4,100.

Video

The Company's video operation is housed in the executive offices at 1380
Lawrence Street, Suite 1400, Denver, Colorado. The production facilities
for the Video Division are located in Casper, Wyoming, in the home of the
producer. The Company pays no rent for its production facilities.

Radio

The Company has facilities in Gillette, Wyoming which house the radio
station, 100.7, The Fox. The facilities were leased under a 10-year lease
agreement, which commenced in August 1986, with a trust, whose trustee was
the president of the Company until 1992. Annual rent was approximately
$21,000. In addition, the radio station leased its FM tower site from a
ranch owned by the former president's wife for an annual rent of $5,400.
In April, 1996 the Company purchased the land and building which houses
the radio station for $350,000 and the land under which the FM tower sits
for $125,000 by issuing common stock valued at $325,000 and a mortgage for
$150,000.

Film

The Film Division is housed entirely at the 1380 Lawrence Street, Suite
1400 location. It is currently using approximately 5 percent of the space
provided at this location.

Live Entertainment

The Live Division rents one facility. Comedy Works Larimer Square leases
its premises under the terms of a five-year lease, which commenced in
March 1994. The monthly lease payments are based upon approximately six
percent of gross revenues. The Tampa Comedy Works which closed January
1995 had leased its space on a month-to-month basis.

Image Marketing

Image leases a building from two of its former stockholders under the
terms of a 25-year lease which terminates in June, 2004. The lease
agreement provides for annual rent of approximately $250,000. In
connection with the termination of operations of Image, it has entered
into a verbal agreement with a prospective buyer to acquire certain assets
of Image by assuming certain secured bank debt and certain accounts
payable. In addition, the buyer will also acquire the building owned by
the two former stockholders of Image. Upon completion of the sale of the
building, the lease obligation will be terminated and the building will be
occupied by the new purchaser. Accordingly, the lessor has waived any
remaining lease payments.

Item 3. Legal Proceedings

First Entertainment

First Entertainment knows of no litigation pending, threatened, or
contemplated, or unsatisfied judgments against it, or any proceedings of
which First Entertainment or any of its subsidiaries is a party, except as
specified below. First Entertainment knows of no legal actions pending or
threatened, or judgment entered against any of its officers or directors
or any of its subsidiaries in their capacities as such, except as
specified below.

The Company has filed several small claims suits against clients,
advertisers who have been unable or unwilling to pay their obligations.
All of these have been successfully settled to the Company's satisfaction.

In December 1994, the Company filed a lawsuit against Mr. Gary Firth and
his legal counsel regarding a dispute with Mr. Firth and the Company's
acquisition of 80 percent of the outstanding stock of The Polton
Corporation. In November, 1995 the Company reached a settlement with Mr.
Firth in which Mr. Firth agreed to return the shares of the Company's
Common stock and pay $100,000 in full settlement of a $200,000 note
receivable.

In January, 1996 the Company, AB Goldberg, Harvey Rosenberg and several
other unrelated third parties were named as defendants in a lawsuit filed
by Sterling Consulting Cooperation as Receiver for Indian Motorcycle
Manufacturing, Inc. The Complaint alleges interference by defendants in
the business of IMMI, conflicts of interest of AB Goldberg, breach of
fiduciary duty, unjust enrichment, and bankruptcy fraud.

The plaintiff is seeking unspecified judgment to be proven at trial for
actual damages, treble damages, punitive damages, attorneys fees, pre and
post judgment interest, cost, expenses and such other and further relief
as the Court deems just and proper.

The Company believes that these allegations are without merit and intends
to defend this case vigorously. The Company does not believe that this
litigation will have a material adverse impact on the financial
statements.

On July 5, 1994, Fineley Brothers, Inc. filed suit against Image in
Hartford Superior Court, alleging the non-payment of certain invoices
amounting to $121,062. Additionally, the amount claimed includes
additional expenses of $7,215, interest of $11,263 and all costs of
litigation. The entire claim is in excess of $140,000. The Company is
disputing some of the charges. However, the Company's accounts payable
includes approximately $66,000 of invoices not in dispute, which are also
included in the cost of goods sold section of the income statement. The
Company has also filed counterclaims alleging conversion of color film
separations, unfair and deceptive trade practices, breach of contract and
tortuous interference with business and contractual relationships. The
Company's total claim is estimated to exceed $750,000. The Company
believes it has meritorious defenses, although no assurance can be given
to that effect, and intends to vigorously pursue its counterclaim against
Fineley Brothers Company, Inc. Any recovery on the counterclaim would be
offset against any damages awarded on the complaint. The ultimate outcome
of this matter cannot presently be determined.

Item 4. Submission of Matters to a Vote of Security Holders

There were no matters submitted to security holder vote during the fiscal
year ended December 31, 1995.

Item 5. Market for the Company's Common Stock and Related Stockholder
Matters

The Company's common stock is traded on NASDAQ in the over-the-counter
market and since October 1988, has been included in NASDAQ. The following
table sets forth the high and low bid quotation for the Company's common
stock for each quarterly period in 1995 and 1994. As of February 29,
1996, there were approximately 1,100 shareholders of record of the
Company's common stock. Holders of common stock are entitled to receive
such dividends as they may be declared by the Company's Board of
Directors. No dividends are anticipated to be paid in the foreseeable
future.
<TABLE>
<CAPTION>
Bid Price
High Low
<S> <C> <C>
1995
First Quarter $ 1.90 $ .69
Second Quarter 2.03 1.12
Third Quarter 1.60 1.00
Fourth Quarter 1.22 .66

1994
First Quarter 1.25 .75
Second Quarter .87 .68
Third Quarter .97 .44
Fourth Quarter 1.31 .63
</TABLE>

Item 6. Management Discussion and Analysis or Plan of Operation

Fiscal 1995 as Compared to Fiscal 1994

The Company had a net loss from continuing operations of approximately
$1.7 million in 1995 as compared to $1.3 million in 1994.

The loss from operations of Image for 1995 was $593,000 as compared to
$261,000 in 1994. The 1995 loss represents a full year of operation,
whereas the 1994 represents only three months of operations since it was
acquired on September 1, 1994.

The loss on the disposal of Image of $1,609,000 represents a write down of
assets to their estimated net realizable value of $1,549,000 and an
estimate of the loss through the state of disposition of Image of $
60,000. Image has terminated substantially all of its employees, has
terminated officer salaries and no longer incurs rent under a related
party lease.

Overall revenues declined from $2.3 million in 1994 to 1.8 million in
1995. Live Entertainment revenues declined from $1.6 million in 1994 to
$1.1 million in 1995. The reason for the decline was the closure of the
Tampa Comedy Works in January 1995 due to declining attendance. Overall
the industry has seen a decline in attendance at comedy clubs nationwide,
although the Denver comedy club has been able to retain attendance and
still ranks as one of the top clubs in the country. With the decline in
live entertainment sales in 1995, cost of goods sold has also declined,
from $1.4 million in 1994 to $.9 million in 1995. The gross margin on
live entertainment was 8% in 1994 and 14.5% in 1995. The increase in the
margin is due to an effort by the Company to control costs due to its
negative cash flow and because Tampa, when it was open in 1994 did not
contribute to the gross profit.

Radio sales have increased from $631,000 in 1994 to $678,000 in 1995
primarily because the Company changed its format from rock to country.
The format change in February 1995 has resulted in an increased market
share and increased revenues. Cost of goods sold-radio has declined by
$38,000 from 1994 to 1995 even though revenues have increased by $47,000.
The radio station is continuing in its efforts to manage its costs and as
such has substantially reduced its operating overhead.

Video sales and costs of sales have declined primarily because of the loss
of the Company's distributor in January 1995, who filed bankruptcy. A new
distributor for the videos was found in late 1995. Cost of goods sold-
video primarily represents the write-off of inventory of blank tapes and
obsolete videos.

Other revenue increased slightly from $38,000 in 1994 to $55,000 in 1995.

Selling, general and administrative expenses (SG&A) increased from
$878,000 in 1994 to $1.73 million in 1995, an increase of nearly
$700,000. With the decision to discontinue the operations of Image in
1995 the Company wrote off any goodwill previously recorded. The Company
also had $123,000 more in bad debts in 1995 than in 1994. Also included
in SG&A expenses in 1995 was approximately $566,000 in cost and expenses
incurred in the Company's pursuit to acquire the Indian Motorcycle
opportunities. The Company has not been successful in its efforts to
acquire these trademark rights and such costs have been expensed. These
costs were primarily responsible for the increase in SG&A expenses over
1994 and are not expected to recur in the future.

The Company had invested some excess cash in 1995, received from the
exercise of stock options, and had generated $3,700 in interest income.
The Company had no excess cash in 1994.

The Company has reduced notes payable by almost $466,000 mostly in the
third and fourth quarter of 1995 thus reducing interest expense from 1994.
In addition , certain noteholders accepted common stock in settlement of
principal and interest at less than the recorded amounts, thus reducing
interest expense.

In 1995 the Company wrote off its investment in Interactive Video
Technology thereby incurring a loss of $125,000. In 1994, the Company
recognized a loss of $114,000 on the sale of its investment in DCC.

In 1995 the Company was more successful in negotiating debt settlements
with unsecured creditors such as note payable holders and accounts payable
holders through the issuance of common stock. These debt settlements
resulted in a gain of $176,717 in 1995.

