U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10-KSB

(Mark One)

/ /      Annual report under Section 13 or 15(d) of the Securities
         Exchange Act of 1934 (Fee required)

For the fiscal year ended _______________

/x/      Transition report under Section 13 or 15(d) of the
         Securities Exchange Act of 1934 (No fee required)

For the transition period from  January 1, 1996 to June 30, 1996
                                ---------------    -------------

Commission file number             33-80935

                           NETWORK EVENT THEATER, INC.
                 (Name of Small Business Issuer in Its Charter)

              Delaware                                 13-3864111
   (State or Other Jurisdiction of                   (I.R.S. Employer
    Incorporation or Organization)                  Identification No.)

  149 Fifth Avenue, New York, New York                    10010
(Address of Principal Executive Offices)                (Zip Code)

                                 (212) 779-2740

                (Issuer's Telephone Number, Including Area Code)

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

          None

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

                          Common Stock, $.01 par value
                                (Title of Class)

<PAGE>

              Warrants, each to purchase one share of Common Stock
                                (Title of Class)

     Check  whether  the issuer:  (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing requirements for the past 90 days.

Yes  x       No
   -----       -----

     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is not 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 fiscal year ended June 30, 1996 were $4,041.

     The aggregate market value of the voting stock held by non-affiliates based
on the last  sale  price  as  quoted  by  Nasdaq  as of  November  15,  1996 was
$11,561,375.

     At November 15, 1996 there were  8,654,440  shares of the  issuer's  Common
Stock outstanding.

     Transitional Small Business Disclosure Format (check one):

Yes          No  X
   -----       -----

<PAGE>

ITEM 1. BUSINESS

Network Event Theater, Inc. (the "Company") was incorporated under the laws of
the State of Delaware in December 1995 to be the successor to the business of
Universal Access Network, LP (the "Partnership"), a Delaware limited partnership
organized in August 1993. In April 1996, the Partnership effected a
reorganization pursuant to which it assigned all of its assets to the Company in
exchange for 6,354,440 shares of the Company's common stock, and distributed
those shares to its partners. On April 9, 1996, the Company sold 2.3 million
shares of its common stock and 2,645,000 warrants to purchase shares of its
common stock in a public offering in which the Company received approximately
$10.2 million of net proceeds.

The Company was organized to develop, own and operate a network of theaters on
college campuses (the "Network") and to develop or acquire businesses active in
collegiate marketing to complement and enhance the Network. The Network is
designed to deliver entertainment and educational events and programming via
satellite to a nationwide network of electronically linked campus theaters for
display through high resolution video projectors on movie theater sized screens
and thereby to reach a geographically dispersed audience of college students,
faculty, administrators and community residents.

The Company is currently in the development stage and its activities so far with
respect to the Network have focused primarily on financial planning, raising
capital, entering into contracts with schools, hiring personnel, acquiring and
installing equipment and undertaking the commencement of operations.

On September 13, 1996, American Passage Media, Inc. ("American Passage"), a
newly organized wholly owned subsidiary of the Company, acquired from American
Passage Media Corporation ("APMC") substantially all of APMC's assets relating
to its college and high school media and marketing business. The acquired
businesses included APMC's college newspaper placement operations, college
campus postering operations, high school focused GymBoardTM operations and
various other advertiser and event sponsorship related activities. APMC has been
involved in the young adult marketing business since 1976.

According to the 1995 Digest of Education Statistics prepared by the United
States Department of Education, the college market consists of more than 3,600
colleges and universities in the United States with enrollments of approximately
14 million students. This represents a target market with significant personal
spending power. In addition, growth in enrollment at colleges and universities
is expected to continue into the next century because (i) the children of baby
boomers are reaching college age and beginning to attend college, (ii) a higher
percentage of young adults are attending college after completing high school
and (iii) more adults are returning to college for advanced degrees. This market
is particularly attractive to certain advertisers, such as entertainment
companies, telecommunications companies, computer and software companies,
automobile manufacturers, fashion and athletic equipment companies and financial
services companies because young adults are receptive to new ideas and products
and have significant disposable income.

NETWORK EVENT THEATER

The Company intends to build and expand its Network into selected colleges and
universities throughout the United States and to create and develop a steady
stream of programming and events for the Network. The Company intends for the
Network to become a useful tool to programmers, sponsors and advertisers because
it provides them an opportunity to reach the important but geographically
dispersed and difficult to access college market. Installing a Network theater
on campus is also attractive to school administrators because it provides the
college with a state-of-the-art satellite signal receiving system and high
resolution audio/video projection system which it can use at no charge for
educational and other non-commercial and non-competitive purposes. This can be a
cost effective way to enhance the quality of campus life in an era of budgetary
austerity.

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The Company also anticipates that American Passage's full-time sales force will
assist the Network in selling such integrated programs to sponsors and
advertisers and that its extensive field force of independent representatives
can be used to place posters on college campuses and otherwise augment the
Network's own field force to publicize events being shown on the Network's
screens.

Installations and School Contracts

The Company has focused its initial marketing efforts with respect to installing
its Network theaters at one hundred of the largest colleges and universities. In
determining which schools to add to its Network, the Company considers factors
such as school size, geographic location and the extent to which the school
would enhance the Network's appeal to programmers, sponsors and advertisers. The
Company markets its Network principally by contacting and making presentations
to school administrators and student organizations responsible for promoting and
coordinating campus events and by attending key college conferences. The
company's marketing efforts relating to its Network are currently made through
its three full-time regional marketing coordinators and the Company's executive
officers.

As of October 31, 1996, the Company had completed installations in 30 colleges
and universities. Installations are as follows:

Arizona State University                 Southeast Missouri State University
Central Michigan University              SUNY-Albany
College of William and Mary              SUNY-Oneonta
Connecticut College                      University of Alabama-Birmingham
Eastern Michigan University              UCLA
Emory University                         University of Houston
Georgia Southern University              University of Idaho
Georgia Tech University                  University of Kansas
Louisiana State University               University of Minnesota
Mankato State University                 University of North Carolina-Charlotte
Michigan State University                University of Rhode Island
New Mexico State University              University of Rochester
Ohio State University                    University of Southern Mississippi
Oklahoma State University                Washington State University
Old Dominion University                  Western Kentucky University

The average theater has a seating capacity of approximately 520 persons. The
typical Network installation package consists of a steerable satellite dish and
attendant satellite signal receiving equipment, a high resolution projection
system with commercial quality movie sized screen and state-of-the-art digital
audio system. The cost of this equipment for a typical installation is
approximately $90,000 which is paid for by the Company. In addition, the Company
maintains this equipment at its own expense. This equipment enables the Company
to offer Network events to most areas of the contiguous United States and
Alaska. Presently, the Company owns all of the equipment at its installations,
but may seek to lease all or a portion of its presently installed and newly
acquired equipment to reduce its up-front capital costs. The Company believes
that satellite technology is the most cost-effective technology for achieving
rapid and complete market coverage in that a single up-link signal can be
broadcast simultaneously and at a fixed cost to all installations. Satellite
transmission is also able to provide the Company with the flexibility to deliver
programming to a single school or group of schools depending upon the time day
or program offered.

The Company has entered into agreements with each of the schools listed above to
install and maintain satellite transmission, projection and audio equipment at
no cost to the school. These schools have granted the Company the exclusive
right to exhibit, promote and sell commercial programming and promotional


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merchandise through its Network, as well as the exclusive use of school venues
for a minimum number of dates per month. Pursuant to its agreements with
colleges and universities, the Company has agreed to install, service and
maintain all equipment necessary for the display of Network events. Under the
terms of such agreements, schools are generally responsible for public access
and security staffing and are required to use their best efforts to provide the
Company with reasonable access to on-campus media and key campus locations for
promotional purposes and to otherwise assist in the promotion, coordination and
staffing of Network events (including printing and selling tickets,
disseminating promotional materials and providing technical support).

The Company's school contracts provide for the Company to present a schedule of
events prior to each school semester or quarter to be agreed upon by the school.
Schools are required to use their best efforts to reserve campus theaters for
additional dates to accommodate special events or replays. Schools are permitted
to use the Company's high-resolution projection equipment for non-commercial,
educational and academic purposes at no cost. School contracts generally have
terms ranging from two to five years and provide for automatic renewals unless
terminated by either party by notice prior to the end of the initial or any
renewal term. Most contracts provide that in the event of termination for any
reason other than a material breach by the Company, the school may not enter
into an agreement with a competitor of the Company for a period of two years
after termination.

Programming

The Company has commenced initial regular operations of the Network and
anticipates that it will broadcast three to four events each month during the
1996-97 academic year. Eventually, the Company anticipates that it will
broadcast at least six events per month. The Network can be used to broadcast
both live and pre-recorded events. In addition, the Network has audio/video
interactive capabilities which allow audiences to interact with performers and
participants before and after live performances.

Since January 1996, the Company has entered into a number of licensing
agreements with content providers such as Miramax Films, Don King Productions,
Mercury Records, Warner Brothers and ABC for individual programs and has
broadcast both live and pre-recorded events including concerts, motion pictures
and sneak previews of yet to be released motion pictures, comedy shows,
documentaries, sporting events, special pay-per-view events and educational
seminars. In particular, the Company believes that there are significant
opportunities for it to preview movies for movie studios on campuses and to show
feature films of independent and foreign film makers which appeal to college
audiences. The Company also believes that recording artists and record companies
will be attracted to the Network because college students are highly receptive
to rock, country and other popular music and that successful music groups often
establish an initial following among college students.

The Network also offers the ability to perform market testing and analytical
services to industry participants seeking to target college audiences. Also, the
Network has shown several boxing matches during this period and anticipates that
promoters of a wide variety of sports events will find the Network attractive,
including football, basketball, baseball and other sports. The Company believes
that many televised sports events are available only in particular regions or in
sports bars which may not be accessible to college students. By making a variety
of sports events available over its Network, the Company will seek to capitalize
on the current popularity of sports events among college students.

In August 1996, the Company entered into an agreement with HBO to preview one
HBO program per month during the 1996-1997 academic year on its Network. In
April, the Network showed three programs concerning admissions to medical and
business schools and issues in career management. In addition, the Network has
shown educational and special events which are of interest to college audiences.
During the next twelve months, the Company intends to develop additional
relationships with these and other content providers to premier other special
events. It should be noted, however, that there can be no assurance that the
Company will attract and retain a sufficient number of schools and obtain the
programming necessary to generate meaningful revenues or achieve profitable
operations from its Network.



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The Company has entered into a consulting agreement with an entity owned by
Freddie Fields and Jerome Hellman, prominent figures in the entertainment
industry, pursuant to which Messrs. Fields and Hellman serve as Chairman and
President, respectively, of the Company's Programming Division. The Company
expects that Messrs. Fields and Hellman will continue to use their extensive
contacts in the entertainment industry to establish relationships with
programmers and to identify and obtain quality programming on behalf of the
Company. This agreement terminates on December 31, 1997.

Marketing and Event Promotion

The Company has initiated significant marketing activities relating to growth of
its Network and intends to substantially increase its marketing efforts in order
to create awareness and demand by programmers, sponsors and advertisers. The
Company will also seek to create event promotions that will maximize student
interest and involvement. The Company has a field force of three campus
coordinators whose job it is to work with local college and student personnel to
facilitate the promotion and the presentation of network events on each campus.
It is anticipated that students will generally be informed of Network events
through advertisements in school newspapers, and on posters, flyers and other
promotional activities.

