U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   Form 10-QSB

(Mark  One)  [X]  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE
SECURITIES EXCHANGE ACT OF 1934 
For the period ended September 30, 1996

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the transition period from to

                       Commission file number 33-80944-LA

                        NATIONAL SPECIALTY NETWORKS, INC.
                 (Name of small business issuer in its charter)

         California                                              33-0403505
(State or other jurisdiction of                            (IRS Employer ID No.)
 incorporation or organization)
 
                          451 W. Lambert Rd., Suite 216
                           Brea, California 92821-3920
                    (Address of principal executive offices)

Registrant's telephone number including area code (714) 256 9654

     Indicate  by check  mark  whether  the  registrant  (1) has  filed  reports
required  to be filed by  Section  13 or 15(d) of the  Securities  Exchange  Act
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

     Indicate the number of shares  outstanding of each of the issuer's  classes
of common equity,  as of the latest  practicable  date: As of October 31, 1996 -
1,225,534 shares of common stock.


                       DOCUMENTS INCORPORATED BY REFERENCE

                                      None

<PAGE>
                         PART I - Financial Information

Item 1. Financial Statements


                          INDEX TO FINANCIAL STATEMENTS


                                                                            Page

Balance Sheets   ............................................................F-2

Statements of Operations  ...................................................F-3

Statements of Stockholders' Equity  .........................................F-4

Statements of Cash Flows   ..................................................F-5

Notes to Financial Statements  ..............................................F-6

































                                       F-1
<PAGE>
                        NATIONAL SPECIALTY NETWORKS, INC.
                        (A Development Stage Enterprise)
                                 Balance Sheets
<TABLE>
<CAPTION>
<S>                                                                           <C>             <C>   
                                                                              June 30, 1996  Sept 30, 1996
                                                                                ----------    ----------
                            ASSETS                                                            (Unaudited)
CURRENT ASSETS
  Cash ......................................................................   $    2,043         1,149
                                                                                ----------    ----------
    Total current assets ....................................................        2,043         1,149
                                                                                ----------    ----------
OTHER ASSETS
  Deferred income tax asset (note 3) ........................................            0             0
                                                                                ----------    ----------
    Total other assets ......................................................            0             0
                                                                                ----------    ----------
Total Assets ................................................................   $    2,043         1,149
                                                                                ==========    ==========

             LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
  Notes payable (notes 4, 6) ................................................   $   50,215        58,676
 Accrued interest ...........................................................        7,336         8,378
                                                                                ----------    ----------
    Total liabilities .......................................................       57,551        67,054
                                                                                ----------    ----------

STOCKHOLDERS' EQUITY
  Common stock, no par value, authorized 15,000,000
    shares; 1,225,534 issued and outstanding. (note 5) ......................       23,693        23,693
  Preferred stock, Series A, no par value ($1 stated value);
    authorized 2,000,000 shares; 915,714 shares issued and
    outstanding. (note 4) ...................................................      915,714       915,714
  Treasury stock (note 6) ...................................................       (1,633)       (1,633)
  Deficit accumulated during the development stage ..........................     (993,282)   (1,003,679)
                                                                                ----------    ----------
Total Stockholders' Equity ..................................................      (55,508)      (65,905)
                                                                                ----------    ----------
Total Liabilities and Stockholders' Equity ..................................   $    2,043         1,149
                                                                                ==========    ==========

</TABLE>





    The accompanying notes are an integral part of the financial statements.

                                       F-2
<PAGE>
                        NATIONAL SPECIALTY NETWORKS, INC.
                        (A Development Stage Enterprise)
                            Statements of Operations
                                   (Unaudited)
<TABLE>
<CAPTION>
<S>                                  <C>                    <C>                  <C>
                                                                                   Period from
                                                                                  July 14, 1989
                                         3 Months ended September 30,            (Inception) to
                                           1995                1996               Sept 30, 1996   

                       REVENUE
Expense re-imbursement                 $         0                   0                    848
Interest                                         0                   0                  1,315
                                      ---------------      --------------      -----------------
  Total revenue                                  0                   0                  2,163
                                      ---------------      --------------      -----------------