Liquidity and Capital Resources

The Company has suffered recurring losses from operations, has a working
capital deficiency of approximately $1.3 million, has negative equity of
$66,000 and is in default on a significant portion of its debt. At
December 31, 1995, the Company had a working capital deficit of
approximately $1.3 million, which is an improvement over December 31, 1994
when it had a working capital deficit of approximately $1.6 million. The
reduction in the deficit is primarily the result of a reduction in notes
payable and the current portion of long term debt.

Management's plans with regard to the Company's ability to continue as a
going concern include continued raising of equity financing, restructuring
of its debt obligations, evaluating mergers and acquisitions to improve
market share or operational synergy's and improving efficiency of
operations. For several years, losses from operations have resulted in
significant cash deficiencies and have hindered the Company's ability to
properly fund certain business segments such as videos, to make them
profitable or to expand current business segments. The Company has
current liabilities of $1.7 million and presently, the Company does not
have the financial resources it needs to meet its existing obligations,
and fund working capital deficits. The Company must generate additional
revenues and those revenues must come from sources other than the existing
business segments. The existing business segments will not generate
significant increases in revenues, therefore new business opportunities
will be needed for the Company to continue in the long term. The Company
is always evaluating additional business opportunities but is limited due
to its lack of working capital. The addition of the Balzac opportunity
subsequent to year end has the potential to add significant revenues to
the Company.(See Item 1- Other Business Development)

In 1995, the Company was able to raise approximately $1.1 million through
the sale of common stock and the exercise of common stock options. Of the
$1.1 million raised approximately $800,000 was used to finance operations,
$100,000 was used to reduce notes payable and $200,000 was used as
advances to Indian Motorcycle Company, Inc.

The Company has been successful in 1995 and in 1994 in financing
operations through issuance of common stock in settlement of accounts
payable and in exchange for services. This form of payment has reduced
the cash requirements of the Company.

A significant capital infusion of up to $2 million will be necessary to
pay down existing debt, finance capital expenditures needed by various
business segments to increase sales and profitability and provide working
capital to finance business expansion. The likelihood of obtaining the
necessary equity financing is uncertain at this time.

The Financial Standards Board has recently issued Statement of Financial
Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of
Long-Lived Assets" and SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 121 requires that long-lived assets and certain
identifiable intangibles be reported at the lower of the carrying amounts
or their estimated recoverable amount and the adoption of this statement
by the Company is not expected to have an impact on the financial
statements. SFAS No. 123 encourages the accounting for stock-based
employee compensation programs to be reported within the financial
statements on a fair-value based method. If the fair value based method
is not adopted, then the statement requires proforma disclosure of net
income and earnings per share as if the fair value based method has been
adopted. The Company has not yet determined how SFAS No. 123 will be
adopted nor its impacts on the financial statements. Both statements are
effective for fiscal years beginning after December 15, 1995.

A valuation allowance offsetting the Company's net deferred tax asset has
been established to reflect management's evaluation that it is more likely
than not that all of the deferred tax assets will not be realized.

Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure

On January 1, 1996, Mitchell Finley and Company, P.C. combined their
practice into BDO Seidman, LLP, and on February 8, 1996, were replaced as
the principal accountants of the Company. Mitchell Finley and Company,
P.C. reported on the financial statement of the Company as of and for the
two years ended December 31, 1994.

The audit report for the years ended December 31, 1994 and 1993, reported
by Mitchell Finley and Company, P.C. was modified due to uncertainty as to
the Company's ability to continue as a going concern.

There were no disagreements with Mitchell Finley and Company, P.C. with
regard to matters of accounting principle or disclosure.

Item 8. Financial Statements and Supplementary Data

FIRST ENTERTAINMENT, INC. AND SUBSIDIARIES

Index to Consolidated Financial Statements

Reports of Independent Certified Public Accountants

Consolidated Balance Sheets

Consolidated Statements of Operations

Consolidated Statements of Stockholders' Equity(Deficit)_

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

Report of Independent Certified Public Accountants

Board of Directors and Stockholders
First Entertainment, Inc.
Denver, Colorado

We have audited the accompanying consolidated balance sheet of First
Entertainment, Inc. and subsidiaries ("the Company" ) as of December 31,
1995, and the related consolidated statements of operations, stockholders'
equity (deficit) and cash flows for the year than ended. These consolidated
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements based on our audit.

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

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of December 31, 1995, and the results of their operations and
their cash flows for the year than ended, in conformity with generally
accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Notes A and F to the consolidated financial statements, the Company has
suffered recurring losses from operations, has a working capital deficiency
of approximately $1.3 million, has negative equity of $66,000 and is in
default on a substantial portion of its debt. These conditions raise
substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regards to these matters are discussed in
Note A. The consolidated financial statements do not include any
adjustments that might result from the outcome of these uncertainties.

BDO Seidman,LLP

March 29, 1996
Denver, Colorado

Report of Independent Certified Public Accountants

Board of Directors and Stockholders
First Entertainment, Inc.
Denver, Colorado

We have audited the accompanying consolidated balance sheet of First
Entertainment, Inc. and subsidiaries ("the Company" ) as of December 31,
1994, and the related consolidated statements of operations, stockholders'
equity and cash flows for the year the ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of the
Company as of December 31, 1994, and the results of their operations and
their cash flows for the year then ended, in conformity with generally
accepted accounting principles.

The accompanying consolidated financial statements have been prepared
assuming that the Company will continue as a going concern. As discussed in
Notes A and F to the consolidated financial statements, the Company has
suffered recurring losses from operations, has a working capital deficiency
and has not been able to satisfy obligations as they have come due. These
conditions raise substantial doubt about the Company's ability to continue
as a going concern. Management's plans in regards to these matters are
discussed in Note A. The consolidated financial statements do not include
any adjustments that might result from the outcome of these uncertainties.

Mitchell Finley and Company, P.C.
Certified Public Accountants

April 4, 1995
Denver, Colorado
<TABLE>

FIRST ENTERTAINMENT, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1995 and 1994
<CAPTION>

1995 1994
<S> <C> <C>
ASSETS

CURRENT ASSETS
Cash and cash equivalents $ 71,488 $ 62,144
Trade accounts receivable,
net of allowance for doubtful
accounts of $2,776
and $10,000 89,203 83,464
Accounts receivable, employees 189
Accounts receivable, other 145,778 18,995
Notes receivable, related party 100,000 200,000
Inventories 22,234 40,633
Other current assets _ 18,911 24,035
---------- ---------
_ 447,614 429,460
---------- ---------
PROPERTY AND EQUIPMENT
Master tape library 1,497,399 1,497,399
Machinery, production and
other equipment 519,505 516,607
Furniture and equipment 168,449 166,879
Leasehold improvements 170,213 170,213
Condominium 57,626
Transportation equipment 37,370
Film cost inventory _103,428 103,428
--------- ---------
2,553,990 2,454,526
Less accumulated
depreciation and amortization 2,162,103 1,928,678
----------- --------
391,887 525,848
--------- ---------
OTHER ASSETS
License, net of accumulated
amortization of $352,730 and
$290,211 892,441 960,170
Goodwill, net of accumulated
amortization of $25,478 as
of December 31,1994 30,000
Investments and other 956 128,624
Net assets of discontinued
operations _ 1,393,212
------- ---------
_ 893,397 2,512,006
----------- -----------
TOTAL ASSETS $ 1,732,898 $ 3,467,314
=========== ===========
<FN>
"See accompanying notes to consolidated financial statements".

</TABLE>
<TABLE>

FIRST ENTERTAINMENT, INC. AND SUBSIDIARIES

Consolidated Balance Sheets, continued

December 31, 1995 and 1994
<CAPTION>

1995 1994

LIABILITIES AND STOCKHOLDERS' EQUITY(DEFICIT)
<S> <C> <C>
CURRENT LIABILITIES
Checks issued against
future deposits $ $ 40,039
Accounts payable 63,268 178,680
Accrued liabilities 122,830 69,668
Accrued liabilities,
related party 34,496
Accrued interest 325,185 341,069
Notes payable and current
portion of long-term debt 923,048 1,337,084
Notes payable, related parties 13,167 13,167
Net liabilities of
discontinued operations _ _297,565
--------- ---------
1,745,063 2,014,203
--------- ---------
LONG-TERM DEBT, NET
OF CURRENT PORTION ___54,281 12,084
--------- --------
MINORITY INTEREST _________ 78,950
--------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY(DEFICIT)
Preferred stock, $.001 par value;
authorized 5,000,000 shares;
Class A preferred stock,
10,689 and 13,469 shares
issued 10 13
Class B preferred stock
231,976 shares issued 232 232
Common stock, $.008 par value;
authorized 6,250,000 shares;
2,631,544 and 1,919,872 shares
issued 21,052 15,359
Capital in excess of par value 11,227,696 8,869,076
Accumulated deficit (10,567,547) 6,709,362)
Deferred compensation (263,065) (10,417)
Investment in Polton (318,000)
Treasury stock, at cost, 77,125
shares of common stock at
December 31, 1995 and 1994 (484,824) (484,824)
--------- ---------
_(66,446) 1,362,077
--------- ---------

TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY (DEFICIT) $ 1,732,898 $ 3,467,314
=========== ============

<FN>
"See accompanying notes to consolidated financial statements."
</TABLE>

<TABLE>
FIRST ENTERTAINMENT, INC. AND SUBSIDIARIES
<CAPTION>
Consolidated Statements of Operations