The Company believes that the acquisition of American Passage will significantly
enhance its marketing and promotional efforts with respect to programs
distributed via its Network. First, the Company plans to utilize the knowledge
and experience of American Passage's marketing and media placement professionals
to gain access to and to develop relationships with both advertisers and school
administrators and to facilitate the promotions of the Network's events. And
second, the Company believes that American Passage's businesses will allow it to
provide an integrated and comprehensive program of marketing opportunities for a
broad array of content providers, sponsors and advertisers who are targeting the
college and young adult markets. For example, a motion picture studio which is
previewing a major motion picture through the Network could launch a
simultaneous and comprehensive marketing program (including college newspapers,
on-campus postering and other marketing vehicles and tools in the Company's
portfolio) at campuses nationwide and which extends far beyond the Company's
installed Network of theaters. The Company believes that this significant added
reach will enable it to build more lucrative long term relationships with these
companies.

The Company also anticipates that American Passage's full-time sales force could
assist the Network in selling such integrated programs to sponsors and
advertisers and that its extensive field force of independent representatives
can be used to place posters on college campuses and otherwise augment the
Network's own field force to publicize events being shown on the Network's
screens.

The Company anticipates that the Network's principal sources of revenues will be
from fees paid by content providers and from sponsorship of Network events. The
Company also anticipates earning revenues from ticket sales to selected events.
When students are charged for admission to events, ticket prices are set by the
Company and ticket receipts are collected by student organizations and remitted
to the Company after the deduction of small amounts to reimburse the costs of
collection.

Network Competition

The Company believes that the Network is the only one of its kind currently
installed on college campuses. The Company believes that its existing
installations are an important competitive factor in the marketing of its
Network to prospective colleges and universities and its value to sponsors and
content providers. The Network will, however, face competition for a finite
amount of student discretionary spending from numerous other media and
businesses in the entertainment industry. The Company will compete with various
forms of entertainment which provide similar value, both on and off campus, such
as music groups an other entertainers who tour colleges and universities, movies
video and audio cassettes, broadcast television, cable programming, special
pay-per-view event, sporting events and other forms of entertainment which may
be less expensive or provide other advantages to college students. The Company
will also compete for advertising dollars with traditional media. The Company is
aware that certain closed-circuit 


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television operators are delivering music videos, current events, sports and
campus news in student cafeterias. If the Network is successful, the Company
expects that other companies may seek to enter or capitalize on college markets
and compete directly with the Company. The Network is not dependent on any
single school, advertiser, sponsor or program provider.

AMERICAN PASSAGE

American Passage is active in a number of businesses including the placement of
print advertising in college newspapers, postering of campus bulletin boards,
postering on distribution racks that contain college newspapers on campus
(AdRaX), its high school focused GymBoards message centers and other advertising
and event sponsorship related activities.

American Passage represents on a non-exclusive basis virtually every college
newspaper that accepts national advertising. The college newspapers that
American Passage represents have a combined circulation of over six million and
enrollment at these schools totals over ten million students. American Passage's
national advertising customers include, among others, American Express, AT&T,
TIAA/CREF, The Wall Street Journal, Nike and Microsoft. American Passage's
resources also include a database of all major college newspapers and
demographic and consumer data that enable it to create customized targeted media
programs for its advertising clients. In addition to providing marketing and
research assistance to advertisers, American Passage assists in the development
and distribution of advertising materials to college newspapers. American
Passage's revenues are generated principally from sales of advertisements to be
run in college newspapers.

American Passage's campus postering service entails the placement of posters and
other advertising messages on bulletin boards on college campuses throughout the
country. Through a network of approximately 250 full-time and student
representatives, American Passages' postering service covers more than 1,250
college campuses with enrollment totaling over ten million students. Advertisers
pay American Passage a fee for these postering services. American Passage's
AdRaX location media are college newspaper distribution racks with large
advertising display spaces above the newspaper bin. American Passage has placed
over 1,250 AdRaX units at prime locations at over 200 college campuses. Revenues
are generated from monthly advertisements appearing on each unit. GymBoards 
are gender specific message and information centers that are installed in boys'
and girls' high school locker rooms at no cost to the school and are customized
with each school's colors and mascot or nickname. GymBoards consist of a coach's
message board and two advertising panels which are protected by acrylic covers.
GymBoards are posted in more than 4,500 highs schools nationwide with more than
four million students representing about one-third of the total high school
market. Advertising is sold on a monthly basis from September through May.

In connection with its acquisition of assets from APMC, American Passage entered
into an agreement to serve as the exclusive representative for the sale of
national advertising for APMC's Directory of Classes publication. Directory of
Classes is the official class guide and registration manual at approximately
eighty college campuses with total enrollments of over 1.3 million students.
This agreement, under which American Passage will receive specified sales
commissions for as long as it achieves certain minimum sales levels, has enabled
American Passage to retain the right to sell national advertising for the
Directory of Classes without assuming responsibility for publishing it. Other
American Passage activities include serving as the exclusive representative for
consumer advertising for the National Association of Colleges and Employers
(NACE) Job Choices publication and marketing and executing Spring Break programs
and promotions at the six resort properties operated by Paradise Found Resorts &
Hotels, in Panama City Beach, Florida.

The Company believes that there are other companies engaged in similar
activities as American Passage which are focused on the college and young adult
markets. Some of these companies may be larger than American Passage or have
more employees. However, the Company believes that the combination of the


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Network with American Passage's resources represents the most complete range of
marketing, media and promotional services serving the college and young adult
markets.

EMPLOYEES

As of October 31, 1996, the Company had 18 employees including four executive
officers, three regional marketing coordinators, three campus coordinators and
eight administrative employees, one of whom was part-time. As of the same date,
American Passage had 36 employees, two of whom are part-time. None of the
Company's nor American Passage's employees is represented by a collective
bargaining unit, and the Company believes that relations with those employees
are good.

TRADEMARKS

The Company has registered with the United States Patent and Trademark Office
the names "Network Event Theater"TM and "NET"TM, as well as the NET logo. The
Company's rights in these marks may be a significant part of its business. The
Company is not aware of any claims of infringement or other challenges to its
rights to use these marks, although the Company is aware of numerous other
registrations of the mark "NET". There can be no assurance that the Company's
marks do not or will not infringe the proprietary rights of others, that the
Company's marks would be upheld if challenged, or that the Company would not be
prevented from using its marks. Neither the Company nor American Passage holds
any patents or copyrights.

ITEM 2. PROPERTIES

The Company's principal executive offices are located in approximately 5,000
square feet of leased space in New York, New York pursuant to a lease expiring
on February 28, 1998. Annual rent payable under that lease is $65,000. The
Company also rents office space in Los Angeles, California pursuant to its
arrangement with Messrs. Fields and Hellman.

In connection with American Passage's Acquisition of the young adult marketing
business of APMC, American Passage and APMC entered into a transition agreement
pursuant to which American Passage is permitted to use the office space
previously used by those businesses in Seattle, Washington, New York, New York
and Rosement, Illinois for specified periods (all less than one year). American
Passage pays APMC a fee based on its square footage of each site. American
passage has entered into temporary short-term leases for new office space in
Seattle, Washington and Rosement, Illinois and is negotiating for new office
space for its New York office.

ITEM 3. LEGAL PROCEEDINGS

Neither the Company nor American Passage is a party to any pending legal
proceeding, and the Company is not aware of any contemplated proceeding.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of the Company's security holders during the
quarter ended June 30, 1996.



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                                     PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The Company's common stock is traded in the over-the-counter market and is
quoted on the NASDAQ SmallCap Market under the symbol "NETS". The high and low
bids for the common stock for the quarter ended June 30, 1996 as furnished by
NASDAQ were $5.375 and $3.25, respectively. Those quotations reflect
inter-dealer prices and do not include retail mark-up, mark-down or commission,
and may not represent actual transactions. As of October 28, 1996, there were
approximately 35 holders of record of the Company's common stock.

To date, the Company has not declared or paid any dividends on its common stock.
The payment by the Company of dividends, if any, is within the discretion of the
Board of Directors and will depend on the Company's earnings, if any, its
capital requirements and its general financial condition, as well as other
relevant factors. The Board of Directors does not intend to declare any
dividends in the foreseeable future, but instead intends to retain any earnings
for use in the Company's business operations.

ITEM 6. PLAN OF OPERATION

The Company is engaged principally in organizational activities relating to the
development of its Network and in developing or acquiring marketing or marketing
services businesses that are complementary to the Network that focus on the
college and young adult market.

The Company believes that the acquisition of American Passage will allow it to
provide an integrated and comprehensive program of marketing opportunities for a
broad array of content providers, sponsors and advertisers which are targeting
the college and young adult markets. For example, a motion picture studio which
is previewing a major motion picture through the Network could launch a
simultaneous and comprehensive marketing program (including college newspapers,
on-campus postering and other marketing vehicles and tools in the Company's
portfolio) at campuses nationwide and which extends far beyond the Company's
installed network of theaters. The Company believes that this significant added
reach will enable it to build more lucrative long term relationships with
companies targeting the college and young adult markets. The Company also
anticipates that American Passage's full-time sales force could assist the
Network in selling such integrated programs to sponsors and advertisers and that
its extensive field force of independent representatives can be used to place
posters on college campuses and otherwise augment the Network's own field force
to publicize events being shown on the Network's screens.

The Company has not generated any material operating revenues from its Network.
Because of expenses required to install equipment at colleges for the Network
and to obtain programming for these theaters, the Company is still generating
operating losses. These losses may continue and may remain significant unless
the Network begins to generate significant sponsorship, advertising and ticket
sales revenues sufficient to offset the Network's development costs. For the
period August 27, 1993 (inception) to June 30, 1996, the Company incurred a
cumulative net loss of approximately $5.4 million.

The Company's proposed plan of operations for its Network will be largely
dependent upon the Company's ability to enter into agreements with a significant
number of colleges and universities, establish and maintain satisfactory
relationships with college administrators and student organizations,
successfully obtain and install satellite transmission projection and audio
equipment on a timely and cost effective basis and successfully expand its
Network to attract programmers which can provide currently popular programming
suitable for college student audiences on commercially reasonable terms and
provide integrated marketing plans that are attractive to program providers and
advertisers. The Company currently has three full-time employees engaged in
marketing the Company's Network to colleges and universities and is focusing its
initial marketing efforts on installing its equipment at one hundred of the
largest colleges and universities.


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As of September 30, 1996, the Company had installed Network equipment at thirty
campus theaters. The Company will seek to install equipment at approximately
twenty-five additional campus theaters in the next twelve months. The number of
installations will be dependent upon the number of school contracts the Company
is able to enter into.

Since January 1996, the Company has entered into a number of licensing
agreements with content providers such as Miramax Films, Don King Productions,
Mercury Records, Warner Brothers and ABC for individual productions. In August,
the Company entered into an agreement with HBO to preview one HBO program per
month during the 1996-1997 academic year on its Network. During the next twelve
months, the Company intends to develop additional relationships with these and
other content providers to acquire rights to special events. It should be noted,
however, there can be no assurance that the Company will attract and retain a
sufficient number of schools and obtain the programming necessary to generate
meaningful revenues or achieve profitable operations from its Network.

Over the next twelve months the Company will continue to make significant
capital investments as it continues to install theaters on college campuses.
There are no plans to increase staff significantly with regard to either the
Network or any of American Passage's operations other than incremental increases
in sales and administrative staff to generate and accommodate increased
business.

Liquidity and Capital Resources

The Company consummated an initial public offering of its common stock and
warrants on April 9, 1996 (the "Offering"), pursuant to which it raised net
proceeds of approximately $10.2 million of which $0.5 million was used to repay
previously existing Company indebtedness. As of June 30, 1996, the Company had
cash (and cash equivalents and investments) in the amount of approximately $0.3
million and $7.9 million, respectively. Since the Offering, the Company has
purchased approximately $1.0 million of Network theater equipment and invested
approximately $0.5 million in the acquisition of American Passage. The balance
of the proceeds have otherwise been used to fund Company operations.

