<PAGE>
 
                                 UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                 FORM 10-Q/A

                      AMENDMENT NO. 1 TO QUARTERLY REPORT
    PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
                 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
                                        
                        COMMISSION FILE NUMBER 0-28476

                                OZEMAIL LIMITED
                                ACN 066387 157
                        ------------------------------
            (Exact name of registrant as specified in its charter)

 
   NEW SOUTH WALES, AUSTRALIA                           NOT APPLICABLE
--------------------------------                -----------------------------
(State or other jurisdiction of                        (I.R.S. Employer
 incorporation or organization)                       Identification No.) 



OZEMAIL CENTRE, 39 HERBERT STREET, ST. LEONARDS NEW SOUTH WALES 2065 AUSTRALIA
------------------------------------------------------------------------------
         (Address of principal executive offices, including zip code)


   Registrant's telephone number, including area code: (011 61 2) 9433-2400


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


                          YES     [ ]     NO     [X]


Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date:


          AT JUNE 30TH, 1997, THERE WERE 10,350,001 SHARES OUTSTANDING OF THE
REGISTRANT'S COMMON STOCK, PAR VALUE A$0.04 ("ORDINARY SHARES").  OF THE
OUTSTANDING ORDINARY SHARES, 3,350,000 ARE REPRESENTED BY 3,350,000 AMERICAN
DEPOSITARY SHARES ("ADSS"). ONE ADS REPRESENTS ONE ORDINARY SHARES.
<PAGE>
 
                                OZEMAIL LIMITED

                                  FORM 10-Q/A
                      AMENDMENT NO. 1 TO QUARTERLY REPORT

                      FOR THE QUARTER ENDED JUNE 30, 1997


                                     INDEX

<TABLE> 
<S>       <C>                                                                                      <C>
PART I.   FINANCIAL INFORMATION

          ITEM 1        FINANCIAL STATEMENTS

          Condensed Consolidated Interim Financial Statements

          Condensed Consolidated Balance Sheets as of June 30, 1997 and 
          December 31, 1996.....................................................................    3

          Condensed Consolidated Statements of Operations for the Three and Six
          Months Ended June 30, 1997 and 1996...................................................    4

          Condensed Consolidated Statements of Cash Flows for the  Six Months
          Ended June 30, 1997 and 1996..........................................................    5

          Notes to Condensed Consolidated Interim Financial Statements..........................    6

          ITEM 2        MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                        AND RESULTS OF OPERATIONS...............................................   15


PART II.  OTHER INFORMATION

          ITEM 1        LEGAL PROCEEDINGS.......................................................   21

          ITEM 2        CHANGES IN SECURITIES AND USE OF PROCEEDS...............................   21

          ITEM 3        DEFAULTS UPON SENIOR SECURITIES.........................................   21

          ITEM 4        SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS......................   21

          ITEM 5        OTHER INFORMATION.......................................................   21

          ITEM 6        EXHIBITS AND REPORTS ON FORM 8-K........................................   22

          SIGNATURES............................................................................   23

          EXHIBIT INDEX.........................................................................   24
</TABLE> 

                                       2
<PAGE>
 
PART I.  FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

                                OZEMAIL LIMITED
                     CONDENSED CONSOLIDATED BALANCE SHEETS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)

<TABLE>
<CAPTION>
                                                      DECEMBER 31,          JUNE 30,
                                                          1996                1997
                                                      ------------        ------------
<S>                                                   <C>                 <C>
                                    ASSETS
Current assets:
Cash..................................................  A$ 44,615         A$ 38,849
   Accounts receivable - trade, net of allowances.....      4,782             4,920
    of A$546 and A$1,610, respectively
   Receivable from shareholder........................         27                26
   Other receivables..................................        707            17,735
   Other current assets...............................      1,366             2,136
                                                        ---------         ---------
Total current assets..................................     51,497            63,666