For the Years Ended December 31, 1995 and 1994

1995 1994
<S> <C> <C>
REVENUE
Live entertainment $ 1,051, 993 $ 1,554,490
Radio 678,685 631,138
Video 31,177 78,278
Other ___55,005 _ 38,263
--------- ---------
1,816,860 2,302,169
--------- ---------

COSTS AND EXPENSES
Cost of sales, live
entertainment 899,585 1,430,012
Cost of products sold,
radio 502,438 540,236
Cost of products sold,
video 19,913 27,527
Depreciation and
amortization 334,164 354,507
Selling, general and
administrative 1,574,833 __877,907
--------- ---------
3,330,933 3,230,189
--------- ---------

OPERATING LOSS FROM
CONTINUING OPERATIONS (1,514,073) (928,020)
----------- --------
OTHER INCOME (EXPENSE)
Interest expense (196,698) (202,303)
Other, net 55,468 (145,837)
------------ --------
(141,230) _(348,140)
------------ --------
NET LOSS FROM CONTINUING
OPERATIONS (1,655,303) (1,276,160)

DISCONTINUED OPERATIONS (NOTE D)
Loss from operations of
discontinuance of Image (593,674) (261,016)
Loss on disposal of Image,
including provision of
$60,000 for operating
losses during phaseout
period (1,609,208) _________
----------- ----------
NET LOSS (3,858,185) (1,537,176)

DIVIDEND REQUIREMENTS ON
PREFERRED STOCK __________ __ (24,221)
----------- ---------
LOSS APPLICABLE TO
COMMON STOCK $ (3,858,185) $ (1,561,397)
============= =============

NET LOSS PER COMMON SHARE, CONTINUING
OPERATION $ (.70) $ (.83)
===== =====

NET LOSS PER COMMON SHARE,
DISCONTINUED OPERATIONS $ (.93) $ (.17)
===== =====

NET LOSS PER COMMON SHARE $ (1.63) $ (1.02)
====== =====

WEIGHTED-AVERAGE NUMBER OF
SHARES OUTSTANDING 2,363,231 1,538,141
============ =========
<FN>
"See accompanying notes to consolidated financial statements."
</TABLE>
<TABLE>

Statement of Shareholders Equity
FIRST ENTERTAINMENT , INC. AND SUBSIDIARIES
Consolidated Statement of Stockholders' Equity (Deficit)
For the Years Ended December 31, 1995 and 1994
<CAPTION>
Class A Class B Capital In
Preferred Stock Preferred Stock Common Stock Excess of
Shares Amount Shares Amount Shares Amount Par Value
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCES
JANUARY 1,
1994 258,482 $258 1,280,754 $10,247 $6,400,509

Common stock
issued for:
Cash, net of
offering
costs 250,795 2,006 630,024
Business
combination 323,297 2,586 1,034,802
Services 41,064 329 199,684
Settlement of
accounts
payable 17,523 140 99,610
Conversion of
Class A
preferred (47,013) (47) 11,753 94 (47)
Payment of
preferred
stock dividends 4,374 35 (35)
Preferred stock
issued for:
Business
combination 231,976 232 695,927
Common stock
options, issued 31,250
Treasury stock
retired (198,000) (198) (9,688) (78) (232,969)
Dividends payable
on preferred stock 10,321
Net loss
BALANCES ,
DECEMBER 31,
1994 13,469 13 231,976 232 1,919,872 15,359 8,869,076

Common stock
issued for:
Cash, net of offering
costs 125,000 1,000 133,400
Consulting
services 194,250 1,553 699,476
Settlement of
accounts payable 33,450 268 192,108
Exercise of stock
options 362,500 2,900 952,514
Conversion of
Class A
preferre (2,780) (3) 695 6 (3)
Conversion of Notes
Payable 70,777 566 258,275
Common stock options,
issued 440,250
Return of Common Stock
Issued for Polton
Acquisition
Retirement of
Treasury Stock (75,000) (600) (317,400)
Amortization of deferred
compensation
BALANCES,
DECEMBER 31,
1995 10,689 $10 231,976 $232 2,631,543 $21,052 $11,227,696
</TABLE>
<TABLE>
Accumulated Deferred Investment Treasury
Deficit Compensation In Polton Stock Total
<S> <C> <C> <C> <C> <C>
BALANCES
JANUARY 1, 1994 ($5,147,965) ($718,069) $544,979

Common stock issued for:
Cash, net of offering
costs 632,031
Business combination (318,000) 719,388
Services 200,013
Settlement of accounts payable 99,750
Conversion of Class A
preferred
Payment of preferred stock dividends
Preferred stock issued for:
Business combination 696,159
Common stock options, issued (10,417) 20,833
Treasury stock
retired 233,245
Dividends payable
on preferred stock (24,221) (13,900)
Net loss (1,537,176) (1,537,176)
BALANCES ,
DECEMBER 31, 1994 (6,709,362) (10,417) (318,000) (484,824) 1,362,077

Common stock issued for:
Cash, net of offering costs 134,400
Consulting services (254,250) 466,779
Settlement of accounts payable 192,376
Exercise of stock options 955,414
Conversion of Class A
preferred 0
Conversion of Notes
Payable 258,841
Common stock options,
issued (191,000) 249,250
Return of Common Stock
Issued for Polton
Acquisition
Retirement of
Treasury Stock 318,000 (318,000)
Amortization of deferred 318,000
compensation 192,602 192,602
Net loss (3,858,185) (3,858,185)
BALANCES,
DECEMBER 31, 1995 ($10,567,547) ($263,065) $0 ($484,824) ($66,446)
============ ========= == ========== =========

<FN>
"See accompanying notes to consolidated financial statements."
</TABLE>
<TABLE>

FIRST ENTERTAINMENT, INC. AND SUBSIDIARIES
<CAPTION>
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1995 and 1994
1995 1994
CASH FLOWS FROM OPERATING
ACTIVITIES
<S> <C> <C>
Net loss $ (3,858,185) $ (1,537,176)
Adjustments to reconcile
net loss to net cash
used in operations
Depreciation and amortization 369,564 364,123
Write-off of deferred
offering costs 14,090
Write-off of goodwill 13,452 51,543
Amortization of Image
inventory purchase valuation 160,000
Loss on investments 125,000 114,310
Debt settlements (176,717) (20,016)
Loss on disposal of Image 1,609,208
Issuance of stock for services
and common stock options, net 888,632 220,680
Minority interest in net
loss of subsidiary (78,950) (42,100)
Changes in operating assets
and liabilities
(Increase) decrease in
Receivable (32,333) 23,084
Inventories 18,399 (4,264)
Other current assets 5,124 (24,035)
Other assets 2,668 41,157
Increase (decrease) in
Accounts payable (53,900) 20,740
Accrued liabilities 129,062 80,964
Cash provided by
discontinued operations 131,371 _91,009
------- ------

NET CASH USED IN OPERATING
ACTIVITIES (747,605) (605,891)
------- -------

CASH FLOWS FROM INVESTING
ACTIVITIES
Capital expenditures (62,229) (133,361)
Sale of investments 504,000
Advances to related parties (200,000)
Other 30,816
Cash used in discontinued
operations (4,029)
--------- ---------

NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (66,258) __201,455
-------- -------

CASH FLOWS FROM FINANCING
ACTIVITIES
Principal payments on debt (132,856) (243,274)
Proceeds from issuance of debt 62,446
Proceeds from issuance of
common stock 1,089,814 632,031
Checks issued against
future deposits (40,039) (3,407)
Cash used in
discontinued operations (93,712) _______
--------- -------

NET CASH PROVIDED BY
FINANCING ACTIVITIES 823,207 _447,796
--------- --------

NET INCREASE IN CASH
AND CASH EQUIVALENTS 9,344 43,360

CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR __ 62,144 __ _18,784
CASH AND CASH EQUIVALENTS,
END OF YEAR $ 71,488 $ 62,144
============== ============

SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Interest paid $ 72,123 $ 57,324
============ ============
Income taxes paid $ 0 $ 0
============ ============
</TABLE>
<TABLE>
SUPPLEMENTAL SCHEDULE OF
NONCASH INVESTING AND
FINANCING ACTIVITIES
<CAPTION>
<S> <C> <C>
Notes payable and accrued
interest converted into common
stock $ 258,840
===========
Accounts payable and accrued
expenses converted into
common stock $ 192,376 $ 99,750
=========== ==========
Preferred stock converted
to common stock $ 22 $ 752
=========== ==========
Issuance of common and
preferred stock for acquisitions $1,733,547
==========
Issuance of common stock
for dividends in preferred stock $ 140
==========
Treasury stock acquisition
and retirements $ 318,000
===========
Increase in contributed capital
for declared dividends on
preferred stock $ 24,221
==========
Mortgage notes assumed in
property acquisitions $ 57,600
===========
Common stock issued for service $ 1,141,280 $ 231,263
=========== ===========

<FN>
"See accompanying notes to consolidated financial statements."
</TABLE>

FIRST ENTERTAINMENT, INC. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE A NATURE OF BUSINESS AND GOING CONCERN

First Entertainment, Inc. (the "Company") was incorporated as a Colorado
corporation on January 17, 1985. The Company and its subsidiaries are
involved in entertainment through several media's: its video segment
produces and markets travel videos; its film segment developed several
film properties of low-budget motion pictures; its live entertainment
segment owns and operates a comedy club and its radio station, 100.7 "The
Fox" operates in Gillette, Wyoming. In 1995, the Company discontinued its
copyrights and proprietary properties division which consisted of the
publication of books, printing of art.

