FORM 10-KSB

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

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

    For the fiscal year ended September 30, 1999

                                       OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934 (NO FEE REQUIRED)

    For the transition period from _____________ to _____________

    Commission file number 000-21659

                       Entertainment Digital Network, Inc
                 ----------------------------------------------
                 (Name of small business issuer in its charter)


           Delaware                                               94-3173300
---------------------------------                            -------------------
(State or other jurisdiction                                 (IRS Employer
of incorporation or organization)                            Identification No.)

One Union Street, San Francisco, California                         94111
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  Address of principal executive offices                          (Zip Code)

Issuer's telephone number, including area code                 (415) 274-8800
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       Securities registered under Section 12(b) of the Exchange Act: None

         Securities registered under Section 12(g) of the Exchange Act:

                         Common Stock, par value $0.001
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter  period that the registrant was required to file such reports),
and (2) has been subject to such filing  requirements  for the past 90 days.
Yes [X] No [ ]
(See Disclosure Items Omitted)

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Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained 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  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [ ]

The  Issuer's  revenues  for the twelve  months  ended  September  30, 1999 were
$3,910,466.

As of December 23, 1999,  the aggregate  market value of the Common Stock of the
Registrant  based upon the closing bid prices of the Common Stock,  as quoted on
the  OTC  Bulletin  Board,   held  by   non-affiliates  of  the  Registrant  was
approximately $10,894,747.

As of December 23, 1999,  23,201,398 shares of $0.001 par value Common Stock, of
the Registrant were outstanding.

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PART I

ITEM 1 DESCRIPTION OF BUSINESS

Summary of Business

Entertainment  Digital  Network,  Inc.,  ("EDN" or the  "Company"),  a  Delaware
corporation  develops and markets digital  communications  systems for the North
American advertising and entertainment industry.  These systems help our clients
deliver,  store and  manage  professional-quality  audio and  video  files  over
proprietary  networks.  Our  private  wide-area  network,  which we  established
through  strategic  alliances with long distance  carriers,  regional  telephone
companies,  satellite operators and independent  fiber-optic  telecommunications
providers,  enables our clients to exchange high quality audio, compressed video
and multimedia data communications.  We provide engineering services,  technical
advice, and audio, video and networking  hardware and software together with our
networking  services.  In January of this year,  we  expanded  our  business  to
include the  production of live audio and video  streaming  broadcasts  over the
Internet for our corporate and entertainment  clients. We also provide crews and
equipment for live audio and video  conferences,  and the digital  communication
lines  for  transporting  the  media  back  to its  server  for  live  streaming
distribution over the Internet.

Industry Overview

The digital communications industry originated in the 1970s based on the ability
of digital  technology to support new and advanced  communication  applications.
Digital content can be compressed,  enabling data-dense applications such as the
instantaneous  exchange  of  large  amounts  of  high-quality  media  in real or
near-real time over any distance.  Important  communications equipment suppliers
increasingly    recognize   our   expertise   in   systems   integration   using
telecommunications and Internet technology.

Business of the Company

Principal  Markets.  We sell services to advertising and entertainment  industry
clients,  including  production  and  post-production  companies,   advertisers,
producers, directors and talent. Our networking technology makes it possible for
producers, directors and talent to interact in real time, with less interruption
of their schedules,  despite being in separate  locations.  Management  believes
this is of growing importance in the entertainment  industry because,  while the
production of audio and video  entertainment  is  inherently a creative  process
requiring the  collaboration  of many parties,  the participants in this process
are often in separate locations.  Traditionally,  this meant frequent travel and
delay in the audio and video  production  process.  Our  technology  allows  the
collaborative  process to go forward without delay despite physical  separation.
We expanded  our market  during the past year by entering  into the  business of
producing audio and video live streaming distribution over the Internet. We have
extended this service into the corporate market.

Audio and Video  Network  Systems  Development  Process.  We use a  standardized
process for developing  audio and video network  communications  systems for our
customers.  When we  contract  with a new audio or video  network  customer,  we
determine the technical information and specifications  regarding the customer's
existing  facility,  equipment and communications

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requirements.  Based on those specifications,  we determine the configuration of
the new system, select the appropriate equipment components, modify the software
and/or  hardware as needed,  and perform the final quality  control  procedures.
Next, we package and ship the system to the customer. Affiliated technicians can
usually install the system with telephone  support from our in-house  engineers.
After  installation,  our technical personnel typically perform a routine series
of system checks and diagnostics from the  headquarters  over the remote network
to ensure that the newly installed equipment functions properly.

Technical  Support.  Our technical  support staff responds  directly to customer
inquiries  during  business  hours.  For emergency  support during  non-business
hours,  domestic  customers can contact us through a toll-free 800 number, and a
special direct-dial  telephone number is available for international  customers.
The technical  support staff can resolve the vast majority of technical  support
issues directly through remote network connection techniques,  which enables the
staff to perform remote diagnostics on a customer's equipment.  If we are unable
to diagnose and service a hardware or software  problem over the remote  network
connection,  a  customer  can ship  equipment  to us for  on-site,  or  "bench",
diagnostics  and service.  We have a supply of field  replacement  equipment for
occasional customer  emergencies.  These services are included in the customers'
fees.

Key Suppliers and Alliances.  We act as a systems  integrator by acquiring other
companies'  technologies and integrating  them into an effective  communications
solution.  We do not  manufacture  any of the  components  used in the networks.
Instead, we purchase digital  communications  equipment components directly from
manufacturers  such as Dolby Labs,  Telos,  Musicam USA,  APT,  PictureTel,  and
Telestream.  We are the North American master distributor for certain Dolby and
APT equipment,  and we are the primary  maintenance support for APT equipment in
the United  States.  Because the individual  components  used in the systems are
generally  available  from  more  than  one  reliable  source  or  manufacturer,
management  believes  the risk of an  adverse  impact  to our  business  from an
interruption in supply from any single  supplier is minimal.  We also maintain a
small ongoing  inventory of all of the components of our various  communications
products. Most of our suppliers have offices and/or distribution points near our
San Francisco  headquarters.  In the event we do not have  sufficient  inventory
on-hand  to fill a system  hardware  order,  we can  usually  order and  receive
additional inventory with turnaround times of as little as twenty-four hours and
generally  no more than four weeks.  This does not exclude an adverse  effect in
the  event   that  any  of  our   suppliers,   for   which  we  have   exclusive
distributorship, files bankruptcy or ceases operations.

Marketing.  We market  our  services  through a direct  full-time  sales  staff,
through  appearances at industry trade shows,  and through selling  arrangements
such as the agreement with PR Newswire.

Description of Current and Developing Products

Audio Networking Services. Our integrated audio networking systems allow artists
and sound  engineers in remote  locations  to record a single  audio  track.  We
provide  compression  and  transmission  of studio  quality  audio  signals over
fiber-optic lines (i.e., telephone digital data lines) between separate studios.
Operators can send time codes with audio data so that operators at the different
studios can  synchronize  the audio to film  projectors or VCR machines for real
time editing of movies and video. When we install an audio media  communications
system  and the  requisite  sound  equipment,  a studio  becomes  an  "affiliate
studio",  equipped  with a device  to  digitize,  compress,  send,  receive  and
decompress audio media (known as a "codec").  In addition,  the studio becomes a
part of our network of media  production and  post-production  studios.  Studios
enter into agreements with us to join our network of recording  studios, usually

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for three years.  Joining the network allows an affiliate  studio to establish a
link with, and transmit audio and/or video  information  to, any other affiliate
studio. An affiliate studio may participate in joint promotional and advertising
activities  describing the network, and it has access to technical support and a
software  directory of affiliate  studios.  Affiliate  studios pay lower link-up
rates than  non-affiliate  studios pay to connect to studios  with  incompatible
equipment.  Currently, our network is comprised of over 550 studios across North
America,  with major concentrations in Los Angeles, San Francisco,  Seattle, St.
Louis, Chicago,  Minneapolis, and Atlanta and on the East Coast from Washington,
D.C. to New York and Boston. By granting access to the network, we earn one-time
fees from customers for the sale and  installation of equipment and ongoing fees
for the use of the network.

Our audio  communications  systems  cost from  $3,500 to  $18,000.  We pay local
telephone  service  providers  the  telephone  connection  installation  charges
(depending  upon  bandwidth  requirements,  from  $250 to  $1,000)  and  monthly
recurring  connection charges (from $40 to $300). Our customers reimburse us for
all of these charges. Outside customers (non-affiliates) seeking to access media
production  facilities  or  otherwise  review or  record an audio  clip with the
assistance  of a person in a different  location can do so through our affiliate
studios.  With  Electronic  Directory  software  or through  EDN's web site,  an
affiliate  studio  can  quickly  determine  whether  their  studio,  or  another
affiliate studio, operates equipment that is compatible with the non-affiliate's
needs. After choosing an appropriate affiliate studio, the customer can schedule
an  appointment  to use the network.  If nearby  studios do not have  compatible
equipment,  technicians in our San Francisco Network Operations Center (NOC) can
digitally  "bridge" the studios  together.  The customer  then pays us a network
access fee. The primary  market for our audio  services are radio and television
advertisers,  motion picture and  television  program  production  companies and
music recording companies.

Video Networking Services. The video networking service is similar in concept to
the audio  networking  service,  in that it provides  end to end service for the
transmission of video from one affiliate to another. The video network presently
incorporates  the   "ClipMail(TM)Pro   ("ClipMail")   appliance   developed  and
manufactured by Telestream,  Inc., of Nevada City, California. The ClipMail is a
"Store and  Forward"  system,  in that the  transmission  of the video is not in
"real time." Using this  technology,  video media  producers and their customers
can efficiently and  effectively  transmit video for approval,  rather than wait
for  overnight  delivery of tapes.  We liken these  systems to e-mail for video.
Compared to conventional methods of transmitting video, such as mail or physical
travel,  it can  significantly  increase the speed and  efficiency  of the video
editing and decision making process.

The ClipMail system uses MPEG-2  compression  technology,  and Internet Protocol
("IP") data networks to allow video  professionals  to send and receive approval
of  digital-master  quality  video  and  audio  over a range  of  standard  data
networks. Professionals use these systems primarily to transmit short form video
such as commercials, special effects, graphics, storyboards and animation shots.
However,  with the increase in high bandwidth data lines,  both  terrestrial and
satellite,  directors,  photographers and other  professionals have been able to
send audio and video  dailies from remote  locations to editors  working back at
the home studio by using EDN's network rather than conventional mail or delivery
methods.

Company's  Internet-Based  Virtual Private Network.  Our video systems cost from
$9,250 to $16,250  depending on the different types of available  products.  The
customer  pays  through  us for the  Internet  Service  Providers  ("ISP"),  the
connectivity  installation charges (depending upon bandwidth requirements,  from
$500 to $5,000) and monthly recurring connection charges (from $200 to $3,000).

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We offer  customer  service for the ClipMail  video  product  through a separate
virtual  private  network  ("VPN").  This  network  offers  customers  wide-area
connections,  based on a variety of technologies,  including ISDN, DSL, or frame
relay T-1. With these wide-band connections, in addition to ClipMail for sending
audio and  video,  we can  provide  other  services,  such as  e-mail,  Internet
connectivity   and   hosting.   This  VPN  network  is  also   offered   through
representatives  selling ClipMail  throughout the United States and Canada. This
service  also  provides  applications  support,  software  upgrades,  media file
conversion  and data storage.  We bill monthly fees to customers who have direct
access to the IP  network.  These  fees cover  local  loop costs and  high-speed
Internet  access.  Other  services,  such as e-mail  and  hosting  services  are
additional revenue for the Company.

Webcasting. We provide crews and equipment for live audio and video conferences,
and the digital  communications  lines to  transport  the media back to the main
office for live  streaming  distribution  over the Internet.  We expect that the
webcasting  services  for our  audio  and video  network  affiliates,  and other
businesses  in  the  fast  growing   streaming   media  market  will  become  an
increasingly important part of our business.

Competition

In the past our  business  involved  primarily  audio  networking  services.  We
limited  our video  networking  services  to  transmission  of short form video,
including commercials, special effects and animation, because video transmission
is  costlier  than  audio  transmission.  This is due to the  size of the  files
required for video compared to audio and the high cost of wider bandwidth needed
for video transmission, which we must procure from telephone companies.

We  believe  that  there are  strong  opportunities  for  growth  with our video
transmission services, and we plan to increase these services despite the higher
cost of video transmission. There is also likely to be an increase in the number
of  competitors  providing  wide-band  services for moving  video.  Several long
distance  and  regional   telephone   companies  have  offered  video  wide-area
networking  services to their  clients  from time to time,  but we believe  that
their efforts have not been substantial.

Audio  and Video  Networking.  Competition  in the  audio  and video  networking
business  is  based  on  the  ability  to  provide  systems   compatibility  and
proprietary   off-the-shelf  codecs.  Due  to  the  difficulty  and  expense  of
developing and maintaining  private digital networks,  management  believes that
the number of competitors is, and will remain,  small. Our principal  competitor
in audio networking has been Globecast or 3D2, a division of IDB, which is owned
by French  Telecom.  Until March 31, 1995, 3D2 was the exclusive  North American
distributor of apt-X codecs manufactured by Audio Processing Technology ("APT"),
which were in demand in the radio voice-over  market.  EDN was able to negotiate
an  agreement  allowing it to  represent  APT,  and  quickly  became the brand's
largest seller.  In 1998, we became the exclusive  distributors in North America
of the apt-X  codecs.  Our primary  video  networking  competitors  are VYVX,  a
division of Williams  Co.,  and  WAM!NET,  a private  Minnesota  company.  These
companies  focus  on   video-networking   services   utilizing  more  expensive,
higher-bandwidth fiber connections than our current networking services.