The Company's primary capital requirement with respect to its Network has been
to fund the purchase and installation of theater equipment on college campuses.
Based on current plans, the Company anticipates that it has sufficient resources
to enable it to install theater equipment in 25 additional campus theaters at an
estimated cost of $90,000 per theater and to otherwise satisfy its contemplated
cash requirements for the next twelve months. In order to reduce the Company's
up-front capital requirements associated with the expansion of its Network, the
Company may seek to lease rather than purchase a portion of its Network
equipment. There can be no assurance that the Company will be able to obtain
satisfactory equipment leasing arrangements.

In connection with its acquisition of certain assets of APMC's young adult
marketing business, (i) American Passage paid APMC approximately $3.5 million in
cash (representing a $4.0 million base price adjusted in accordance with the
terms of the purchase agreement), (ii) American Passage issued to APMC a
two-year subordinated promissory note for $750,000, (iii) the Company issued to
APMC a contingent option to purchase up to 100,000 shares of the Company's
common stock pursuant to an option agreement, (iv) American Passage engaged APMC
for a two-year consulting agreement for a total compensation of $273,600 and (v)
American Passage assumed certain of APMC's contractual liabilities. The cash
portion of the purchase price and related transaction costs were funded by a
$500,000 equity contribution from the Company to American Passage and a five
year $3,500,000 loan to American Passage from Signet Bank. The loan is secured
by all of America Passage's assets and is guaranteed by the Company. American
Passage is anticipated to be able to fund its cash and debt service requirements
out of its own operations.

Any implementation of the Company's business plan beyond the next twelve months
may require financial resources substantially greater than the proceeds of the
Offering or otherwise currently available to the Company. In the event that the
Company's plans and assumptions with respect to the Network change or prove to
be inaccurate or if the proceeds of the Offering otherwise prove to be
insufficient to implement its 


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business plan with respect to the Network (due to unanticipated expenses or
technical or other problems), or if its assumptions with respect to American
Passage being able to fund its operations and make required debt service
payments prove to be inaccurate, then the Company could be required to seek
additional financing. The inability to obtain additional financing will have a
material adverse effect on the Company, including possibly requiring the Company
to significantly curtail or cease its operations. The Company may also
determine, depending upon the opportunities available to it, to seek additional
debt or equity financing to fund the cost of additional expansion of its Network
or to develop or acquire college marketing businesses complementary to the
Network. To the extent that the Company finances its requirements through the
issuance of additional equity securities, any such issuance would result in
dilution to the interests of the Company's stockholders. Additionally, to the
extent that the Company incurs indebtedness or issues debt securities in
connection with financing activities, the Company will be subject to all of the
risks associated with incurring substantial indebtedness including the risk that
interest rates may fluctuate and cash flow may be insufficient to pay principal
and interest on any such indebtedness. The Company has no current arrangements
with respect to, or sources of, additional financing. There can be no assurance
that any additional financing will be available to the Company on acceptable
terms, if at all.

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ITEM 7. FINANCIAL STATEMENTS

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                              Financial Statements

                         Six months ended June 30, 1996
                    and the two years ended December 31, 1995

                                    CONTENTS

Report of Independent Auditors.............................................. 11
Balance Sheets as of June 30, 1996, December 31, 1995 and 1994.............. 12
Statements of Operations for the six months ended June 30, 1996 and
    1995 (unaudited), the years ended December 31, 1995 and 1994
    and the period from inception to June 30, 1996.......................... 13
Statements of Cash Flows for the six months ended June 30, 1996 and
   1995 (unaudited), the years ended December 31, 1995 and 1994
   and the period from inception to June 30, 1996........................... 14
Statements of Changes in Stockholders' Equity for period from inception
   to June 30, 1996......................................................... 15
Notes to Financial Statements............................................... 16

10
<PAGE>

                         Report of Independent Auditors

Board of Directors
Network Event Theater, Inc.

We have audited the accompanying  balance sheets of Network Event Theater,  Inc.
(A Development Stage Company),  as of June 30, 1996, December 31, 1995 and 1994,
and  the  related   statements  of   operations,   cash  flows  and  changes  in
stockholders'  equity for the two years and six months in the period  ended June
30,  1996 and the  period  from  inception  to June 30,  1996.  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 audit 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  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 financial position of Network Event Theater, Inc. (A
Development Stage Company) at June 30, 1996, December 31, 1995 and 1994, and the
results of its operations and its cash flows for the two years and six months in
the period  ended June 30, 1996 and the period from  inception to June 30, 1996,
in conformity with generally accepted accounting principles.

                                                        Ernst & Young LLP

New York, New York
October 17, 1996


11
<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                                 Balance Sheets

<TABLE>
<CAPTION>

                                                               June 30,                      December 31
                                                                 1996                 1995                 1994
                                                       ---------------------------------------------------------------
<S>                                                       <C>                  <C>                  <C>

ASSETS
Current assets:
   Cash and cash equivalents                              $      266,806       $      790,705       $      922,312
   Investments                                                 7,882,570                    -              987,100
   Accounts receivable                                               236                    -                    -
   Deposits                                                       26,169                9,426               11,736
                                                       ---------------------------------------------------------------
Total current assets                                           8,175,781              800,131            1,921,148

Property and equipment, at cost, less accumulated
   depreciation of $654,724 in 1996, $346,110 in 1995
   and $33,452 in 1994                                         3,081,620            2,531,205              299,066
Organization costs, at cost, less accumulated
   amortization of $58,633 in 1996, $46,906 in 1995
   and $23,453 in 1994                                            58,634               70,361               93,814
Deferred offering costs                                                -              207,164                    -
                                                       ---------------------------------------------------------------
Total assets                                              $   11,316,035       $    3,608,861       $    2,314,028
                                                       ===============================================================

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

   Accounts payable and accrued expenses                  $      462,634       $      541,762       $       34,807
                                                       ---------------------------------------------------------------
Total liabilities                                                462,634              541,762               34,807

Stockholders' equity:

   Preferred stock, $.01 par value, 1,000,000 shares
     authorized, no shares issued and outstanding                    -                    -                    -
   Common  stock,  $.01 par  value,  17,000,000
     shares  authorized,  8,654,440, 6,354,440
     and 4,732,554 shares issued and outstanding
     in 1996, 1995 and 1994, respectively                         86,544               63,544               47,325
   Additional paid-in capital                                 16,177,302            6,461,466            3,552,685
   Deficit accumulated during the development
      stage                                                   (5,380,355)          (3,457,911)          (1,320,789)
   Unrealized depreciation on marketable debt
     securities                                                  (30,090)                   -                    -
                                                       ---------------------------------------------------------------
Total stockholders' equity                                    10,853,401            3,067,099            2,279,221
                                                       ---------------------------------------------------------------
Total liabilities and stockholders' equity               $    11,316,035      $     3,608,861      $     2,314,028
                                                       ===============================================================
</TABLE>

See notes to financial statements.

                                                                              12

<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                            Statements of Operations

<TABLE>
<CAPTION>
                                                                                                        Period from
                                     Six Months Ended June 30            Year Ended December 31         Inception To
                                       1996             1995             1995              1994         June 30, 1996
                                 ---------------------------------------------------------------------------------------
                                                     (Unaudited)

<S>                                <C>               <C>            <C>               <C>              <C>      
Revenues                            $       4,041    $          -   $            -     $           -    $       4,041
Expenses:
   Selling, general and
     administrative expenses            1,738,241         757,483        1,927,374         1,222,643        4,938,258
   Depreciation and amortization          320,341         173,084          336,111            56,905          713,357
                                 ---------------------------------------------------------------------------------------
Total expenses                          2,058,582         930,567        2,263,485         1,279,548        5,651,615
                                 ---------------------------------------------------------------------------------------

Loss from operations                   (2,054,541)       (930,567)      (2,263,485)       (1,279,548)      (5,647,574)

Interest and other income                 132,097          79,089          126,363             8,759          267,219
                                 ---------------------------------------------------------------------------------------
Net loss                           $   (1,922,444)   $   (851,478)  $   (2,137,122)    $  (1,270,789)   $  (5,380,355)
                                 =======================================================================================

Net loss per common share                  $(.22)           $(.13)          $(.34)             $(.20)           $(.62)
                                 =======================================================================================

Weighted average common shares
   outstanding                          8,654,440       6,354,440        6,354,440         6,354,440        8,654,440
                                 =======================================================================================
</TABLE>

See notes to financial statements.

                                                                              13
<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                            Statements of Cash Flows

<TABLE>
<CAPTION>
                                                                                                          Period From
                                                                                                           Inception
                                             Six Months Ended June 30        Year Ended December 31         To June
                                                1996           1995           1995           1994          30, 1996
                                           -----------------------------------------------------------------------------
                                                            (Unaudited)

<S>                                         <C>              <C>          <C>            <C>             <C>           
Cash Flows From Operating Activities
Net loss                                    $ (1,922,444)    $  (851,478) $ (2,137,122)  $ (1,270,789)   $  (5,380,355)
Adjustments to reconcile net loss to net
   cash used in operating activities:

     Depreciation and amortization               320,341         173,084       336,111         56,905          713,357
     Fair value of common stock issued
       for services                                    -          60,000        60,000        150,000          210,000
     Changes in assets and liabilities:
       (Increase) decrease in deposits           (16,743)              -         2,310        (11,736)         (26,169)
       Increase in accounts receivable              (236)              -             -              -             (236)
       (Decrease) increase in accounts
         payable and accrued expenses            (79,128)         78,324       506,955         34,807          462,634
       Decrease (increase) in deferred
         offering costs                          207,164               -      (207,164)             -                -
                                           -----------------------------------------------------------------------------
Total adjustments                                431,398         311,408       698,212        229,976        1,359,586
                                           -----------------------------------------------------------------------------
Net cash used in operating activities         (1,491,046)       (540,070)   (1,438,910)    (1,040,813)      (4,020,769)

Cash Flows From Investing Activities

Purchase of property, plant and equipment       (859,029)        (95,729)   (2,544,797)      (332,518)      (3,736,344)
Organization costs                                     -               -             -       (117,267)        (117,267)
Purchase of investments                       (7,882,570)              -             -       (987,100)      (8,869,670)
Proceeds from sale or gain (loss) in
   value of investments                          (30,090)        987,100       987,100              -          957,010
                                           -----------------------------------------------------------------------------
Net cash (used in) provided by investing
   activities                                 (8,771,689)        891,371    (1,557,697)    (1,436,885)     (11,766,271)

Cash Flows From Financing Activities

Net proceeds from sale of common stock         9,508,836       1,958,422     2,865,000      3,400,000       15,823,846
Proceeds from sale of warrants                   230,000               -             -              -          230,000
                                           -----------------------------------------------------------------------------
Net cash provided by financing activities      9,738,836       1,958,422     2,865,000      3,400,000       16,053,846
                                           -----------------------------------------------------------------------------

Net (decrease) increase in cash
   and cash equivalents                         (523,899)      2,309,723      (131,607)       922,302          266,806
Cash and cash equivalents at
   beginning of period                           790,705       1,909,412       922,312             10                -
                                           -----------------------------------------------------------------------------
Cash and cash equivalents at end of period  $    266,806     $ 4,219,135  $    790,705   $    922,312    $     266,806
                                           =============================================================================
</TABLE>

See notes to financial statements.