During the period from inception (January 17, 1985) to December 31, 1995,
the Company has incurred cumulative net losses of approximately $10.6
million and, as of December 31, 1995, had an excess of current liabilities
over current assets of approximately $1.3 million, has negative equity of
$66,000 and is in default on a substantial portion of its debt. These
conditions raise substantial doubt about the Company's ability to continue
as a going concern. The Company is dependent upon obtaining additional
financing, and/or extending its existing debt obligations, and/or
obtaining additional equity capital and ultimately achieving profitable
operations. The accompanying consolidated financial statements do not
include any adjustments that might result from the outcome of these
uncertainties.

Management's plans with regard to the Company's ability to continue as a
going concern include continued raising of equity financing in the U.S.
and/or international markets, completing negotiations for improved
domestic and international distribution channels for its products,
restructuring of its debt obligations, evaluating mergers or acquisitions
to improve market share or operational synergyies and improving efficiency
of operations.

NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Consolidation: The accompanying consolidated financial
statements include the accounts the Company and its subsidiaries. All
significant intercompany accounts and transactions have been eliminated.

Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles necessarily
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities, the disclosure of contingent
assets and liabilities at the date of the financial statements and
reported amounts of revenues and expense during the reporting periods.
Actual results could differ from those estimates.

Investments: The equity method of accounting is used when the Company has
a 20 percent to 50 percent equity interest in other companies and is able
to exert significant influence. Under the equity method, original
investments are recorded at cost and adjusted by the Company's share of
undistributed earnings and losses. Investments accounted for under the
equity method are evaluated periodically for net realizable value.

The cost method of accounting is used when the Company has less than a 20
percent equity interest, or has a greater than 20 percent equity interest
but does not have the ability to exercise significant influence over
operating and financial policies. Under the cost method, the Company does
not record its proportional share of undistributed income or loss but
periodically evaluates the carrying value of the cost investment for
permanent loss of value.

Inventories: Inventories are stated at the lower of cost or market
value (first-in, first-out basis). Inventories are comprised of video
cassettes and liquor supplies.

Property and Equipment: The Company has a library of master video tapes
and film cost inventory related to its video product line. Capitalized
costs, when completed, are amortized over the estimated economic life of
the master tape, generally not in excess of seven years. The excess, if
any, of the capitalized costs of master tapes over anticipated gross
revenues is charged to expense.

Production equipment, furniture and other equipment are recorded at cost
and depreciated using straight-line and declining balance methods over the
estimated useful lives of the assets, ranging from three to fifteen years.

Leasehold improvements are recorded at cost and are amortized on a
straight-line basis over their estimated useful lives, but not in excess
of the lease term.

The cost and related accumulated depreciation and amortization of assets
sold or retired are removed from the appropriate asset and accumulated
depreciation and amortization accounts and the resulting gain or loss is
reflected in income.

Maintenance and repairs are charged to operations as incurred and
expenditures for major improvements are capitalized.

License, Goodwill and Intangibles: Broadcast licenses, goodwill and
intangibles, consisting of copyright rights, are amortized on a straight-
line basis over a period of 10 to 20 years.

Periodically the Company reviews the recoverability of its intangible
assets based on estimated undiscounted future cash flows from operating
activities compared with the carrying value of the intangible assets.
Should the aggregate future cash flows be less than the carrying value, a
write-down would be required measured by the difference between the
undiscounted future cash flow and the carrying value of the intangible
assets.

Revenue Recognition: Video cassette sales and copyrighted materials are
generally recorded upon shipment. Broadcast fees are recorded as revenue
when the broadcast is aired.

Net Loss Per Share: Net loss per share is computed on the basis of the
weighted-average number of shares outstanding during the respective
periods presented. The assumed conversion of stock options, warrants,
debentures and convertible preferred stock would be antidilutive for all
periods presented and, thus, are not included in the computation of
weighted-average shares.

Concentration of Risk: Financial instruments which potentially expose the
Company to concentration of credit risk, as defined by Financial
Accounting Standards Board Statement No. 105, "Disclosure of Information
about Financial Instruments with Off-Balance-Sheet Risk and Financial
Instruments with Concentration of Credit Risk," consist primarily of cash
equivalents and accounts receivable with the Company's various customers.
The Company establishes an allowance for doubtful accounts based on
factors surrounding the credit risk of specific customers, historical
trends and other information.

The Company maintains all cash in bank deposit accounts, which at times
may exceed federally insured limits. The Company has not experienced a
loss in such accounts.

Reclassifications: Certain balances in the 1994 consolidated financial
statements have been reclassified in order to conform to the 1995
presentation. The reclassifications had no effect on financial condition
or results of operation.

Income Taxes: Under the provisions of SFAS No. 109, the Company's policy
is to provide deferred income taxes related to property and equipment,
inventories and other items that result in differences between the
financial reporting and tax basis of assets and liabilities.

Deferred Compensation: Deferred compensation results from granting stock
options at option prices less than the fair market value of the stock on
the date of grant, under agreements with terms extending
beyond one year. Deferred compensation is initially charged to
stockholders' equity and amortized to expense over the term of the related
agreement.

Cash Equivalents: The Company considers all highly liquid debt
instruments purchased with an original maturity of three months or less to
be cash equivalents.

Financial Instruments: The following methods and assumptions were used to
estimate the fair value of each class of financial instruments for which
it is practicable to estimate that value;

Notes Payable: These notes substantially bear interest at a floating
rate of interest based upon the lending institutions prime lending
rate. Accordingly, the fair value approximates their reported carrying
amount at December 31, 1995.

Mortgage Notes: Estimated based upon current market borrowing rates
for loans with similar terms and maturates.

The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
December 31, 1995 December 31, 1994
<S> <C> <C> <C> <C>
Financial Liabilities Carrying Fair Carrying Fair
Notes Payable Amount Value Amount Value
and Mortgage Notes $1,516,050 $1,516,050 $1,981,601 $1,981,601
</TABLE>

Recent Accounting Pronouncements: The Financial Standards Board has
recently issued Statement of Financial Accounting Standards ("SFAS") No.
121, "Accounting for the Impairment of Long-Lived Assets" and SFAS No.
123, "Accounting for Stock-Based Compensation." SFAS No. 121 requires
that long-lived assets and certain identifiable intangibles be reported at
the lower of the carrying amounts or their estimated recoverable amount
and the adoption of this statement by the Company is not expected to have
an impact on the financial statements. SFAS No. 123 encourages the
accounting for stock-based employee compensation programs to be reported
within the financial statements on a fair-value based method. If the
fair-value based method is not adopted, then the statement requires
proforma disclosure of net income and earnings per share as if the fair
value based method has been adopted. The Company has not yet determined
how SFAS No. 123 will be adopted nor its impacts on the financial
statements. Both statements are effective for fiscal years beginning
after December 15, 1995.

NOTE C ACQUISITIONS

On May 10, 1994, the Company acquired approximately 80% of the issued and
outstanding common stock of the Polton Corporation ("Polton") by issuing
75,000 shares of the Company's restricted common stock valued at $318,000.
In addition, the Company advanced Polton $200,000 for working capital.
Polton is primarily engaged in the manufacturing and distribution of
compact discs and cassettes for Warner Music labels.

Shortly after the consummation of the Polton acquisition a dispute arose
between the Company and Polton whereby Polton refused to provide financial
information to the Company necessary to report the consolidated results of
operations since the date of acquisition. Because the Company did not have
the ability to exercise significant influence over operating and financial
policies, Polton was accounted for using the cost method.

In November, 1995, the Company reached an agreement with Mr. Gary Firth,
president of Polton, and Polton whereby Mr. Firth will return the 75,000
shares of the Company's common stock and repay $100,000 of the $200,000
advanced as working capital. The agreement resulted in a write down of
the note receivable of $100,000 which has been reflected in the
accompanying consolidated statement of operations in selling, general and
administrative expenses.

NOTE D DISCONTINUED OPERATIONS

On September 6, 1994, the Company purchased approximately 84% of the
issued and outstanding common stock of Image Marketing Group, Inc.
("Image"). Image, an art publisher, had expanded its business activities
to include the development and exploitation of copyrighted properties in
multi-media marketing formats.

In November, 1995 the Board of Directors determined to discontinue the
operations of Image. In February, 1996, the Company verbally agreed to
terms of the sale of certain assets of Image with a prospective buyer.
Based on information obtained through negotiations, the net proceeds from
the proposed sale are expected to be less than the current carrying value.
Accordingly, the assets have been written down by approximately $1.6
million to their estimated net realizable value. The disposition is
expected to occur by the end of 1996 therefore the net liabilities of
discontinued operations have been classified as a current liability at
December 31, 1995. Proceeds from the sale of assets are expected to pay
secured debt in its entirety and some proceeds may be available for
unsecured creditors. The Company intends to liquidate Image in a Chapter
7 proceeding upon the sale of certain assets to the secured creditor.
Prior years financial statements have been restated to reflect Image on a
discontinued basis. Revenues of Image for 1995 and 1994 were $1.5
million and $600,000, respectively.

The estimated loss on disposal of Image is $1,609,208, which includes a
provision for anticipated operating losses until disposition of $60,000.