Patents & Trademarks

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We do not own any patents and rely instead on a  combination  of  statutory  and
common-law  copyright,  trademark and trade secret laws to protect the rights of
our proprietary technologies. We have registered "EDnet", "Entertainment Digital
Network" and "ZeroC" as trademarks with the U.S. Patent and Trademark Office.

Research and Development

We had no research  and  development  expenditures  in 1999 or 1998.  We did not
spend any funds on material  customer-sponsored  research and development either
of the past two years.

Governmental Approvals and Regulation

Our  products  and  services  are  currently  not subject to  regulation  by any
government agency or regulatory body.

Subsidiaries

We  currently   operate  through  a  wholly  owned   subsidiary  also  known  as
Entertainment Digital Network, Inc., which is a California corporation.  We sold
all of the assets of Internet  Business  Solutions to Enterprise  Communications
Consulting,  Inc.,  a wholly  owned  subsidiary  of  Attachmate  Corporation  of
Bellevue,  Washington,  as of December 11, 1998. We sold those assets because we
believe  that the product and service  offerings  of that  subsidiary  would not
remain profitable or cost-effective to us in the long term.

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IBS  Transaction.  We acquired all of the outstanding  shares of Common Stock of
Internet  Business  Services,  Inc.  ("IBS"),  an  unrelated  Internet  services
provider,  through a merger of IBS into a subsidiary of the Company  pursuant to
an  Agreement  and  Plan  of  Reorganization  dated  June  24,  1996  (the  "IBS
Agreement").  As  consideration  for  such  merger,  we  issued  to the  two IBS
shareholders,  Trevor Stout and Randall Schmitz: (i) two promissory notes in the
aggregate  principal  amount of  $250,000  (the  "First  IBS  Notes");  (ii) two
promissory notes in the aggregate  principal amount of $250,000 (the "Second IBS
Notes");  and (iii) 311,284 shares of Common Stock. The First IBS Notes were due
sixty (60) days after the  closing of the IBS  Agreement  and were repaid by the
Company in August 1996. The Second IBS Notes originally provided for interest of
eight  percent  (8%) and maturity on the earlier of one year from the closing of
the IBS Agreement or fifteen (15) days after the closing of a public offering by
the Company of Common Stock. In addition,  pursuant to an earn-out plan, Messrs.
Stout and Schmitz  were  originally  entitled to receive up to an  aggregate  of
500,000 shares of Common Stock if IBS met certain specified  performance  goals.
During a period commencing on the effective date of the IBS Agreement and ending
120 days after June 30, 1999 (the "Earnout").  Messrs. Stout and Schmitz entered
into three-year  employment  agreements with the Company and IBS  (collectively,
the IBS  Employment  Agreements).  We granted  options to three IBS employees to
purchase an  aggregate  of 50,000  shares of Common  Stock  under the  Company's
Non-Qualified  Stock Option Plan at $1.25 per share.  These  options vest over a
three-year period. The merger was accounted for as a purchase.

IBS Reorganization - Breakthrough  Software,  Inc.  Subsequently,  we determined
that the cost of supporting IBS in researching, developing and marketing certain
software related to the development,

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operation and  maintenance of world-wide web sites (the "IBS Website  Software")
was, in management's view, prohibitively expensive.  Accordingly, pursuant to an
Amendment to the  Agreement and Plan of  Reorganization  dated as of January 31,
1997 and certain collateral documents,  IBS licensed the IBS Website Software to
a  new  entity,   Breakthrough   Software,   Inc.,  a   California   corporation
("Breakthrough").  We agreed to lend up to $250,000 to  Breakthrough  to be used
for specified  purposes.  Breakthough  prepared an unsecured  promissory note in
favor of the  Company,  payable 30 days after  demand after July 1, 1997 or upon
the date that  Breakthrough  closed a financing of not less than $1,000,000 (the
"Breakthrough  Note").  Breakthrough  issued to the Company  2,000,000 shares of
convertible  Series A  Preferred  Stock (the  "Breakthrough  Series A  Preferred
Shares")  representing  (after conversion into Breakthrough Common Stock) 40% of
Breakthrough's  outstanding Common Stock (the remainder of Breakthrough's Common
Stock was held by Mr. Stout and Mr. Schmitz).  We canceled the Second IBS Notes;
and reduced  the number of shares of Common  Stock  subject to the Earnout  from
500,000 to 125,000.

In November 1997, we sold the Company's  2,000,000 shares of Breakthrough Series
A Preferred  Stock for  $415,000.  The first payment of $250,000 for the sale of
the Series A Preferred  Stock was received on November 7, 1997, a second payment
of $67,995  was  received  on  December  19, 1997 and the balance of $97,005 was
received on January 21, 1998. The  Breakthrough  Note was amended as of December
19, 1997. A debt transfer reduced the Breakthrough Note by IBS and assumption by
Breakthrough of certain of EDN's  outstanding debts to vendors or suppliers that
were  connected  with  the IBS  Website  Software  development  business.  These
included a debt of $91,892 to Global  Automation,  Inc., and an overdue  account
with  the San  Jose  Mercury  News of  $2,000,  both of which  were  assumed  by
Breakthrough.  The balance of $156,108 in principal due on the Breakthrough Note
was  canceled  and,  in  its  place,  we  received  a  Convertible  Subordinated
Promissory Note and warrants to purchase shares of Breakthrough's  Common Stock.
On March 13, 1998, we sold this note to an outside investor for $80,000.

Investment  by Visual  Data  Corporation.  Faced  with  substantial  short-  and
long-term  liabilities  at the  beginning of the 1998 fiscal year,  we pursued a
number of  fundraising  opportunities  over the year to finance  operations  and
reorganize  past due  liabilities  to allow EDN to continue as a going  concern.
Toward  the end of the  fiscal  year  we  identified  a  suitable  investor  and
strategic partner in Visual Data Corporation  ("VDC"), a Pompano Beach,  Florida
multimedia   development  and  production   company.   VDC  specializes  in  the
production,  marketing and distribution of full-motion visual information on the
Internet.  VDC develops  full-motion  video libraries  containing  short concise
vignettes  relating to various topics,  including travel,  business,  education,
health, fitness, medicine and consumer products.

VDC was a potential customer of our video network,  and VDC's own customers were
also potential customers of our video network. Subject to the detailed terms and
conditions stated in that certain securities  purchase agreement between VDC and
EDN effective as of June 20, 1998 (the "VDC Purchase Agreement"),  VDC agreed to
acquire a majority  interest in EDN's  outstanding  shares of Common  Stock.

Under the VDC Purchase Agreement,  VDC acquired 8,563,417 shares of EDN's Common
Stock, equal to a 51% interest in the Company. Subsequent to the VDC investment,
EDN had approximately 16.7 million shares  outstanding.  In order to ensure that
VDC had the opportunity to retain  ownership as a majority owner in EDN's Common
Stock,  VDC was also given an option that  mirrors  each option  and/or  warrant
outstanding for EDN Common Stock as of the closing date. Thus

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for every  outstanding  option  and/or  warrant  existing  at the  closing  date
subsequently exercised, VDC can purchase one additional share of Common Stock at
$0.10 per share.

In  consideration,  we received  $698,004 in cash,  75,000  shares of VDC Common
Stock,  warrants to purchase up to 50,000  shares of VDC Common Stock (valued at
$418,250); and a promissory note in the principal amount of $283,746, secured by
the Common Stock and certain real property in Florida,  for a total  acquisition
price of $1.4 million.

An  additional  term  of the VDC  Purchase  Agreement,  as well as one of  EDN's
primary goals in finding an investor,  was that we restructure  certain accounts
payable  debt  that the  Company  had  incurred  over  the  prior  three  years.
Therefore,  we used a substantial portion of the proceeds of the VDC Transaction
to repay certain outstanding  liabilities and to make current certain delinquent
accounts with suppliers.  We paid certain creditors a total of $414,020 in cash,
and  assigned  others the 75,000  shares of VDC Common Stock and the warrants to
purchase an additional  50,000  shares of VDC Common  Stock,  in order to settle
claims based on overdue  accounts  totaling  $643,562,  and to settle claims for
repayment of principal and interest of $904,019 on certain promissory notes.

As an  additional  term of its  investment,  VDC received the right to name four
members to EDN's Board of Directors.  With the concurrent  resignation of one of
the existing  directors,  this was intended to give VDC effective control of the
Board.  VDC's four  nominees  began  acting as directors at a meeting of the EDN
Board of Directors  held on July 10, 1998.  At the same time,  one of the former
Board  members,  Avi  Fogel,  resigned  from  the EDN  Board of  Directors.  Tom
Kobayashi,  Chairman of the Board prior to the VDC  investment,  stepped down as
Chairman and was replaced by Randy  Selman,  President  of VDC.  During  October
1998,  David Goodman  resigned  from the Board and Eric Jacobs  replaced him. In
addition,  we appointed one of the VDC nominees,  Brian  Service,  to a director
position with particular focus on investor  relations,  strategic  funding,  and
cash management issues. We have renewed our one-year  consulting  agreement with
Mr. Service, under which Mr. Service receives a monthly fee of $9,000. Effective
July 1999 Robert  Wussler  transferred from the Board of Directors of EDN to the
Board of Directors of VDC.

ITEM 2 PROPERTY

Description of Property

Our  principal  business  offices  are  located  at  One  Union  Street,  in San
Francisco, California. This office is a 5,000 square foot facility that operates
as  administrative  headquarters  and provides the  centralized  network hub for
electronically   bridging  affiliate   studios,   as  well  as  overall  network
management. We lease this facility pursuant to a Sublease dated November 1, 1993
with Varitel Video, Inc.  ("Varitel"),  an unaffiliated  entity. The term of the
sublease was for five years, commencing November 15, 1993. At November 14, 1998,
the lease was renewed for an additional  term ending August 31, 2003.  Under the
renewed  sublease,  the monthly lease payment is $13,251 per month. In lieu of a
security  deposit,  we granted  Varitel a security  interest in certain of EDN's
equipment with an aggregate purchase price of approximately $75,000. Varitel may
terminate this sublease: upon 90 days prior written notice, upon a change in the
principal ownership of the Company or in the event that the Company engages in a
"competing  type of film or video service  business like or similar to Varitel".
This excludes any "networking service  application" which we offer in connection
with audio, video and  other multimedia  networking services. Varitel has agreed
not to terminate the lease due to the VDC Purchase Agreement.

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On June 23,  1998,  Lantana,  a property  management  company in the Los Angeles
Area,  and EDN,  Inc.  canceled the balance of the lease and the guaranty by Mr.
Kobayashi per mutual agreement.

ITEM 3 LEGAL PROCEEDINGS

EDN is not a party to any legal proceedings.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No items were  submitted  to the  shareholders  for vote  during the fiscal year
ending September 30, 1999.

PART II

ITEM 5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS

Price Range of Common Stock

Our Common Stock is traded on the OTC electronic bulletin board under the symbol
EDNT.  The reported high and low bid  information  as quoted on the OTC bulletin
board for the period July 1, 1997 through  September  30, 1999,  is shown below.
The high and low bid information as quoted on the OTC bulletin board  represents
prices  between  brokers  and  dealers  and does  not  include  retail  markups,
markdowns or commissions to the broker-dealer.

              High and Low Bid Price for Registrant's Common Stock
                     July 1, 1997 through September 30, 1999

      Period                                      High           Low
      ------                                      ----           ---

      Quarter ended September 30, 1999            1.750         0.660
      Quarter ended June 30, 1999                 4.125         1.000
      Quarter ended March 31, 1999                4.875         0.266
      Quarter ended December 31, 1998             0.641         0.125

      Quarter ended September 30, 1998            0.453         0.094
      Quarter ended June 30, 1998                 0.719         0.094
      Quarter ended March 31, 1998                0.250         0.094
      Quarter ended December 31, 1997             0.750         0.125
      Quarter ended September 30, 1997            1.047         0.250

The number of holders of record of EDN's Common Stock as of September  30, 1999,
was  approximately  650.

Dividends

EDN has never  paid cash  dividends  on Common  Stock,  and we intend to utilize
current  resources  to expand our  operations.  Moreover,  outstanding  warrants
restrict the ability of the Company to pay dividends.  Therefore,  we anticipate
that cash  dividends  will not be paid on the  Common  Stock in the  foreseeable
future.

                                       11
<PAGE>

ITEM 6 MANAGEMENT'S DISCUSSION AND ANALYSIS

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

Overview

In December,  1998, we completed the sale of assets of our subsidiary,  Internet
Business  Solutions  ("IBS") to Enterprise  Communications  Consulting,  Inc., a
private  company  located in  Bellevue,  Washington.  It became  apparent to the
management and the Board of Directors of EDN that the web  development  services
of IBS were being provided by our parent company, Visual Data Corporation.  This
sale  allowed  EDN to focus all of its  efforts on  pursuing  new  products  and
services in the video market as well as  webcasting on the Internet.

We  continued  to  expand  our core  audio  networking  services,  which has now
expanded to over 550  affiliates in the United States and Canada.  The number of
Grammy and Oscar  recipients  that use the audio network in the music and motion
picture industry has increased annually.

In January of this year,  we entered  into an  agreement  with PR  Newswire  and
Visual  Data  Corporation  to  provide  customers  with  live  audio  and  video
webcasting over the Internet

In March, we announced an agreement with Telestream,  the manufacturer of a high
quality video delivery system,  ClipMail(TM)Pro  (which can send video over data
networks using high-speed wide-band, Internet networks). We became the first OEM
dealer for this video appliance. Since its launch at the National Association of
Broadcasting  trade show in Las Vegas, this appliance  has been well accepted in

                                       12


<PAGE>

the advertising,  television and motion picture  production and  post-production
market. We feel that this new product and service will become a significant part
of growth in the Company's revenue stream in the coming year.