                                                                              14
<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                  Statements of Changes in Stockholders' Equity

                     Period from inception to June 30, 1996

<TABLE>
<CAPTION>
                                                                            Common Stock             Additional      
                                                                      --------------------------       Paid-in       
                                                                       Shares          Amount          Capital       
                                                                      ----------------------------------------------                
<S>                                                                     <C>             <C>            <C>        
Inception--August 1993 ($.02 per share)                                 2,755,743       $ 27,557       $   22,453 
Net loss                                                                        -              -                - 
                                                                      ----------------------------------------------                
Balance at December 31, 1993                                            2,755,743         27,557           22,453  

Issuance of common stock--January 1994 ($2.43 per share)                  576,589          5,766        1,394,234  
Fair value of stock issued for consulting services--October 1994
   ($2.65 per share)                                                       56,713            567          149,433  
Issuance of common stock--December 1994 ($1.49 per share)               1,343,509         13,435        1,986,565  
Net loss                                                                        -              -                -  
                                                                      ----------------------------------------------                
Balance at December 31, 1994                                            4,732,554         47,325        3,552,685  

Issuance of common stock--January 1995 ($1.49 per share)                1,252,823         12,528        1,852,472  
Fair value of stock issued as severance--February 1995 ($3.15
   per share)                                                              19,063            191           59,809  
Issuance of common stock--December 1995 ($2.86 per share)                 350,000          3,500          996,500  
Net loss                                                                        -              -                -  
                                                                      ----------------------------------------------                
Balance at December 31, 1995                                            6,354,440         63,544        6,461,466  

Issuance of Common Stock upon the Initial Public Offering--April
   1996 ($5.00 per share)                                               2,300,000         23,000        9,485,836  
Issuance of warrants upon the Initial Public Offering--April
   1996 ($.10 per share)                                                        -              -          230,000  
Unrealized depreciation on marketable equity securities                         -              -                -  
Net loss                                                                        -              -                -  
                                                                      ----------------------------------------------
Balance at June 30, 1996                                               8,654,440      $  86,544      $16,177,302   
                                                                      =============================================
<CAPTION>
                                                                         (Deficit)         Unrealized                               
                                                                        Accumulated       Depreciation 
                                                                        During The        On Marketable             
                                                                        Development           Debt                           
                                                                           Stage           Securities            Total       
                                                                      ----------------------------------------------------          
<S>                                                                     <C>                <C>               <C>           
Inception--August 1993 ($.02 per share)                                 $           -      $         -       $     50,010  
Net loss                                                                      (50,000)               -            (50,000) 
                                                                      ----------------------------------------------------          
Balance at December 31, 1993                                                  (50,000)                                 10  
                                                                                                                           
Issuance of common stock--January 1994 ($2.43 per share)                            -                -          1,400,000  
Fair value of stock issued for consulting services--October 1994                                                           
   ($2.65 per share)                                                                -                -            150,000  
Issuance of common stock--December 1994 ($1.49 per share)                           -                -          2,000,000  
Net loss                                                                   (1,270,789)               -         (1,270,789) 
                                                                      -----------------------------------------------------         
Balance at December 31, 1994                                               (1,320,789)                          2,279,221  
                                                                                                                           
Issuance of common stock--January 1995 ($1.49 per share)                            -                -          1,865,000  
Fair value of stock issued as severance--February 1995 ($3.15                                                              
   per share)                                                                       -                -             60,000  
Issuance of common stock--December 1995 ($2.86 per share)                           -                -          1,000,000  
Net loss                                                                   (2,137,122)               -         (2,137,122) 
                                                                      -----------------------------------------------------         
Balance at December 31, 1995                                               (3,457,911)               -          3,067,099  
                                                                                                                           
Issuance of Common Stock upon the Initial Public Offering--April                                                         
   1996 ($5.00 per share)                                                           -                -          9,508,836           
Issuance of warrants upon the Initial Public Offering--April                                                                
   1996 ($.10 per share)                                                            -                -            230,000   
Unrealized depreciation on marketable equity securities                             -          (30,090)           (30,090)  
Net loss                                                                   (1,922,444)               -         (1,922,444)) 
                                                                      ----------------------------------------------------- 
Balance at June 30, 1996                                                $  (5,380,355)     $   (30,090)     $  10,853,401    
                                                                      ===================================================== 
</TABLE>

See notes to financial statements.
 
                                                                              15
<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                          Notes to Financial Statements

                                  June 30, 1996

1. Organization and Basis of Presentation

Network Event Theater,  Inc. (the "Company") was incorporated  under the laws of
the State of Delaware in December  1995 to become the  successor to the business
of Universal  Access  Network,  L.P.  (the  "Partnership"),  a Delaware  limited
partnership  organized  in August  1993.  Pursuant  to a  reorganization  of the
Company,  the general and limited  partners of the  Partnership  exchanged their
partnership  interests for 6,354,440  shares of common stock in April 1996.  The
accompanying  financial  statements  of the  Company  retroactively  reflect the
reorganization with respect to the capitalization of the Company.  References to
the Company include the activities of its predecessor, the Partnership.

The Company was organized to develop,  own and operate Network Event Theater(TM)
a satellite entertainment network for college campuses. Network Event Theater is
designed  to  deliver  entertainment  programming  events  via  satellite  to  a
nationwide network of electronically-linked  campus theaters for display through
high-resolution  projection  on large  screens.  The Company  intends to offer a
variety of programming events through its network, consisting primarily of music
concerts,  motion pictures,  sports, special pay-per-view events and educational
seminars, targeting college student audiences.

The Company is currently in the  development  stage.  As such,  operations  have
focused on financial planning, raising capital,  developing markets,  evaluating
complementary  acquisitions  and commencing  principal  operations.  At June 30,
1996,  the Company had signed  contracts  with 31 schools.  Each  contract  sets
forth,  among  other  items,  (1) the term of the  contract,  (2) the  Company's
obligations  with regard to the  installation  and maintenance of equipment at a
specific campus venue,  (3) the Company's  obligation to broadcast events at the
venue, (4) the school's  obligation to provide the Company  exclusive  broadcast
rights at the venue,  (5) the school's  obligation to set aside a certain number
of  dates  for the  Company's  exclusive  use of the  campus  venue,  and 6) the
school's  overall  obligation to provide  marketing,  promotional  and technical
assistance in support of the Company's programs.

As described  further in Note 4, on September  13,  1996,  the Company  acquired
through its wholly-owned subsidiary, American Passage Media, Inc., substantially
all the  assets of  American  Passage  Media  Corporation  ("American  Passage")
relating to its college and high school media and marketing businesses.


                                                                              16
<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                    Notes to Financial Statements (continued)

2. Significant Accounting Policies

Fiscal Year End

On August 21,  1996,  the  Company's  board of  directors  elected to change the
fiscal year end of the Company to a June 30th year end.

Cash Equivalents

Highly liquid investments with a maturity of three months or less when purchased
are generally considered to be cash equivalents.

Investments in Marketable Securities

The Company  records its investment in marketable  securities in accordance with
Financial  Accounting  Standards  Board  Statement  No. 115  ("SFAS  No.  115"),
"Accounting for Certain Investments in Debt and Equity Securities." SFAS No. 115
requires  management  to  determine  the  appropriate   classification  of  debt
securities at the time of purchase and to reevaluate such designation as of each
balance sheet date.

The Company's securities are classified as available-for-sale and are carried at
fair value,  with the  unrealized  gains and losses,  net of tax,  reported as a
separate component of stockholders' equity.  Realized gains are included in gain
on sale of investments  reflected in the consolidated  statements of operations.
The cost of securities sold is based on the specific identification method.

Property and Equipment

Property  and  equipment  is recorded  at cost.  Depreciation  of  property  and
equipment is provided for by the straight-line  method over the estimated useful
lives of five years.  Expenditures  for  maintenance  and repairs are charged to
operations as incurred.


                                                                              17
<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                    Notes to Financial Statements (continued)


2. Significant Accounting Policies (continued)

Organization Costs

Organizations costs are being amortized using the straight-line method over five
years.

Revenue Recognition

The  Company's  primary  source  of  revenue  will be  revenue  from the sale of
sponsorships of network events, fees collected for showing certain events on the
network, and the sale of tickets to its program events. Revenue is recorded when
the events are broadcast.

Advertising Costs

The Company  expenses  advertising  costs related to its  programming  events as
incurred.  Advertising  expense for the six months  ended June 30, 1996 and 1995
and the years ended December 31, 1995 and 1994 were $62,213,  $0, $7,968 and $0,
respectively.

Income Taxes

The Company,  which operated as a partnership  until its Initial Public Offering
in April 1996 (see Note 3),  had  incurred  losses  since its  inception.  Those
losses were  utilized by the  individual  partners in prior periods and were not
available to the  Company.  Commencing  with the Initial  Public  Offering,  the
Company  began   accounting  for  income  taxes  in  accordance  with  Financial
Accounting  Standards  Board  Statement No. 109  "Accounting  for Income Taxes."
Under this method,  deferred income taxes are provided for  differences  between
the carrying  amounts of the  Company's  assets and  liabilities  for  financial
reporting purposes and the amounts used for income tax purposes.


                                                                              18
<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                    Notes to Financial Statements (continued)


2. Significant Accounting Policies (continued)

Earnings Per Share

The  calculation  of earnings  per share  assumes  that all common  stock issued
within a one year period prior to the initial  public  offering of the Company's
stock (see Note 3) was  outstanding  for all  periods.  Loss per common share is
based on the net loss for the period  divided by the weighted  average number of
shares of common stock  outstanding  for the period.  Shares  issuable  upon the
exercise  of  all  common  stock  equivalents  and  other  potentially  dilutive
securities are not included in the  computations  for 1996,  1995 and 1994 since
their effect is not dilutive.

Use Of Estimates

The  preparation  of the  financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that affect the amounts  reported in the financial  statements  and
accompanying notes. Actual results could differ from those estimates.

3. Initial Public Offering

In April 1996, the Company  completed its initial public  offering (the "Initial
Public  Offering")  of  2,300,000  shares of common  stock for $5.00 per  share,
including the issuance of 2,645,000  warrants at $.10 per warrant.  The warrants
are exercisable to purchase one share of common stock  commencing one year after
the effective  date of the Initial  Public  Offering and expire five years after
such effective  date. The Company  realized net proceeds of  approximately  $9.7
million from the Initial Public Offering.


                                                                              19
<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                    Notes to Financial Statements (continued)


4. Acquisition

On  September  13,  1996,  the Company  through its newly  created  wholly owned
subsidiary  American  Passage Media,  Inc.  ("American  Passage")  acquired from
American Passage Media Corporation  ("APMC")  substantially all of APMC's assets
relating  to  its  college  and  high  school  media,  marketing,   and  service
businesses.  The businesses  acquired include APMC's college newspaper placement
operations,  college campus postering operations,  high school focused gymboards
operations  and  various  other   advertiser  and  event   sponsorship   related
activities.  APMC is a  Washington  Corporation  which has been  involved in the
young adult marketing business since 1976.

As consideration for the assets,  the Company:  (1) paid APMC approximately $3.5
million in cash, (2) issued to APMC a two-year subordinated  promissory note for
$750,000,  (3)  issued to APMC a  contingent  option to  purchase  up to 100,000
shares of the  Company's  common  stock  pursuant  to an option  agreement,  (4)
entered  into a two-year  consulting  agreement  with APMC for  $273,600 and (5)
assumed certain of the contractual  obligations of APMC. The acquisition will be
accounted for under the purchase method of accounting.

The following  unaudited  supplemental pro forma  information is presented as if
the Company had completed the acquisition as of January 1, 1995:

                                   Six Months Ended June Year Ended December 31,
                                         30, 1996                  1995
                                   --------------------- -----------------------
Net revenue                         $    3,082,739         $    5,523,433
Net loss applicable to common stock     (1,908,237)            (2,179,322)
Net loss per common share                     (.22)                 (.34)
Common shares outstanding                8,654,440              6,354,440

The pro forma information is not necessarily indicative either of the results of
operations  that  would have  occurred  had this  transactions  been made at the
beginning of the period or of future results of operations.