                      EXPENSES
Human resources:
     NSN officers (note 5)                       0                   0                340,178
     RMG employees                               0                   0                 97,014
     Others                                      0                   0                 40,550
Consultants:                                                                                         
     NSN officers                                0                   0                109,167
     Others                                      0                   0                 19,638
Professional fees                                0                   0                 66,690
Bad debt                                         0                   0                    454
Bank charges                                    18                   0                     71
Communications                                   0                   0                 17,485
Office rent and overhead                         0                   0                120,089
Office expenses                                  0               1,204                 19,406
Public offering expense                          0               7,950                 10,135
Travel                                           0                   0                133,952
Interest                                       832               1,043                 24,752
Miscellaneous                                    0                 200                  6,261
                                       ---------------      --------------      -----------------
  Total expenses                               850              10,397              1,005,842
                                       ---------------      --------------      -----------------
Net loss before tax benefit                   (850)            (10,397)            (1,003,679)
                                       ---------------      --------------      -----------------
Income tax benefit (note 3)                      0                   0                      0
                                       ---------------      --------------      -----------------
Net loss                               $      (850)            (10,397)            (1,003,679)
                                       ===============      ==============      =================
Weighted average number of
  shares outstanding                     1,225,534           1,225,534              1,225,534
                                       ===============      ==============      =================
Net loss per share                     $     (0.01)               (0.01)                (0.82)
                                       ===============      ==============      =================

</TABLE>



    The accompanying notes are an integral part of the financial statements.

                                       F-3
<PAGE>
                        NATIONAL SPECIALTY NETWORKS, INC.
                        (A Development Stage Enterprise)
                       Statements of Stockholder's Equity
                                   (Unaudited)
<TABLE>
<CAPTION>
<S>                          <C>                   <C>                <C>               <C>                    <C>
                                                                                                                   Total
                                 Common            Preferred          Treasury             Accumulated          Stockholders'
                                  Stock              Stock              Stock                Deficit               Equity

BALANCE, June 30, 1996       $       9,900                  0               0               (920,511)             (910,611)

Net loss                                 0                  0               0                (10,397)              (10,397)
                              --------------      -------------      -------------     -----------------      ------------------

BALANCE, Sept 30, 1996       $      23,693            915,714          (1,633)            (1,003,679)              (65,905)

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

</TABLE>




































    The accompanying notes are an integral part of the financial statements.


                                       F-4
<PAGE>
                        NATIONAL SPECIALTY NETWORKS, INC.
                        (A Development Stage Enterprise)
                            Statements of Cash Flows
                                   (Unaudited)
<TABLE>
<CAPTION>
<S>                                                              <C>               <C>            <C> 
                                                                                                  Period from
                                                                                                  July 14, 1989
                                                                 3 Months ended September 30,     (Inception) to
                                                                       1995          1996          Sept 30, 1996

CASH FLOWS FROM DEVELOPMENT ACTIVITIES:
Net loss ......................................................   $     (850)      (10,397)         (1,003,679

Adjustments to reconcile net loss to net cash used for
development activities:
    Stock issued for services rendered ........................            0             0              23,000
    Increase in interest payable ..............................          832         1,043               8,379
    (Increase) decrease in interest receivable ................            0             0                   0
                                                                   ----------    ----------          ----------
Net cash used for development activities ......................          (18)       (9,354)           (972,300)
                                                                   ----------    ----------          ----------

CASH FLOWS FROM INVESTING ACTIVITIES:
Sale of fixed assets ..........................................            0             0               6,000
                                                                   ----------    ----------          ----------
Net cash provided by investing activities .....................            0             0               6,000
                                                                   ----------    ----------          ----------

CASH FLOWS FROM FINANCING ACTIVITIES:
Common stock issued for cash ..................................            0             0                 693
Notes payable under third-party development agreements
 (note 2) .....................................................            0             0             899,315
Cash received for notes payable ...............................            0         8,460              71,188
Cash used to reduce notes payable .............................            0             0              (3,747)
                                                                   ----------    ----------          ----------
Net cash provided by financing activities .....................            0         8,460             967,449
                                                                   ----------    ----------          ----------

(Decrease) increase in cash ...................................          (18)         (894)              1,149
                                                                   ----------    ----------          ----------
CASH, beginning of period .....................................          143         2,043                   0
                                                                   ----------    ----------          ----------
CASH, end of period ...........................................   $      125         1,149               1,149
                                                                   ==========    ==========          ==========

SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid in cash .........................................   $        0             0                 837
                                                                   ==========    ==========          ==========
Preferred stock issued for notes payable ......................   $        0             0             915,714
                                                                   ==========    ==========          ==========
</TABLE>


    The accompanying notes are an integral part of the financial statements.