Liquidity and Capital Resources at September 30, 1999

At September 30, 1999, our principal  sources of liquidity  included $282,862 in
cash and an unsecured  $250,000  revolving line of credit. The current ratio was
greatly  improved  over  the  year  ending  June  30,  1998 as a  result  of the
restructuring  discussed above. At September 30, 1999 the current ratio (current
assets divided by current liabilities) was 1.47, whereas at June 30, 1998 it was
0.87.

Net cash  provided by  investing  activities  of  $646,484  for fiscal year 1999
related primarily to the sale of our investment in IBS less purchase of property
and equipment. Financing activities provided a net amount of $680,899 for fiscal
year 1999, primarily due to the sale of Common Stock for $655,693.

At September 30, 1999, our accumulated  deficit was $6,260,249.  Working capital
was  $547,484.  We have not been able to generate  any  operating  profit  since
inception and the loss from  operations  has increased from $755,731 in the year
ending June 30, 1998 to $793,714 in fiscal year 1999.  This is attributed to the
sale of our subsidiary IBS and the launch of new businesses.  We have replaced a
portion  of  the  lost  revenue  with  increases  in  audio   equipment   sales,
installation,  and monthly fees.  These revenue streams have lower gross margins
than the lost IBS revenue of web design and  consulting.  We also introduced two
new business  components:  webcasting and video  equipment  sales.  As these are
still in the initial phase,  these  businesses are incurring start up costs that
will  decrease  over time.  These costs are related to  personnel,  travel,  and
overhead and have lower gross  margins.  In fiscal year 1999, we realized a gain
on the sale of our subsidiary's assets in the amount of $663,530, similar to the
net  profit  from the gain on the sale of  investment  and  forgiveness  of debt
recognized in the year ending June 30, 1998 of $622,225.

Results of Operations: Year Ended September 30, 1999 and Year Ended
June 30, 1998

The following  table sets forth for the periods  indicated the percentage of net
sales  represented  by certain line items from our  consolidated  statements  of
operations:

                                     September 30, 1999          June 30, 1998
                                     ------------------          -------------
  Revenues                                   100.0%                  100.0%
  Cost of sales                               74.1%                   65.0%
                                             -----                   -----
  Gross profit                                25.9%                   35.0%
  Operating expenses:
  Sales and marketing                         14.1%                   16.7%
  General and administrative                  32.1%                   37.2%
                                             -----                   -----
  Total operating expenses                    46.2%                   53.9%
                                             -----                   -----
  Loss from operations                       (20.3%)                 (18.9%)

  Other income                                17.3%                   14.2%
                                             -----                   -----
  Loss before income taxes and
   extraordinary item                         (3.0%)                  (4.7%)

  Provision for income taxes                   0.2%                    0.1%
                                             -----                   -----

  Loss before extraordinary item              (3.2%)                  (4.8%)
  Extraordinary item                            --                    17.7%
                                             -----                   -----
  Net (loss) income                           (3.2%)                 (12.9%)
                                             =====                   =====

                                       13

<PAGE>

Revenues.  Net sales  for  fiscal  year 1999  decreased  2.3% to  $3,910,466  as
compared to  $4,004,341 in the year ended June 30, 1999.  Management  attributes
the decrease in revenue to the sale of its subsidiary IBS.  Revenues from IBS in
fiscal year 1999 were $252,000  compared to $1,117,421 for the fiscal year ended
June 30, 1998. Due to its sale in December 1998,  IBS revenue  contributed  just
slightly  more than two  months'  revenue  to the  current  reporting  period as
compared to twelve  months'  revenue ended June 30, 1998. At June 30, 1998,  IBS
contributed  28% of gross sales.  This loss of revenue is being  replaced by the
introduction of our new businesses,  webcasting and video equipment sales,  that
in total  contributed 9% to our gross sales.  Currently  video  equipment  sales
contribute  approximately  4% to our gross  sales.  The  equipment  component of
revenue  increased in the period ended  September 30, 1999 due to improved audio
equipment availability and a new line of video equipment.  We anticipate revenue
from video  equipment  sales to  increase  substantially  during the next fiscal
year. Webcasting contributed approximately 5% to our gross sales. We expect this
segment of the business to make a significant  contribution  in fiscal year 2000
as new strategic alliances have been formed to increase market share.

Gross Profit. Gross Profit decreased to $1,011,925 or 26 % of sales, in the year
ended  September  30, 1999 compared to  $1,401,847,  or 35% of sales in the year
ended June 30, 1998. Decreases in gross profit as a percentage of sales compared
to June 30, 1998 are primarily due to increased costs  associated with new lines
of business and discounts to attract this business. The decrease in gross profit
can also be linked to the loss of higher contributions that were provided by the
website hosting and consulting services of our former subsidiary IBS.

Operating Expenses. Operating expenses (including sales & marketing, and general
&  administrative)  decreased to $1,805,639 in the year ended September 30, 1999
compared to $2,157,578  for the fiscal year ended June 30, 1998. The decrease is
primiarly  due to  the  elimination  of  sales  and  marketing  expenses  of our
subsidiary,  IBS. In the year ended June 30, 1998, IBS  contributed  $322,181 or
48% of the total  marketing  expense,  compared  to  $58,112 or 11% for the year
ended  September 30, 1999.  Administrative  expenses also decreased for the year
ended  September  30, 1999 due to the  decrease in investor  relations  expense.
Investor  relations  expense  for the year  ended  June 30,  1998 was more  than
$420,000. This expense was primarily due to the hiring of the consulting firm of
Liviakas  Financial.  (see ITEM 12) We hired  Liviakas  to  assist  in  securing
additional funding.

Other Income and  Expenses.  Other income and expenses  increased to $675,239 in
fiscal year 1999,  compared to $565,779 for fiscal year ended June 30,1998.  The
increase is due to the sale of our subsidiary, IBS, netting $663,530 (See Note 2
to  the  Consolidated  Financial  Statements).  Additionally,  interest  expense
decreased  from  $63,772  for fiscal  year ended June 30, 1998 to $22,773 in the
current fiscal year. The decrease is primarily due to the  elimination of senior
note holders.  These notes were  converted to warrants with demand  registration
rights. The majority of these warrants were exercised in the third quarter 1999.
The  fiscal  year 1999  interest  expense  is mostly  attributable  to the funds
provided by Eric  Jacobs,  which were used to purchase  our  inventory  of video
equipment.

                                       14

<PAGE>

Readiness for Year 2000

We are aware of the issues  associated  with the  programming  code in  existing
computer  systems as the year 2000  approaches.  The year 2000 issue  relates to
whether  computer  systems  will  properly  recognize  and  process  information
relating  to dates in and after  the year  2000.  These  systems  could  fail or
produce  erroneous  results if they cannot  adequately  process dates beyond the
year 1999 and are not  corrected.  Many  people  in the  software  industry  are
uncertain about the potential  consequences  that may result from the failure of
software to adequately address the year 2000 issue.

We have  reviewed the software  and  hardware we use  internally  in our support
systems to determine whether they are year 2000 compliant. We are confident that
we have  already  taken  the steps to  complete  the work  required  to make our
systems,  products and infrastructure  year 2000 ready. Most of our software has
already been upgraded by the manufacturer or was recently  purchased and is year
2000 compliant.  There are no  technological  issues in the hardware or software
that we sell or rent to our clients that will be affected by year 2000 issues.

We do not  believe  that the  aggregate  cost for the year  2000  issue  will be
material, but we cannot predict the effect of the year 2000 issue on many of the
entities  with  which we  transact  business.  We are  evaluating  the year 2000
readiness of our  consultants,  vendors and  suppliers.  Where we determine that
critical  suppliers are not year 2000 ready,  we will monitor their progress and
take appropriate actions. In particular,  the telephone companies that supply us
with services  must be year 2000 ready in order to avoid major  billing  errors.
Though we may  experience  some  temporary  delay in our  ability to  accurately
rebill customers,  we do not foresee any permanent liability,  should some error
occur on the part of these suppliers.

Forward-Looking Statements

This Annual Report on Form 10-KSB contains forward-looking  statements. For this
purpose,  any statements  contained herein that are not statements of historical
fact may be  deemed  to be  forward-looking  statements.  Without  limiting  the
foregoing, the words "believes,"  "anticipates," "plans," "expects," and similar
expressions  are intended to identify  forward-looking  statements.  There are a
number of  important  factors  that  could  cause our  actual  results to differ
materially  from  those  indicated  by such  forward-looking  statements.  These
factors include those set forth below under the caption "Factors that May Affect
Future Results."

Factors That May Affect Future Results.

We  intend  to focus on  expanding  our  audio  networking  equipment  sales and
services  and also  expanding  our video media  networking  equipment  sales and
services. Significant opportunities exist in the audio and video media area as a
result of our affiliation with VDC and the potential use of the video network by
customers  VDC's  video  newswire  product.  We  expect  to be able to fund  our
expanded  activities  from  within  our  own  cash  flow  and  lines  of  credit
facilities.

                                       15

<PAGE>

Audio  Media  Networking  Services.  We  utilize  hardware,  software  and  both
public-switched  and  Internet  Protocol  ("IP")  networks  in  providing  audio
networking services to our customers.  This service  participates in an industry
that undergoes  rapid changes in new products and services.  We presently do not
develop  hardware  or  software  or build wide-area  networks.  Instead,  we buy
commercially  available  equipment,  purchase  network  time from long  distance
carriers,  integrate  this  equipment  and time into  full time or 24/7  network
service,  and resell this  service to our  customers.  Because we do not develop
software or manufacture  hardware  itself,  we can adapt new hardware or network
offerings to our  customers'  needs and  integrate new equipment and new network
access  mechanisms  into our  services  with a minimum  of cost,  provided  that
customers  are  willing  to pay to  upgrade  to  such  new  network  service  or
equipment.  We will need to be aware of new  products  and  services,  since any
delay or failure to  anticipate or respond to any new  technology  could have an
affect upon our anticipated operating results.

Video  Networking  Services.  With  the  introduction  of our new  line of video
products from  Telestream,  we are expecting the revenue from this equipment and
services to be a major contribuor to our current business model. This technology
transmits short form videos,  such as commercials,  special  effects,  and daily
shoots over the Internet to virtually any destination the customer desires. With
the increase in high bandwidth data lines,  directors,  photographers  and other
professionals  have been able to send and receive  audio and video  dailies from
remote  locations  to  editors  working  back at the  home  studio  rather  than
conventional mail or delivery mehtods.

We plan to expand the video  market and offer our  customers  the ability to use
our network for their communication requirements.  This product was designed for
a store  and  forward  type of  transmission.  We are  currently  expanding  our
capabilities to be able to provide this service to our customers.

Wecasting.  We have  entered  into the business of  webcasting,  which  provides
corporate  customers with live audio and video  streaming over the Internet.  We
believe the  webcasting  market  will  enhance  our  current  business  model of
products and services.

                                       16
<PAGE>


ITEM 7 FINANCIAL STATEMENTS

                          INDEPENDENT AUDITORS' REPORT

To the Board of Directors and Stockholders of
Entertainment Digital Network, Inc.

We have audited the  accompanying  consolidated  balance sheets of Entertainment
Digital Network,  Inc. and subsidiaries as of September 30, 1999,  September 30,
1998, and June 30, 1998, and the related consolidated  statements of operations,
stockholders'  equity,  and cash flows for the year, three months, and year then
ended,  respectively.  These financial  statements are the responsibility of the
Company's  management.  Our  responsibility  is to  express  an opinion on these
financial statements based on our audits.

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

In our opinion,  the financial  statements  referred to above present fairly, in
all material  respects,  the  consolidated  financial  position of Entertainment
Digital Network,  Inc. and subsidiaries as of September 30, 1999,  September 30,
1998, and June 30, 1998, and the  consolidated  results of their  operations and
their cash flows for the year ended  September 30, 1999,  the three months ended
September  30,  1998,  and the year  ended June 30,  1998,  in  conformity  with
generally accepted accounting principles.


/s/ Burr, Pilger & Mayer.

San Francisco, California
November 16, 1999

                                       17

<PAGE>
                                  ENTERTAINMENT DIGITAL NETWORK, INC.

                                      CONSOLIDATED BALANCE SHEETS
                                September 30, 1999, September 30, 1998,
                                           and June 30, 1998
                                             ------------
<TABLE>
<CAPTION>

                                                         September 30,    September 30,     June 30,
                                 ASSETS                      1999             1998           1998
                                                          -----------     -----------     -----------
<S>                                                       <C>             <C>             <C>
Current assets:
 Cash                                                     $   282,862     $    88,470     $    32,911
 Accounts receivable, net of allowance for
  doubtful accounts of $18,453, $8,500, and
  $17,502 at September 30, 1999, September 30, 1998,
  and June 30, 1998, respectively                             713,452         574,800         471,341
 Accounts receivable-related party                             32,698          33,008              --
 Accounts receivable-escrow                                    50,000              --              --
 Inventories                                                  576,433         122,986          87,157
 Prepaid expenses                                              45,952           4,601          58,823
 Other current assets                                           2,500             826          16,665
                                                          -----------     -----------     -----------
       Total current assets                                 1,703,897         824,691         666,897

Property and equipment, net                                   385,698         380,416         391,481
Other assets                                                    5,254           6,455          13,711
                                                          -----------     -----------     -----------

                                                          $ 2,094,849     $ 1,211,562     $ 1,072,089
                                                          ===========     ===========     ===========

                  LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
 Accounts payable                                         $   628,959     $   303,628     $   388,325
 Accrued expenses                                             225,374         239,476         294,980
 Deferred revenue                                                  --          33,421          21,286
 Line of credit                                                    --           8,214           8,872
 Notes payable-related party                                  290,500         240,500          40,500
 Current portion of capital lease obligations                  11,580          17,147           9,288
                                                          -----------     -----------     -----------
       Total current liabilities                            1,156,413         842,386         763,251

Capital lease obligations                                       4,045          15,058          11,470
                                                          -----------     -----------     -----------
           Total liabilities                                1,160,458         857,444         774,721
                                                          -----------     -----------     -----------

Stockholders' equity:
 Common stock; $0.001 par value; 50,000,000 shares
  authorized; 23,186,398, 16,761,836, and 16,761,836
  shares issued and outstanding at September 30, 1999,
  September 30, 1998 and June 30, 1998, respectively           22,506          16,761          16,761
 Additional paid-in capital                                 7,501,391       6,755,443       6,755,443
 Secured note receivable                                     (283,746)       (283,746)       (283,746)
 Unearned compensation                                        (45,511)             --              --
 Accumulated deficit                                       (6,260,249)     (6,134,340)     (6,191,090)
                                                          -----------     -----------     -----------
       Total stockholders' equity                             934,391         354,118         297,368
                                                          -----------     -----------     -----------

                                                          $ 2,094,849     $ 1,211,562     $ 1,072,089
                                                          ===========     ===========     ===========
<FN>
                                The accompanying notes are an integral
                           part of these consolidated financial statements.
</FN>
</TABLE>

                                                  18
<PAGE>
                              ENTERTAINMENT DIGITAL NETWORK, INC.

