U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
    SEPTEMBER 30, 1996

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

                                                     Commission File No. 1-13890


                           BUREAU OF ELECTRONIC PUBLISHING, INC.
  (Exact name of small business issuer as specified in its charter)


          Delaware                                           22-2894444
(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                         Identification number)


619 Alexander Road
Princeton, New Jersey 08540                                           08540
---------------------------                                         ---------
(Address of principal executive offices)                           (Zip Code)

                                 (609) 514-1600
                           (Issuer's telephone number)


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

                                                 YES __X__    NO____


The number of shares outstanding of the issuer's common stock, par value
$.001 per share as of October 31, 1996 was 4,519,869 shares.

The number of the issuer's common stock purchase warrants outstanding as of
October 31, 1996 was 1,340,476 warrants.


Transitional Small Business Disclosure Format:   Yes ____   No __X__


                           Page __1__ of __29___ pages

<PAGE>


                      BUREAU OF ELECTRONIC PUBLISHING, INC.
                                   FORM 10-QSB


                                      INDEX


Part I       FINANCIAL INFORMATION                                       PAGE
------       ---------------------                                       ----


 Item 1.     Financial Statements

             Balance Sheet as of September 30, 1996                        3

             Statements of Operations for the three and
             nine months ended September 30, 1996 and 1995.                4

             Statement of Changes in Shareholders' Equity
             for the nine months ended September 30, 1996.                 5

             Statements of Cash Flows for the three and
             nine months ended September 30, 1996 and 1995.                6

             Notes to Financial Statements                                 7

Item 2.      Management's Discussion and Analysis of
             Financial Condition and Results of Operations                 10


Part II      OTHER INFORMATION
-------      -----------------

Item 6.      Exhibits and Reports on Form 8-K                             13

             Signatures                                                   14



                                        2


<PAGE>


Part I  FINANCIAL INFORMATION

Item 1.  Financial Statements

                      BUREAU OF ELECTRONIC PUBLISHING, INC.
                                  BALANCE SHEET
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                       September 30,
                                                                           1996
                                                                           ----
<S>                                                                    <C>
ASSETS

CURRENT ASSETS
   Cash and Cash Equivalents                                            $ 1,095,824
   Accounts Receivable, net of allowance for doubtful accounts
        of $350,000                                                         116,908
   Inventories                                                              201,574
   Prepaid Expenses and Other Current Assets                                 99,378
                                                                        -----------
                Total Current Assets                                    $ 1,513,684

Property and Equipment, net of accumulated depreciation of $276,455     $   513,098
Prepublication Costs, net of accumulated amortization of $922,663           890,851
Investment in Joint Venture                                                 230,000
Other Assets
                                                                             64,250
                                                                        -----------
                Total Assets                                            $ 3,211,883
                                                                        ===========


LIABILITIES AND SHAREHOLDERS' EQUITY

CURRRENT LIABILITIES
   Accounts Payable                                                     $   399,194
   Accrued Expenses                                                         171,437
                                                                        -----------
                Total Current Liabilities                               $   570,631


SHAREHOLDERS' EQUITY
      Preferred Stock, par value $.001 per share - 2,000,000 shares
         authorized, no shares outstanding                              $         0
      Common Stock, par value $.001 per share - 12,000,000
        shares authorized, 4,519,869 shares issued and outstanding            4,520
      Common Stock Purchase Warrants, 1,340,476 warrants issued
         and outstanding                                                    335,119
      Additional Paid-In Capital                                          8,102,809
      Accumulated Deficit                                                (5,801,196)
                                                                        -----------
                Total Shareholders' Equity                              $ 2,641,252
                                                                        -----------

                Total Liabilities and Shareholders' Equity              $ 3,211,883
                                                                        ===========
</TABLE>


       The accompanying notes are an integral part of this balance sheet.