                                                                              20
<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                    Notes to Financial Statements (continued)


5. Property and Equipment

Property and equipment consists of the following at:

<TABLE>
<CAPTION>
                                                      June 30,                  December 31
                                                        1996              1995               1994
                                                  -----------------------------------------------------
<S>                                                 <C>               <C>                  <C>        
Equipment                                           $   3,685,823     $   2,852,655        $   310,702
Furniture and fixtures                                     11,387             8,031              8,031
Computer equipment                                         26,822            10,719             10,719
Office equipment                                           12,312             5,910              3,066
                                                  -----------------------------------------------------
                                                        3,736,344         2,877,315            332,518
Less accumulated amortization and depreciation
                                                         (654,724)         (346,110)           (33,452)
                                                  -----------------------------------------------------
                                                    $   3,081,620     $   2,531,205      $     299,066
                                                  =====================================================
</TABLE>

6. Income Taxes

At June 30, 1996, the Company had a net operating loss  carryforward  for income
tax purposes of approximately  $1,104,000 that will expire in the year 2011. For
financial  reporting  purposes,  a  valuation  allowance  of  $375,320  has been
recognized to offset the deferred tax asset related to those carryforwards.  The
net  operating  loss  carryforward  at June 30,  1996 is subject to  limitations
brought about by the  Company's  change of the tax year end.  Accordingly,  only
one-sixth of the  approximately  $1,104,000  net operating  loss may be used per
year for the next six years to offset income.


                                                                              21
<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                    Notes to Financial Statements (continued)

6. Income Taxes (continued)

Deferred  income  taxes  reflect  the net tax effects of  temporary  differences
between the carrying  amounts of assets and liabilities for financial  reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax assets as of June 30, 1996 are as follows:

   Deferred tax assets:

      Net operating loss carryforwards        $       375,320   
                                              ---------------
   Total deferred tax assets                          375,320
      Valuation allowance                            (375,320)                  
                                              ---------------
   Net deferred tax                           $             -
                                              =============== 
                                        
No federal or state tax  provision has been provided for at June 30, 1996 due to
significant losses incurred.

7. Related Party Transactions

Programming Services Agreement

During 1995,  the Company  entered  into an agreement  with the Fields & Hellman
Company  ("Fields  &  Hellman")  for  programming   acquisition  services  which
terminates on December 31, 1997.  This  agreement was amended in December  1995.
Fields & Hellman is entitled to receive  royalties of 10% of the pre-tax  income
of the Company until December 1999.

Fields & Hellman will also receive an annual fee for its  services.  For the six
months ended June 30, 1996 and 1995 and the year ended  December 31, 1995,  such
fees totaled  $225,000,  $150,000  and  $300,000,  respectively,  and were fully
expensed.  The  annual  fees for the  years  ended  June  30,  1997 and 1998 are
$500,000 and $275,000, respectively.


                                                                              22
<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                    Notes to Financial Statements (continued)


7. Related Party Transactions (continued)

Additionally,  Fields & Hellman  receives an annual fee for overhead  (primarily
relating  to the  Company's  office in Los  Angeles,  California)  paid in equal
monthly installments.  The annual overhead fee for the six months ended June 30,
1996 and 1995 and the year ended  December  31, 1995 of  $131,250,  $125,000 and
$250,000,  respectively,  was fully expensed. Such fees for the years ended June
30, 1997 and 1998 are $269,000 and $138,000,  respectively. The Company believes
that these  overhead fees are comparable to terms which could have been obtained
from an unrelated third party.

The Company  has also  granted  Fields & Hellman an option to  purchase  552,560
shares of common stock at an exercise price of $1.58 per share.

Management Services

In accordance with the  Partnership's  partnership  agreement,  Universal Access
Network,  Inc., the General Partner, was entitled to receive annual compensation
and additional bonus compensation.  Compensation paid to the General Partner for
the six months ended June 30, 1996 and 1995 was  approximately  $113,000 and for
the  years  ended  December  31,  1995  and  1994  was  $220,000  and  $104,000,
respectively.  This compensation  represents the salaries of the Company's Chief
Executive Officer and President.  This agreement was canceled upon the effective
date of the reorganization described in Note 1.


                                                                              23
<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                    Notes to Financial Statements (continued)


8. Commitments

Leases

The Company leases office space for its corporate  headquarters  in New York. In
January  1996,  the Company  entered  into a new sublease  agreement  for office
space.  The minimum annual rental  commitments for the term of this sublease are
as follows:

1997                                                        $      65,000
1998                                                               43,333
                                                            =============
Total minimum lease payments                                $     108,333
                                                            =============

Rent expense for the six months ended June 30, 1996 and 1995 and the years ended
December  31,  1995  and  1994  was  $32,118,   $15,000,  $30,139  and  $20,417,
respectively.

Consulting Agreement

On September 22, 1995, the Company entered into a one year consulting  agreement
related to new business  development  in the  programming  area.  The  agreement
provided for a consulting  fee of $4,000 per month and also granted an option to
purchase a 1% equity interest in the Company (93,000 shares of common stock) for
$200,000 at any time prior to October 31, 1996.  The agreement was terminated in
November  of 1995;  however,  the equity  purchase  option  remained  open until
October 31, 1996 when it expired unexercised.

9. Capital Contributions

On January 18, 1995, the Company received  additional  capital  contributions in
the amount of $1,865,000, pursuant to a Subscription Agreement dated December 7,
1994.  The amount  represents  the second  payment of $2 million  less  expenses
incurred related to this financing transaction.  The first payment of $2 million
was received  prior to December 31, 1994.  In accordance  with the  subscription
agreement,  the $1,865,000 was deposited into an escrow account to be drawn upon
as the Company entered into additional  school  contracts.  As of June 30, 1996,
the Company had entered into the required 20 school  contracts and therefore the
balance of the escrow  account,  $3,418,  was  available to the Company  without
restriction and is included in the cash balances at that date.


                                                                              24
<PAGE>

                           Network Event Theater, Inc.
                          (A Development Stage Company)

                    Notes to Financial Statements (continued)


10. Stock Option Plan

Upon the effective date of the Initial Public  Offering,  the Company  adopted a
Stock Option Plan (the "Plan") in order to grant employees and others  providing
services  to the  Company  incentive  stock  options.  The Plan  allows  for the
granting of options to purchase up to 400,000 shares of the Company's stock. The
exercise price of the options  granted in 1996 were at the fair market values at
the date of grant.

The following table summarizes the Plan's  transactions for the six months ended
June 30, 1996:

     Options granted                                                845,560
     Options canceled or expired                                          -
     Options exercised                                                    -
                                                               --------------
     Options outstanding at June 30, 1996                           845,560
                                                               ==============
     Average price of options exercised                        $          -
     Weighted average exercise price at June 30, 1996          $          -
     Options exercisable at June 30, 1996                           845,560
     Options available for future grant                             200,000

The Company applies Accounting  Principles Board Opinion No. 25, "Accounting for
Stock Issued to Employees",  and related  interpretations  in accounting for the
Plan.  Accordingly,  no compensation expense has been recognized for the Plan to
date. Had  compensation  cost for the Company's Plan been determined  based upon
the fair value at the grant date for awards under the Plan  consistent  with the
methodology  prescribed under Financial Accounting Standards Board Statement No.
123, "Accounting for Stock-Based Compensation",  the Company's net loss and loss
per share would have been increased by approximately $169,000, or $.02 per share
and  $34,000,  or $.01 per share for the six months  ended June 30, 1996 and the
year ended  December  31,  1995,  respectively.  The fair  value of the  options
granted  during the six months  ended June 30, 1996 and the year ended  December
31, 1995 is  estimated  at $606,000  and $784,000 on the date of grant using the
Black-Scholes  option-pricing  model with the  following  assumptions:  dividend
yield of 0%,  volatility  of  1.368,  risk-free  interest  rate of 5.26%  and an
expected life of 3 years.

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

     None.


                                                                              25
<PAGE>

                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE OFFICERS

         The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>

Name                                     Age           Position
----                                     ---           --------
<S>                                      <C>           <C>                                                 
Harlan D. Peltz........................  31            Chairman of the Board and Chief Executive Officer

Don Leeds..............................  45            President; Director

Bruce L. Resnik........................  50            Executive Vice President and Chief Financial Officer

Steven M. Flanders.....................  32            Senior Vice President-Strategic Alliances

Freddie Fields.........................  72            Director

George Lindemann.......................  60            Director

Jeffrey Berg...........................  49            Director

Jan Miller.............................  46            Director

Metin Negrin...........................  30            Director

Joseph Tahl............................  34            Director
</TABLE>

     Harlan D. Peltz has been Chairman of the Board, Chief Executive Officer and
Secretary of the Company since its inception.  From September 1991 to July 1993,
Mr. Peltz was an associate at Veronis,  Suhler & Associates  Inc., an investment
banking firm specializing in the media industry. From July 1990 to May 1991, Mr.
Peltz  worked  for  Home  Box  Office  in the  area  of  international  business
development in Eastern  Europe and South America.  From September 1987 to August
1989, Mr. Peltz managed a family food service distribution  business.  Mr. Peltz
received  an MBA from the Stern  School of Business  at New York  University  in
1991.

     Don Leeds has been a director of the Company  since  December  1994. He was
elected Executive Vice President-Strategic  Planning and Business Development of
the Company in June 1996 and then President in September 1996. From 1989 to June
1996, Mr. Leeds was a Managing Director at Veronis, Suhler & Associates Inc.

     Bruce L.  Resnik has been  Executive  Vice  President  and Chief  Financial
Officer of the Company since October 1996.  From August 1992 to September  1996,
Mr.  Resnik was the  Director of Finance of the  International  Division of Grey
Advertising.  From  January  1991  to  August  1992,  Mr.  Resnik  worked  as an
independent consultant to equipment leasing companies.

     Steven M.  Flanders has been Senior Vice  President-Strategic  Alliances of
the Company since  September 1996. From May 1995 to September 1996, Mr. Flanders
was the Vice  President  of  Business  Development  at  EMCI,  Ltd.,  a  leading
entertainment and marketing company. From October 1993 to May 1995, Mr. Flanders
was the President of Entertainment  Management Corp., a sports and entertainment
marketing and consulting firm. From May 1991 to October 1993, Mr. Flanders was a
marketing  executive  at  International   Management  Group,  a  leading  sports
management and marketing agency.

     Freddie Fields has been a director of the Company since February 1996 and a
consultant to the Company since January 1995.  Since  September 1993, Mr. Fields
has been the  Chairman  of  Fields  &  Hellman  Company,  a motion  picture  and
television production company. Mr. Fields has also been the Executive


<PAGE>

Producer of "The Montel Williams Show" since September 1991. In 1990, Mr. Fields
produced the motion picture "Glory". Mr. Fields has also served as the President
and Chief Executive Officer of the talent agency, Creative Management Associates
(now known as International Creative Management),  and as the President of Metro
Goldwyn Mayer and United Artists motion picture studios.  Mr. Fields is a member
of the Board of Directors of The Sports and Entertainment Commission of the City
of Los Angeles. Mr. Fields is also a director of Dove Audio, Inc.

     Jeffrey  Berg has been a director  of the Company  since March 1996.  Since
1985,  Mr.  Berg  has  been  the  Chairman  and  Chief   Executive   Officer  of
International Creative Management, Inc.

     Jan Miller has been a director of the Company since  February  1996.  Since
January 1980, Ms. Miller has been the Chief Executive Officer of Dupree,  Miller
& Associates,  a literary agency whose clients include Anthony Robbins,  Stephen
Covey, Les Brown and Maria Shriver.

     George  Lindemann  has been a director of the Company  since  August  1996.
Since  February 1990,  Mr.  Lindemann has been the Chairman and Chief  Executive
Officer of Southern Union Company,  one of the largest natural gas  distributors
in the United  States,  and since May 1982,  has been the  President of Cellular
Dynamics,  Inc.,  the  general  partner of  Activated  Communications,  L.P.,  a
diversified communications firm. Mr. Lindemann founded Metro Mobile CTS, Inc., a
cellular  telephone  company,  in 1982 and  served  as its  Chairman  and  Chief
Executive  Officer until it merged with Bell Atlantic  Corporation  in 1992. Mr.
Lindemann also served as President of Vision Cable Communications,  a pioneer in
the cable television industry, from 1972-1981.