Summarized balance sheet data for the discontinued operations as of December
31, 1995 and 1994 is as follows:
<TABLE>
1995 1994
<S> <C> <C>
ASSETS
Accounts receivable $ 100,000 $ 466,370
Inventory 350,000 1,841,331
Other __ 34,318 _374,477
---------- ----------
Total current assets 484,318 2,682,178
Property, plant and equipment, net 188,721 88,466
Other non-current assets _-- 113,452
------- ---------
Total _ 673,039 2,884,096
------- ---------
LIABILITIES
Current liabilities 970,604 1,451,204
Noncurrent liabilities _______ -- __39,680
-------- ---------
Total ___970,604 1,490,884
-------- ----------
Net assets (liabilities) of
discontinued operations $ (297,565) $1,393,212
============ ===========
</TABLE>
NOTE E RADIO STATION OPERATIONS

The Company operates a radio station in Gillette, Wyoming. The assets of
the radio station are collateral on certain bank debt.

On December 1, 1993, the Company executed notes bearing a principal
balance of $588,257 and interest at seven percent per annum to replace
certain past-due notes. The notes were renegotiated during December 1995,
extending the due date to November 20, 1996 with monthly principal and
interest payments of $5,250 at nine percent per annum.

In order to obtain an extension of the maturity date of the notes in 1993,
the bank required the Company to issue 50,000 shares of its common stock
to Quality Communications as collateral. The Company then granted the
bank a security interest in the 50,000 common shares such that, upon
default or nonperformance under the terms of the notes, the bank may sell
the 50,000 common shares. The Company agreed to make all necessary
filings to register the collateral to provide for its free trading by
August 1, 1994. Such shares have not been registered as of December 31,
1995. The Company has recorded the issuance of the 50,000 common shares
as treasury stock in the accompanying consolidated financial statements.

NOTE F NOTES PAYABLE AND LONG-TERM DEBT

The Company is in noncompliance under the original terms of substantially
all of its debt obligations. In an effort to restructure its debt, a
number of the terms of the original loans were rewritten and/or
renegotiated. However, the majority of these notes are past due and due at
various times over the next year. Creditors may commence execution of
judgments already obtained or commence legal proceedings to obtain
judgments. Substantially all of the Company's assets are pledged as
collateral to one or more obligations. Notes that are not in compliance
are classified as current liabilities.
<TABLE>
December 31,
1995 1994
<S> <C> <C>
Notes payable, First
National Bank Gillette
(Note E) $ 479,364 $ 562,931
Note payable to the
State of Wyoming(1) 300,000 300,000
Note payable,
Shawmut Bank of Connecticut(2) 500,324 548,594
Note payable, Cornerstone Bank 5,604
Capital lease obligation,
Telecommunication
Systems, Inc. 1,707
Capital lease obligation,
Advent Leasing(3) 4,692 10,949
Capital lease obligations
for various computer
equipment(4) 33,705 65,580
Note payable to a
leasing company(5) 30,382 30,382
Note payable, mortgage
company(6) 54,808
Notes payable, individuals(7) 78,000 391,000
Note payable, company(8) 6,300 6,300
Note payable, company 30,080
Note payable, creditor(9) 18,475 18,474
Note payable, company(10) 10,000 10,000
---------- ---------
1,516,050 1,981,601
Less current portion 923,049 1,337,084
Less amount included
in net assets of
discontinued operations _538,721 632,433
--------- ---------
Long-term debt $ 54,280 $ 12,084
=========== ===========
</TABLE>
<TABLE>
Future maturates of debt as of December 31, 1995 are as follows:
Continuing Discontinued
Operations Operations Total
<S> <C> <C> <C>
1996 $ 923,049 $ 538,721 $ 1,461,770
1997 54,280 54,280
------------- ---------- ----------
$ 977,329 $ 538,721 $ 1,516,050
========== ========== ===========
</TABLE>
(1) In February 1989, the Company borrowed $300,000 from the State of
Wyoming for the purpose of purchasing equipment, inventory and to
provide working capital necessary to establish a video duplicating
facility. As of December 31, 1995, the Company has not yet
established an operating duplicating facility and was in violation of
several of the compliance requirements of this note. Although the
note, by its original terms, is not due until March 1, 1999, the State
of Wyoming has deemed the note to be currently due as a result of the
violations of the compliance requirements. The note, with default
interest at 16.5 percent, is due in daily installments of $150, and is
collateralized by the Company's master tape library.

(2)Note payable to Shawmut Bank of Connecticut is due in monthly
installments of $5,000 plus interest at three percent above the bank's
prime rate. The loan is secured by a lien on all corporate assets, is
unconditionally guaranteed by two officers of the Company and also has
a limited guarantee by the partnership which owns the premises leased
by the Company in the form of a third mortgage on the building for
$150,000. Additionally, all related party debts are subordinated to
the bank note. The note had a balloon payment of $548,594 due on
January 31, 1995. In addition, the note contains various covenants,
including restrictions on additional capital expenditures and minimum
equity which must be maintained in the stockholders equity
accounts. The Company must also maintain certain minimum financial
ratios. The Company is in violation of certain covenants which has
placed the note in default. Accordingly, the note is included as a
current liability.

(3)Capital lease obligation payable in monthly installments of $657
including interest through August 1996. The lease is collateralized
by computer equipment.

(4)Consists of various capital lease obligations payable in monthly
installments totaling $2,303 including interest through June 1997.
The leases are collateralized by various computer equipment.

(5)Note payable to a leasing company was dated June 1991 (previously
recorded in accounts payable), bears interest at 12 percent and
required monthly payments of $309. On February 10, 1992, the Company
renegotiated the note and the total balance is due in full.

(6)Note payable to mortgage company , interest at 8.015% per annum,
monthly principal and interest payments of $403 for 59 months with a
balloon payment of $53,000 due August 1, 2000. Collateralized by
certain property and equipment.

(7)Various notes payable to individuals, which were in default as of
December 31, 1993. Interest accrues on the notes at 21 percent per
annum. The Company is currently negotiating to extend the notes.

(8)Note payable to a company, interest at 10 percent, due December 31,
1991. The note is past due.

(9)Note payable to a Company dated October 21, 1993, which bears
interest at 10 percent, is due on May 1, 1996. The note is
collateralized by the Company's master tape inventory as subordinated
to previously filed liens.

(10)During 1993, the Company entered into a settlement with its former
legal counsel. The note bears interest at ten percent per annum and
was due September 1993.

NOTE G STOCKHOLDERS' EQUITY

The Company has the authority to issue 5,000,000 shares of preferred stock
and 6,250,000 shares of common stock. The Board of Directors has the
authority to issue such preferred shares in series and determine the
rights and preferences of the shares.

On November 7, 1994, the Board of Directors authorized a one-for-two
reverse stock split. Accordingly, all references in the consolidated
financial statements to average number of shares outstanding and related
prices, per share amounts, common stock purchase rights, stock option plan
data and shares issued have been restated to reflect the reverse stock
split.

On January 18, 1996 the Board of Directors amended the Articles of
Incorporation creating a Class C preferred stock. Of the 5,000,000 shares
of preferred stock authorized, 3,000,000 shall be designated as Class A,
1,000,000 shall be designated as Class B and 1,000,000 shall be
designated as Class C.

The Class A shares have annual cumulative dividends of 7% per annum,
redeemable by the Company by November 18, 1996, convertible into common
stock on a four-for-one basis and carry a liquidation preference.

The Class B shares have annual cumulative dividends of 6%, payable
quarterly if and when declared, redeemable by the Company into common
stock at a rate of $12.00 per share and subordinated to Class A shares.

The Class C shares have no dividends and are convertible into common stock
(four shares of preferred to one share of common) at a conversion price of
Class C preferred stock equal to the average previous thirty day bid price
of the Common Stock on the date of conversion. The rights of the Class C
shall be subordinate to Class A and Class B shares.

Common Stock

During 1995, the Company issued 70,777 shares of common stock valued at
$258,840 in settlement of notes payable and accrued interest of $331,280 ,
resulting in a gain of $72,440.

During 1995, the Company sold 125,000 shares of common stock in a private
placement resulting in proceeds of $134,400.

During 1995, the Company issued 194,250 shares of common stock to non-
employees, officers, and directors for services valued at $701,030.

During 1995, the Company issued 362,500 shares of common stock upon
exercise of common stock options resulting in proceeds of $955,500. In
addition, the Company recorded compensation of $440,250 in connection with
granting certain stock options.

During 1995, the Company issued 33,450 shares of common stock, valued at
$192,376, in settlement of certain trade accounts payable.

During 1995, the Company issued 695 shares of common stock upon conversion
of 2,780 shares of Class A preferred stock.

During 1994, the Company sold 250,795 shares of restricted common stock
for $695,131 net of offering costs of $63,100.

During 1994, the Company issued 34,213 shares of restricted common stock
to non-employees, officers or directors, valued at $196,830, for services.

During 1994, the Company issued 351 shares of restricted common stock to
employees for bonuses. The stock valued at the fair market value at the
date of issuance was valued at $3,183.

During 1994, the Company issued 323,297 shares of restricted common stock
in connection with business acquisitions. (See Note C and D)

During 1994, the Company issued 16,313 shares of common stock valued at
$99,750 in settlement of certain trade accounts payable.

During 1994, the Company issued 11,753 shares of common stock upon
conversion of 47,013 shares of convertible preferred stock.

During 1994, the Company issued 2,187 shares of common stock, valued at
$17,498, as payment of preferred stock dividends.

In 1994, the Company canceled 4,844 shares of common stock held in
treasury.