                             CONSOLIDATED STATEMENTS OF OPERATIONS
                             for the year ended September 30, 1999,
                           the three months ended September 30, 1998,
                                and the year ended June 30, 1998
                                          ------------

<TABLE>
<CAPTION>
                                                  September 30,    September 30,     June 30,
                                                      1999             1998           1998
                                                   -----------     -----------     -----------
<S>                                                <C>             <C>             <C>
Revenue:
 Equipment sales                                   $1,160,617      $  283,573      $  874,785
 Installation and monthly fees                        647,174         153,423         610,514
 Usage fees                                         1,562,387         338,671       1,617,291
 Web design and consulting                            272,533         348,811         784,528
 Webcasting                                           192,258              --              --
 Rental fees                                           70,072          18,275          99,384
 Other                                                  5,425           4,275          17,839
                                                   ----------      ----------      ----------
                                                    3,910,466       1,147,028       4,004,341

Cost of sales                                       2,898,541         680,078       2,602,494
                                                   ----------      ----------      ----------
     Gross profit                                   1,011,925         466,950       1,401,847
Sales and marketing                                   551,480         129,052         666,985
General and administrative                          1,254,159         281,990       1,490,593
                                                   ----------      ----------      ----------
     (Loss) income from operations before
       other income (expenses) and provision
       for income taxes and extraordinary item       (793,714)         55,908        (755,731)
                                                   ----------      ----------      ----------
Other income (expenses):
 Interest income                                       35,300           5,993           4,166
 Interest expense                                     (22,773)         (5,151)        (63,772)
 (Loss) gain on sale of equipment                        (818)             --           3,160
 Gain on sale of subsidiary assets                    663,530              --              --
 Gain on sale of investment                                --              --         422,225
 Forgiveness of debt                                       --              --         200,000
                                                   ----------      ----------      ----------
     Total other income                               675,239             842         565,779
                                                   ----------      ----------      ----------
     (Loss) income before provision for income
       taxes and extraordinary item                  (118,475)         56,750        (189,952)

Provision for income taxes                              7,434              --           2,400
                                                   ----------      ----------      ----------
     (Loss) income before extraordinary item         (125,909)         56,750        (192,352)

Extraordinary item-gain on restructuring of
 debt (no applicable income taxes)                         --              --         710,488
                                                   ----------      ----------      ----------

     Net (loss) income                             $ (125,909)     $   56,750      $  518,136
                                                   ==========      ==========      ==========
Basic (loss) income per share:
     Loss before extraordinary item                $    (0.01)            Nil      $    (0.02)
     Net (loss) income                             $    (0.01)            Nil      $     0.07
Diluted (loss) income per share:
     Loss before extraordinary item                $    (0.01)            Nil      $    (0.02)
     Net (loss) income                             $    (0.01)            Nil      $     0.07
<FN>
                             The accompanying notes are an integral
                        part of these consolidated financial statements.
</FN>
</TABLE>

                                                19
<PAGE>
<TABLE>
                                             ENTERTAINMENT DIGITAL NETWORK, INC.

                                       CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
                                           for the year ended September 30, 1999,
                                         the three months ended September 30, 1998,
                                              and the year ended June 30, 1998
                                                        ------------
<CAPTION>
                                                                    Common Stock         Preferred Stock
                                                                --------------------   -----------------      Additional
                                                                 Shares       Amount   Shares     Amount    Paid-in Capital
                                                                 ------       ------   ------     ------    ---------------
<S>                                                          <C>          <C>          <C>     <C>          <C>
Ending balance, June 30, 1997                                  5,740,465    $ 5,740      150    $ 117,541    $4,411,559

Common shares issued under Regulation D offering                 738,000        738       --           --       126,382
Common shares issued under S-8 offering                          400,000        400       --           --       399,600
Common shares issued for conversion of note
 and accrued interest                                          1,000,000      1,000       --           --       374,000
Conversion of preferred shares to common shares                  150,000        150     (150)    (117,541)      117,391
Common shares issued pursuant to consulting service              169,954        170       --           --        21,074
Common shares issued to Visual Data Corporation                8,563,417      8,563       --           --     1,305,437
Net income                                                            --         --       --           --            --
                                                              ----------    -------     ----    ---------    ----------

Ending balance, June 30, 1998                                 16,761,836     16,761       --           --     6,755,443

Net income                                                            --         --       --           --            --
                                                              ----------    -------     ----    ---------    ----------

Ending balance, September 30, 1998                            16,761,836     16,761       --           --     6,755,443

Common shares issued upon exercise of stock options            1,297,500      1,298       --           --       128,453
Common shares issued upon exercise of warrants pursuant
 to S-3 Registration                                           1,914,831      1,235       --           --       203,484
Common shares issued to Visual Data Corporation upon
 exercise of mirror stock options and warrants                 3,212,231      3,212       --           --       318,011
Stock options issued                                                  --         --       --           --        96,000
Net loss                                                              --         --       --           --            --
                                                              ----------    -------     ----    ---------    ----------

Ending balance, September 30, 1999                            23,186,398    $22,506       --           --    $7,501,391
                                                              ==========    =======     ====    =========    ==========
</TABLE>
<TABLE>
<CAPTION>
                                                               Secured      Unearned
                                                                 Note        Compen-     Accumulated
                                                              Receivable     sation        Deficit         Total
                                                              ----------     ------        -------         -----
<S>                                                           <C>          <C>         <C>            <C>
Ending balance, June 30, 1997                                        --          --    $(6,709,226)   $(2,174,386)

Common shares issued under Regulation D offering                     --          --             --        127,120
Common shares issued under S-8 offering                              --          --             --        400,000
Common shares issued for conversion of note
 and accrued interest                                                --          --             --        375,000
Conversion of preferred shares to common shares                      --          --             --             --
Common shares issued pursuant to consulting service                  --          --             --         21,244
Common shares issued to Visual Data Corporation               $(283,746)         --             --      1,030,254
Net income                                                           --          --        518,136        518,136
                                                              ---------    --------    -----------    -----------

Ending balance, June 30, 1998                                  (283,746)         --     (6,191,090)       297,368

Net income                                                           --          --         56,750         56,750
                                                              ---------    --------    -----------    -----------

Ending balance, September 30, 1998                             (283,746)         --     (6,134,340)       354,118

Common shares issued upon exercise of stock options                  --          --             --        129,751
Common shares issued upon exercise of warrants pursuant
 to S-3 Registration                                                 --          --             --        204,719
Common shares issued to Visual Data Corporation upon
 exercise of mirror stock options and warrants                       --          --             --        321,223
Stock options                                                        --    $(45,511)            --         50,489
Net loss                                                             --          --       (125,909)      (125,909)
                                                              ---------    --------    -----------    -----------

Ending balance, September 30, 1999                            $(283,746)   $(45,511)   $(6,260,249)   $   934,391
                                                              =========    ========    ===========    ===========
<FN>
                                           The accompanying notes are an integral
                                      part of these consolidated financial statements.
</FN>
</TABLE>

                                                              20

<PAGE>
                                     ENTERTAINMENT DIGITAL NETWORK, INC.

                                    CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    for the year ended September 30, 1999,
                                  the three months ended September 30, 1998,
                                       and the year ended June 30, 1998
                                                 ------------
<TABLE>
<CAPTION>
                                                              September 30,    September 30,       June 30,
                                                                  1999             1998             1998
                                                               -----------      -----------      -----------
<S>                                                            <C>              <C>              <C>
Cash flows from operating activities:
 Net (loss) income                                             $  (125,909)     $    56,750      $   518,136
 Adjustments to reconcile net income (loss) to cash
  used in operating activities:
  Gain on sale of subsidiary assets                               (663,530)              --               --
  Depreciation and amortization                                    122,380           52,888          199,458
  Compensation expense on below market value stock options          50,489               --               --
  Loss (gain) on sale of fixed assets                                  818               --           (3,160)
  Stock issued in lieu of consideration for services                    --               --          421,244
  Gain on sale of investment                                            --               --         (422,225)
  Gain on forgiveness of debt                                           --               --         (200,000)
  Inventory write-off                                                   --               --           49,061
  Noncash debt restructure                                              --               --         (773,026)
  (Increase) decrease in assets:
    Accounts receivable                                           (335,944)        (136,467)         (26,220)
    Inventories                                                   (445,251)         (35,829)          66,695
    Prepaid expenses and other assets                              (54,794)          77,317          (56,439)
  Increase (decrease) in liabilities:
    Accounts payable                                               331,174          (84,697)        (868,083)
    Accrued expenses                                               (12,424)         (43,141)         (31,168)
                                                               -----------      -----------      -----------
      Net cash used in operating activities                     (1,132,991)        (113,179)      (1,125,727)
                                                               -----------      -----------      -----------
Cash flows from investing activities:
 Purchase of property and equipment                               (258,729)         (25,849)         (31,246)
 Sale of investments                                                    --               --          588,892
 Proceeds from sale of subsidiary's and other assets               905,213               --               --
                                                               -----------      -----------      -----------
      Net cash provided by (used in) investing activities          646,484          (25,849)         557,646
                                                               -----------      -----------      -----------
Cash flows from financing activities:
 Net decrease in line of credit                                     (8,214)            (886)         (25,755)
 Net increase in short-term related party note                     250,000          200,000               --
 Principal payments on debt                                       (200,000)              --         (115,481)
 Payments on capital leases                                        (16,580)          (4,527)         (27,963)
 Proceeds from sale of Common Stock                                655,693               --          739,124
                                                               -----------      -----------      -----------
      Net cash provided by financing activities                    680,899          194,587          569,925
                                                               -----------      -----------      -----------
      Net increase in cash                                         194,392           55,559            1,844

Cash at beginning of year                                           88,470           32,911           31,067
                                                               -----------      -----------      -----------
Cash at end of year                                            $   282,862      $    88,470      $    32,911
                                                               ===========      ===========      ===========
<FN>
                                    The accompanying notes are an integral
                               part of these consolidated financial statements.
</FN>
</TABLE>

                                                        21
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  ------------

1.  Significant Accounting Policies

    Nature of Operations

    Entertainment  Digital Network,  Inc. (the Company), a Delaware corporation,
    and its subsidiaries develop and market integrated systems for the delivery,
    storage, and management of professional  quality digital  communications for
    media-based applications, including audio and video production for the U. S.
    entertainment  industry.  The  Company,  through  strategic  alliances  with
    long-distance carriers,  regional telephone companies,  satellite operators,
    and independent fiber optic telecommunications  providers, has established a
    worldwide  network that enables the exchange of high quality  audio,  video,
    multimedia,  and  data  communications.  The  Company  provides  engineering
    services  and  application-specific  technical  advice,  audio,  video,  and
    networking  hardware and software as part of its business. In December 1998,
    the Company completed the sale of substantially all the assets of its wholly
    owned  subsidiary,  which provided Internet web site development and hosting
    services.

    Basis of Consolidation

    The consolidated  financial  statements  include the accounts of the Company
    and its  principal  subsidiaries,  Entertainment  Digital  Network (EDN) and
    Internet  Worldwide  Business Solutions (IBS). The accounts of IBS have been
    included through December 1998 when its principal assets and operations were
    sold. All material  intercompany  transactions  have been  eliminated in the
    consolidated financial statements.

    Effective  June 20,  1998,  the  Company  became  51% owned by  Visual  Data
    Corporation  (VDC),  a public  company,  through the  issuance of  8,563,417
    shares of the Company's Common Stock (See Note 13). Accordingly, the results
    of the  Company's  operations  will be  consolidated  with  those of VDC for
    periods subsequent to June 20, 1998.

    Use of Estimates

    The  preparation  of the financial  statements in accordance  with generally
    accepted  accounting  principles  requires  management to make estimates and
    assumptions  that  affect  reported  amounts of assets and  liabilities  and
    disclosure of contingent assets and liabilities at the date of the financial
    statements  and the reported  amounts of revenues  and  expenses  during the
    reporting  period.   Actual  results  could  differ  from  those  and  other
    estimates.

    Allowance for Doubtful Accounts

    Bad  debts  are  provided  on  the  allowance  method  based  on  historical
    experience and management's evaluation of outstanding accounts receivable.

    Inventories

    Inventories, composed primarily of purchased products for resale, are valued
    at the lower of cost or market with cost being  determined  on the first-in,
    first-out  basis.  During the year ended  September  30,  1999,  the Company
    established an inventory valuation reserve in the amount of $40,000.