Plant and equipment, net..............................     13,789            21,436
Non-current investments...............................         24             3,105
Deferred tax asset, net...............................          -               299
                                                        ---------         ---------
                                                        A$ 65,310         A$ 88,506

                     LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable......................................  A$  8,835         A$  9,861
   Bank overdraft.....................................         64               184
   Current portion of financing.......................        134             2,596
   Accrued expenses and other liabilities.............        980             1,963
   Deposits under agreements with Metro...............          -            18,686
   Net deferred income tax liability..................        152                 -
   Income taxes payable...............................        399             4,269
                                                        ---------         ---------
   Total current liabilities..........................     10,564            37,559

   Non-current portion of financing...................        240             5,052
                                                        ---------         ---------
Total liabilities.....................................     10,804            42,611
                                                        ---------         ---------
Minority interest.....................................          -                 -

Commitments and contingencies (Note 6)
Shareholders' equity:
Ordinary Shares, A$0.04 par value; 125,000,000
 shares authorized:
 10,350,001 shares issued and outstanding.............        414               414
Additional paid-in capital............................     53,234            53,234
Retained earnings/(loss)..............................        852            (7,754)
Cumulative foreign currency translation adjustment....          6                 1
                                                        ---------         ---------
                                                           54,506            45,895
                                                        =========         =========
                                                        A$ 65,310         A$ 88,506
</TABLE>

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

                                       3
<PAGE>
 
                                OZEMAIL LIMITED
                CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                     (IN THOUSANDS, EXCEPT PER SHARE DATA)
                                  (UNAUDITED)


<TABLE>
<CAPTION>
                                                     THREE MONTHS ENDED              SIX MONTHS ENDED
                                                           JUNE 30                         JUNE 30
                                                    1996            1997            1996            1997
                                                ------------    ------------    ------------    ------------
<S>                                             <C>             <C>             <C>             <C>
Net access revenues.............................  A$ 6,529        A$ 13,077       $ 10,585        A$ 23,829
Costs and expenses:
Cost of revenues - network operations
and support.....................................     1,470            3,842          2,489            7,008
Cost of revenues - communications and
other...........................................     2,250            4,604          3,748            8,050
Sales and marketing.............................     1,711            3,013          3,125            5,772
Product development.............................        78            3,423            109            5,095
General and administrative......................       717            3,503          2,022            4,944
                                                  --------        ---------       --------        ---------
Total costs and expenses........................     6,226           18,385         11,493           30,869
                                                  --------        ---------       --------        ---------

Income (loss) from operations...................       303           (5,307)          (908)          (7,040)

Other income (expense):
Foreign exchange gain...........................       741                -            741                4
Interest and other income.......................       247              552            282            2,048
Interest paid to shareholders...................       (38)               -            (68)               -
Interest expense................................       (30)            (112)           (50)            (123)
                                                  --------        ---------       --------        ---------
Income (loss) before provision for income
taxes and minority equity interest..............     1,223           (4,867)            (3)          (5,111)
Income tax expense..............................      (441)          (3,423)           (70)          (3,495)
Less: Minority equity interest..................         -                -             17                -
                                                  --------        ---------       --------        ---------
Net income (loss)...............................       782           (8,290)           (56)          (8,606)

Net income (loss) per share.....................  A$  0.09        A$  (0.80)      A$ (0.01)       A$  (0.83)
                                                  ========        =========       ========        =========
Weighted average ordinary shares and
share equivalents...............................     8,620           10,350          7,580           10,350
                                                  ========        =========       ========        =========
Net income (loss) per ADS.......................  A$  0.09        A$  (0.80)      A$ (0.01)       A$  (0.83)
                                                  ========        =========       ========        =========
Weighted average ADSs...........................     8,620           10,350          7,580           10,350
                                                  ========        =========       ========        =========
</TABLE>



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

                                       4
<PAGE>
 
                                OZEMAIL LIMITED
                CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                (IN THOUSANDS)
                                  (UNAUDITED)
<TABLE>
<CAPTION>