Common Stock Options In June 1994, the Company adopted a Non-Qualified
Stock Option Plan, under which the Company's Board of Directors are
authorized to issue options to purchase up to 62,500 shares of the
Company's common stock to qualified employees, officers and directors of
the Company. The options are generally granted for a period of five years
with an exercise price of $2.00 per share. The option price may be
changed at the discretion of the Board of Directors. No options have been
issued under this plan. During 1995 and 1994, the Company has also issued
other non-qualified stock options under terms and at prices deemed
appropriate by the Board of Directors to non-employees.

The following is a summary of the number of shares under option:
<TABLE>
Non-Qualifying Exercise Expiration
Stock Options Price Dates
<S> <C> <C> <C>
Balance,
January 1, 1994 142,500 $ .40-$10.48 1995-1998
Granted 1994 112,500 $ .40-$ 8.00 1995
Exercised (12,500) $ 4.00
Expired (1,250) $ .40
-------
Balance,
December 31, 1994 241,250 $ .40-$10.48 1995-1998
Granted 400,000 $ 2.00-$ 6.00 1995-1996
Exercised (362,500) $ 2.00-$ 4.00
Expired (108,750) $4.00-$10.48
--------
Balance,
December 31, 1995 170,000 $ .40-$10.48 1996-1998
=======
</TABLE>
Preferred Stock

Cumulative dividends in arrears on the outstanding shares of preferred
stock total 39,435 at December 31, 1995 and 1994. The Company has
reserved sufficient common shares to effect the exchange of the preferred
shares.

The Company's Class B preferred shares have annual cumulative dividends of
6%, redeemable by the Company into common stock at face value at a rate of
$12.00 per share, so long as the 30-day average bid price of the Company's
common stock is at least $12.00 per share.

In connection with a business combination as discussed in Note D, the
Company issued 231,976 shares of Class B preferred stock in exchange for
related party debt of approximately $420,000 and preferred stock of Image
valued at $275,875. Subsequent to year end the 231,976 shares of Class B
preferred stock were converted into 57,994 shares of common. In addition,
the related party waived payment of dividends in arrears.

Treasury Stock

The Company retired 75,000 common shares held in treasury as a result of a
January 1, 1995 change in the Colorado Business Corporation Act.

NOTE H INCOME TAXES

The tax effects of temporary differences and carryforward amounts that
give rise to significant portions of the deferred tax assets and deferred
tax liabilities as of December 31, 1995 and 1994 are:
<TABLE>
Deferred tax assets: 1995 1994
<S> <C> <C>
Net operating loss
carryforwards $ 1,940,000 $ 985,000
Investments 25,000
Future deductible
amounts for stock
issuance 74,000
Discontinued operations 322,000
Other 23,000 33,000
---------- -------
Total gross deferred
tax assets 2,285,000 1,117,000
Less valuation allowance (2,229,000) (1,050,000)
---------- ---------
Deferred tax liabilities: 56,000 67,000
---------- ---------
Property and equipment (56,000) (67,000)
---------- ---------
Net deferred taxes $ 0 $ 0
</TABLE>
A valuation allowance has been established to reflect management's
evaluation that it is more likely than not that not that all of the deferred
tax assets will not be realized.

The valuation allowance increased $1,179,000 in 1995 $172,000 in 1994.

As of December 31, 1995, net operating loss carryforwards were approximately
$9.7 million. Utilization of certain portions of this amount is subject to
limitations under the Internal Revenue Code. Carryforward amounts expire at
various dates through 2010.

NOTE I RELATED PARTY TRANSACTIONS

In July 1986, the Company entered into a ten-year operating lease
agreement with a trust controlled by a former officer of the Company for
an office building and land which houses the Company's radio station.
Annual rent was $21,000. The Company also leased land which is occupied
by its radio tower from an entity controlled by a former officer of the
Company. The lease had a ten-year term beginning in 1992 with an annual
rent of $5,400. In April 1996, the Company acquired the office
building and land which houses its radio station and the land occupied by
its radio tower for $475,000. The Company issued stock valued at
$325,000 and a mortgage note in the amount of $150,000.

The Company is obligated under a lease agreement with two of its
stockholders for the use of a building by one of its subsidiaries. The
lease provides for an annual rent of $123,740 for base year 1980 with a
cost of living increase every year based on the Consumer Price Index.
Current annual lease payments are approximately $250,000. The lease is
for a period of twenty five years and expires June 1, 2004. Under the
terms of the lease agreement, the Company is obligated to pay all
utilities, taxes and insurance relating to the building. In connection
with the proposed sale of certain of Image's assets as described in Note
D, the two stockholders are also selling the building occupied by Image to
the prospective purchaser of Image. Upon completion of the sale of the
building the lease obligation will be terminated and the building will be
occupied by the new purchaser. This transaction is expected to be
complete by May 1996. According the lessor has waived any remaining lease
payments.

Commencing April 1995, the Company contracted out some administrative,
management and accounting functions of the Company to a company owned by
the former president and a Director of the Company. Monthly fees for such
services were $15,000 for the period April 1 to July 31, 1995 and $20,000
thereafter. In addition a one time start-up fee of $25,000 was also paid.
Total fees for 1995 were $201,000.

Notes payable to related parties are comprised of the following:
<TABLE>
December 31,
1995 1994
<S> <C> <C>
Note payable to the wife of
the Company's former president,
with interest at 8.5 percent.
$29,607 of the note payable
was converted into common stock.
The remaining balance is past due.$ 13,167 $ 13,167
</TABLE>
NOTE J COMMITMENTS

Lease Commitments The Company has long-term operating lease agreements
for office space, building, and certain equipment. Future minimum lease
payments required under long-term leases in effect, at December 31, 1995
are as follows:
<TABLE>
Continuing
Operations
<S> <C>
1996 $136,945
1997 120,943
1998 38,359
1999 __ 9,960
-------- __
$306,207
--------
</TABLE>

Rent expense for continuing operations was $179,121 and $200,801 in 1995
and 1994. Rent expense for discontinued operations was $261,903 and
$60,582 in 1995 and 1994.

NOTE K LITIGATION

On July 5, 1994, Finelay Brothers Company, Inc. filed suit against the
Company in Hartford Superior Court, alleging the non-payment of certain
invoices amounting to $121,062. Additionally, the amount claimed includes
additional expenses of $7,215, interest of $11,263 and all costs of
litigation. The entire claim is in excess of $140,000. The Company is
disputing some of the charges. However, the Company's accounts payable
includes approximately $66,000 of invoices not in dispute.

The Company has filed counterclaims alleging conversion of color film
separations, unfair and deceptive trade practices, breach of contract and
tortuous interference with business and contractual relationships. The
Company's total claim is estimated to exceed $750,000. The Company
believes it has meritorious defenses, although no assurance can be given
to that effect, and intends to vigorously pursue its counterclaim against
Finelay Brothers Company, Inc. Any recovery on the counterclaim would be
offset against any damages awarded on the complaint. The ultimate outcome
of this matter cannot presently be determined.

NOTE L FOURTH QUARTER ADJUSTMENTS

During the fourth quarters of 1995 and 1994, the Company recorded the
following year-end adjustments, which it believes are material to the
results of that quarter:
<TABLE>
1995 1994
<S> <C> <C>
Goodwill write-off $ 144,793 $ 51,543
Write down of assets of
discontinued operations
to net realizable value 1,609,208
Amortization of goodwill 28,725
Write-off deferred
offering costs 14,090
------------ -----------
$ 1,794,001 $ 94,358
=========== ==========
</TABLE>
NOTE M EVENTS SUBSEQUENT TO THE DATE OF THE REPORT OF THE INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS (UNAUDITED)

Effective March 30, 1996 the Company acquired certain assets from Balzac,
Inc., a private company which manufactures and distributes toys, including a
product line of toy balls. The assets and rights acquired consist of the
following: inventory of Balzac toys the exclusive licenser of Balzac for
Australia, Atlanta Distributorship for the Olympics, Jason Carson Employment
Agreement, Joseph Gabriel Secrets of Magic, distributor of Balzac in Japan,
World of Balzac TV Show, five additional Balzac venues to be determined by
Balzac over the next 18 months.

The exclusive, license agreement for Australia was acquired for $800,00 and
is payable within five years based upon a formula of 60% of net profits from
the sale of Balzac products in Australia. The other assets and rights were
acquired by issuing 1,100,00 shares of the Company's restricted common stock
valued at $1.6 million. In addition, the Company granted a stock option to
Balzac to purchase 750,000 shares of common stock at $11.00 a share and an
option to purchase an additional 750,000 at $19.00 a share. The option will
expire in five years. Additionally, the Company and Balzac agreed to
negotiate options for an additional 1,500,000 at such time and upon such
terms and conditions as the parties may mutually agree.

On April 9, 1996 the Board of Directors approved a four for one reverse
stock split. Accordingly all references in the consolidated financial
statement to average number of shares outstanding and related prices, per
share amounts, common stock purchase rights, stock option plan data and
shares issued have been restated to reflect the reverse stock split.

On February 12, 1996 the Company entered into a purchase Agreement with
Scott Kajiya and Jamie Ruiz (the Sellers) whereby the Company will acquire
55% of the issued and outstanding common stock of Indian Motorcycle Company
Japan, a development stage company, and certain licensing rights in exchange
for 300,000 shares of Registrants Class C Preferred Stock values a $1.00 per
share.

The licensing rights acquired allow the use of Indian Motorcycle Trademark
on various products including denim related products, shoes, boots, jewelry,
accessories and eyewear for sale in Japan.