     Metin Negrin has been a director of the Company since December 1994.  Since
August  1993,  Mr.  Negrin  has been the Chief  Operating  Office  and a Manager
Director of The Athena Group, a real estate  investment  firm. From July 1990 to
July  1993,  Mr.  Negrin  was an  associate  in the New York  office of  LaSalle
Partners, a Chicago-based real estate firm.

     Joseph Tahl has been a director of the Company since December  1995.  Since
November  1995,  Mr.  Tahl has been the  Executive  Vice  President  and General
Counsel of The Athena Group.  From November 1990 to November  1995, Mr. Tahl was
Associate General Counsel of The Trump Organization,  a real estate acquisition,
finance and development firm.

     All directors hold office until the next annual meeting of stockholders and
the election and  qualification of their  successors.  Directors receive no cash
compensation  for serving on the Board of Directors other than  reimbursement of
reasonable  expenses  incurred  in  attending  meetings.  Officers  are  elected
annually by the Board of  Directors  and serve at the  discretion  of the Board,
subject  to the  provision  of certain  employment  agreements.  See  "Executive
Compensation -- Employment and Consulting Agreements."

     The Company has obtained key man life insurance on the life of Mr. Peltz in
the amount of $2 million.

     In connection with the Offering,  the Company agreed, for a period of three
years  following the date of the Offering,  if so requested by Whale  Securities
Co., L.P., the underwriter of the Offering (the "Underwriter"),  to nominate and
use its best efforts to elect a designee of the Underwriter as a director of the
Company  or,  at  the  Underwriter's  option,  as a  non-voting  advisor  to the
Company's  Board of Directors.  The  Underwriter has not exercised its rights to
designate such a person.

     Harlan Peltz and a group of stockholders of the Company have agreed to vote
their  shares  in  favor  of the  other's  nominees  to the  Company's  Board of
Directors. See "Certain Relationships and Related Transactions."


<PAGE>

Compliance with Section 16(A) of The Securities Exchange Act of 1934

     Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
executive  officers  and  directors  and  persons  who own more  than 10% of the
outstanding common stock of the Company  (collectively,  "reporting persons") to
file  reports of  ownership  and changes in ownership  with the  Securities  and
Exchange Commission. Based solely on the Company's review of the copies of these
reports  received  by it, and  written  representations  received  from  certain
reporting persons,  the Company believes that all filings required to be made by
the reporting  persons for the fiscal year ended June 30, 1996 were timely made,
except that (i) the Company  has not  received  copies of any reports or written
representations  from  Jeffrey  Berg  and  (ii)  since  the  Company's  Board of
Directors  elected to change its fiscal  year to June 30 more than 45 days after
June 30, 1996, Harlan Peltz and Don Leeds have not timely filed Forms 5 relating
to the granting of stock options by Mr. Peltz and the Company to Mr. Leeds.  See
"Certain Relationships and Related Transactions."

ITEM 10.  EXECUTIVE COMPENSATION

     The following  table sets forth the  compensation  paid to Harlan D. Peltz,
the  Company's  Chief  Executive  Officer,  and Lawrence  Kieves,  the Company's
President at June 30, 1996,  for the fiscal years ended June 30, 1994,  1995 and
1996. No other executive  officer  received  compensation in any of those fiscal
years that exceeded $100,000.

                           Summary Compensation Table

                                                     Annual Compensation
                                          --------------------------------------
            Name And                                             Other Annual
       Principal Position          Year   Salary ($)  Bonus ($) Compensation ($)
--------------------------------- ------  ----------  --------- ----------------

Harlan D. Peltz,                   1994   $ 16,667    $    --      $    --
   Chief Executive Officer.......  1995   $ 78,846    $    --      $    --
                                   1996   $112,500                 $    --
                                                                  
Lawrence Kieves,                   1994   $ 25,000    $    --      $    --
   President.....................  1995   $ 92,308    $    --      $    --
                                   1996   $112,500    $    --      $    --
                                                                 


     Prior to the  Offering and related  Reorganization,  the salaries of Harlan
Peltz and  Lawrence  Kieves  were paid by the  Partnership  through  its general
partner.

Employment and Consulting Agreements

     On  April  2,  1996,  the  Company  entered  into a  three-year  employment
agreement  with Harlan  Peltz,  its  Chairman  of the Board and Chief  Executive
Officer.  The agreement  requires Mr. Peltz to devote  substantially  all of his
business time to the management and operations of the Company and provides for a
base annual  salary of  $110,000  during the term of the  agreement,  subject to
increase as determined by the Board of Directors.  Mr. Peltz also may be granted
annual  bonuses  at the  discretion  of the Board of  Directors.  The  agreement
provides  that if Mr. Peltz is  terminated  without  cause,  he will continue to
receive the base salary during the remainder of the contract term. The agreement
also provides that the Company will continue to pay the base salary to Mr. Peltz
or his legal representative in the event of his termination due to disability or
death,  for a period ending on the earlier of the one-year  anniversary  of such
termination or the end of the employment term. The agreement contains provisions
prohibiting  Mr.  Peltz  from  competing  with the  Company  during  the term of
employment and for a period of one year thereafter.


<PAGE>

     The Company also entered into a two-year employment agreement with Lawrence
Kieves,  its President,  in April 1996.  Mr. Kieves  resigned as President and a
director  of the  Company  on  August  21,  1996  and,  except  for a  provision
prohibiting  Mr. Kieves from competing with the Company for a period of one year
from that date, his employment agreement terminated.

     On  June  17,  1996,  the  Company  entered  into a  three-year  employment
agreement  with Don  Leeds to serve as its  Executive  Vice  President-Strategic
Planning and Business Development. (Mr. Leeds was elected President in September
1996.) The  agreement  requires  Mr.  Leeds to devote  substantially  all of his
business time to the management and operations of the Company and provides for a
base annual  salary of  $200,000  during the term of the  agreement,  subject to
increase as determined by the Board of Directors.  Mr. Leeds may also be granted
annual  bonuses  at the  discretion  of the Board of  Directors.  The  agreement
requires the Company to provide and maintain certain insurance  benefits for Mr.
Leeds. The agreement provides that in the event of Mr. Leeds' termination due to
disability or death,  the Company will continue to pay the base salary to him or
his estate for a period  ending on the earlier of the  one-year  anniversary  of
such  termination  or the end of the contract  term. The agreement also provides
that Mr. Leeds may terminate  his  employment  for Good Reason (as defined),  in
which event he will be entitled to receive his base salary for the  remainder of
the contract term. The agreement contains provisions  prohibiting Mr. Leeds from
competing  with  the  Company  during  the  term of  employment  and,  upon  the
satisfaction  of certain  conditions,  for a period of one year  thereafter.  In
connection with his employment by the Company, Mr. Leeds also received a $50,000
fee for consulting  services he rendered to the Company prior to his employment,
and options from the Company and Harlan Peltz.  See "Certain  Relationships  and
Related Transactions."

     The Company has entered into a consulting agreement with an entity owned by
Freddie  Fields and Jerome  Hellman  pursuant  to which the  Company has engaged
Messrs.  Fields and  Hellman  to acquire  rights to  programming.  See  "Certain
Relationships and Certain Transactions."

     On September  9, 1996,  the Company  entered  into a three-year  employment
agreement with Steven  Flanders to serve as its Senior Vice  President-Strategic
Alliances.  The agreement  provides for a base annual salary of $120,000  during
the term of the  agreement,  subject to increase as  determined  by the Board of
Directors.  Mr. Flanders may also be granted annual bonuses at the discretion of
the  Board  of  Directors.  The  agreement  provides  that in the  event  of Mr.
Flanders'  termination due to disability or death,  the Company will continue to
pay the base  salary to him or his estate for a period  ending on the earlier of
the six-month  anniversary of such  termination or the end of the contract term.
The agreement contains  provisions  prohibiting Mr. Flanders from competing with
the  Company  during  the  term of  employment  and  for a  period  of one  year
thereafter.  In connection  with his hiring,  Mr.  Flanders was granted  options
pursuant to the  Company's  1996  Employee  Stock  Option Plan to purchase up to
40,000  shares of the  Company's  common  stock at the fair market  value of the
stock on the date of grant.

     On September  26, 1996,  the Company  entered into a three-year  employment
agreement  with Bruce L. Resnik to serve as its Executive  Vice  President-Cheif
Financial  Officer.  The agreement provides for a base annual salary of $175,000
during the term of the  agreement,  subject to increase  as  determined  by the
Board of  Directors.  Mr.  Resnik  may also be  granted  annual  bonuses  at the
discretion of the Board of Directors.  The agreement  provides that in the event
of Mr.  Resnik's  termination  due to  disability  or death,  the  Company  will
continue to pay the base salary to him or his estate for a period  ending on the
earlier  of the  six-month  anniversary  of such  termination  or the end of the
contract term. The agreement  contains  provisions  prohibiting  Mr. Resnik from
competing with the Company during the term of employment and for a period of one
year thereafter.  In connection with his hiring,  Mr. Resnik was granted options
pursuant to the  Company's  1996  Employee  Stock  Option Plan to purchase up to
50,000  shares of the  Company's  common  stock at the fair market  value of the
stock on the date of grant.  

ITEM 11. SECURITY  OWNERSHIP OF CERTAIN  BENEFICIAL
OWNERS AND MANAGEMENT

     The  following  table  sets  forth  information  regarding  the  beneficial
ownership of the Common Stock of the Company as of November 15, 1996 by (i) each
person  known by the Company to be the  beneficial  owner of more than 5% of the
outstanding  shares  of  Common  Stock,  (ii)  each of the  Company's  executive
officers and  directors  and (iii) all  executive  officers and directors of the
Company as a group.

                                           Amount And Nature
Name And Address                            of Beneficial           Percent of
of Beneficial Owner(1)                       Ownership(2)             Class
----------------------                       ------------             -----

Harlan D. Peltz                                 2,392,813             27.6%

A. Alfred Taubman(3)                              788,889              9.1
200 East Long Lake Road
Bloomfield Hills, MI 48304

George Lindemann(4)                               630,757              7.3
c/o Cellular Dynamics, Inc.
767 Fifth Avenue
New York, NY 10153

Crescent International Holdings                   563,060              6.5
c/o Reid & Priest
40 West 57th Street
New York, NY 10019

<PAGE>

                                             Amount And Nature
Name And Address                              of Beneficial        Percent of
of Beneficial Owner(1)                         Ownership(2)           Class
----------------------                         ------------           -----
Roy F. Zurkowski(5)                               450,448              5.2
451 Goodhue Road
Bloomfield Hills, MI 48304

Freddie Fields(6)                                 332,587              3.7
c/o The Fields & Hellman Company
8899 Beverly Boulevard
Los Angeles, CA 90048

Don Leeds(7)                                      187,045              2.1

Metin Negrin                                       75,276               .9

Joseph Tahl                                            --               --

Jeffrey Berg                                           --               --

Jan Miller                                             --               --

Bruce L. Resnik                                        --               --

Steven M. Flanders                                     --               --

All executive officers and directors as a       3,618,478(4)(6)(7)    40.0
group (10 individuals)

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

(1)  Unless otherwise indicated, the address of each beneficial owner identified
     is 149 Fifth Avenue, New York, New York 10010.

(2)  Unless otherwise indicated,  the Company believes that all persons named in
     the table have sole voting and investment  power with respect to all shares
     of Common  Stock  beneficially  owned by them. A person is deemed to be the
     beneficial  owner of securities that can be acquired by such person with 60
     days  from the date of this  Form  10-KSB  upon the  exercise  of  options,
     warrants or convertible  securities.  Each  beneficial  owner's  percentage
     ownership is determined by assuming that convertible securities, options or
     warrants  that are held by such  person  (but not  those  held by any other
     person) and which are  exercisable  within 60 days of the date of this Form
     10-KSB have been exercised.