                                        3

<PAGE>

                      BUREAU OF ELECTRONIC PUBLISHING, INC.
                            STATEMENTS OF OPERATIONS
                                   (Unaudited)
<TABLE>
<CAPTION>

                                                     Nine Months Ended                Three Months Ended
                                                       September 30,                    September 30,

                                                    1996            1995             1996           1995
                                                    ----            ----             ----           ----
<S>                                             <C>             <C>               <C>            <C>

NET SALES                                        $   454,439     $ 2,384,644     $   181,195     $   943,149

COST OF SALES                                      1,318,314         751,530         831,023         178,746
                                                 -----------     -----------     -----------     -----------

                Gross (Loss) Profit              $  (863,875)    $ 1,633,114     $  (649,828)    $   764,403

SELLING, GENERAL and
     ADMINISTRATIVE EXPENSES                     $ 2,609,450     $ 1,710,481     $   830,585     $   565,312
                                                 -----------     -----------     -----------     -----------

                (Loss) income from operations    $(3,473,325)    $   (77,367)    $(1,480,413)    $   199,091

EQUITY in LOSS of INVESTMENT
     in JOINT VENTURE                                 20,000               0               0               0

INTEREST EXPENSE                                       2,305       1,171,445           2,257         251,183

OTHER INCOME                                          61,401          16,308          20,820          15,541
                                                 -----------     -----------     -----------     -----------


                Loss before income taxes         $(3,434,229)    $(1,232,504)    $(1,461,850)    $   (36,551)

PROVISION FOR INCOME TAXES                                 0               0               0               0
                                                 -----------     -----------     -----------     -----------

                Net Loss                         $(3,434,229)    $(1,232,504)    $(1,461,850)    $   (36,551)
                                                 ===========     ===========     ===========     ===========


NET LOSS PER COMMON
     SHARE OUTSTANDING                           $     (0.97)    $     (0.42)    $     (0.33)    $     (0.01)
                                                 ===========     ===========     ===========     ===========

COMMON SHARES OUTSTANDING                          3,523,969       2,915,643       4,466,369       2,915,643
                                                 ===========     ===========     ===========     ===========
</TABLE>


        The accompanying notes are an integral part of these statements.



                                        4



<PAGE>


                      BUREAU OF ELECTRONIC PUBLISHING, INC.

                  STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY

                    FOR NINE MONTHS ENDED SEPTEMBER 30, 1996
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                         Issued and           Issued and 
                                 Authorized Authorized  Outstanding          Outstanding            
                                 Preferred    Common       Common               Common              
                                   Shares      Shares      Shares     Amount   Warrants    Amount   
                                   ------      ------                 ------   --------    ------   
<S>                             <C>          <C>         <C>         <C>       <C>         <C>

BALANCE - December 31, 1995      2,000,000   7,719,623   2,927,298    $2,927    1,340,476  $335,119 
                                                                                                    
   Issuance of common stock                                 37,588        38            0         0 
                                                                                                  
   5% stock dividend                                       81,721        82            0         0 
                                                                                                
   Issuance of common stock                                  5,262         5            0         0 
                                                                                            
   Issuance of common stock                                886,000       886            0         0 
                                                                                     
   Issuance of common stock                                582,000       582            0         0 
                                                               
   Additional authorized shares              4,280,377  
                                                        
   Net loss for the nine months                         
       ended September 30, 1996                                  0         0            0         0 
                                 ---------  ----------   ---------   -------    ---------  ---------
BALANCE - September 30, 1996     2,000,000  12,000,000   4,519,869    $4,520    1,340,476  $335,119 
                                 =========  ==========   =========   =======    =========  ======== 

</TABLE>

<TABLE>
<CAPTION>
Additional 
  Paid-in   Accumulated
  Capital    (Deficit)           Total    
  -------     --------           -----    
<S>         <C>             <C>
                                          
                                          
 $6,130,568  $(2,366,967)    $ 4,101,647  
                                          
    121,747            0         121,785  
                                          
       (82)            0               0  
                                          
     17,044            0          17,049  
                                          
  1,106,614            0       1,107,500  
                                          
    726,918            0         727,500  
                                          
                                          
                                          
                                          
          0   (3,434,229)     (3,434,229) 
 ---------   -----------    ------------ 
                                          
 $8,102,809  $(5,801,196)    $ 2,641,252  
 ==========  ============    ===========  

</TABLE>





     The accompanying notes are an integral part of this statement.