                                       F-5
<PAGE>
                        NATIONAL SPECIALTY NETWORKS, INC.
                        (A Development Stage Enterprise)
                          Notes to Financial Statements
                                   (Unaudited)

(1) Summary of Significant Accounting Policies
     The Company.  National Specialty Networks,  Inc. is a California  chartered
development  stage  corporation which conducts business from its headquarters in
Brea, California and was incorporated on July 14, 1989.

     The financial  statements  have been prepared in conformity  with generally
accepted  accounting   principles.   In  preparing  the  financial   statements,
management  is  required  to make  estimates  and  assumptions  that  affect the
reported  amounts of assets and liabilities as of the dates of the statements of
financial  condition and revenues and expenses for the years then ended.  Actual
results could differ significantly from those estimates. Material estimates that
are  particularly  susceptible to significant  change in the near-term relate to
the book-tax  difference of accounting for the development  expenses (see note 3
). The financial  statements  for the three months ended  September 30, 1995 and
1996 include all  adjustments  which in the opinion of management  are necessary
for fair presentation.  The following summarize the more significant  accounting
and reporting policies and practices of the Company:

     a) Furniture  and  equipment  Furniture  and  equipment was carried at cost
during the development  process. In March 1992 NSN sold all of its furniture and
equipment. At that time the cost was removed from the accounts and the resulting
loss reflected in the development expenses.

     The Company  expects that future  expenditures  for furniture and equipment
will be  capitalized,  and  depreciated  over the  estimated  useful life of the
assets.  Expenditures  for maintenance and repairs will be charged to operations
as incurred.

     b) Notes  payable  The  Company  issued  notes  payable to various  parties
pursuant to third-party  development  agreements (note 2). Interest on the notes
was capitalized  into the principal  balance of the notes during the development
process pursuant to the third-party development agreements.

     c) Net loss per share Net loss per share is computed  by  dividing  the net
loss by the number of shares outstanding during the period.

     (2) Development  expenses The Company entered into  third-party  agreements
with two companies and two  individuals  in January 1990 for the  development of
its Standard Treatment Protocols (STP) concept, the Specialty Preferred Provider
Organization  (SPPO) concept and the search for funding from  independent  third
parties.

     The  two   contracted   companies   (whose   principals  are  founders  and
stockholders of NSN) are independent health care consulting  companies which are
currently  expected  to remain in their  primary  businesses  subsequent  to the
initial  public  offering.  The  principals  of one of  the  companies,  Ronning
Management  Group,  Inc.  (RMG),  will be involved in the operations of NSN on a
part-time basis. The principal of the other company, Medworth Futures, Inc., and
the two  individuals  will be involved in the  operations of NSN full-time  upon
funding of the company.

     Financial   Accounting   Standards  Board  (FASB)  Statement  of  Financial
Accounting   Standards  2  (SFAS  2)  requires  that  all  internally  generated
development  costs be charged to expense when incurred.  SFAS 68 requires that a
company  which is  obligated  to repay  another  for  development  costs under a
funding  agreement  must record a liability to the extent of its  obligation and
charge  the  costs  to  expense  as  incurred.   Accordingly,  NSN  charged  its
development  costs to expense as incurred,  and recorded the liability  incurred
under the third- party  agreements.  100% of the  cumulative  total  development
expenses  relate to the  development of the STP concept,  the development of the
SPPO  concept and NSN's  search for funding from  independent  third  parties to
allow NSN to begin marketing both the STP and SPPO concepts.
                                       F-6
<PAGE>
                        NATIONAL SPECIALTY NETWORKS, INC.
                        (A Development Stage Enterprise)
                          Notes to Financial Statements

     (3) Income taxes The Company recorded the development  costs as expenses in
the period when incurred for  financial  statement  purposes,  per note 2 above.
However,  for state income tax purposes,  the development costs were recorded as
an intangible  asset to be amortized over future years.  The primary purpose for
this treatment for tax purposes is to retain the tax benefit of the  development
costs.  California tax law does not recognize  operating loss  carry-forwards as
the Federal tax code does.  Therefore,  by  capitalizing  and  amortizing  these
costs,  the tax  benefit  of the  development  costs is  retained  for state tax
purposes  rather  than being lost  forever,  (which  immediate  expensing  would
cause).  This treatment will require a longer time before the tax benefit of the
costs is realized, but will increase the tax benefit realized over time.