(3)  As trustee of the A. Alfred Taubman Restated Revocable Trust.

(4)  All shares owned by Activated  Communications Limited Partnership ("ACLP"),
     which is entirely owned,  directly or indirectly,  by Mr. Lindemann and his
     family  members.  Mr.  Lindemann  is the  President,  and he and his family
     members are the sole shareholders, of the general partner of ACLP.

(5)  As trustee of the Roy F. Zurkowski Trust.

(6)  Includes  276,280  shares  issuable  upon  exercise of an option owned by a
     family trust of which Freddie Fields is a trustee.

(7)  Includes 125,332 shares issuable upon exercise of options.

<PAGE>

ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Reorganization

     Prior  to  the  Offering,  the  Company's  business  was  conducted  by the
Partnership.  In  connection  with the  Offering,  the  Partnership  effected  a
reorganization  (the  "Reorganization")  pursuant  to which (i) the  Partnership
assigned  all of its assets to the Company  and the  Company  assumed all of the
Partnership's liabilities, (ii) in exchange for those assets, the Company issued
6,354,440  shares  of Common  Stock to the  Partnership,  (iii) the  Partnership
distributed those shares to its partners in proportion to their interests in the
Partnership,  and  (iv) the  Partnership  dissolved.  In  connection  with  that
Reorganization,  Harlan  Peltz,  Chairman  and Chief  Executive  Officer  of the
Company,   received  2,392,813  shares;  NET  Portfolio  Investors,  L.P.  ("NET
Portfolio")  received  2,771,332  shares;  Fields &  Hellman  Company,  of which
Freddie Fields, a director of the Company,  is a beneficial  owner,  received an
option to purchase  552,560 shares;  and Don Leeds,  President and a director of
the Company, received 56,713 shares.

Transactions With Directors And Stockholders

     Upon its  formation,  the  Partnership  issued to Mr.  Peltz a 99%  limited
partnership  interest  and  to  Universal  Access  Network,   Inc.,  a  Delaware
corporation  wholly-owned  by Mr. Peltz (the  "General  Partner"),  a 1% general
partnership  interest,  for  aggregate  consideration  of $50,010.  Mr.  Peltz's
interest in the Partnership was subsequently  diluted by Partnership  financings
and transfers by Mr. Peltz. In October 1994, Mr. Peltz  transferred a portion of
his interest in the  Partnership  to Don Leeds in  consideration  of  investment
banking  services  provided to the  Partnership.  Mr. Peltz  received  2,392,813
shares  of  Common  Stock  in the  Reorganization.  Mr.  Peltz  may be  deemed a
"promoter" of the Company, as such term is defined in the Securities Act.

     Pursuant to the Partnership's  partnership  agreement,  the General Partner
was paid compensation for managing the Partnership of approximately $104,000 and
$220,000  in 1994 and 1995,  respectively.  The  salaries  of  Harlan  Peltz and
Lawrence  Kieves  were paid by the  General  Partner  from those  proceeds.  See
"Executive Compensation."

     In December 1994, the  Partnership  issued a limited  partnership  interest
(exchanged for 2,596,332  shares of Common Stock in the  Reorganization)  to NET
Portfolio  in  consideration  of  $4,100,000.  NET  Portfolio  entered  into  an
agreement with the Company pursuant to which NET Portfolio was granted the right
to require  the  Company to include  the  2,596,332  shares in any  registration
statement  filed  by the  Company  on  behalf  of any  of  the  Company's  other
shareholders (the "NET Portfolio  Registration  Rights").  In December 1995, the
Partnership issued an additional  limited  partnership  interest  (exchanged for
175,000  shares of  Common  Stock in the  Reorganization)  to NET  Portfolio  in
consideration  of $500,000.  The Company  included  those shares in the Offering
registration   statement.   NET  Portfolio  and  Harlan  Peltz  entered  into  a
shareholders  agreement (the  "Shareholders  Agreement"),  pursuant to which Mr.
Peltz  agreed to vote all  shares of Common  Stock  owned by him in favor of the
election of nominees of NET Portfolio so that NET Portfolio would be entitled to
designate at least one-third of the directors of the Company,  and NET Portfolio
agreed to vote all shares of Common  Stock owned by it in favor of the  election
of Mr.  Peltz and his  nominees so that Mr. Peltz would be entitled to designate
at least a majority of the  directors of the Company.  The  agreement  provided,
however,  that upon the death or disability of Mr. Peltz, his estate or personal
representative  would  vote all of his  shares  so that NET  Portfolio  would be
entitled  to  designate  at least a majority  of the  Company's  directors.  The
Shareholders  Agreement  also  provided that Mr. Peltz would not vote any of his
shares of Common Stock in favor of any sale of all or  substantially  all of the
Company's assets or any merger of the Company unless NET Portfolio also voted in
favor of such transaction. In addition, the Shareholders Agreement provided that
Mr. Peltz would give NET Portfolio notice of any proposed sales by him of shares
of Common Stock (other than sales in a public  market),  and NET Portfolio would
then have the right to include  certain  of its own  shares of Common  Stock for
sale to the prospective purchaser.

<PAGE>

     Following  consummation  of  the  Offering,  NET  Portfolio  dissolved  and
distributed  its shares of Common  Stock to its  partners,  including  an entity
controlled  by George  Lindemann,  a director of the Company  (630,757  shares),
Freddie  Fields,  a director of the Company  (56,307  shares),  Metin Negrin,  a
director of the Company  (75,276  shares),  and all of the other 5% shareholders
listed in Item 11 (other than Harlan Peltz). In connection with that dissolution
(i) NET Portfolio assigned the NET Portfolio Registration Rights to its partners
and (ii) Harlan Peltz and those  partners (who  collectively  own  approximately
32.0% of the  outstanding  Common  Stock  and  together  with  Harlan  Peltz own
approximately 59.6% of the outstanding Common Stock) have agreed to enter into a
new  shareholders  agreement  in  substitution  of  the  Shareholders  Agreement
pursuant to which the partners  will  exercise  their  rights by majority  vote.
Metin Negrin and Joseph Tahl are the  designees of NET  Portfolio's  partners on
the Company's Board of Directors.

     In  connection  with the  Company's  hiring of Don Leeds as Executive  Vice
President  in June 1996,  the Company  granted to Mr.  Leeds an option under the
Company's 1996 Employee Stock Option Plan to purchase,  at a price of $3.875 per
share,  up to 66,666  shares of Common Stock  immediately,  up to an  additional
66,667  shares  of  Common  Stock  on and  after  June  17,  1997,  and up to an
additional  16,667  shares  of  Common  Stock on and  after  June 17,  1998.  In
addition,  Harlan Peltz granted to Mr. Leeds an option to purchase up to 176,000
shares of his Common Stock at the same price and in equal  proportions  over the
same vesting periods.

     In connection with its acquisition of the young adult marketing  businesses
of APMC, the Company paid a $150,000 fee to Veronis,  Suhler and Associates Inc.
("VS&A").  Don Leeds  participated in the transaction on behalf of VS&A prior to
joining the Company as its  Executive  Vice  President,  and was paid $45,000 by
VS&A on account of that participation.

Transactions with Fields and Hellman

     Effective  January 1995,  the Company  entered into a consulting  agreement
with Fields & Hellman Company,  a corporation owned by Freddie Fields and Jerome
Hellman.  In December 1995, the Company and Fields & Hellman Company amended and
restated the consulting agreement to provide,  among other things, that Fields &
Hellman  Company will be entitled to receive annual  consulting fees of $450,000
and  $550,000  in  1996  and  1997,   respectively,   annual  overhead   expense
reimbursements  (primarily  relating  to the  Company's  office in Los  Angeles,
California) of $262,500 and $275,625 in 1996 and 1997, respectively,  and 10% of
the Company's pre-tax income through 1999. The Company has also granted Fields &
Hellman  Company  an option to  purchase  552,560  shares of Common  Stock at an
exercise price of $1.58 per share.  For the fiscal year ended June 30, 1996, the
Company paid consulting fees of $375,000 and overhead expenses of $256,249 under
such agreement.  To date, Fields & Hellman Company has facilitated the Company's
school  contracting and programming  efforts.  Each of Freddie Fields and Jerome
Hellman  owned a limited  partnership  interest in NET  Portfolio  and  received
56,307 shares of Common Stock upon the dissolution of NET Portfolio.

ITEM 13.  EXHIBITS, LISTS AND REPORTS ON FORM 8-K.

       (a)    Exhibits.

3.1    Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to
       the Registrant's  Registration  Statement on Form SB-2,  Registration No.
       33-80935, filed on March 6, 1996).

3.2    Certificate of Amendment of Certificate of Incorporation (incorporated by
       reference to Exhibit 3.2 to the  Registrant's  Registration  Statement on
       Form SB-2, Registration No. 33-80935, filed on March 6, 1996).

3.3    Bylaws  (incorporated  by  reference  to Exhibit 3.3 to the  Registrant's
       Registration Statement on Form SB- 2, Registration No. 33-80935, filed on
       March 6, 1996).

4.1    Warrant  Agreement  (incorporated  by  reference  to  Exhibit  4.1 to the
       Registrant's  Registration  Statement  on  Form  SB-2,  Registration  No.
       33-80935, filed on March 6, 1996).


<PAGE>

4.2    Underwriter's  Warrant  (incorporated  by reference to Exhibit 4.2 to the
       Registrant's  Registration  Statement  on  Form  SB-2,  Registration  No.
       33-80935, filed on March 6, 1996).

10.1   Employee  Stock Option Plan of Registrant  (incorporated  by reference to
       Exhibit  10.1 to the  Registrant's  Registration  Statement on Form SB-2,
       Registration No. 33-80935, filed on March 6, 1996).

10.2   Employment Agreement between Registrant and Harlan D. Peltz (incorporated
       by reference to Exhibit 10.2 to the Registrant's  Registration  Statement
       on Form SB-2, Registration No. 33-80935, filed on March 6, 1996).

10.3   Employment  Agreement between  Registrant and Don Leeds  (incorporated by
       reference to Exhibit 1 to the Registrant's  Form 10-QSB for the quarterly
       period ended June 30, 1996).

10.4   Employment Agreement between Registrant and Steven Flanders (incorporated
       by  reference  to  Exhibit  1 to the  Registrant's  Form  10-QSB  for the
       quarterly period ended September 30, 1996).

10.5   Employment Agreement between Registrant and Bruce L. Resnik (incorporated
       by  reference  to  Exhibit  2 to the  Registrant's  Form  10-QSB  for the
       quarterly period ended September 30, 1996).

10.6   Agreement dated December 19, 1995 between Registrant and Fields & Hellman
       Company  (incorporated  by reference to Exhibit 10.4 to the  Registrant's
       Registration Statement on Form SB-2, Registration No. 33-80935,  filed on
       March 6, 1996).

10.7   NET  Portfolio  Investors  Agreement  dated  December  21,  1995  between
       Registrant and NET Portfolio Investors,  L.P.  (incorporated by reference
       to Exhibit 10.5 to the Registrant's  Registration Statement on Form SB-2,
       Registration No. 33-80935, filed on March 6, 1996).

10.8   Form of  Shareholders  Agreement  between  Harlan Peltz and NET Portfolio
       Investors,  L.P.  (incorporated  by  reference  to  Exhibit  10.6  to the
       Registrant's  Registration  Statement  on  Form  SB-2,  Registration  No.
       33-80935, filed on March 6, 1996).

10.9   Registration  Rights Agreement dated December 21, 1995 between Registrant
       and NET Portfolio Investors,  L.P.  (incorporated by reference to Exhibit
       10.7  to  the   Registrant's   Registration   Statement   on  Form  SB-2,
       Registration No. 33-80935, filed on March 6, 1996).