                                        5

<PAGE>



                      BUREAU OF ELECTRONIC PUBLISHING, INC.
                            STATEMENTS OF CASH FLOWS
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                Nine Months Ended             Three Months Ended
                                                          September 30,  September 30,   September 30,  September 30,
                                                              1996            1995           1996            1995
                                                              ----            ----           ----            ----
<S>                                                       <C>              <C>           <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                                                 $(3,434,229)   $(1,232,504)   $(1,461,850)   $   (36,551)
                                                            -----------    -----------    -----------    -----------

Adjustments to reconcile net loss to
  net cash provided by operating activities
   Depreciation of property and equipment                        95,134         39,557         42,030         14,737
   Provision for doubtful accounts                              491,581              0        150,000              0
   Amortization of prepublication costs                         837,295        244,899        555,382         83,985
   Amortization of financing costs                                    0        937,500              0        205,357
   Equity in loss of investment in joint venture                 20,000              0              0              0

   Changes in operating assets and liabilities
     (Increase) decrease in accounts  receivable                (50,158)      (178,537)           665        (79,084)
     Decrease (increase) in inventories                         165,620       (326,903)       135,781       (331,958)
     Decrease (increase) in prepaid expenses and
       other current assets                                       5,829        (55,658)           892         47,256
     (Increase) decrease in other assets                         (6,250)       119,125         12,916         35,018
     (Decrease) increase in accounts payable,
       and accrued expenses                                     (36,507)      (140,183)      (176,495)      (323,586)
                                                            -----------    -----------    -----------    -----------
         Total adjustments                                    1,522,544        639,800        721,171       (348,275)
                                                            -----------    -----------    -----------    -----------

         Net cash used in operating activities               (1,911,685)      (592,704)      (740,679)      (384,826)
                                                            -----------    -----------    -----------    -----------
CASH FLOWS FROM INVESTING ACTIVITIES:

    Purchase of property and equipment                         (407,880)       (84,529)       (47,667)       (27,433)
    Increase in prepublication costs                           (811,035)      (509,439)      (281,755)      (193,969)
                                                            -----------    -----------    -----------    -----------
        Net cash used in investing activities                (1,218,915)      (593,968)      (329,422)      (221,402)
                                                            -----------    -----------    -----------    -----------

CASH FLOWS FROM FINANCING ACTIVITIES:

    Repayment of bridge loan, net                                     0       (500,000)             0     (1,000,000)
    Issuance of common stock                                  1,973,834         29,410        727,500          1,190
    Issuance of common stock purchase warrants                        0        297,619              0        297,619
    Initial public offering                                           0      3,753,737              0      3,753,737
                                                            -----------    -----------    -----------    -----------
        Net cash provided by financing activities             1,973,834      3,580,766        727,500      3,052,546
                                                            -----------    -----------    -----------    -----------
        Net (decrease) increase in cash                      (1,156,766)     2,394,094       (342,601)     2,446,318

CASH and CASH EQUIVALENTS,
  beginning of period                                         2,252,590         52,224      1,438,425              0
                                                            -----------    -----------    -----------    -----------

CASH and CASH EQUIVALENTS, end of period                    $ 1,095,824    $ 2,446,318    $ 1,095,824    $ 2,446,318
                                                            ===========    ===========    ===========    ===========

SUPPLEMENTAL CASH FLOW DISCLOSURES:
     Cash paid during the period for interest                   $ 2,305    $    57,162        $ 2,257    $    12,934
     Cash paid during the period for taxes                           50              0              0              0
                                                            ===========    ===========    ===========    ===========
</TABLE>


        The accompanying notes are an integral part of these statements.
                                        6


<PAGE>


                          NOTES TO FINANCIAL STATEMENTS
                    SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995


1. Financial Statements

The balance sheet as of September 30, 1996 and the related statements of
operations, shareholders' equity and cash flows for the periods ended September
30, 1996 and 1995 have been prepared by Bureau of Electronic Publishing, Inc.
(the "Company"), without audit, in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB. In the opinion of management, all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position,
results of operations and cash flows of the Company for the interim periods
presented have been made.

Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these financial statements
be read in conjunction with the December 31, 1995 audited financial statements
and notes thereto. The results of operations for the nine month period ended
September 30, 1996 are not necessarily indicative of the operating results for
the full year.

2. Summary of Accounting Policies

Cash and Cash Equivalents-
      The Company considers cash on hand, cash on deposit with banks and United
      States Treasury Bill investments to be cash equivalents.

Inventories-
      Inventories, principally finished goods available for distribution, are
      stated at the lower of cost or market. Cost is determined on the first-in,
      first-out method. It is the Company's policy to review the composition of
      its inventory on an ongoing basis and reserve or dispose of obsolete,
      slow-moving or nonsalable inventory. As of September 30, 1996 the Company
      maintained an inventory reserve balance of $244,000.

Property And Equipment-
       Property and equipment is stated at cost, less accumulated depreciation.
     Depreciation is calculated on the straight-line method over the estimated
     useful lives of the assets, which ranges from four to seven years.

 Prepublication Costs-
     Prepublication costs, including editing and design of new CD-ROM titles,
     have been capitalized and are being amortized as a component of cost of
     sales. Amortization expense is computed on a product-by-product basis using
     the greater of (a) the ratio that current period gross revenue bears to the
     total of current and anticipated future gross revenues or (b) straight-line
     over the estimated economic life of the product (not exceeding two years).
     Amortization commences in the period in which the products are available
     for general release. Prepublication costs include salaries and other direct
     production costs incurred once technological feasibility is established and
     licensing rights, if any, are obtained for the titles. Research and
     development costs incurred prior to this point are expensed as incurred.
     Such costs were not significant for the periods presented.



                                        7

<PAGE>

      The Company evaluates the carrying value of prepublication costs for each
      title on an ongoing basis in relation to anticipated future sales and,
      where appropriate, provides additional write downs of unamortized balances
      or accelerates the amortization rate so that the individual unamortized
      title costs do not exceed their net realizable value. During the nine
      months ended September 30, 1996 and 1995, accelerated amortization of
      prepublication costs were approximately $566,000 and $0, respectively.

Investment in Joint Venture-
      During August 1995, the Company and the American Management Association
      ("AMA") formed a joint venture to develop and publish AMA materials on
      CD-ROM and the Internet. The new company, Amacom New Media, Inc., combines
      resources of these two publishers and is 50% owned by each party. During
      December 1995 the Company contributed $250,000 to the joint venture to
      provide initial funding requirements. For the nine months ended September
      30, 1996, the joint venture incurred expenses of approximately $40,000 of
      which the Company's share is 50% or $20,000.

Revenue Recognition-
      Sales revenue is recognized when products are shipped to customers, since
      there are no remaining significant service or support obligations or
      warranties associated with the product sale and collectibility of the sale
      is probable. Technical support provided to consumers who purchase the
      Company's products generally occurs at or shortly after the time of sale.
      Such costs are not significant in relation to the product sale and are
      expensed as incurred. The effect of this treatment for technical support
      costs is not material to the results of operations for all periods
      presented. The Company provides a reserve for possible returns from
      customers, vendor price protection and discount allowances based upon
      historical experience as well as current and anticipated trends. These
      reserves are included in the allowance for doubtful accounts.

Guaranty and Warranty Policies-
      The Company maintains a 30-day money back guaranty and a one-year
      defective product warranty for products that are sold by the Company to
      ultimate retail consumers. Product guaranty and warranty expense is not
      significant in relation to the product sale and is expensed when incurred.
      The effect of this accounting treatment is not material to the results of
      operations for any period presented.

Advertising and Catalog Costs-
      Advertising and catalog costs associated with distribution of the
      Company's products are expensed as incurred.