                                       22
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED STATEMENTS, Continued
                                  ------------

1.  Summary of Significant Accounting Policies, continued

    Property and Equipment and Leasehold Improvements

    Property  and  equipment  are  carried  at cost and are  depreciated  on the
    straight-line  basis over their  estimated  useful life of five  years.  The
    costs of leasehold  improvements  are amortized over the lesser of the lease
    term  or the  life  of the  improvement.  Expenditures  for  improvement  or
    expansion of property and equipment are capitalized. Repairs and maintenance
    are  charged to expense as  incurred.  When the assets are sold or  retired,
    their  cost  and  related  accumulated  depreciation  are  removed  from the
    accounts  with the  resulting  gain or loss  reflected  in the  statement of
    operations.

    Income Taxes

    The Company accounts for income taxes using the liability  method.  Deferred
    income tax assets and  liabilities  are computed  annually  for  differences
    between the financial reporting and tax bases of assets and liabilities that
    will result in taxable or deductible  amounts in the future based on enacted
    tax laws and rates  applicable to the periods in which the  differences  are
    expected to affect taxable income. Valuation allowances are established when
    necessary  to reduce  deferred  tax  assets  to the  amount  expected  to be
    realized.

    Fair Value of Financial Instruments and Credit Risk

    The  carrying  amounts of certain  financial  instruments,  including  cash,
    accounts receivable,  notes receivable,  accounts payable, accrued expenses,
    notes  payable,  and line of credit,  approximate  fair value because of the
    relatively  short-term  maturity of these  instruments.  The Company and its
    subsidiaries  maintain cash in bank deposit accounts at accredited financial
    institutions. The balances in these accounts may, at times, exceed federally
    insured limits.

    Long-lived Assets

    Long-lived   assets  such  as  property  and  equipment  are  evaluated  for
    impairment  when  events  or  changes  in  circumstances  indicate  that the
    carrying amount of the assets may not be recoverable. When the indicators of
    impairment are present and the estimated undiscounted future cash flows from
    the use of these  assets  are less  than the  assets'  carrying  value,  the
    related assets will be written down to fair value.

    Revenue Recognition

    A significant  component of revenue relates to the sale of equipment,  which
    is recognized  when the equipment is installed or upon signing of a contract
    after a free  trial  period.  During the trial  period a  customer  normally
    receives an extended  period of time before  purchasing the product.  During
    this trial  period,  the Company  accounts for the product as inventory  and
    recognizes  the revenue  upon  signature  of the  contract by the  customer.
    Installation  fees are recognized when the  installation has been completed.
    Usage fees are recognized over the period the equipment is used based on the
    relative usage level.  Deferred revenues  represented  billings in excess of
    revenue recognized.


                                       23
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED STATEMENTS, Continued
                                  ------------

1.  Summary of Significant Accounting Policies, continued

    Revenue Recognition, continued

    The  Company  leases  some  equipment  to  customers  under  terms  that are
    accounted  for as  operating  leases.  Under the  operating  method,  rental
    revenue from leases is recognized ratably over the life of the lease and the
    related equipment is depreciated over its estimated useful life.

    Stock-Based Compensation

    The Company has elected to account for  stock-based  compensation  under the
    intrinsic  value method in  accordance  with the  provisions of Statement of
    Financial  Accounting  Standards (SFAS) No. 123,  Accounting for Stock-Based
    Compensation.  Under this method,  no  compensation  expense is recorded for
    stock options granted when the exercise price of the option granted is equal
    to or exceeds the fair  market  value of the  Company's  Common  Stock.  The
    Company makes the pro forma disclosures of stock-based compensation required
    by SFAS No. 123.

    Earnings (Loss) per Share

    Earnings  (loss) per share have been  computed  according  to SFAS No.  128,
    Earnings per Share for all periods  presented.  Basic earnings per share are
    computed  using the  weighted-average  number  of  shares  of  Common  Stock
    outstanding  during the  periods.  Diluted  earnings  per share are computed
    using  the  weighted-average  number  of  common  shares  and  common  share
    equivalents outstanding during the period.

    Reclassification

    Certain  reclassifications  have  been  made  to the  prior  year  financial
    statements in order for them to conform to the current year presentation.

2.  Internet Business Solutions (IBS)

    On December 11, 1998, the Company completed the sale of substantially all of
    the assets of the Company's  wholly owned  subsidiary.  The  transaction was
    completed  for a total of  $1,000,000,  of which $50,000 was deposited in an
    escrow  account.  The balance is to be released in full to the Company  upon
    the termination of the statute of limitations  governing  certain  potential
    claims  against IBS or the Buyer  connected  with the  disposition  of IBS's
    assets,  or upon the earlier  agreement of the Buyer.  Pursuant to the sales
    agreement, the balance of $50,000 is to be paid in December 1999.

    Results of  operations  for the year ended  September 30, 1999 include total
    IBS revenues and expenses of $252,000 and $229,000,  respectively.  The sale
    of IBS resulted in a $663,530 realized gain for the Company.


                                       24
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED STATEMENTS, Continued
                                  ------------

3.  Accounts Receivable

    Accounts  receivable  at  September  30,  1999 and 1998,  and June 30,  1998
    comprise the following:

                                        September 30,  September 30,   June 30,
                                            1999           1998          1998
                                         ---------      ---------     ---------

          Receivables                    $ 561,863      $ 353,757     $ 444,243

          Unbilled charges                 170,042        229,543        44,600
                                         ---------      ---------     ---------

                                           731,905        583,300       488,843
          Less allowance for doubtful
            accounts                       (18,453)        (8,500)      (17,502)
                                         ---------      ---------     ---------

                 Total                   $ 713,452      $ 574,800     $ 471,341
                                         =========      =========     =========

    Additions to the allowance for doubtful accounts are made as a percentage of
    sales,  adjusted  annually  based  upon  review of the  individual  accounts
    receivable. Accounts are written off when deemed to be uncollectible.  Total
    bad debt  expense  was  $17,945,  $3,218,  and  $1,501  for the  year  ended
    September 30, 1999, the three months ended  September 30, 1998, and the year
    ended June 30, 1998, respectively.

    The Company also  maintains a receivable of $50,000 from the escrow  account
    utilized during the sale of IBS (see Note 2).

4.  Related Party Transactions

    A note  receivable,  at the face value of $283,746,  due from VDC is part of
    the  payment  resulting  from  VDC's  purchase  of  8,563,417  shares of the
    Company's  Common  Stock (See Note 13).  The note is secured by the acquired
    Common Stock and second mortgage. Principal payment of $56,749 plus interest
    is due annually commencing July 1, 1999 until July 1, 2003; the note bears a
    fixed  interest  rate  of 7% per  annum.  No  payment  had  been  made as of
    September 30, 1999.

    At September 30, 1999 VDC owed the Company $18,584 for webcasting events and
    $14,114 for other inter-company items.

    In March 1999,  the Company began  incurring  management  fees of $5,000 per
    month payable to VDC (see Note 6).


                                       25
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED STATEMENTS, Continued
                                  ------------

5.  Property and Equipment

    Property  and  equipment  are  summarized  by major  category  as follows at
    September 30, 1999 and 1998, and June 30, 1998:

                                      September 30,   September 30,    June 30,
                                          1999           1998           1998
                                      ----------      ----------     ----------

    Network and related equipment     $  991,549      $  918,450     $  881,473
    Furniture and fixtures               175,279         239,804        234,984
    Computer software                     29,176          16,801         16,802
    Leasehold improvements                26,183          26,183         26,183
                                      ----------      ----------     ----------

       Subtotal                        1,222,187       1,201,238      1,159,442

    Depreciation and amortization       (836,489)       (820,822)      (767,961)
                                      ----------      ----------     ----------

       Property and equipment, net    $  385,698      $  380,416     $  391,481
                                      ==========      ==========     ==========


    Depreciation  and  amortization  included in the  statements  of  operations
    amounted to $122,380, $52,888, and $199,458 for the year ended September 30,
    1999, the three months ended September 30, 1998, and the year ended June 30,
    1998, respectively.

6.  Accrued Expenses

    Accrued  expenses are  summarized by major  category as follows at September
    30, 1999 and 1998, and June 30, 1998:

                                      September 30,   September 30,    June 30,
                                          1999           1998           1998
                                      ----------      ----------     ----------

    Accrued expenses-other             $101,886        $116,313       $ 92,805
    Vacation                             45,462          27,720         28,520
    Management fees-related party
      (Note 4)                           30,000              --             --
    Payroll                              46,693          90,955        144,995
    Customer deposits                     1,333           4,488         28,660
                                       --------        --------       --------

                                       $225,374        $239,476       $294,980
                                       ========        ========       ========


                                       26
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED STATEMENTS, Continued
                                  ------------

7.  Notes Payable and Other Debt

    Notes Payable

    Notes payable-related party consist of the following:

                                                        September 30
                                                      ----------------  June 30,
                                                      1999       1998     1998
                                                      ----       ----     ----
    Note payable to Eric Jacobs, a Director of the
    Company and VDC,  with  original  principal of
    $200,000 at 12%  interest.  This note was paid
    in  full  in  December  1998.  In  May 1999, a
    new  note   payable  to  Eric  Jacobs  with  a
    principal  of $250,000 at 12% was issued.  The
    principal  balance and accrued interest is due
    on November 17,  1999.  Interest has been paid
    to date as of September 30, 1999.               $250,000   $200,000       --

    Notes payable to officers,  interest at 6% per
    annum,   uncollateralized.   Accrued  interest
    payable as of  September  30,  1999 is $1,823.
    The notes  are  subordinated  to the  $250,000
    credit line discussed below. Notes are due  on
    demand thereafter.                                40,500     40,500   40,500
                                                    --------   --------  -------

    Total notes payable-related party               $290,500   $240,500  $40,500
                                                    ========   ========  =======

    Line of Credit

    The Company had a line of credit of $10,000 with a financial institution, of
    which $8,214,  and $8,872 was outstanding as of September 30, 1998, and June
    30, 1998, respectively.

    In 1999 the Company  obtained a line of credit of $250,000  with a different
    financial   institution.   The  line  of  credit   bears   interest  at  the
    institution's  published reference rate plus 2.5%. The assets of the Company
    collateralize the line of credit.  There is no balance on the line of credit
    as of September 30, 1999.

    Restructuring of Debt

    During the  fiscal  year ended June 30,  1998 the  Company  restructured its
    accounts  payable  and  debt  which  was a  contingent  requirement  of  the
    agreement  whereby VDC acquired its 51%  ownership  interest in the Company.
    The  following  table  summarizes  the  adjustments  made  according  to the
    accounts payable and debt settlement agreements:

                                                Amount       Debt        Amount
                                                 Due       Discharge     Settled
                                              ----------   ---------    --------
    Entertainment Digital Network, Inc.:
      Trade and unsecured claims              $  257,376    $137,817    $119,559
      Notes payable                              904,019     381,269     522,750
    Entertainment Digital Network:
      Trade and unsecured claims                 179,664     109,435      70,229
    Internet Worldwide Business Solutions:
      Trade and unsecured claims                 201,699      81,967     119,732
                                              ----------    --------    --------
          Total                               $1,542,758    $710,488    $832,270
                                              ==========    ========    ========



                                       27
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED STATEMENTS, Continued
                                  ------------

8.  Income Taxes

    The provision for income taxes for the fiscal year ended  September 30, 1999
    and June 30, 1998 consists of California  franchise  taxes. A reconciliation
    of the expected and reported provision for income taxes follows:

<TABLE>
<CAPTION>
                                               Year Ended        Three Months Ended     Year Ended
                                           September 30, 1999    September 30, 1999    June 30, 1998
                                           ------------------    ------------------    -------------
<S>                                              <C>                    <C>                  <C>
    Benefit (provision) expected based
      on federal statutory rate                  34.0%                  34.0%                34.0%
    State taxes, net of federal benefit           6.1                    6.1                  6.1
    Utilization of net operating loss
      carryforwards                                --                  (40.1)                  --
    Valuation allowance, net                    (40.1)                    --                (40.2)
                                                -----                  -----                -----
    Net income tax provision                      0.0%                   0.0%                 0.1%
                                                =====                  =====                =====
</TABLE>

    The  Company  has  Federal  and   California   net   operating   loss  (NOL)
    carryforwards   totaling   approximately  $6.4  million  and  $2.8  million,
    respectively,  as shown below. The utilization of these NOL carryforwards is
    limited  due to a change of  ownership  as defined in the  Internal  Revenue
    Code. As a result, the federal and state NOLs can be utilized at the rate of
    $68,000 a year through the year 2012.