                                                                         SIX MONTHS ENDED
                                                                              JUNE 30
                                                                        1996            1997
                                                                     ---------        ---------
<S>                                                                  <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)...................................................  A$   (56)       A$(8,606)
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization.......................................       786           3,280
Allowance for bad and doubtful accounts.............................       307           1,064
Writeback of provisions and expenses incurred.......................         -            (556)
Loss on disposal of plant and equipment.............................         -               5
Minority equity interest............................................       (17)              -
Gain on sale of interests in related  entities......................         -            (775)
Changes in assets and liabilities:
Accounts receivable.................................................    (2,285)         (1,203)
Other current assets................................................      (734)         (1,484)
Accounts payable....................................................     3,155           1,026
Accrued expenses and other current  liabilities.....................      (206)          2,347
Income taxes payable and deferred income taxes......................      (297)          3,419
                                                                      --------        --------
Net cash provided by (used in) operating activities.................       653          (1,483)
                                                                      --------        --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net repayments from (advances to) shareholders......................       132               1
Purchase of current investment in marketable securities.............    (3,089)              -
Purchase of non-current investment..................................       (53)              -
Unpaid portion of investment........................................     1,671               -
Purchase of plant and equipment.....................................    (2,143)         (7,560)
Proceeds from sale of plant and equipment...........................         -              37
Distribution to minority shareholders...............................         -            (896)
                                                                      --------        --------
Net cash used in investing activities...............................    (3,482)         (8,418)
                                                                      --------        --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of ordinary shares...........................    50,182               -
Proceeds from short-term debt - due to shareholder..................     1,300               -
Net repayment of long term debt.....................................    (1,800)              -
Net principal repayments on short-term
 debt - due to shareholder..........................................      (236)              -
Proceeds from long-term debt........................................       138               -
Proceeds from minority shareholders.................................        77               -
Payments under capital lease obligations............................         -            (980)
Proceeds from sale and leaseback transactions.......................         -           5,000
Net proceeds from (repayment of) bank overdraft.....................      (187)            120
                                                                      --------        --------
Net cash provided by financing activities...........................    49,474           4,140
                                                                      --------        --------
INCREASE (DECREASE) IN CASH.........................................    46,645          (5,761)
Cash at the beginning of the period.................................         9          44,615
Effect of exchange rate changes on
 subsidiary balances................................................         2              (5)
                                                                      --------        --------
Cash at the end of the period.......................................  A$46,656        A$38,849
                                                                      ========        ========
</TABLE>
  The accompanying notes are an integral part of these financial statements.

                                       5
<PAGE>
 
                                OZEMAIL LIMITED

       NOTES TO THE CONDENSED CONSOLIDATED INTERIM FINANCIAL STATEMENTS
                                  (UNAUDITED)



NOTE 1 - THE COMPANY

The Company

     OzEmail Limited ("OzEmail"), its 80% owned subsidiary Voyager New Zealand
Limited ("Voyager") and wholly-owned subsidiary Cyber Publications Pty Limited
collectively (the "Company"), provide Internet access and other value added
services in Australia and New Zealand. The Company also has an 80% owned dormant
subsidiary, OzEmail Telecommunications Pty Limited. In November, 1996 the
Company, through OzEmail Fax Investments Pty Limited ("OzEmail Fax
Investments"), a wholly owned subsidiary of OzEmail, entered into a partnership
agreement with Ideata Pty Limited ("Ideata"), a company incorporated in
Australia, to develop and commercialize devices for voice and fax digitisation
and transmission through telephone, Internet and other communications systems as
developed by or on behalf of Ideata. The voice/fax system, business,
intellectual property in the system, and other assets of this partnership were
then transferred to OzEmail Interline Pty Limited ("OzEmail Interline") and the
partnership was dissolved. Following this transaction, OzEmail Fax Investments
owns an 80% equity interest in OzEmail Interline.  The company purchased an
additional 8% investment in OzEmail Interline in April 1998.