Income Taxes-
      The Company uses the liability method of computing deferred income
      taxes. Deferred taxes are recognized for tax consequences of "temporary
      differences" by applying enacted statutory tax rates, applicable to future
      years, to differences between the financial reporting and the tax basis of
      existing assets and liabilities. No benefit has been reflected for the
      Company's net operating loss until such time as realization of this
      benefit is more likely than not.

Net Loss Per Common Share
      Net loss per common share has been computed by dividing net loss by the
      weighted number of common shares outstanding after giving retroactive
      effect to the 5% stock dividend declared in April 1996. As required by the
      Securities and Exchange Commission rules, all warrants, options and shares
      within one year of the public offering at less than the public offering
      price are assumed to be outstanding for each year presented for purposes
      of the per share calculation. All other warrants and options have not been
      considered in the computation of net loss per common share as they would
      be anti-dilutive.



                                        8
<PAGE>


3. Shareholders' Equity

      On August 11, 1995 the Company sold to the public 1,000,000 shares of the
      Company's common stock at a price of $5.00 per share as well as redeemable
      common stock purchase warrants (the "Warrants") at a price of $.25 per
      Warrant. The Warrants initially permitted the holders thereof to purchase
      1,000,000 shares of the Company's common stock in the future at an
      exercise price of $7.50 per share. The exercise price of such Warrants was
      subsequently reduced by the Company (see below). On October 2, 1995 the
      Company received net proceeds of $685,125 from the sale of 150,000 shares
      of the Company's common stock and 150,000 of the Company's Warrants. These
      shares and Warrants were issued upon the exercise of an over-allotment
      option granted to the underwriters of the Company's initial public
      offering which occurred in August 1995. Net proceeds to the Company after
      underwriting commissions, related underwriting expenses, and additional
      expenses incurred in connection with the initial public offering were
      approximately $4,400,000.

      Pursuant to an agreement dated September 9, 1994, 113,337 warrants were
      granted to a consultant of the Company at an exercise price of $3.24 per
      share, which was based upon the price of the stock sold to a group of
      unaffiliated investors in 1994. As of June 30, 1996, 42,850 of these
      warrants were exercised. Of the warrants remaining outstanding, 50,487
      expire in 1999 and 20,000 expire in the year 2000.

      On April 4, 1996, the Board of Directors of the Company declared a 5%
      stock dividend for all holders of record as of April 30, 1996 of the
      Company's common stock. The stock dividend was paid by the Company on May
      24, 1996. The two largest shareholders of the Company, Larry Shiller and
      Richard and Georgia Raysman, as joint tenants, elected not to receive such
      stock dividend. Mr. Shiller is a Director, President and Chief Executive
      Officer of the Company and Mr. Raysman is a Director of the Company.

      On April 4, 1996, the Company also announced that it had extended the
      expiration date of, and reduced the exercise price of, its Warrants that
      were issued as part of the Company's initial public offering which was
      consummated in August 1995. Each Warrant previously expired on August 10,
      1998 and entitled the holder to purchase one share of the Company's common
      stock at a price of $7.50 per share. For holders of Warrants of record as
      of April 15, 1996, each Warrant will now expire on August 10, 1999 and
      will entitle the holder to purchase one share of the Company's common
      stock at a price of $6.50 per share. All other terms and provisions of the
      Warrants remain unchanged.

      On July 31, 1996, the Company completed a financing in the amount of
      $1,835,000 with an investor group for the sale of 36.7 units consisting of
      its common stock and its common stock purchase warrants. Each unit was
      priced at $50,000 and consisted of 40,000 shares of common stock and
      warrants to purchase 40,000 shares of common stock at an exercise price of
      $2.00 per share upon the terms and conditions more fully set forth in such
      warrants.


4. Subsequent Events

      On October 11, 1996 the Company announced the layoff of 16 of its 28
      employees. The reduction in staff was due to disappointing sales results
      and a decision was made to redirect the Company's efforts.