     California  tax law was changed for tax years  beginning  after  January 1,
1994.  California tax law now recognizes net operating loss carryforwards on the
same basis as the federal tax code. The amounts  recorded as deferred income tax
assets at  September  30, 1995 and 1996,  $295,354  and  $301,104  respectively,
represent  the amount of tax  benefit of loss  carry-forwards.  The  Company has
established a $301,104  valuation  allowance against this asset, as currently it
is not more likely than not to be realized  through the generation of sufficient
future taxable income within the carry-forward period.

     (4) Exchange of notes  payable for  preferred  stock On September 30, 1992,
the board of directors of the Company  authorized the Company to issue 2,000,000
shares of no par  value  preferred  stock.  The  Company  then  entered  into an
agreement with the parties  holding the notes payable to exchange the balance of
the notes for an equal amount of preferred  stock of the Company.  This issuance
of preferred is referred to as Series A, carries a $1 per share stated value and
a cumulative  dividend rate of 6%,  payable from earnings on or after January 1,
1995,  to the extent cash is available  and the board of directors  declare such
payment.  The remaining  balance of preferred  shares are to remain unissued for
possible future use.

     (5) Stockholders'  equity The Company has authorized 1,666,666 shares of no
par value common stock.  In December  1990,  the Company issued 11,000 shares to
the founders in exchange  for $198 in cash.  In April 1991,  the Company  issued
27,500  shares to the founders in exchange for $495 in cash.  In June 1991,  the
Company issued 511,500 shares to the founders in exchange for services valued at
$9,207.  These  services  were  valued at 50% of  current  full-time  employment
consideration.

     On September  30, 1992,  the board of directors  authorized  an increase of
authorized  shares from 100,000  shares to  1,666,666 by splitting  the existing
shares 1 share for 16.66666  shares.  On October 2, 1992, the board of directors
authorized  the issuance of 533,333  additional  shares of the Company's  common
stock to the founding  shareholders  in  consideration  of past  services to the
corporation  with the same basis as their  previously held shares,  or 1.8 cents
per share. On December 20, 1993, the board of directors and  stockholders of the
Company voted to increase the authorized number of shares of common stock of the
Company to 2,000,000 shares.

     On December 31, 1993,  the board of  directors  authorized  the issuance of
130,000  additional  shares  of the  Company's  common  stock  to  the  founding
shareholders in  consideration of past services to the corporation with the same
basis as their previously held shares, or 1.8 cents per share. In February 1994,
the Company  sold  102,939  shares of the  Company's  common stock for $1,853 in
services  rendered to the Company.  These shares were valued by the board at 1.8
cents per share. On May 31, 1994, the board of directors and stockholders of the
Company  increased the authorized  number of shares of the Company to 15,000,000
shares.

     (6)  Repurchase of a founders  stock for a note payable In August 1993, the
Company entered into an agreement to repurchase all the common stock held by one
of the founders pursuant to the Company's Founders  Shareholder  Agreement.  The
90,738 shares were repurchased as treasury stock at a price of $0.018 per share,
for a total of $1,633.28.  The Company issued a note payable to the  stockholder
for this sum. This note carries a stated interest rate of 5.23%.
                                       F-7
<PAGE>
                        NATIONAL SPECIALTY NETWORKS, INC.
                        (A Development Stage Enterprise)
                          Notes to Financial Statements

     (7) Common stock public  offering  The board of  directors  authorized  the
Company  to sell  up to  500,000  shares  of the  Company's  common  stock  in a
"self-underwritten" public offering pursuant to a Registration Statement on Form
SB-2 under the Securities Act of 1933. This offering is being made with a 90,000
share  minimum,  and is effective  for one year from the  effective  date of the
registration, August 16, 1996. On December 31, 1993 the board of directors voted
to  increase  the  number of shares to be sold to the  public  from  500,000  to
675,000.