Basis of presentation

     The accompanying unaudited financial statements of OzEmail Limited (the
"Company") have been prepared in accordance with generally accepted accounting
principles for interim financial information and in accordance with the
instructions for Form 10-Q and Article 10 of Regulation S-X.  The condensed
balance sheets as of December 31, 1996 and June 30, 1997, the condensed
statements of operations  for the three months and six months ended June 30,
1996 and 1997, and the condensed statements of cash flows for the six months
ended June 30, 1996 and 1997 have been prepared by the Company, and have not
been audited.  In the opinion of management, these interim financial statements
reflect all adjustments, consisting of normal recurring adjustments necessary to
present fairly the financial position, results of operations, and cash flows of
the Company at June 30, 1997, and for all periods presented.  Although the
Company believes that the disclosures in these financial statements are adequate
to make the information presented not misleading, certain information normally
included in financial statements and related footnotes prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange Commission.
The accompanying financial statements should be reviewed in conjunction with the
audited financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.

     The results for the quarter ended June 30, 1997, are not necessarily
indicative of the results that may be expected for the fiscal year ended
December 31, 1997, or any future period.

     The Company conducts most of its business in Australian dollars.  Amounts
included in the financial statements and in notes herein are in Australian
dollars and referenced as "A$."  References to "US$" are to United States
dollars and references to "NZ$" are to New Zealand dollars.  The exchange rates
between the U.S. dollar and the Australian dollar were $0.7844, $0.7936 and
$0.7428 (expressed in U.S. dollars per Australian dollar) at June 28, 1996,
December 31, 1996, and June 30, 1997, respectively.

Restatement and Transactions with Metro

     In November 1996, OzEmail Fax Investments entered into a partnership, in
which it held an 80% interest, to commercialize devices for voice and fax
digitization and transmission through telephone, Internet and other
communications systems. The voice/fax system, business, intellectual property in
the system, and other assets of this partnership were transferred to OzEmail
Interline and the partnership was dissolved on June 26, 1997.  Following this

                                       6
<PAGE>
 
transaction, OzEmail Fax Investments owned an 80% equity interest in OzEmail
Interline.

     During June 1997, the Company via OzEmail Fax Investments, and its
partnership interest with Ideata Pty. Limited ("Ideata"), entered into
agreements with subsidiaries of Metro Holdings AG ("Metro") under the terms of
which (1) the partnership agreed to grant an exclusive license to a subsidiary
of Metro in respect to certain Internet telephony technology for US$9,400,000
(A$12,655,000) and (2) Metro would purchase a 40% equity interest in OzEmail
Interline on a ratable basis from the current shareholders for US$5,600,000
(A$7,539,000), of which 80% being US$4,480,000 (A$6,031,000) was accounted for
by OzEmail Fax Investments. In the original quarterly report on Form 10-Q for
the quarter ended June, 1997, filed with the SEC on August 14, 1997, on the
basis of the above transactions, the Company reported license fee revenues of
A$10,124,000 and a profit on sale of its equity in OzEmail of $4,791,000, net of
costs associated with the investment. OzEmail consolidated  Interline's
operating losses and recorded a minority interest of 52%.

     During April 1998, the Company for a number of reasons, agreed to
repurchase the equity interest in OzEmail Interline held by Metro and rescind
the license agreement in exchange for issuing to Metro 5,400,000 ordinary shares
of the Company (represented by 540,000 ADSs), valued at approximately
US$11,948,000 (A$18,381,000) on April 15, 1998.

     Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
Topic 5-H the Company has restated its previously reported second quarter
results to reverse the gain recorded on the initial sale of the equity interest
in OzEmail Interline. The Company has also reversed previously recorded license
revenues recognised in the second quarter of 1997 from Metro. (As noted in Note
4 to the consolidated financial statements, these transactions are still subject
to tax under Australian taxation laws).