NOTE N SEGMENT INFORMATION

Financial information by industry segments for the years ended December
31, 1995 and 1994 is summarized as follows:
<TABLE>

Live Other
Radio Video Entertainment Segments Eliminations Consolidated
<S> <C> <C> <C> <C> <C> <C>
FOR THE YEAR ENDED
DECEMBER 31, 1995
Revenue
unaffiliated $ 678,685 $ 31,177 $1,051,993 $ 55,005 $ $1,816,860
affiliated 293,652 (293,652)
Operating income
(loss),continuing
operations 83,474 11,264 170,939 (1,248,396) (1,514,073)
Identifiable
assets 1,015,647 258,102 177,129 3,889,944 (3,607,924) 1,732,898
Depreciation and
amortization 84,325 231,020 1,920 16,899 334,164
Capital
expenditures 31,855 62,486 25,488 119,829

FOR THE YEAR ENDED
DECEMBER 31, 1994
Revenue
unaffiliated $ 631,138 $ 78,278 $1,554,490 $ 38,263 $ $2,302,169
affiliated 435,600 (435,600)
Operating income
(loss),continuing
operations 94,438 24,713 144,407 (1,191,578) (928,020)
Identifiable
assets 1,084,785 537,161 136,969 5,178,712 (3,470,313) 3,467,314
Depreciation and
amortization 90,970 238,159 11,200 14,178 354,507
Capital
expenditures 5,496 61,841 1,305 64,719 133,361
</TABLE>

PART III

Item 9. Directors and Executive Officers of the Registrant

Information concerning the Directors and Executive Officers of the
Company is as follows:
Tenure as Officer
Name Age Position or Director

Douglas R. Olson 47 President, April 1994 to February 1995
Principal Executive
Officer and Director

Gary Firth Director May 1994 to January 1995

Dr. Nick Catalano 55 Director March 1992 to present

A. B. Goldberg 48 Director April 1993 to present
President and Commencing February 1995
Chief Executive Officer

Burt Katz 71 Director December 1994 to present
Chief Operating
Officer December 1994 to March 1996

Harvey Rosenburg 54 Director December 1994 to April 1996

Cindy Jones 41 Secretary and April 1994 to present
Treasurer

Douglas R. Olson resigned as President, Director and Chief Executive
Officer, February 1995.

Gary Firth resigned January 1995. Mr. Firth served on the Company board
since May 1994.

Harvey Rosenburg resigned on April 9, 1996 as Director and Chief Operating
Officer

All of the Directors' terms expire at the next annual meeting of
shareholders or when their successors have been elected and qualified.
The Officers of the Company serve at the pleasure of the Board of
Directors.

The following sets forth background information concerning the above
Directors and Executive Officers:

Douglas R. Olson was elected as interim president and chief executive
officer in April 1994 upon resignation of Richard Batenburg. He has
served as President of First Films, Inc. from July 25, 1990 and as
Director of First Films since August 30, 1990. Mr. Olson previously
served as a member of First Films' Advisory Committee. Mr. Olson co-
produced "Mind Killer" and "Night Vision" and produced "Lone Wolf" and
"Almost Blue," all of which are films produced by First Films' subsidiary,
Flash Features.

Since October 1984, Mr. Olson has served as Secretary of another
subsidiary of First Films, Comedy Core, Inc., an entertainment consulting
firm. Mr. Olson has also been a Director and an Officer of Vacation
Management since June 1989. Mr. Olson, who served as a Director in 1991,
was elected to the Board of Directors of the Company in March 1993. Mr.
Olson is also the co-owner and an officer of Frost Olson Producers, Inc.,
a company engaged in the business of music production, writing, publishing
and artist management. He also serves as the controller for Pistol
Production Services, Inc., a commercial production services entity owned
by his wife. In addition, Mr. Olson is an officer and serves on the Board
of Directors for the Mekong Foundation and Grandmaster Enterprises, Inc.
In February 1995, Mr. Olson resigned as officer, director and executive
officer of the Company and all of its subsidiaries.

Dr. Nick Catalano is presently serving in his twenty-third year as
professor of English Literature, Communications and music at Pace
University, New York City. He is also the University's director for the
Performing Arts. Over the past several years, he has been a
writer/producer for several television network shows, including The Bill
Cosby Show, PBS documentaries, Doug Hennings' The World of Illusion, and
TV specials for Richard Belzer on HBO. Dr. Catalano has produced
travelogue videos for Video Trips on Greece, the Greek Islands, Utah, St.
Martin and is currently completing the Hamptons. In addition, he is the
founder of "The Big Apple Comedy Showcase" at Pace University, now in its
18th year. It is the oldest college comedy series in the country.

Abraham "A.B." Goldberg has been employed by First Films as Executive
Producer and Financial Consultant since January 1987. Mr. Goldberg served
as Executive Producer for "Almost Blue" and "The Amityville Curse." In
addition, he served as Executive Producer for "Mind Killer," "Night
Vision" and "Lone Wolf." Mr. Goldberg has been an independent consultant
and has advised several film companies, beginning in 1977 with
Innovations/ECA, which produced "The Buddy Holly Story" starring Gary
Busey and "Under The Rainbow" starring Chevy Chase and Carrie Fisher. He
also advised Robert Halmi Productions, a New York-based production company
which was merged with Hal Roach Studios and later acquired by Quintex
Entertainment. Mr. Goldberg served as President of Harvard Financial
Group, an independent investment consulting firm, from November 1976
through April 1982. Since April 1982, Mr. Goldberg has consulted with a
variety of businesses, including First Films. Mr. Goldberg earned a
Bachelor's Degree in Finance from the University of Colorado, Boulder,
Colorado in 1969 and attended the University of Denver College of Law.
Mr. Goldberg was elected President and Chief Executive Officer in February
1995.

Harvey Rosenberg. Mr. Rosenberg graduated from the Wharton School of
Business in 1963 and has extensive experience in all fields of consumer
marketing from fashion apparel to consumer electronics. He has been a
marketing and engineering consultant to many Fortune 500 companies,
including Celanese, DuPont, Monsanto, Hoescht and Xerox Corp. He has
owned and operated many different "image" businesses, from photography
studios and screen printing factories, to color processing laboratories.
Mr. Rosenberg has received many engineering awards for his developments in
the consumer electronics field.

Burton Katz. Mr. Katz graduated from New York University and the United
States Military Academy at West Point. Mr. Katz has over forty years
experience in the image publishing business. He founded the Company's
wholly owned subsidiary, Bernard Picture Co., Inc., in 1951 and relocated
the business to Stamford, Connecticut in 1979. His extensive experience
includes all aspects of art publishing, including printing, matting, silk
screening and picture framing.

No family relationship exists between or among any of the persons named
above, except Cindy Jones is the sister of Mr. Doug Olson. None of the
Company's Directors are directors of any other company that has a class of
equity securities registered under, or required to file reports pursuant
to, Section 15(d) of the Securities Act of 1933 or Section 12 of the
Securities Exchange Act of 1934, or any company registered as an
investment company under the Investment Company Act of 1940. There are no
arrangements or understandings between any of the named directors or
officers and any other persons pursuant to which any director or officer
was selected or nominated
as a director or officer.

Item 10. Executive Compensation

No executive officer received cash compensation in excess of $100,000
during the fiscal year ended December 31, 1995. Compensation does not
include minor business-related and other expenses paid by the Company for
its officers during fiscal year 1995 and 1994, nor the personal usage of a
Company automobile. Such amounts in the aggregate do not exceed $10,000.
The Company's Chief Executive Officer, A.B. Goldberg received compensation
of $24,000 for 1995. The Company's President Doug Olson, received
compensation of $43,000 in 1994.

From time to time, the Company has granted shares of its common stock as
additional compensation to its offices and key employees for their
services, as determined by the Company's Board of Directors. During 1995
and 1994 no shares were granted to officers or key employees.

As of December 31, 1995, the Company had no group life, health,
hospitalization, medical reimbursement or relocation plans in effect which
discriminates, in scope, terms, or operation, in favor of officers or
directors of the Company and that are not generally available to all
salaried employees. Further, the Company has no pension plans or plans or
agreements which provide compensation on the event of termination of
employment or change in control of the Company.

The Company does not pay members of its board of Directors any fees for
attendance or similar remuneration, but reimburses them for any out-of-
pocket expenses incurred by them in connection with Company business.

Item 11 Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regarding ownership of
the Common Stock of the Company as of February 28, 1996 by (I) each person
known by the Company to be the beneficial owner of more than 5 percent of
the outstanding common stock of the Company; (ii) each director of the
Company; and (iii) all executive officers and directors of the Company as
a group.

Amount of
Names and Addresses Beneficial Percent
of Beneficial Owner Ownership of Class

A. B. Goldberg 70,676 2.7%
1380 Lawrence Street, Suite 1400
Denver, CO 80204

Cindy Jones 2,500 .1%
1380 Lawrence Street, Suite 1400
Denver, CO 80204

Nick Catalano 2,500 .1%
189-32 44th Avenue
Flushing, NY 11358

Burt Katz
1380 Lawrence Street, Suite 1400 133,217 5.1%
Denver, CO 80204

Harvey Rosenburg 115,080 4.4%
1380 Lawrence Street, Suite 1400
Denver, CO 80204

Officers and Directors 323,973 12.4%
as a Group (6 persons)

Nannette Goldberg is the wife of A.B. Goldberg, who is a director of the
Company. Included in the number of shares listed above are 29,336 shares
owned by her husband's sister, two children and mother.