     On  October  13,  1995,  the  Department  of  Corporations  of the State of
California issued an effective order for the sale of the Company's securities in
the State of California.  This order imposes certain financial qualifications on
California resident purchasers of the Company's securities.

     (8) Completion of Concept Development The Company completed the development
stages of the STP and SPPO  concepts and RMG  completed the beta site testing of
the STP concept as of September 30, 1992.  The Company is still  classified as a
development  stage enterprise as it is still in the process of raising the funds
to begin operations, and it has not yet begun its intended operations.

     The Company has entered into an agreement  with Ronning  Management  Group,
Inc. (RMG) whereby RMG has begun the marketing of STPs. RMG has entered into and
completed  several  contracts for STP development  for third parties.  The major
provisions of this agreement are:

     a) As soon as NSN receives at least the minimum  proceeds  under the common
stock public  offering (see note 7) RMG will transfer the STP technology  (i.e.,
methodologies,  processes, data base, charge cost model, etc.) and the rights to
develop STPs to NSN. NSN expects to extend  employment offers to those RMG staff
members currently working on STPs.

     b) RMG will also  assign any  existing  STP  contracts  in progress to NSN.
Should any third party to an existing STP contract refuse to allow RMG to assign
such  contract to NSN, RMG will  subcontract  the  completion of the contract to
NSN, and remit 80% of the remaining contract revenue to NSN.

     c) NSN will pay RMG a marketing royalty of 20% of NSN's receipts on any STP
contract assigned under b) above, as well as on the first 7 contracts NSN enters
into.

     d) The three principals of RMG will become part-time consultants to NSN for
a period of 5 years. RMG will bill NSN for the hours worked by these individuals
for NSN at approximately  80% of RMG's normal billing rates.  Annual billings by
RMG to NSN for these  services  are  limited to the lesser of $420,000 or 33% of
NSN's STP contract revenues.

     e) RMG and its principals agree not to compete with NSN in the provision of
consulting services to develop STPs for third parties.

     f) The Company and RMG have developed cross-referral fee schedules, as well
as cross  right of first  refusal  agreements  pursuant  to  medical  consulting
services requested by third parties during other engagements.  The minimum cross
referral fees are set at 10% of revenues received by the other company.

     g) NSN expects to develop a sales commission schedule for employees as well
as a separate  schedule for third party  brokers for the sale of STP  contracts.
RMG and its employees will be covered by the schedule  developed for third party
brokers.

     The Company has also entered into an agreement with Medworth Futures,  Inc.
which provides the following:
                                       F-8
<PAGE>
                        NATIONAL SPECIALTY NETWORKS, INC.
                        (A Development Stage Enterprise)
                          Notes to Financial Statements

     (8) Completion of Concept Development, continued
     a) MFI and its  principal  agree  not to  compete  with NSN in  either  the
provision of specialty managed care or consulting services to develop STPs.

     b) NSN expects to develop a sales commission schedule for employees as well
as a separate  schedule for third party  brokers for the sale of STP  contracts.
NSN and its employees will be covered by the schedule  developed for third party
brokers.

     (9) Related party  transactions The Company currently occupies office space
in MFI's offices on a rent-free basis. MFI allows this because the President and
sole  stockholder  of MFI is a  stockholder  in the Company,  and the  Company's
current  principal  activities at this stage are primarily related to its common
stock public offering.


























                                       F-9
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of Operation.

     After the  completion of its Offering,  management  intends to begin hiring
employees  necessary  to  establish  a STP  consulting  division,  and  to  hire
qualified personnel for marketing, provider development, accounting, and systems
and administration. NSN does not currently employ any paid staff. In addition to
the current non-paid employees receiving  appropriate  salaries once the Company
is funded, management intends to initially hire approximately ten or fifteen new
employees to fill the required positions.

     NSN has already  developed  systems for the operations of the Company,  and
after the  closing of its  Offering,  NSN plans to promptly  complete  the final
development of the financial systems and administrative procedures which will be
needed to operate the Company on the scale envisioned.

     Management  believes that should NSN realize at least the minimum  proceeds
from its Offering, the Company will not need to seek any further funding for the
twelve-month period following the completion of its Offering.  NSN believes that
the  Company  will meet  future  financial  requirements  through  revenue  from
operations.