    At  September  30, 1999 the Company had NOL  carryforwards  for tax purposes
    expiring as follows:

            Year Expires                          Federal            State
            ------------                          -------            -----
               2009                             $  204,000                --
               2010                                386,000                --
               2011                              1,181,000        $  485,000
               2012                              4,262,000         2,131,000
               2013                                395,000           196,000
                                                ----------        ----------
               Total loss carryforwards         $6,428,000        $2,812,000
                                                ==========        ==========

    The tax effects of significant temporary  differences  representing deferred
    tax  assets as of  September  30,  1999 and 1998,  and June 30,  1998 are as
    follows:

                                        September 30,  September 30,   June 30,
                                            1999           1998          1998
                                         ---------      ---------     ---------
    Deferred tax assets:
      Net operating loss carryforwards   $ 405,000      $ 385,000     $ 413,000
      Property and equipment                24,000         28,000        28,000
                                         ---------      ---------     ---------

    Total deferred tax assets              429,000        413,000       441,000
    Less: valuation allowance             (429,000)      (413,000)     (441,000)
                                         ---------      ---------     ---------
          Net deferred tax asset                --             --            --
                                         =========      =========     =========


                                       28
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED STATEMENTS, Continued
                                  ------------

9.  Earnings (Loss) Per Share

    Basic  earnings  (loss) per share are  computed  using the  weighted-average
    number of shares of Common Stock  outstanding  during the  periods.  Diluted
    earnings per share are computed using the weighted-average  number of common
    shares  and  common  share  equivalents  outstanding  during  the year.  The
    computation of net income (loss) per share was as follows:

<TABLE>
<CAPTION>
                                                       Income (Loss)     Shares      Per Share
                                                       (Numerator)    (Denominator)    Amount
                                                       -----------    -------------    ------
<S>                                                     <C>            <C>            <C>
    Twelve months ended September 30, 1999:
      Basic loss per share                              $(125,909)     19,298,846     $(0.01)
      Effect of dilutive stock options and warrants            --              --         --
                                                        ---------      ----------     ------
      Diluted loss per share                            $(125,909)     19,298,846     $(0.01)
                                                        =========      ==========     ======
    Three months ended September 30, 1998:
      Basic earnings per share                          $  56,750      16,761,836        Nil
      Effect of dilutive stock options and warrants            --       5,344,156
                                                        ---------      ----------     ------
      Diluted earnings per share                        $  56,750      22,105,992        Nil
                                                        =========      ==========     ======
    Twelve months ended June 30, 1998:
      Basic and diluted loss before extraordinary item  $(192,352)      7,936,358     $(0.02)
      Extraordinary item                                  710,488              --       0.09
                                                        ---------      ----------     ------
      Basic and diluted net loss per share              $ 518,136       7,936,358     $ 0.07
                                                        =========      ==========     ======
</TABLE>

    At September  30,  1999,  options and warrants for the purchase of 7,142,668
    common shares at prices  ranging from $0.10 to $1.25 were  antidilutive  and
    therefore not included in the computation of diluted earnings per share.

    At September  30, 1998 options and  warrants,  for the purchase of 1,391,643
    common shares at prices ranging from $.375 to $2.50 per share, for which the
    exercise  price was greater than the average  market price of common  shares
    were not included in the computation of diluted earnings per share.

    At June 30, 1998 options and warrants for the purchase of 12,126,944  common
    shares at prices ranging from $.10 to $2.50 per share were  antidilutive and
    therefore not included in the computation of diluted earnings per share.


                                       29
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED STATEMENTS, Continued
                                  ------------

10. Commitments

    Lease Commitments

    As of  September  30,  1998,  the Company  leases  office  space and certain
    equipment  under various  noncancelable  capital and operating  leases.  The
    operating  lease is effective for two years with yearly  options  thereafter
    for not more than five years.  The lease began in January 1999.  The capital
    leases begin expiring in March 2000.  The equipment  under lease secures the
    capital   lease.   Future   minimum  lease   payments   required  under  the
    noncancelable leases are as follows:

                                                        Operating       Capital
        Year Ending September 30:                        Leases          Leases
                                                        --------        -------
          2000                                          $155,703        $12,795
          2001                                           159,016          4,239
          2002                                           159,016             --
          2003                                           159,016             --
          2004                                            39,754             --
                                                        --------        -------
             Total minimum lease payments               $672,505         17,034
                                                        ========
        Less amount representing interest                                 1,409
                                                                        -------
        Present value of net minimum lease payments                      15,625

        Less current portion                                             11,580
                                                                        -------
              Long-term portion                                         $ 4,045
                                                                        =======

    Total rental expense for all operating  leases for the year ended  September
    30, 1999, the three months ended September 30, 1998, and the year ended June
    30, 1998 amounted to $137,521, $52,146, and $195,925, respectively.

    Employment Contracts

    The Company and its subsidiaries have entered into employment contracts with
    several  of their key  employees  that  expire at  different  times  through
    December 31, 2000.  At September  30, 1999 the  commitment  under all of the
    contracts was approximately $495,000.

    Annual Volume Commitment

    The Company has entered  into an agreement  with a major  telecommunications
    company for network  usage  discounts.  The Company  committed to a two-year
    term commencing March 31, 1998 to a $480,000 annual volume commitment. As of
    September 30, 1999, the commitment remaining was approximately $240,000.


                                       30
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED STATEMENTS, Continued
                                  ------------

11. Concentration of Credit Risk

    Cash

    The Company  maintains  cash  balances  primarily  with two major  financial
    institutions  and, as such,  from time to time the balances may be in excess
    of the federally insured limit of $100,000 per institution.


12. Employee Benefit Plans

    The Company has a 401(k)  Income  Deferral Plan (the Plan) for employees who
    have  completed  three  months of  service  and are 21 years or  older.  The
    Company  may  make a  discretionary  contribution  to the  Plan  each  year,
    allocable to all Plan participants.  However, the Company elected to make no
    contributions for the year ended September 30, 1999. Administrative fees for
    the plan totaled $2,075.


13. Stockholders' Equity

    Investment by Visual Data Corporation

    On June 20, 1998,  the Company  entered into an agreement with VDC, a public
    company,  to  sell  a 51%  (8,563,417  shares)  ownership  interest  in  the
    Company's Common Stock. The form of payment consisted of:

        Cash                                                     $  698,004
        VDC stock: 75,000 shares (valued at $3.75 per share)        281,250
        VDC warrants: 50,000 (valued at $2.74 per warrant)          137,000
        Note receivable - secured Common Stock (see Note 4)         283,746
                                                                 ----------
                                                                  1,400,000

        Less expenses                                                86,000
                                                                 ----------
            Net investment                                       $1,314,000
                                                                 ==========

    In addition,  the Company issued a blanket mirror option covering  6,542,722
    shares  (3,304,979  options and 3,237,743  warrants),  which entitles VDC to
    acquire  shares equal to those  actually  purchased upon exercise of options
    and warrants by others at $.10 per share.  In addition,  the Company granted
    the investment  banker who organized the transaction  750,000 warrants at an
    exercise  price of  $.145.  The  transaction  was  contingent  upon  certain
    restructuring  of accounts  payable debt the Company had  incurred  over the
    prior three years (See Note 7).


                                       31
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED STATEMENTS, Continued
                                  ------------

13. Stockholders' Equity, continued

    Regulation D Equity Placement

    In July 1997, the Company  offered up to a maximum of 3,750,000  units (each
    consisting  of one share of Common  Stock and one warrant) for T Bar W Ranch
    Investments (T Bar) to purchase shares of the Company at a price of $.20 per
    unit. Each warrant is exercisable until the fifth anniversary of the date of
    its  issuance  and  entitles the holder to purchase one share at an exercise
    price of $1.00 per share.  The warrants had an antidilution  clause in their
    terms.  T-Bar invested  $147,600 to acquire  738,000 units.  Expenses on the
    offering  amounted to $20,480  resulting  in net  proceeds of the Company of
    $127,120.  The Company  negotiated  an agreement  with T-Bar in June 1998 to
    reduce the warrant  exercise price to $.10 per share in exchange for removal
    of the antidilution clause.

    Warrants

    At September 30, 1999, the Company has reserved  1,971,210 common shares for
    potential exercise of outstanding warrants issued in connection with various
    equity and debt financing activities as follows:

                                               Number of     Expiration
                                               Warrants        Date        Price
                                               --------        ----        -----
    September 30, 1999:
      Conversion of notes, August 1997          974,000         2002       1.250
      Senior note warrants, November 1996        11,605         2003       0.250
      VDC mirror warrants                       985,605      1999-2003     0.100
                                              ---------
             Total warrants                   1,971,210
                                              =========

14. Stock Compensation Plans

    The Company  adopted a stock  option plan on April 3, 1998 which  allows the
    Company to grant incentive or nonqualified options up to 3,000,000 shares of
    Common Stock to its employees,  board members, and certain other consultants
    in order to motivate  them to maintain  their  commitment  to the Company at
    this stage of its  development.  In February  1999,  the plan was amended to
    allow  the  Company  to  grant  up to  5,000,000  shares  of  Common  Stock.
    Additionally,   the  Company  has  stock  options   outstanding   under  two
    nonqualified stock option plans adopted in 1995.

    The Company applies  Accounting  Principles Board Opinion No. 25 and related
    interpretations  in accounting for its stock option plans.  Accordingly,  no
    compensation  expense has been  recognized  for options  where the  exercise
    price has equaled the stock fair value on the date of grant.  During  fiscal
    1999,  an employee was granted  options to acquire  75,000  shares of Common
    Stock at exercise  prices  below the fair value at the date of grant.  Total
    compensation expense recognized for these grants in fiscal 1999 was $50,489,
    and unearned compensation in the amount of $45,511 relating to these options
    was recorded as a reduction in stockholders' equity.


                                       32
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED STATEMENTS, Continued
                                  ------------

14. Stock Compensation Plans, continued

    Had  compensation  expense been  determined for stock options granted during
    three months ended  September  30, 1998 and the twelve months ended June 30,
    1998,  based on the fair value at grant dates  consistent with SFAS No. 123,
    the Company's  condensed Pro Forma Statement of Operations for those periods
    would have been as follows:

<TABLE>
<CAPTION>

                                               September 30,     September 30,    June 30,
                                                  1999              1998            1998
                                                  ----              ----            ----
<S>                                             <C>               <C>             <C>
    Net income (loss):
       As reported                              $(125,909)        $56,750         $518,136
                                                =========         =======         ========
       Pro forma                                $(376,833)        $46,998         $505,065
                                                =========         =======         ========
    Basic and diluted income (loss) per share:
       As reported                              $   (0.01)            Nil         $   0.07
                                                =========         =======         ========
       Pro forma                                $   (0.02)            Nil         $   0.06
                                                =========         =======         ========
</TABLE>

    The pro forma amounts were estimated using the Black-Scholes  option-pricing
    model with the following  assumptions  for the 12 months ended September 30,
    1999, the 3 months ended September 30, 1998 and the 12 months ended June 30,
    1998, respectively.

                           September 30, 1999  September 30, 1998  June 30, 1998
                           ------------------  ------------------  -------------

    Interest rate            4.45% - 5.80%            5.5%             5.5%
    Dividend yield                      0%              0%               0%
    Expected volatility       197% -  214%            228%             228%
    Expected life in years              5              4.5              4.5

    The following table  summarizes  employee stock option plan activity for the
    twelve months ended September 30, 1999, the three months ended September 30,
    1998 and the twelve months ended June 30, 1998:

<TABLE>
<CAPTION>
                                               September 30, 1999      September 30, 1998        June 30, 1998
                                             ---------------------   ---------------------   --------------------
                                                          Weighted                Weighted               Weighted
                                                           Average                 Average                Average
                                               Number     Exercise     Number     Exercise     Number    Exercise
                                             of Options    Price     of Options    Price     of Options   Price
                                             ----------    -----     ----------    -----     ----------   -----
<S>                                           <C>          <C>        <C>          <C>         <C>        <C>
    Outstanding, beginning of period          6,271,458    $0.11      5,651,458    $0.12       787,146    $0.92
    Granted                                   1,525,000     0.81        620,000      .10     5,346,479     0.10
    Canceled                                     30,000     0.11             --       --       482,167     1.25
    Exercised                                 2,595,000     0.10             --       --            --       --
                                             ----------               ---------              ---------
    Outstanding                               5,171,458     0.34      6,271,458     0.11     5,651,458     0.12
    Eligible for exercise, end of period      4,901,458     0.31      6,271,458     0.11     5,651,458     0.12
    Weighted average fair value of options
     granted during the year                         --     0.81             --     0.10            --     0.10

</TABLE>

                                       33
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED STATEMENTS, Continued
                                  ------------

14. Stock Compensation Plans, continued

    The  following  table   summarizes   information   regarding  stock  options
    outstanding at September 30, 1999:

                              Weighted        Weighted       Number      Average
    Exercise     Number       Average         Average      Exercisable  Exercise
     Price    Outstanding  Remaining Life  Exercise Price  at 9/30/99    Price
     ------   -----------  --------------  --------------  ----------    -----
    $1.250        74,500     2.1  years       $1.250          74,500     $1.250
     1.000     1,195,000     4.5  years        1.000       1,000,000      1.000
     0.145       800,000     4.0  years        0.145         800,000      0.145
     0.110       260,479     2.0  years        0.110         245,479      0.110
     0.100     2,841,479     4.5  years        0.100       4,781,479      0.100
               ---------                                   ---------
               5,171,458                                   6,901,458
               =========                                   =========

15. Supplemental Cash Flow Information

    The following table presents  additional cash flow  information for the year
    ended September 30, 1999, the three months ended September 30, 1998, and the
    year ended June 30, 1998:

                                        September 30,   September 30,   June 30,
                                            1999           1998           1998
                                          -------        -------        --------
    Interest paid                         $22,773        $ 3,317        $ 97,193
    Income taxes paid                       7,434             --           2,400
    Assets and lease obligations
     capitalized                               --         15,974              --
    Common Stock issued for consulting
     services                                  --             --         421,244
    Common Stock issued for settlement
     of note and accrued interest              --             --         375,000
    Stock option-related compensation      50,489             --              --

16. Segment Information

    The  Company  adopted  SFAS  No.  131,  "Disclosure  about  Segments  of  an
    Enterprise and Related  Information," as of September 30, 1999. SFAS No. 131
    establishes  reporting standards for an enterprise's  operating segments and
    related   disclosures  about  its  services,   geographic  areas  and  major
    customers.

    The Company's  operations involve developing and marketing  integrated audio
    and video production  applications for the entertainment  industry. As such,
    the Company has a single reportable  segment,  digital  communications.  The
    Company's management relies on an internal management accounting system that
    presents various data for management to run the business. Company management
    makes financial  decisions and allocates  resources based on the information
    it receives from this internal system.


                                       34
<PAGE>
                       ENTERTAINMENT DIGITAL NETWORK, INC.