     Amounts received from Metro totalling A$18,686,000 are reflected as
"Deposits under agreements with Metro" in the accompanying Balance Sheet as of
June 30, 1997. These amounts will be released in April 1998, when the Company
issues the aforementioned 540,000 ADS's and records an additional 8% equity
interest in OzEmail Interline.


<TABLE>
<CAPTION>
 
                                                        1997
                                                   SECOND QUARTER
                                                   (IN THOUSANDS)
<S>                                              <C> 
Net Income previously reported                        A$  8,776
Less adjustments to reported Net Income:
License Fee Revenue                                     (10,124)
Profit on sale of 40% equity interest in OzEmail
 Interline(1)                                            (5,034)
Minority Interest adjustment                             (1,908)
                                                      ---------  
Adjusted Net Income (Loss)                               (8,290)
                                                      =========  
</TABLE>

(1)  Reversal of Profit on sale of 40% equity interest in OzEmail Interline
     excludes costs associated with transactions, and therefore varies from the
     reported income of A$ 4,792,000.

     The Company's repurchase of the equity interest in OzEmail Interline held
by Metro and the termination of the license agreement will be recorded as 1998
transactions in the Company's statutory accounts and amounts received from Metro
will be subject to taxation in 1997 under Australian tax laws.

Use of estimates

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

                                       7
<PAGE>
 
Principles of consolidation

     The consolidated financial statements include the accounts of OzEmail and
its controlled subsidiaries and partnerships.  All intercompany accounts and
transactions have been eliminated.

     Revenue recognition

          The Company's revenues are derived primarily from hourly connect time
and monthly user charges for access to the Internet and are recognized over the
period such services are rendered, if collection of the resulting receivable is
deemed probable and provided no significant obligations remain outstanding. The
Company also derives revenue from its share of license fees for the licensing of
OzEmail Phone and OzEmail Fax technology to network affiliates of OzEmail
Interline, one-time registration, sales of the Company's value added services,
set-up and establishment fees, advertising revenues received from the provision
of online content, and timed charges for the provision of the OzEmail Phone
Internet telephony service in Australia. Revenues from registration, set-up and
establishment fees are recognized at the time these services are completed and
related software, hardware and other services are delivered and provided.
Revenues associated with other activities are recognized as services are
rendered and products are delivered. Revenues from advertising associated with
NetGuide Online, the Company's web-based hypertext-linked guide to the Internet
are recognized ratably over the period such advertisements are run.

          In conjunction with providing hourly and monthly internet access, the
Company provides free telephone technical support to its customers.  Costs of
these services are period expensed to match the related revenues recognized from
access to the Internet.

     Cost of revenues

          The Company segregates its cost of revenues into two categories:
"network operations and support" and "communications and other."

          Cost of revenues - network operations and support includes: technical
and customer support staff; network and equipment maintenance and support;
depreciation and operating lease rental expense on network equipment; and
applicable overhead costs.

          Cost of revenues - communications and other includes: monthly
telecommunications expenses; a fee payable as a percentage of revenue to the New
South Wales government for revenues-sourced from government customers; cost of
domain name registrations; and editorial and production costs related to the
production of NetGuide Magazine.

     Plant and equipment

          Plant and equipment are stated at cost.  Depreciation is computed
using the straight line method over the estimated useful lives of the assets.
Leasehold improvements, including labour and overhead costs of Points of
Presence ("POPs"), fax interface node and voice interface node installations,
are amortized over the shorter of the term of the related lease or the estimated
useful lives of the assets.  Plant and equipment classes and their respective
useful lives are as follows:

                                                                        YEARS
 .      Telecommunications plant and equipment                            3
 .      Computer equipment                                                3
 .      Furniture and fittings                                            5

     Advertising costs

          The Company expenses advertising costs as incurred.  Given its limited
operating history, the 

                                       8
<PAGE>
 
Company does not believe that sufficient objective evidence exists to estimate
probable future benefits of direct response advertising; accordingly, the costs
relating to direct response advertising are expensed as incurred. The costs
associated with direct response advertising include costs of printing,
production and shipping of starter kits.