     NSN  does  not  anticipate  the need  for any  immediate  further  research
regarding of the basic STP program or SPPO  networks.  Management  believes that
the STP program is sufficiently developed to commence STP operations immediately
without  any  further  development.  Once  the  Company  is  funded,  one of its
principal objectives is the development of its initial SPPO networks,  which are
not yet developed.

     NSN does not  intend to  purchase  any  operating  facilities  for at least
twelve months after the  completion of its Offering.  NSN currently  uses office
space free of charge pursuant to an informal  month-to-month  lease  arrangement
with Medworth Futures, Inc., an affiliate of the Company. The Company intends to
lease new, larger  facilities  once full  operations  have  commenced.  NSN also
intends to purchase or lease a computer system and other office equipment should
the Company receive the maximum proceeds from its Offering.

     Once the required  personnel  are hired and other  initial  objectives  are
attained, management intends to notify the California hospitals which previously
responded to NSN's Request for Proposal program, and which indicated an interest
in becoming Centers of Excellence,  that NSN has completed its Offering and will
be contacting  them soon  regarding the  development  of NSN's  California  SPPO
network.

     NSN then intends to notify the HMOs,  PPOs,  insurance  companies and large
self-insured  employers which have  previously  expressed an interest in the NSN
model  that  NSN  will  contact  them  in the  near  future  regarding  possible
participation  in NSN's  California  SPPO network.  NSN intends to  concurrently
contact similar West Michigan organizations  regarding the future development of
a West Michigan SPPO network.

     Management  anticipates  that the Company will then  complete the selection
process for the Centers of Excellence in California.  Once Centers of Excellence
have been contracted,  NSN will begin STP development at those COE hospitals and
will commence  negotiations  between COEs, payers and NSN to form the California
SPPO network. NSN also anticipates  beginning similar activities with respect to
the establishment and development of the West Michigan SPPO network.

     Using a carefully designed and rigorous  selection process,  NSN intends to
identify  the highest  quality  hospital in each  community  for each of fifteen
high-cost services experienced by employers and insurers, to designate each such
hospital as a Center of Excellence  (COE),  and to require each COE to implement
at least one STP in order to cut costs and avoid  cost  shifting.  NSN will then
contract with each hospital at rates lower than the hospital currently offers in
conventional  HMOs and PPOs,  enabled by the hospital's  improved  profit margin
afforded by its STP development and implementation.
                                       11
<PAGE>
     Providers  will  pay a  $120,000  fee  for  assistance  in  developing  and
implementing  STPs  for a major  medical  specialty  (such  as  coronary  bypass
surgery) and a $1,500 monthly fee for ongoing network support.  NSN will receive
a  one-time  fee  of  $75,000  from  payers  (such  as  HMOs,  PPOs,  and  large
self-insured  companies) for membership  in, and the  development  of, each SPPO
network,  and the Company will also receive a monthly  access fee  calculated on
either a per-employee-per-month basis or a twenty-five-percent-of-savings basis.
For example, using the per-employee-  per-month basis, at a per-employee cost of
$2.20, a payer with 10,000 employees would pay NSN a total monthly access fee of
$22,000.

     Management  estimates  that there are at least 15,000  companies  and other
payers which are  suitable  prospects  for joining  NSN's SPPOs in the next four
years.  This  estimate  is based on the  number of  employers  with  over  1,000
employees,  as reported in Ward's Business  Directory of U.S. Private and Public
Companies 1993 and in the Statistical Abstract of the United States 1992.

     Management  based these estimated fees on the actual  experience of certain
Officers of NSN with respect to SPPOs,  and also from actual  statistics and the
results of the performance of contracted  services by Ronning  Management Group,
Inc.  (RMG),  an affiliate of NSN, which will fully transfer its STP business to
NSN once the Company commences operations.

     NSN's plan of operation for the next several years includes the development
of SPPO networks for selected  population  centers  throughout the United States
for fifteen high-cost tertiary healthcare services,  and to sell access to these
SPPO  networks to HMOs,  PPOs and  employer-sponsored  managed care programs for
integration  with their existing  networks.  However,  only four entities (and a
benefits  consulting  company) have  expressed any interest in membership in the
Company's  SPPO  networks  since  the  Company  was  found in  1989.  One of the
Company's  priorities  in the  future  will most  certainly  be its need to sell
access to its SPPOs to payers.