                   NOTES TO CONSOLIDATED STATEMENTS, Continued
                                  ------------

16. Segment Information, continued

    All material balances related to Company sales, primary business activities,
    and location of property, plant, and equipment are within the United States.
    For the year ended  September 30, 1999, the three months ended September 30,
    1998, and the year ended June 30, 1998, no single customer accounted for 10%
    or more of the Company's net sales.

17. Year 2000

    Because many computer systems use only two digits to record the year in date
    field,  such systems may not be able to accurately  process dates  including
    the year 2000 and after.

    The Company has taken measures to prepare itself for this  uncertainty.  The
    cost of this  compliance  effort has been expensed as incurred and funded by
    cash flows from  operations.  It is,  however,  difficult to assess with any
    accuracy the degree to which the Company's  vendors and customers  have also
    prepared themselves or the degree to which this issue may potentially affect
    the Company's future operations.


ITEM 8 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
       FINANCIAL DISCLOSURE

There have been no changes in or  disagreements  with the Company's  accountants
regarding accounting and financial disclosure.

PART III

ITEM 9 DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT

The following sets forth the names,  ages and current positions with the Company
held by Directors,  Executive Officers and significant employees,  together with
the year such  positions  were  assumed.  Tom  Kobayashi,  the  Chief  Executive
Officer,  and David  Gustafson,  President  and  Chief  Operating  Officer,  are
brothers-in law. Other than as described in the preceding sentence,  there is no
immediate family relationship  between or among any of the Directors,  Executive
Officers  or  significant  employees.  We are not  aware of any  arrangement  or
understanding  between any  Director or  Executive  Officer and any other person
pursuant to which he was elected to his current position.

Randy S. Selman, age 43, has served as the Chairman of the Board of Directors of
EDN since July 1998. Mr. Selman also has served as the Chief Executive  Officer,
President,  and  Chairman of the Board for VDC since its  inception in May 1993,
and since September 1996, as VDC's acting Chief Financial Officer.

Brian K. Service, age 51, has served on the Board of Directors and presides over
the Audit and Remuneration  Committees of the Board of Directors since 1998. Mr.
Service is an international  business consultant with clients in North and South
America,  the United Kingdom,  Asia,  Australia and New Zealand. Mr. Service has
served as a member of the Board of Directors  and on the Audit and  Compensation
Committees  of VDC since July 1997.  In addition to becoming a Director in 1998,
Mr.  Service was  appointed  the CFO and  Secretary of Travel  Dynamics in 1999.
Effective September 15, 1999, Mr. Service was appointed CEO of 3D Systems, Inc.,
a publicly traded company.

                                       35
<PAGE>

Tom Kobayashi,  age 70, has served as a Director and Chief Executive  Officer of
EDN from  1992 to  present.  Mr.  Kobayashi  also has  served  on the  Executive
Committee of EDN since August 1998.  From June 1992 to July 1998, Mr.  Kobayashi
served as the  Chairman of the Board of  Directors  of EDN.  Mr.  Kobayashi is a
member of the American  Engineering  Society,  the Society of Motion Picture and
Television  Engineers  (SMPTE),  the  Society of  Professional  Audio  Recording
Studios (of which he has been a member of the Board of Governors for over twelve
years),  the  Academy of Motion  Picture  Arts and  Sciences  and the Academy of
Television Arts and Sciences.

David Gustafson,  age 53, has served as a Director of the Company since 1992. He
has held his current  position on the  Executive  Committee  of EDN since August
1998.  He has occupied his current  positions as the  President,  Secretary  and
Chief Operating  Officer of EDN since March 1996, and previously  served as Vice
President, Marketing and Sales, from July 1992 to March 1996.

Eric Jacobs,  age 52, has been a member of the Board of Directors since December
1998. He has served on the Board of Directors of Visual Data  Corporation  since
July 1997 and has served as Secretary since February 1999. From March 1996 until
August 1997, Mr. Jacobs was Vice  President and General  Manager of VDC's wholly
owned  subsidiary,  HotelView  Corporation  and thereafter he has served as Vice
President  and General  Manager of their  wholly  owned  subsidiary,  ResortView
Corporation.  Since  1976,  Mr.  Jacobs has served as the  Chairman of the Miami
Beach Visitor and Convention  Authority and since  September 1995 as Chairman of
the Greater Miami and the Beaches Hotel Association.  Since 1972, Mr. Jacobs has
been a member of Miami Beach  Chamber of Commerce and has served as its Chairman
since September 1996.

Alan M.  Saperstein,  age 40, has served as a Director  and on the  Remuneration
Committee of the Board of Directors  since 1998. Mr.  Saperstein also has served
as the  Executive  Vice  President,  Treasurer  and a director  of VDC since its
inception in May 1993.  Mr.  Saperstein  also provides  consulting  services for
corporations that have set up their own sales and training video departments.

Tom Scott, age 55, has served as the Vice-President and Chief Technology Officer
of the  Company  since  1992.  Mr.  Scott is  active  in  numerous  professional
organizations and standards committees, including the Audio Engineering Society,
Society of Motion Picture and Television Engineers,  the Society of Professional
Audio Recording  Studios,  the National  Academy of Recording Arts and Sciences,
and the Academy of Motion  Picture Arts and  Sciences.  He currently  chairs the
Audio subcommittee for the Digital Cinema committee of the SMPTE.

Employment Contracts

We maintain  employment  contracts  with key  management and employees as listed
below. All referenced contracts contain identical non-competition provisions:

Name, Title                        Date of Agreement            Expiration Date
-----------                        -----------------            ---------------
Tom Kobayashi, CEO                 September 1, 1995           December 31, 2000


                                       36


<PAGE>
David Gustafson, President COO     September 1, 1995           December 31, 2000
Tom Scott, VP Engineering          September 1, 1995           December 31, 2000

Each contract  provides that for the period following the date of the employment
agreement,  the employee will not,  directly or  indirectly,  within any county,
city  or  part  thereof  and  other  areas  in  the  United  States  of  America
(collectively,  the "Locations"), so long as the Company continues to be engaged
in the same or similar  business or activity (the  "Business") in such Location:
(i) own,  manage,  operate,  control,  or be  connected  in any manner  with the
ownership, management, operation or control of any person or entity that engages
in the same or similar type of Business as the Business or engages in a business
competitive  with the Business (a Competitive  Business),  which includes but is
not limited to,  acting as a director,  officer,  agent,  employee,  consultant,
partner or  stockholder of a Competitive  Business;  (ii) engage in any activity
which is the same as,  similar to or in  competition  with the  Business;  (iii)
interfere  with,  disrupt  or  attempt to  disrupt  the  business  relationship,
contractual,  employment or  otherwise,  between the Company and any customer or
prospective  customer,  supplier,  lessee or employee of the Company,  including
without limitation the customers and suppliers of the Business prior to the date
of the employment agreement;  (iv) solicit employment for or of employees of the
Company or induce any employee to leave the employ of the  Company;  (v) lend or
allow his name or reputation to be used by or in connection with any Competitive
Business; or (vi) otherwise allow his skill,  knowledge or experience to be used
in or by any Competitive Business.

Each employment  agreement  provides that the employee may invest in up to 5% of
the shares of any  public  corporation  without  violating  the  non-competition
provisions.  Such non-competition provisions will survive the termination of the
employment  agreement,  excepting:  (a) the  employee  exercises  his  right  to
terminate the employment  agreement upon a sale or transfer of substantially all
of the assets of the Company,  or a change in control of the  Company,  (b) when
the Company  exercises its right to terminate the  employment  agreement upon 30
days written notice,  or (c) the Company  breaches the employment  agreement and
fails to cure such breach within  thirty (30) days of receipt of written  notice
thereof.  A  court  applying  California  law may  decline  to  enforce  (or may
partially enforce) these non-competition provisions.

Compliance with Section 16(a) of the Exchange Act

Under the Securities  Laws of the United States,  the Company's  Directors,  its
Executive (and certain other)  Officers,  and any persons  holding more than ten
percent  (10%) of the  Company's  Common  Stock are  required  to  report  their
ownership of the Company's Common Stock and any changes in that ownership to the
Securities  and Exchange  Commission  and the NASDAQ stock market.  Specific due
dates for these  reports  have been  established  and the Company is required to
disclose in this report any failure to file by these dates during the  preceding
fiscal year.

All of these filing  requirements  were  satisfied by its Officers and Directors
and  ten  percent  (10%)  holders,  except  the  following:  prior  to  the  VDC
Transaction,  (See Part I, Item 1 -  Description  of Business -  Subsidiaries  -
Investment by Visual Data  Corporation)  Charles  Clark,  a Director from July 7
1997 to April 2, 1998,  and John Wampler,  a 10% holder by definition of Section
16, failed to file with the Commission,  on a timely basis, an Initial Statement
of Beneficial  Ownership of Securities  on Form 3.  Additionally,  Mr. Clark may
have  failed to file on a timely  basis  subsequent  Statements  of  Changes  in
Beneficial  Ownership  on Form 4. In making  these  statements,  the Company has
relied on the  representation  of its  Directors  and  Officers or copies of the
reports  that they have  filed  with the  Commission.  Due to an  administrative
oversight Messrs.  Selman,  Saperstein,  Service and Goodman failed to file on a
timely basis an Initial Statement of Beneficial  Ownership of

                                       37
<PAGE>

Securities  on Form 3,  and  subsequent  Statements  of  Changes  in  Beneficial
Ownership on Form 4. As of the date of this report, these forms have been filed.

ITEM 10 EXECUTIVE COMPENSATION

The following table sets forth  information  concerning all annual  compensation
paid to our Chief  Executive  Officer and each of the two highest  paid  persons
other than the Chief  Executive  Officer who were  officers or directors for the
fiscal year ended September 30, 1999:


Name and title of individual                                         Additional
  or identity of group                 Year     Salary       Bonus  remuneration
  --------------------                 ----     ------       -----  ------------
Tom Kobayashi                          1999    $132,708 (1)   --        --
Chief Executive Officer                1998     131,000
and Director                           1997     132,000


David Gustafson                        1999    $131,831 (2)   --        --
President and Chief Operating Officer  1998     131,000
and Director                           1997     139,000

Tom Scott                              1999    $111,403 (3)   --        --
Vice-President,                        1998      90,000
Chief Technology Officer               1997      94,000

                                       1999    $375,942       --        --
                                       1998     352,000
Total of Above                         1997     365,000

(1)  Mr.  Kobayashi  has an  Employment  Agreement  with the  Company,  expiring
     December  2000,   with  a  base  salary  of  $11,666  per  month.  FY  1999
     compensation includes $6,000 of auto allowance.

(2)  Mr.  Gustafson  has an  Employment  Agreement  with the  Company,  expiring
     December  2000,   with  a  base  salary  of  $11,333  per  month.  FY  1999
     compensation includes $6,000 of auto allowance.

(3)  Mr. Scott has an Employment  Agreement with the Company that provides for a
     three-and-one-half-year  term expiring December 2000, with a base salary of
     $10,000 per month.

With the exception of Mr. Service,  who has a one-year consulting contract under
which he receives $9,000 per month,  Directors of the Company do not receive any
compensation for their services as directors.  They receive  reimbursement  from
the Company for reasonable  out-of-pocket travel expenses incurred in connection
with attending director meetings in person.

                                       38
<PAGE>
Stock Options

As a result of the  recapitalization,  these options were converted into options
to purchase  Common Stock at a  conversion  of .87495 per share for each Company
share, resulting in 230,479 options outstanding on September 30, 1999 at a price
of $.11 per share.  These fully vested  options  expire on  September  29, 2000.
There were no options exercised during the period.

Our initial nonqualified option plan was terminated as of April 3, 1998. At that
time,  the Board of Directors of the Company  adopted and approved the Company's
1998 Stock Option Plan (the "Plan") for its employees, board members and certain
other  consultants in order to motivate them to maintain their commitment to the
Company.  Options  under  this Plan may be either  Incentive  Stock  Options  or
Nonstatutory  Stock  Options and may be  exercised  no later than five (5) years
from the date of their grant. The Board of Directors of the Company  administers
the Plan.  The Board has directed  the officers of the Company to reserve  three
million (3,000,000) shares of Common Stock for issuance upon exercise of options
granted  pursuant to the Plan. As of September 30, 1999, we had granted  options
under the Plan to  purchase  a total of  2,041,500  shares of Common  Stock at a
price of $.10 per share.  There were 1,297,500  options  exercised during fiscal
year ended September 30, 1999. The Plan is currently  subject to the approval of
EDN's shareholders at its upcoming annual shareholders' meeting.

Other than as  discussed  herein,  we do not have any pension,  profit  sharing,
stock bonus,  or other benefit plans.  In addition,  we make  available  certain
non-monetary  benefits to its  executive  officers  with a view to acquiring and
retaining  qualified  personnel and facilitating  job  performance.  The Company
considers  such  benefits  to be  ordinary  and  incidental  business  costs and
expenses.

The following  table sets forth certain  information  concerning the granting of
stock  options  during the fiscal year ended  September  30, 1999 to each of the
named Executive Officers:


                 Shares of Common    % of Total Options
                 Stock Underlying   Granted to Employees   Exercise   Expiration
Name             Options Granted       in Fiscal Year        Price       Date
----             ---------------       --------------        -----       ----
Tom Kobayashi        120,000                8%               $1.00      3/19/04
David Gustafson      120,000                8%               $1.00      3/19/04
Tom Scott            120,000                8%               $1.00      3/19/04
                     -------
Total                360,000
                     =======
There were no options exercised during the fiscal year.