     Income taxes

          Income taxes are computed using the asset and liability method.  Under
the asset and liability method, deferred income tax assets and liabilities are
determined based on the differences between the financial reporting and tax
bases of assets and liabilities and are measured using the currently enacted tax
rates and laws.  A valuation allowance is established for any deferred assets
for which realisation is not considered more likely than not.

     Functional currency

          The functional currency of OzEmail, Cyber, OzEmail Fax Investments and
OzEmail Interline is the Australian dollar.  The functional currency of Voyager
is the New Zealand dollar.  Voyager's balance sheet accounts are translated into
Australian dollars at the exchange rate prevailing at the balance sheet date.
Revenues, costs and expenses are translated into Australian dollars at average
rates for the period.  Gains and losses resulting from translation are
accumulated as a component of shareholders' equity.  Net gains and losses
resulting from foreign exchange transactions are included in the consolidated
statement of operations and were not significant during the periods presented.

     Concentration of credit risk

          Financial instruments that potentially subject the Company to credit
risk consist principally of trade receivables from customers in Australia and
New Zealand.  The Company generally requires no collateral from its customers.
However, the Company maintains an allowance for bad and doubtful accounts
receivable based on the expected collectibility of all accounts receivable.  At
December 31, 1996 and June 30, 1997, no customer accounted for more than 10% of
accounts receivable.  Cash and cash equivalents held with banks and financial
institutions in Australia and New Zealand also potentially subject the Company
to credit risk.

     Dependence on certain third party suppliers

          The Company is currently dependent on third party suppliers with
respect to purchase of certain key products and services including services
provided by Telstra, digital modems, server equipment, and license for its web
browser software.  Although alternate sources of supply are available for these
products, making a transition could prove costly and cause interruption in
service.  Failure to obtain the key products on a timely basis could have a
material adverse effect on the Company's business, results of operations and
financial condition.

     Net income (loss) per share

          Net income (loss) per share is based upon the weighted average number
of Ordinary and Ordinary equivalent shares outstanding during the period.
Ordinary equivalent shares consist of stock options (using the treasury stock
method).  Pursuant to the Securities and Exchange Commission Staff Accounting
Bulletins, Ordinary and Ordinary equivalent shares issued during the period from
April 1995 to March 1996 have been included in the calculation of net income
(loss) per share as if they were outstanding for all periods presented (using
the treasury stock method for options at the initial public offering price).

     Product development costs

          Statement of Financial Accounting Standard No. 86 ("SFAS 86") requires
the capitalization of certain software development costs once technological
feasibility is established, which the Company defines as the completion of a
working model.  The capitalized cost is then amortized on a straight line basis
over the estimated product life, or on the ratio of current revenues to total
projected product revenues, whichever is greater.

                                       9
<PAGE>
 
     Stock Based Compensation

          The Company accounts for stock-based employee compensation
arrangements in accordance with the provisions of APB No. 25 "Accounting for
Stock Issued to Employees", and complies with the disclosure provisions of SFAS
No. 123, "Accounting for Stock-Based Compensation."  Under APB No. 25,
compensation cost is recognized based on the difference, if any, on the date of
grant between the fair value of the Company's stock and the amount an employee
must pay to acquire the stock.

     Dividends

          Any dividend payments made by the Company would, under the Australian
Corporations Law, be limited to the Company's retained earnings, which
aggregated A$852,000 at December 31, 1996 and A$9,312,000 at June 30, 1997 as
determined under the Australian Corporations Law and relevant Australian
Accounting Standards.  Any payment of dividends would be made in Australian
dollars.

     Cash equivalents and short-term investments

          All highly liquid investments with a maturity of three months or less
when purchased are considered to be cash equivalents and those with maturities
greater than three months are considered short-term investments.  As of December
31, 1996, and June 30, 1997, the Company had no current investments with
original maturities greater than three months.