     Management  projects that NSN's potential for market acceptance and success
will be based  on the  Company's  ability  to  convince  its  target  customers,
employers  who self insure or purchase  healthcare  benefits that are managed by
HMOs or PPOs that : (1) the  conventional  HMO/PPO  approach to encouraging  all
hospital  networks to  generalize  and provide  the full  spectrum of  services,
including high-cost tertiary services,  breeds wasteful duplication,  mediocrity
of performance in the services which are most difficult to perform,  and minimal
opportunity to generate constructive competition on a service-by-service  basis;
(2) its SPPOs, when integrated with conventional  HMO/PPO networks,  will reduce
duplication  and  unnecessary  capacity by using fewer hospitals to perform each
specialty  service;  (3) its SPPOs will improve the quality of specialty care by
selecting Centers of Excellence based on demonstrated excellence;  (4) its SPPOs
will  improve  specialty  service  cost  performance  beyond  the  reduction  of
duplication noted above through implementing STPs in each COE hospital;  and (5)
its SPPOs,  when integrated with  conventional  HMO/PPO  networks,  will provide
lower prices, less cost-shifting, and overall reduced healthcare costs.

     Management  projects that the key capabilities NSN will need to develop and
sell SPPOs are (1) an experienced managed care and provider relations staff; (2)
an experienced  managed care  marketing/sales  staff; (3) an efficacious process
for selecting  COEs which is respected by both  employers and  providers;  (4) a
process  for  developing  STPS that is proven  to reduce  costs;  (5) a means of
providing  assistance  to  employers,  HMOs and PPOs in  conveniently  directing
patients to COEs and in modifying their existing networks to accommodate  SPPOs;
(6) a means of  providing  assistance  to COE  hospitals in  developing  patient
friendly  administrative  and clinical  service so that patients learn to accept
some travel  inconvenience;  (7) management  information systems that enable the
effective  collection  of payer  and  provider  data and (8) the  administrative
support of staff in the field and in main office;  and an  effective  management
team.

     The  following  chart  describes  the  extent  to which  the  above  listed
capabilities have been developed as of the date of this report:
                                       12
<PAGE>
<TABLE>
<CAPTION>
<S>       <C>                            <C>                                    <C>
              Capability                           Extent Developed                         Comments/Basis
1.       Managed care and               Partial.  Remainder to be recruited     CEO, Senior Vice President are
         provider relations staff       after receipt of proceeds.              experienced (see "Management").
2.       Managed care                   Need to be recruited.                   Will commence hiring upon receipt
         marketing/sales staff                                                  of proceeds.
3.       COE selection process          RFP document with selection             RFP was generally well received
                                        criteria have been developed.           by hospitals.  Process will be
                                        Selection process initiated in          continued upon receipt of proceeds.
                                        California and terminated
                                        (midway) in 1991 due to lack of
                                        funding.
4.       STP process                    Fully developed and tested in 21        Initial cost reduction results
                                        hospital programs.                      indicate that STP are successful in
                                                                                reducing costs.
5.       Assistance to employers        Fully developed.                        Available for review upon request.
6.       Assistance to providers        Fully Developed                         Available for review upon request.
7.       Information systems            Not developed.                          Will be acquired after receipt of
                                                                                proceeds.
8.       Management team                Partially hired.                        Remainder to be recruited after
                                                                                receipt of proceeds.
</TABLE>
                                            PART II - Other Information

Item 1. Legal Proceedings.
The Company is not a party to any pending legal proceedings.

Item 2. Changes in Securities
None to report.

Item 3. Defaults Upon Senior Securities
None to report.

Item 4. Submission of Matters to a Vote of Security Holders.
     The Company did not submit any matters to a vote of security holders during
the first quarter.

Item 5. Other Information
None to report.

Item 6. Exhibits and Reports on Form 8-K and 8-K/A.
During the first quarter the Company did not file any reports on Form 8-K.

                                       13
<PAGE>
                                   SIGNATURES

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

Date: November 14, 1996

                                        NATIONAL SPECIALTY NETWORKS, INC.
                                             a California Corporation



                                        By:  /s/ Ronald D. Osborne
                                        Ronald D. Osborne
                                        President, CEO and Chairman of the Board



                                        By:  /s/ Douglas E. Wells
                                        Douglas E. Wells
                                        Senior Vice President and Chief
                                        Financial Officer






















                                       14