      On November 7, 1996 the Company announced that it has signed a non-binding
      letter of intent to acquire a 51% interest in a joint venture which
      produces polyester raw material in Jinan, China. The production facility
      owned by the joint venture is currently the second largest producer of
      polyester raw material in China and the largest producer in Northern
      China. The letter of intent contemplates that approximately 90.2 million
      common stock equivalents will be issued by the Company to complete the
      acquisition and the additional financing required in connection with the
      closing of the transaction. The closing of the transaction is subject to
      negotiation and the signing of a definitive purchase agreement, the
      receipt of a fairness opinion and various other terms and conditions. If
      this transaction is completed it will be accounted for financial
      reporting purposes as a reverse merger, with the shareholders of the
      company being aquired obtaining a controlling interest in the Company.


                                        9
<PAGE>


Item 2.

                       MANAGEMENT DISCUSSION AND ANALYSIS
                           OF FINANCIAL CONDITION AND
                              RESULTS OF OPERATIONS


The Company was incorporated in 1988 as a distributor of titles, drives and
accessories for the CD-ROM (Compact Disc-Read Only Memory) industry. It issued
its first internally developed title in 1990 and by 1993 the Company completed
phase out of third-party titles and marketed and sold solely its own titles.
Fiscal year 1994 was the first full year in which substantially all net sales of
the Company were generated by internally developed titles. During 1995 the
Company entered into a joint venture agreement with the American Management
Association ("AMA") to develop and publish AMA materials on CD-ROM and the
Internet. In addition, the Company entered into an exclusive distribution
arrangement with The Weather Channel Enterprises, Inc. (formerly known as BVE
Products, Inc.) for Everything Weather. The Company's strategy is to internally
develop high quality informational and educational interactive multimedia
software based on licenses of existing print and other media properties
primarily in fields that will achieve sustained consumer appeal and brand name
recognition. The Company's products are intended for use by adults and students
in homes, businesses, schools and libraries. The Company develops and publishes
its software on CD-ROMs for use on personal computers using Windows(TM),
Macintosh and MS-DOS based CD-ROM playback systems.


Results of Operations

Nine Months ended September 30, 1996 and 1995

Net sales for the nine months ended September 30, 1996 were $454,439 as compared
to $2,384,644 for the comparable period of 1995, or a decrease of $1,930,205 or
81%. The decrease is primarily the result of lower sales attributable to lack of
new title releases and sluggishness in the retail channel.

Cost of sales totaled $1,318,314 or 290% of net sales for the first nine months
of 1996 as compared to $751,530 or 31.5% of net sales for the first nine months
of 1995. The increase as a percentage of net sales is primarily due to the lower
volume of sales and higher software amortization expenses related to the effect
of a shorter time period over which these costs are amortized. In addition,
higher inventory reserves for packaging materials and the amortization of
expenses related to discontinued projects also contributed to the increase of
cost of sales as a percentage of net sales. As a result primarily of the
increase in the amortization of pre-publication costs and the higher inventory
reserves for packaging materials, the Company's gross profits as a percentage of
net sales were lower in 1996 as compared to 1995. Gross losses were (190%) of
net sales, or ($863,875) in the first nine months of 1996 as compared to gross
profits of 68.5% of net sales or $1,633,114 during the same period in 1995.

Selling, general and administrative expenses, totaled $2,609,450 and $1,710,481
during the first nine months of 1996 and 1995, respectively, an increase of
$898,969 or 52.6%. As a percentage of net sales, selling, general and
administrative expenses increased to 574.2% during the first nine months of 1996
from 71.7% during the same period in 1995. This increase is due to several
factors including, primarily, higher reserves for doubtful accounts, costs
associated with being a public company (e.g. legal fees, insurance), and
increases in rent and public relations expenses. Also, higher personnel costs
due to staffing increases and higher average salaries contributed to the
increase in selling, general and administrative expenses.

Operating loss for the period ended September 30, 1996 was $3,473,325 or 764.3%
of net sales, as compared to an operating loss of $77,367 or 3.2% of net sales
during the same period in 1995.