     Fair value of financial instruments

          The carrying amount of the Company's financial instruments, including
accounts receivable, approximates fair values.


NOTE 2 - PLANT AND EQUIPMENT


<TABLE>
<CAPTION>
                                                               DECEMBER 31,            JUNE 30,
                                                                   1996                  1997 
                                                              (IN THOUSANDS)
<S>                                                             <C>             <C>
PLANT AND EQUIPMENT CONSISTED OF THE FOLLOWING:                 
        Telecommunications plant and equipment                  A$ 6,930               A$12,236  
        Computer equipment                                         8,529                 11,228 
        Furniture and fittings                                       262                  1,795 
        Leasehold improvements                                       512                  1,009 
                                                                --------               --------   
                                                                  16,233                 26,268

        LESS:
        Accumulated depreciation                                  (2,444)                (4,832) 
                                                                --------               --------   
        Net plant and equipment                                 A$13,789               A$21,436 
                                                                --------               --------   
</TABLE>

NOTE 3 - NON CURRENT ASSETS


Non Current Investments

     The Company recorded a gain of A$775,000 when it transferred the assets of
the Web Wide Media business to Softbank Interactive Marketing Inc. on March 13,
1997 in return for the issue of 7.25% of the total share capital of Softbank
Interactive Marketing (subsequently reduced to 6.25% as a consequence of the
allotments of stock options to Softbank employees).  The equity holding in
Softbank has been valued at A$3,082,000 as at March 31, 1997.  This valuation is
based on an independent valuation of the Company's interest in Softbank
Interactive 

                                       10
<PAGE>
 
Marketing. As at June 30, 1997, the directors consider this valuation to still
be indicative of the value of the investment.


NOTE 4 - INCOME TAXES

     The Company's incurred tax for the six months ended June 30, 1997, despite
the US GAAP losses recorded, as the Company was assessed under Australian
taxation laws on A$16,155,000, being 80% of the license revenue and 80% of the
proceeds from Metro when purchasing its 40% share of OzEmail Interline, received
as part of the Metro transactions which will not be recorded as income for 
US GAAP purposes (Note 1).

     Income before provision for income taxes and minority interest in the six
months to June 30, 1997, includes A$687,000 of losses relating to the New
Zealand operations of the Company's majority-owned subsidiary Voyager.

     Voyager has incurred a loss since its formation in 1995.  At June 30, 1997,
the Company had A$1,592,000 of net operating loss carry forwards associated with
its New Zealand operations.  These loss carryforwards are available to reduce
future taxable income of Voyager without any time limitation.  However, the loss
carryforwards will expire in the event of a change in ownership of Voyager of
greater than 51%.  Management believes that, based on the history of such losses
and other factors, the weight of available evidence indicates that it is more
likely than not that the New Zealand operations will not be able to utilize the
net operating loss carryforwards, and thus a full valuation reserve of A$573,000
has been recorded at June 30, 1997 with respect to such losses.  If future
evidence indicates that it is likely that the Company will be able to utilize
its New Zealand operations' net operating loss carryforwards in future years,
the valuation reserve will be reduced, which correspondingly will reduce the
Company's tax provision.

NOTE 5 - RELATED PARTY TRANSACTIONS

     In the quarter ended June 30, 1997, the Company paid $60,000 to a company
affiliated with a non-executive director for corporate advisory services and
related expenses associated with the transfer of the assets of the Web Wide
Media business to Softbank Interactive Marketing Inc. in March, 1997.

     In the quarter ended June 30, 1997, the Company paid an amount of A$2,500
to a director of a company affiliated with one of its executive directors for
consultancy services.

     On September 4, 1996, the Company entered into an agreement with FTR
Holdings Limited ("FTR"), an entity affiliated with Turnbull & Partners Limited
("TPL"). Mr Malcolm Turnbull, a director of the Company, is a controlling
shareholder of FTR. The agreement appointed FTR as the Company's sole and
exclusive sales and marketing representative in Western Australia. The delivery
of this service is conducted by Microweb Pty. Limited ("Microweb"), a wholly-
owned subsidiary of FTR.