10.10  Standard Form of School  Contract  (incorporated  by reference to Exhibit
       10.8  to  the   Registrant's   Registration   Statement   on  Form  SB-2,
       Registration No. 33-80935, filed on March 6, 1996).

10.11  Warrant Agreement dated March 5, 1996 between Registrant and Merv Adelson
       (incorporated   by  reference  to  Exhibit  10.12  to  the   Registrant's
       Registration Statement on Form SB-2, Registration No. 33- 80935, filed on
       March 6, 1996).

10.12  Registration  Rights Agreement dated March 5, 1996 between Registrant and
       Merv  Adelson   (incorporated  by  reference  to  Exhibit  10.13  to  the
       Registrant's  Registration  Statement  on  Form  SB-2,  Registration  No.
       33-80935, filed on March 6, 1996).

10.13  Asset Purchase  Agreement dated September 13, 1996 among American Passage
       Media Corporation,  Gilbert Scherer,  the Registrant and American Passage
       Media,  Inc.  (incorporated by reference to Exhibit 2 to the Registrant's
       Form 8-K filed on September 28, 1996).

10.14  $750,000  Subordinated  Promissory Note from American Passage Media, Inc.
       to American  Passage  Media  Corporation  (incorporated  by  reference to
       Exhibit 32 to the Registrant's Form 8-K filed on September 28, 1996).

10.15  Guaranty by the Registrant in favor of American Passage Media Corporation
       (incorporated  by  reference  to Exhibit 4 to the  Registrant's  Form 8-K
       filed on September 28, 1996).

10.16  Option  Agreement  between the  Registrant  and  American  Passage  Media
       Corporation  (incorporated  by reference to Exhibit 5 to the Registrant's
       Form 8-K filed on September 28, 1996).

10.17  Consulting and Non-Competition  Agreement between American Passage Media,
       Inc. and American Passage Media Corporation (incorporated by reference to
       Exhibit 6 to the Registrant's Form 8-K filed on September 28, 1996).

10.18  Transition  Agreement  between American Passage Media,  Inc. and American
       Passage Media Corporation  (incorporated by reference to Exhibit 7 to the
       Registrant's Form 8-K filed on September 28, 1996).

10.19  Directory of Classes  Representation  Agreement  between American Passage
       Media,  Inc. and American  Passage  Media  Corporation  (incorporated  by
       reference  to Exhibit 8 to the  Registrant's  Form 8-K filed on September
       28, 1996).

10.20  Business Loan Agreement  between American Passage Media,  Inc. and Signet
       Bank (incorporated by reference to Exhibit 9 to the Registrant's Form 8-K
       filed on September 28, 1996).

<PAGE>


10.21  Promissory  Note  from  American  Passage  Media,  Inc.  to  Signet  Bank
       (incorporated  by  reference to Exhibit 10 to the  Registrant's  Form 8-K
       filed on September 28, 1996).

10.22  Commercial  Security  Agreement  between American Passage Media, Inc. and
       Signet Bank  (incorporated by reference to Exhibit 11 to the Registrant's
       Form 8-K filed on September 28, 1996).

10.23  Commercial   Guaranty  from  the  Registrant  in  favor  of  Signet  Bank
       (incorporated  by  reference to Exhibit 12 to the  Registrant's  Form 8-K
       filed on September 28, 1996).

10.24  Commercial Pledge and Security  Agreement from the Registrant in favor of
       Signet Bank  (incorporated by reference to Exhibit 13 to the Registrant's
       Form 8-K filed on September 28, 1996).

21     Subsidiaries of the Registrant.
27     Financial Data Schedule.

       (b)    Reports on Form 8-K.

              None.

<PAGE>

                                   SIGNATURES

     In accordance  with 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.

November 19, 1996                                 NETWORK EVENT THEATER, INC.

                                                  By:/s/ Harlan D. Peltz
                                                     -------------------------
                                                     Harlan D. Peltz
                                                     Chairman of the Board and
                                                     Chief Executive Officer

     In accordance  with 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.

November 19, 1996                              /s/ Harlan D. Peltz
                                               -------------------
                                               Harlan D. Peltz
                                               Chairman of the Board and
                                               Chief Executive Officer
                                               (Principal Executive Officer)

November 19, 1996                              /s/ Bruce L. Resnik
                                               -------------------
                                               Bruce L. Resnik
                                               Executive Vice President and
                                               Chief Financial Officer
                                               (Principal Financial Officer and
                                               Principal Accounting Officer)


November 19, 1996                              /s/ Don Leeds
                                               ----------------------
                                               Don Leeds
                                               President and Director

November 19, 1996                              /s/ Freddie Fields
                                               ----------------------
                                                   Freddie Fields
                                                   Director

November 19, 1996                              /s/ George Lindemann
                                               ----------------------
                                                   George Lindemann
                                                   Director

November 19, 1996                              /s/ Joseph Tahl
                                               ----------------------
                                                   Joseph Tahl
                                                   Director


<PAGE>

                                  EXHIBIT INDEX

Exhibit No.

3.1  Certificate of  Incorporation  (incorporated by reference to Exhibit 3.1 to
     the  Registrant's  Registration  Statement on Form SB-2,  Registration  No.
     33-80935, filed on March 6, 1996).

3.2  Certificate of Amendment of Certificate of  Incorporation  (incorporated by
     reference to Exhibit 3.2 to the Registrant's Registration Statement on Form
     SB-2, Registration No. 33-80935, filed on March 6, 1996).

3.3  Bylaws  (incorporated  by  reference  to  Exhibit  3.3 to the  Registrant's
     Registration  Statement on Form SB-2,  Registration No. 33-80935,  filed on
     March 6, 1996).

4.1  Warrant  Agreement  (incorporated  by  reference  to  Exhibit  4.1  to  the
     Registrant's   Registration  Statement  on  Form  SB-2,   Registration  No.
     33-80935, filed on March 6, 1996).

4.2  Underwriter's  Warrant  (incorporated  by  reference  to Exhibit 4.2 to the
     Registrant's   Registration  Statement  on  Form  SB-2,   Registration  No.
     33-80935, filed on March 6, 1996).

10.1 Employee  Stock  Option Plan of  Registrant  (incorporated  by reference to
     Exhibit  10.1 to the  Registrant's  Registration  Statement  on Form  SB-2,
     Registration No. 33-80935, filed on March 6, 1996).

10.2 Employment  Agreement between Registrant and Harlan D. Peltz  (incorporated
     by reference to Exhibit 10.2 to the Registrant's  Registration Statement on
     Form SB-2, Registration No. 33- 80935, filed on March 6, 1996).

10.3 Employment  Agreement  between  Registrant and Don Leeds  (incorporated  by
     reference to Exhibit 1 to the  Registrant's  Form 10-QSB for the  quarterly
     period ended June 30, 1996).

10.4 Employment  Agreement between Registrant and Steven Flanders  (incorporated
     by reference to Exhibit 1 to the Registrant's Form 10-QSB for the quarterly
     period ended September 30, 1996).

10.5 Employment  Agreement between Registrant and Bruce L. Resnik  (incorporated
     by reference to Exhibit 2 to the Registrant's Form 10-QSB for the quarterly
     period ended September 30, 1996).

10.6 Agreement  dated December 19, 1995 between  Registrant and Fields & Hellman
     Company  (incorporated  by reference  to Exhibit  10.4 to the  Registrant's
     Registration  Statement on Form SB-2,  Registration No. 33-80935,  filed on
     March 6, 1996).

10.7 NET  Portfolio   Investors   Agreement  dated  December  21,  1995  between
     Registrant and NET Portfolio Investors,  L.P. (incorporated by reference to
     Exhibit  10.5 to the  Registrant's  Registration  Statement  on Form  SB-2,
     Registration No. 33-80935, filed on March 6, 1996).

10.8 Form of  Shareholders  Agreement  between  Harlan  Peltz and NET  Portfolio
     Investors,   L.P.  (incorporated  by  reference  to  Exhibit  10.6  to  the
     Registrant's   Registration  Statement  on  Form  SB-2,   Registration  No.
     33-80935, filed on March 6, 1996).

10.9 Registration  Rights  Agreement dated December 21, 1995 between  Registrant
     and NET Portfolio  Investors,  L.P.  (incorporated  by reference to Exhibit
     10.7 to the Registrant's  Registration Statement on Form SB-2, Registration
     No. 33-80935, filed on March 6, 1996).

10.10 Standard  Form of School  Contract  (incorporated  by reference to Exhibit
      10.8 to the Registrant's Registration Statement on Form SB-2, Registration
      No. 33-80935, filed on March 6, 1996).

10.11 Warrant Agreement dated March 5, 1996 between  Registrant and Merv Adelson
      (incorporated   by  reference  to  Exhibit   10.12  to  the   Registrant's
      Registration Statement on Form SB-2,  Registration No. 33-80935,  filed on
      March 6, 1996).

10.12 Registration  Rights Agreement dated March 5, 1996 between  Registrant and
      Merv  Adelson   (incorporated   by  reference  to  Exhibit  10.13  to  the
      Registrant's   Registration  Statement  on  Form  SB-2,  Registration  No.
      33-80935, filed on March 6, 1996).


10.13 Asset Purchase  Agreement dated September 13, 1996 among American  Passage
      Media  Corporation,  Gilbert Scherer,  the Registrant and American Passage
      Media,  Inc.  (incorporated  by reference to Exhibit 2 to the Registrant's
      Form 8-K filed on September 28, 1996).

<PAGE>


10.14 $750,000 Subordinated Promissory Note from American Passage Media, Inc. to
      American Passage Media  Corporation  (incorporated by reference to Exhibit
      32 to the Registrant's Form 8-K filed on September 28, 1996).

10.15 Guaranty by the Registrant in favor of American Passage Media  Corporation
      (incorporated by reference to Exhibit 4 to the Registrant's Form 8-K filed
      on September 28, 1996).

10.16 Option  Agreement  between  the  Registrant  and  American  Passage  Media
      Corporation  (incorporated  by reference to Exhibit 5 to the  Registrant's
      Form 8-K filed on September 28, 1996).

10.17 Consulting and  Non-Competition  Agreement between American Passage Media,
      Inc. and American Passage Media Corporation  (incorporated by reference to
      Exhibit 6 to the Registrant's Form 8-K filed on September 28, 1996).

10.18 Transition  Agreement  between American  Passage Media,  Inc. and American
      Passage Media  Corporation  (incorporated by reference to Exhibit 7 to the
      Registrant's Form 8-K filed on September 28, 1996).

10.19 Directory of Classes  Representation  Agreement  between  American Passage
      Media,  Inc. and  American  Passage  Media  Corporation  (incorporated  by
      reference to Exhibit 8 to the Registrant's Form 8-K filed on September 28,
      1996).

10.20 Business Loan Agreement  between American  Passage Media,  Inc. and Signet
      Bank  (incorporated by reference to Exhibit 9 to the Registrant's Form 8-K
      filed on September 28, 1996).

10.21 Promissory  Note  from  American  Passage  Media,   Inc.  to  Signet  Bank
      (incorporated  by  reference  to Exhibit 10 to the  Registrant's  Form 8-K
      filed on September 28, 1996).

10.22 Commercial  Security  Agreement  between American Passage Media,  Inc. and
      Signet Bank  (incorporated  by reference to Exhibit 11 to the Registrant's
      Form 8-K filed on September 28, 1996).

10.23 Commercial   Guaranty  from  the   Registrant  in  favor  of  Signet  Bank
      (incorporated  by  reference  to Exhibit 12 to the  Registrant's  Form 8-K
      filed on September 28, 1996).

10.24 Commercial  Pledge and Security  Agreement from the Registrant in favor of
      Signet Bank  (incorporated  by reference to Exhibit 13 to the Registrant's
      Form 8-K filed on September 28, 1996).

21    Subsidiaries of the Registrant.

27    Financial Data Schedule.