                                       10
<PAGE>

Interest expenses for the period ended September 30, 1996 were $2,305 or .5% of
net sales. Interest expenses for the first nine months of 1995 were $1,171,445
or 49.1% of net sales due to the November 1994 and April 1995 tranches of the
Company's bridge financing ("Bridge Financing") and the amortization of $937,500
of the value of the common stock and the redeemable common stock purchase
warrants that were issued to the investors in the Bridge Financing upon the
consummation of the Company's initial public offering in August 1995.

Other income for the period ended September 30, 1996 was $61,401 or 13.5% of net
sales, as compared to $16,308 or .68% of net sales during the same period in
1995. Other income consists primarily of interest earned from temporary
investments in U.S. Treasury Bills.

Due to the combination of the preceding factors, pre-tax losses increased
$2,201,725 to a loss of $3,434,229 or 755.7% of net sales during the nine months
ended September 30, 1996, from a loss of $1,232,504 or 51.7% of net sales during
the comparable period of 1995.


Three Months ended September 30, 1996 and 1995

Net sales for the three months ended September 30, 1996 totaled $181,195,
as compared to $943,149 for the three months ended September 30, 1995, or a
decrease of $761,954, or 80.8%. This decrease is primarily due to delays in
product development and the overall sluggishness of the retail market for
CD-ROMs.

Cost of sales totaled $831,023 or 458.6% of net sales for the third quarter of
1996 as compared to $178,746, or 19% of net sales for the same period of 1995.
The increase of $652,277 is primarily the result of higher software amortization
expenses related to the effect of a shorter time period over which these costs
are amortized and the amortization of expenses related to discontinued projects.
Primarily as a result of the lower sales levels, the Company realized a decrease
in gross profits for the three months ended September 30, 1996 as compared to
the same period in 1995. Gross losses totaled ($649,828) or (358.6%) of net
sales in 1996 as compared to a gross profit of $764,403 or 81% of net sales in
1995.

Selling, general and administrative expenses totaled $830,585 in the third
quarter of 1996, an increase of $265,273 or 46.9%, as compared to $565,312
incurred in the third quarter of 1995. This increase is due to several factors
including, primarily, higher reserves for doubtful accounts, costs associated
with being a public company (e.g. legal fees, insurance), and increases in rent
and public relations expenses. Also, higher personnel costs due to staffing
increases and higher average salaries contributed to the increase in selling,
general and administrative expenses.

The Company's operating loss was $1,480,413 or 817 % of net sales for the three
month period ended September 30, 1996 as compared to the operating income of
$199,091, or 21.1% of net sales achieved in the same period of the prior year.

Interest expenses were $2,257 in the three months ended September 30, 1996 and
were $251,183 during the three months ended September 30, 1995, a decrease of
$248,926. This decrease is primarily the result of the interest cost of the
Bridge Financing and the amortization of the value of the shares of common stock
and warrants issued to investors in the Bridge Financing which was recognized in
1995 and not in 1996.

Other income was $20,820 or 11.5% of net sales for the three month period ended
September 30, 1996 as compared to $15,541, or 1.6% of net sales in the same
period of the prior year. Other income consists primarily of interest earned on
temporary investments in U.S. treasury bills.

The preceding factors all combined to cause a pre-tax loss of $1,461,850 or
806.8% of net sales, as compared to a pre-tax loss of $36,551 or 3.9% of net
sales, achieved in the same period of 1995.
                                       11
<PAGE>

Liquidity and Capital Resources

The Company had a working capital surplus of $943,053 at September 30, 1996,
which represented a decrease of $453,444 from the working capital surplus of
$1,396,497 at June 30, 1996. The decrease in the working capital surplus was due
mainly to a lower level of accounts payable at the end of the third quarter of
1996 as compared to the second quarter of 1996. The Company's cash position
decreased to $1,095,824 at September 30, 1996 from $1,438,425 at June 30, 1996.