Item 12. Certain Relationships and Related Transactions

In March 1994, the Company's subsidiary, First Films, requested that its
retirement of a promissory note in the amount of $60,000 in principal to
Ms. Sara Goldberg (mother of A. B. Goldberg) in exchange for 108,500
shares of the Company's preferred stock convertible into 27,125 of common
be mutually reached. With the payment to Ms. Goldberg of all principal,
any accrued interest on such note. Ms. Goldberg has granted First Film's
request and the 27,125 shares are not reflected above.

Commencing April 1995, the Company contracted out some administrative,
management and accounting functions of the Company to a company owned by
the former president and director of the Company. Monthly fees for such
services were $15,000 for the period April 1 to July 31, 1995 and $20,000
thereafter. In addition, a one time start-up fee of $25,000 was also
paid. Total fees for 1995 were $201,000.

PART IV

Item 13. Exhibits and Reports on Form 8-K and 8-K/A

(a)Exhibits. The following exhibits are filed herewith pursuant to Rule
601 of Regulation S-K or are incorporated by reference to previous
filings.

Exhibit
Table No. Document
Reference

(2) Plan of acquisition, reorganization,
arrangement, liquidation, None
or succession

(3) Articles of Incorporation and Bylaws (A)

(4) Instruments defining the rights of
security holders, including (B)
indentures

(9) Voting trust agreement None

(10) Material contracts (C)

(13) Annual or quarterly reports,
Form 10-QSB None

(16) Letter on change in certifying
accountant (F)

(18) Letter on change in accounting
principles None

(21) Subsidiaries of the registrant (D)

(22) Published report regarding
matters submitted to a vote of None
security holders

(23) Consent of experts and counsel (E)

(24) Power of attorney None

(27) Financial Data Schedule (6)

(28) Information from reports
furnished to state insurance None
regulatory authorities

(99) Additional exhibits None

(A)A complete copy of the Company's Articles of Incorporation as currently
in effect and all amendments thereto was filed as Exhibit 89.3.1 to the
Registrant' Form 10-K for the fiscal year ended December 31, 1989, and a
complete copy of the Company's Bylaws as currently in effect was filed as
Exhibit 86-3(c) to the Company's Registration Statement on Form S-18
(Registration No. 33-9163-D) and are incorporated herein by reference
thereto.

(B)The Company hereby agrees to furnish a copy of the form of its
convertible subordinated debentures to the Commission upon request.

(C)The following material contracts are filed herewith or incorporated
herein by reference thereto:

Document Title Reference Commission Filing

Stock Option Agreement 86-10(a) Registration Statement
on Robert Beattie on Form S-18 (33-9163-D)

Host Agreement-Annette
Funnicello 86-10(b) Registration Statement
on Form S-18 (33-9163-D)

Host Agreement-Jill St. John 86-10(c) Registration Statement
on Form S-18 (33-9163-D)

Host Agreement-James Farentino 86-10(d) Registration Statement
on Form S-18 (33-9163-D)

Host Agreement-Tony Randall 86-10(e) Registration Statement
on Form S-18 (33-9163-D)

Video Distribution Agreement 86-10(f) Registration Statement
Lightning Video (Vestron) on Form S-18 (33-9163-D)

Trademark License Agreement 86-10(g) Registration Statement
Rand McNally & Company on Form S-18 (33-9163-D)

Stock Option Agreement 86-10(h) Registration Statement
Peter TenEyck on Form S-18 (33-9163-D)

November 4, 1987 amendment to 87-10(a) Registration Statement
Vestron Distribution Agreements on Form S-18 (33-9163-D)

January 29, 1988 amendment to 87-10(b) Registration Statement
Trademark License Agreement on Form S-18 (33-9163-D)

Selluloid Agreement dated
March 4, 1988 87-10(d) Registration Statement
on Form S-18 (33-9163-D)

Children as Teachers of Peach 87-10(e) Registration Statement
Agreement dated June 6, 1988 on Form S-18 (33-9163-D)

Eastman's Outdoor World
and Western American Films,
Inc. dated March 17, 1988 87-10(f) Registration Statement
on Form S-18 (33-9163-D)

Sturgis Exclusive Licensing 87-10(g) Registration Statement
and Use Agreement dated July 1987 on Form S-18 (33-9163-D)

Best Film and Video Corporation 87-10(h) Registration Statement
Distribution Agreement dated December on Form S-18 (33-9163-D)
7, 1987

Gillette, Wyoming Office
Lease Agreement 87-10(i) Registration Statement
on Form S-18 (33-9163-D)

Document Title Reference Commission Filing

KGWY-FM Tower Lease 87-10(j) Registration Statement
on Form S-18 (33-9163-D)

December 15, 1988 89-10(a) Form 10-K for the year
Atlantis Video License Agreement ended December 31, 1988

Iowa Radio Stations 89-10(b) Form 10-K for the year
Asset Purchase Agreement dated ended December 31, 1988
April 18, 1989

January 31, 1989 89-10(c) Form 10-K for the year
License Agreement with Adler ended December 31, 1988
Video Marketing, Ltd

Stock Option Agreement
Ray Ricci 89.10.1 Form 10-K for the year
ended December 31, 1989

Stock Option Agreement
Ray Ricci 89.10.2 Form 10-K for the year
ended December 31, 1989

Stock Option Agreement
Keller, Wing, 89.10.3 Form 10-K for the year
Godbolt and Polakovic ended December 31, 1989

Stock Option Agreement
Dennis Dowd 89.10.4 Form 10-K for the year
ended December 31, 1989

Rand McNally Video Trip
Guide to Ohio 89.10.5 Form 10-K for the year
Agreement, dated ended December 31, 1989
January 11, 1990

Wyoming Radio Station
Letter of Intent 89.10.6 Form 10-K for the year
dated March 28, 1990 ended December 31, 989

Settlement Agreement
with Miller & 89.10.7 Form 10-K for the year
Weiss, P.C., dated ended December 31, 1989
March 30, 1990

Distributor Agreement
with Adler Video 89.10.8 Form 10-K for the year
Marketing, Ltd. ended December 31, 1989

Post-Production 93-10.1 Form 10-K for the year
Services Agreement ended December 31, 1993

Settlement Agreement
with DCC and 93.10.2 Form 10-K for the year
Marshall Blonstein ended December 31, 1993

Agreement with Rand
McNally and Company 93.10.3 Form 10-K for the year
ended December 31, 1993

Promissory note with
Keller, Wing & 93.10.4 Form 10-K for the year
Godbolt ended December 31, 1993

Distribution/licensing
agreement with 93.10.5 Form 10-K for the year
Woodknapp and Company ended December 31, 1993

Amendment to Articles
of Incorporation 93.10.6 Form 10-K for the year
Name change ended December 31, 1993

Amendment to Articles
of Incorporation 93.10.7 Form 10-K for the year
increase authorized shares ended December 31, 1993

Stock Option Agreement
Robert Young 93.10.8 Form 10-K for the year
ended December 31, 1993

Letter of Intent
Polton Corporation 93.10.9 Form 10-K for the year
ended December 31, 1993

Promissory note sample
bridge lenders 93.10.10 Form 10-K for the year
ended December 31, 1993

Subscription Agreement 93.10.11 Form 10-K for the year
ended December 31, 1993

(D) Not required since the information is ascertainable from the Company's
financial statements filed herewith.

(E) A list of all subsidiaries of the Company was filed as Exhibit 89-22(a)
to the Company's Form 10-K for the year ended December 31, 1988 and is
incorporated herein by reference thereto.

(b) Reports on Form 8-K

The following Form 8-K's were filed with the Commission during the fourth
quarter of 1995.

(1) December 15, 1995
Item 5 Other Events
Registrant files a claim in U.S. District Court alleging tortuous,
interference with contractile relations against the Receivership
Estate of Indian Motorcycle Manufacturing, Inc., a Company in
federal receivership.

(2) October 31, 1995
Item 5 Other Events
Registrant enters into agreement to purchase Indian licensing
rights from MBL Investments if MBL is successful in the purchase
of Indian trademark assets from the Bankruptcy Trustee in
Worecester, Massachusetts.

SIGNATURES

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

FIRST ENTERTAINMENT, INC.

Dated: April 12, 1996 By A. B. Goldberg
A. B. Goldberg, President

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

Dated: April 12, 1996 A. B. Goldberg
__________ A. B. Goldberg
President and Principal Executive
Officer

Dated: April 12, 1996 Cynthia M. Jones
Cynthia M. Jones
Secretary and Treasurer

Dated: April 12, 1996 Dr. Nicholas Catalano
Dr. Nicholas Catalano
Director

Dated: April 12, 1996 Burt Katz
Burt Katz
Director

Dated: April 12, 1996 Harvey Rosenberg
Harvey Rosenberg
Director

<ARTICLE>5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-31-1995
<PERIOD-END> Dec-31-1995
<CASH> 71
<SECURITIES> 0
<RECEIVABLES> 93
<ALLOWANCES> (3)
<INVENTORY> 22
<CURRENT-ASSETS> 448
<PP&E> 2554
<DEPRECIATION> 2162
<TOTAL-ASSETS> 1733
<CURRENT-LIABILITIES> 1745
<BONDS> 0
<COMMON> 21
0
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<OTHER-SE> (87)
<TOTAL-LIABILITY-AND-EQUITY> 1733
<SALES> 1817
<TOTAL-REVENUES> 1817
<CGS> 1422
<TOTAL-COSTS> 3331
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 197
<INCOME-PRETAX> (1655)
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<INCOME-CONTINUING> (1655)
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</TABLE>