ITEM 11 SECURITY OWNERSHIP OF MANAGEMENT AND PRINCIPAL STOCKHOLDERS

 The following table sets forth information, as of September 30, 1999, regarding
shares of Common  Stock (a) held of record and (b) that the named  owner has the
right to acquire within sixty days from options,  warrants,  rights,  conversion
privilege  or  similar  obligations  by: (i)  officers  or  directors;  (ii) all
officers and directors as a group; and (iii) each shareholder who owns more than
5% of any class of our securities, including those shares subject to outstanding

                                       39
<PAGE>
options and warrants.  Unless indicated  otherwise,  each shareholder  exercises
sole voting and investment power with respect to shares owned.

                                              Amount Owned or
 Title         Name and Address               Right to Acquire       Percent
of Class         of Owner                      Within 60 Days      of Class(1)
--------         --------                      --------------      -----------
Common        Tom Kobayashi                        932,474(2)            4%
              One Union Street
              San Francisco, CA 94111

Common        David Gustafson                      558,684(3)            2%
              One Union Street
              San Francisco, CA 94111

Common        Tom Scott                            542,802(4)            2%
              One Union Street
              San Francisco, CA 94111

Common        Randy Selman                         300,000(5)            1%
              1291 SW 29th Avenue
              Pompano Beach, FL 33069

Common        Alan Saperstein                      300,000(6)            1%
              1291 SW 29th Avenue
              Pompano Beach, FL 33069

Common        Brian Service                        300,000(7)            1%
              One Union Street
              San Francisco, CA 94111

Common        Eric Jacobs                          350,000(8)            2%
              1291 SW 29th Avenue
              Pompano Beach, FL 33069

Common        Visual Data                       11,775,648              51%

Common        All officers and directors as      3,283,960              14%
                a group

                                       40

<PAGE>

(1)  Based upon  23,186,398  shares of Common Stock issued and outstanding as of
     September 30, 1999.
(2)  Includes right to acquire 232,426 shares within 60 days from options.
(3)  Includes right to acquire 547,923 shares within 60 days from options.
(4)  Includes right to acquire 127,917 shares within 60 days from options.
(5)  Includes  right to  acquire  300,000  shares  within 60 days from  options,
     excludes VDC shares.
(6)  Includes  right to  acquire  300,000  shares  within 60 days from  options,
     excludes VDC shares.
(7)  Includes  right to  acquire  300,000  shares  within 60 days from  options,
     excludes VDC shares.
(8)  Includes  right to  acquire  350,000  shares  within 60 days from  options,
     excludes VDC shares.


ITEM 12 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Investment Banking and Brokerage Services

All of the agreements  described  below were  negotiated  with  unrelated  third
parties on an arms-length basis.

Century Financial Partners, Inc. Pursuant to a Consulting Agreement,  dated July
31, 1995, between EDN and Century,  EDN hired Century to advise EDN with respect
to a merger of EDN with an entity whose  securities were publicly  traded.  Such
consulting  agreement granted Century the exclusive right to represent EDN, on a
best efforts basis, to prospective investors for financing and general corporate
advisory  services for a period of three years,  and a right of first refusal to
provide investment banking services for a period of three years.

As payment for Century's  services,  the consulting  agreement provided that EDN
would grant to Mr.  Onggara,  an investor in Century,  and a shareholder  of the
Company  holding an aggregate of 100,000  shares of Common  Stock,  an option to
purchase 1,000,000 shares of the Common Stock of any publicly traded entity into
which  EDN would  merge,  at $1.25  per  share,  which  option  shares  would be
registered  immediately  by EDN with the SEC on Form  S-8.  Management  does not
believe that such a  registration  is legally  possible due to the fact that Mr.
Onggara is not an employee of EDN. On August 20, 1997, we provided  warrants for
1,000,000  shares  of  EDN's  Common  Stock  at  $1.25  per  share  as part of a
negotiated settlement of Mr. Onggara's outstanding loan to EDN of $340,000. (See
Short-Term Loans from Officers, Directors and Shareholders in Item 12).

Liviakis  Financial  Communications,  Inc.  Pursuant to a Consulting  Agreement,
dated as of January 12,  1996,  between  EDN and  Liviakis,  Liviakis  agreed to
provide  public  relations  consulting  services  to EDN for a term of one  year
ending on January 11,  1997.  As payment  for its  services,  Liviakis  received
390,000  unregistered  shares of Common Stock from us. At the end of the term of
the consulting agreement,  Liviakis could demand that we use its best efforts to
register such shares with the Securities and Exchange Commission. Pursuant to an
additional  Consulting  Agreement  effective as of January 12, 1997, between EDN
and Liviakis,  Liviakis agreed to provide consulting services to the Company for
a term of one year  ending on  January 2, 1998.  As  payment  for its  services,
Liviakis  received 490,000 shares of Common Stock. At the end of the term of the
consulting agreement,  Liviakis was to have  the same demand registration rights

                                       41

<PAGE>

to  register  such  shares  with  the SEC as  given to  investors  in a  private
placement  offering by EDN of Common Stock in December,  1996.  On September 18,
1997, Liviakis resigned as EDN's investor relations consultant.

Morgan Fuller Capital Group L.L.C.  Pursuant to engagement letters dated May 20,
June 25, June 28, June 28, November 19 and November 21, 1996, we retained Morgan
Fuller to provide  investment  banking services to and raise capital for EDN. As
of October 10, 1997, EDN had: (i) granted  Morgan Fuller 250,000  Warrants at an
exercise price of $6.37 per share for general investment advisory services; (ii)
delivered  the  Company's  Senior  Secured Notes payable to Morgan Fuller in the
aggregate  principal amount of $1,000,000 (for resale to investors);  (iii) paid
Morgan  Fuller a loan  fee of five  percent  (5%) of the  amount  of the  Senior
Secured Notes; and (iv) granted Morgan Fuller warrants to purchase 39,255 shares
of Common Stock at an exercise  price of $4.25 and  warrants to purchase  25.205
shares of Common Stock at an exercise price of $3.69 in connection with the sale
of  participation  in  the  notes  (the  "Participation").  The  June  28,  1996
engagement  letter  provides  that in the event that we fail to  proceed  with a
subsequent  Regulation  S  financing,  the Company is obligated to pay to Morgan
Fuller a cash fee of $140,000 and $200,000 in Warrants to purchase  Common Stock
at an exercise  price equal to the lesser of: (i) $3.00;  or (ii) sixty  percent
(60%) of the average  closing bid price of the Common Stock during a consecutive
ten (10) day period immediately  preceding the issuance date of the Warrants. In
connection with the extension of the  Participation,  we agreed to pay to Morgan
Fuller a cash fee of one and one-half percent (1.5%) of the amount of the Senior
Secured Notes and granted Morgan Fuller  three-year  warrants to purchase 55,970
shares of Common Stock at an exercise price of $2.68.  In connection with a Loan
Modification  Agreement  effective  June 30, 1997, we amended our agreement with
Morgan  Fuller and agreed to  re-price  the  warrants  held by Morgan  Fuller to
$1.50.

On June 20, 1998,  Morgan  Fuller agreed to accept 75,000 shares of VDC stock at
$3.75 per share,  and warrants to purchase  50,000  shares of VDC stock at $2.74
per share,  totaling $418,250,  in consideration of forgiving the balance of the
debt  remaining  to Morgan  Fuller,  totaling  $331,750.  Additionally,  the EDN
warrants  held by  Morgan  Fuller  and the  noteholders  were  re-priced  at the
exercise price of $.25 per share.

Consulting  Agreement with Charles W. Clark. On June 30, 1997, we entered into a
consulting agreement with Mr. Clark, pursuant to which Mr. Clark agreed to serve
the  Company  in  advising  and  assisting  in  the   structuring  of  debt  and
liabilities,   joint  venture,   acquisitions  or  merger   partners,   business
development and developing long term financial plans. We agreed to pay Mr. Clark
for  re-structuring  and re-organizing our senior notes and debts on the balance
sheet 400,000 shares of Common Stock.  These shares were issued to Mr. Clark and
registered  with  the  Securities  and  Exchange  Commission  under  a Form  S-8
registration  on July 25, 1997.  This  agreement  was mutually  terminated as of
November 17, 1997.  Charles  Clark was elected to the Board of Directors of EDN,
Inc.,  on July 7,  1997.  On April 2,  1998,  Charles  W.  Clark  submitted  his
resignation as a director of EDN, Inc.

Consulting Agreement with B.K. Service International  Business  Consultancy.  On
July 1, 1998, we entered into a consulting agreement with Mr. Service,  pursuant
to which Mr.  Service  agreed to serve EDN in preparing  SEC filings,  corporate
governance, financial planning, cash management, and investor relations. We have
renewed the annual  contract  for $9,000 per month.  The term of this renewal is
for one year.

                                       42
<PAGE>
Consulting  Agreement with Mackenzie Shea Inc. On June 16, 1998, we entered into
an agreement with Mackenzie Shea, Inc. ("MSI"), pursuant to which MSI introduced
EDN to Visual Data  Corporation and assisted in effecting the closing of the VDC
Purchase  Agreement.  We agreed to compensate MSI for its services in a lump sum
of $66,000.  MSI also  received  warrants to  purchase an  aggregate  of 750,000
shares of Common  Stock at a per share  price of  $0.145.  These  warrants  were
exercised in May, 1999.

Short-Term Loans from Officers, Directors and Shareholders

Several of the officers  and  directors of EDN have made short term loans to the
Company,  pursuant to promissory  notes, each providing for maturity ninety days
after the date  thereof  and simple  interest  of 6% on unpaid  principal.  Such
promissory  notes are overdue.  Mr. Kobayashi made loans in the aggregate amount
of  $36,000,  as  evidenced  by  promissory  notes  dated from June 11,  1993 to
February  10, 1994.  As of  September  30,  1999,  unpaid  principal  (excluding
interest)  of $24,000 was due on Mr.  Kobayashi's  notes.  Mr.  Scott,  the Vice
President  and Chief  Technology  Officer of EDN,  made  loans in the  aggregate
amount of $43,050, as evidenced by promissory notes dated from August 6, 1993 to
June 12, 1995. As of September 30, 1999, unpaid principal  (excluding  interest)
of $16,500 was due on Mr. Scott's notes.  Each of these  individuals  has agreed
not to declare default under these notes for an indefinite  period and to accept
repayment by the Company at a future date.

Mr.  Onggara  has made three  loans to the  Company in the  aggregate  amount of
$425,000, pursuant to: (a) a promissory note in the principal amount of $250,000
dated  February 8, 1996 with a maturity date of August 8, 1996; (b) a promissory
note in the  principal  amount of $100,000  dated April 18, 1996 with a maturity
date of October 18, 1996; and (c) a promissory  note in the principal  amount of
$75,000 dated May 20, 1996 with a maturity  date of November 20, 1996.  All such
promissory  notes provide for interest of 7% on unpaid principal and are secured
by a subordinate  security interest in the accounts  receivable,  chattel paper,
accounts  and certain  other assets of EDN. In August  1996,  we made  aggregate
principal payments of $120,000 to Mr. Onggara on the first note. Mr. Onggara has
verbally  agreed to extend the  maturity  date of such  notes for an  indefinite
period and to accept  repayment by EDN at a future date, and advanced $35,000 to
the Company  under the first note.  On August 20, 1997, an agreement was reached
with Mr.  Onggara  whereby the  $340,000 in  outstanding  principal  owed to Mr.
Onggara, plus accrued interest of $35,000, was converted to shares of EDN Common
Stock at $.375 per share,  resulting  in  1,000,000  shares.  EDN  addressed  an
unresolved  commitment of options by issuing 1,000,000  warrants priced at $1.25
each.  The  warrants  are  convertible  over 3 years  and are  transferable  and
divisible.

                                       43
<PAGE>
ITEM 13 EXHIBITS AND REPORTS ON FORM 8-K

 Exhibit No.       Type of Exhibit
 -----------       ---------------

   (10)            Material Contracts.

                   (a)  Form 8-K dated  November  5,  1998 to  report  change in
                        fiscal year. PREVIOUSLY FILED.

                   (b)  Form 8-K dated  December 4, 1998 and amended  Form 8-K/A
                        dated  December  11,  1998 to  report  the sale of EDN's
                        wholly owned  subsidiary  Internet  Business  Solutions,
                        Inc. PREVIOUSLY FILED.

                   (c)  Form 8-K dated  February  23, 1999 to report name change
                        from EDnet, Inc. to Entertainment  Digital Network, Inc.
                        This form also  reported  the  change in  domicile  from
                        Colorado to Delaware. PREVIOUSLY FILED.

                   (d)  Form S-3 dated April 30, 199, a prospectus for 2,900,439
                        shares of Common Stock in  anticipation  of the exercise
                        of previously issued warrants, and as amended at May 12,
                        1999. PREVIOUSLY FILED.

   (27)            Financial Data Schedule. FILED HEREWITH.

SIGNATURES

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

Entertainment Digital Network, Inc.

(Registrant)

Date: December 29, 1999                By: /s/ Tom Kobayashi
                                          --------------------------------------
                                          Tom Kobayashi, Chief Executive Officer

In accordance with the requirements of the Securities Exchange Act of 1934, this
report  has  been  signed  below  by the  following  persons  on  behalf  of the
Registrant and in the capacities and on the dates indicated.


Date: December 29, 1999                By: /s/ Tom Kobayashi
                                          --------------------------------------
                                          Tom Kobayashi, Chief Executive Officer
                                          and Director

                                       44
<PAGE>

Date: December 29, 1999                By: /s/ David Gustafson
                                          --------------------------------------
                                          David Gustafson,President, Chief
                                          Operating Officer and Director


Date: December 29, 1999                By: /s/ Brian Service
                                          --------------------------------------
                                          Brian Service, Director


Date: December 29, 1999                By: /s/ Randy Selman
                                          --------------------------------------
                                          Randy Selman,
                                          Chairman of the Board of Directors

                                       45