The Company's operating activities used cash of $1,911,685 and $592,704 in the
first nine months of 1996 and 1995, respectively. In the first nine months of
1996 the net loss of $3,434,229 was partly offset, primarily by the provision
for doubtful accounts, the amortization of pre-publication costs and the
increase in inventory reserves for packaging materials. In the first nine months
of 1995, the net loss of $1,232,504 was partly offset, primarily by the
amortization of costs associated with the Bridge Financing, the amortization of
pre-publication costs and a decrease in other assets. In addition, cash was used
to finance an increase in accounts receivable and inventories and a decrease in
accounts payable. For the third quarter of 1996 and 1995, the Company's
operating activities used cash of $740,679 and $384,826, respectively. In the
third quarter of 1996 the net loss of $1,461,850 was partly offset primarily the
amortization of pre-publication costs. In the third quarter of 1995 the net loss
of $36,551 was partly offset, primarily by the amortization of costs associated
with the Bridge Financing and the amortization of prepublication costs. In
addition, cash was primarily used by an increase in accounts receivable and
inventories.

The Company's investing activities used cash of $1,218,915, $593,968, $329,422
and $221,402 during the first nine months of 1996 and 1995, and for the three
months ended September 30, 1996 and 1995, respectively. The principal use of
this cash was the capitalization of prepublication costs involved in the
development of new titles, and the purchase of property and equipment in
connection with the Company's recent relocation to Princeton, New Jersey.

The Company's financing activities provided cash of $1,973,834, $3,580,766,
$727,500 and $3,052,546 during the first nine months of 1996 and 1995 and for
the three months ended September 30, 1996 and 1995, respectively. For the nine
and three months ended September 30, 1996, cash was provided primarily by the
issuance of common stock in connection with the financing with an investor group
discussed above. For the nine and three months ended September 30, 1995, cash
was primarily provided by the proceeds of the Company's initial public offering
consummated in August 1995. Cash was also used for the repayment of debt related
to the Bridge Financing.

During the first nine months of 1996, the Company experienced a net decrease in
cash of approximately $1,157,000. If such rate of negative cash flow continues,
the Company believes its current cash resources will be sufficient to fund its
operations until the first quarter of 1997. Therefore, the long-term future of
the Company is dependent upon the Company's ability to increase its sales,
reduce its expenses an/or raise additional funds through bank borrowings, lines
of credit, new issuances of its debt and/or equity securities or from other
sources. There can be no assurance that the Company will be able to increase its
sales, reduce its expenses or raise such additional funds.

"Safe Harbor" Statement

Forward looking statements made herein are based on current expectations of the
Company that involve a number of risks and uncertainties and such forward
looking statements should not be considered guarantees of future performance.
These statements are made under the "Safe Harbor Provisions" of the Private
Securities Litigation Reform Act of 1995. The factors that could cause actual
results to differ materially from the forward looking statements include the
impact of competitive products and pricing, product demand and market acceptance
risks, the presence of competitors with greater financial resources than the
Company and an inability to arrange additional debt or equity financing.

                                       12
<PAGE>


PART II  OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K




(a)      EXHIBIT INDEX



EXHIBIT DESCRIPTION                                           PAGE NO.
-------------------                                           --------


10.29    Consulting Agreement dated July 1, 1996
         between the Company and Bryan Finkel,
         with Form of Warrants attached                           15

11       Calculation of Net Loss per Common Share                 29



(b)      REPORTS ON FORM 8-K

         On October 22, 1996, the Company filed a Form 8-K with the Securities
         and Exchange Commission. Such Form 8-K disclosed that the Company
         announced the layoff of 16 of its 28 employees. The reduction was due
         to disappointing sales results and a decision was made to redirect the
         Company's efforts. The Company plans to enhance shareholder value by
         focusing its efforts upon the building of profitable lines of business
         via internal development and acquisition.




                                       13

<PAGE>





                                   SIGNATURES




In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.





                                      BUREAU OF ELECTRONIC PUBLISHING, INC.


Date:  November 14, 1996              By: /s/ Elliott S. Eisenberg
                                          -------------------------------
                                          Elliott S. Eisenberg, Chief
                                           Operating Officer



Date:  November 14, 1996              By: /s/ Brent J. Subkowsky
                                          -------------------------------
                                          Brent J. Subkowsky, Controller and
                                           Secretary (Principal Financial and
                                           Accounting Officer)






                                       14