     On May 24, 1997, the Company and FTR terminated this agreement and entered
into a new agreement. Under the new agreement, the Company has agreed to pay FTR
gross income based on 35% of all revenue received by the Company in respect of
OzEmail services delivered to subscribers in Western Australia, net of referral
fee amounts paid to third parties in connection with the establishment of
accounts with OzEmail for services.  FTR has agreed that at least 28.6% of all
revenues paid to it by the Company under the agreement are spent on marketing
and promotion expenditure within Western Australia. The agreement has an initial
term of two years, during which either party has a right to terminate on sixty
days notice. After the initial term, the agreement shall be automatically
renewed until terminated by either party on sixty days notice in writing. The
parties have agreed that if OzEmail exercises its right to terminate during the
initial term, then FTR shall receive, in each month for a period of  twelve
months following expiry of the agreement,  gross income based on 25% of all
revenue received by the Company in respect of OzEmail services in Western
Australia, net of referral fees paid to third parties.

NOTE 6 - COMMITMENTS AND CONTINGENCIES

                                       11
<PAGE>
 
Litigation

     The Company, its chief executive officer and director and a former director
are named defendants in an action commenced in September 1995 by Trumpet
Software Pty. Limited ("Trumpet") in the Federal Court of Australia, Hobart
District Registry.  The suit claims copyright infringement and violations of the
Trade Practices Act based on alleged modification, reproduction and distribution
of Trumpet's "Trumpet Winsock" software by the Company.

     On July 11, 1996 the Company reported that an adverse ruling had been
rendered by the Federal Court of Australia in the pending lawsuit against the
Company by Trumpet Software over alleged copyright infringements and violations
of Australia's Trade Practices Act. Procedural matters are now underway with
respect to the damages hearing which is currently scheduled to be held in late
September, 1997.  Evidence received to date has not affected the advice of the
Company's litigation counsel that its monetary exposure in respect of the
damages component in this litigation is expected to be between A$50,000 and
A$350,000. The Company has accrued an estimated amount for such exposure that is
within this range and an estimate for potential payment of costs to Trumpet and
continues to believe that the ultimate disposition of this proceeding will not
have a material adverse effect on its business, results of operations or
financial position.

     On March 18, 1997, the Australasian Performing Rights Association ("APRA")
filed a statement of claim against the Company.  APRA claims that the Company
has infringed copyright in a variety of musical works owned and controlled by
APRA by permitting the Company's customers to download those works.  APRA seeks
injunctive relief and damages against the Company.  The Company is defending
this action.  The Company does not believe that this action will give rise to
any material liability.  However, there can be no assurance that the ultimate
disposition of this claim will not have a material adverse impact on the
business, results of operations or financial condition of the Company, or that
the Company will not be required to obtain a license or pay a license fee.  The
failure to obtain such a license could have a material adverse impact on the
Company.

Leases

     The Company leases premises, facilities, and certain of its network and
host system equipment, hardware and equipment relating to office fitout, under
capital leases and non-cancellable operating leases expiring in various years
through 2001.  At June 30, 1997 the Company's future minimum payments under non-
cancellable operating leases with initial terms of one year or more aggregated
A$3,018,000.  At June 30, 1997, the present value of future minimum capital
lease payments, including the current portion of A$2,596,000, aggregated
A$7,648,000.

Capital Expenditure Commitments

     As at June 30, 1997, total capital expenditure, relating to
telecommunications plant and equipment and communications equipment contracted
but not provided for in the financial statements totalled A$693,000.

NOTE 7 - INVESTMENT IN VOYAGER NEW ZEALAND LIMITED

     OzEmail owns an 80% equity interest in Voyager, with the remaining 20%
equity interest held by two non-executive directors of Voyager (the "Minority
Shareholders").  OzEmail and the Minority Shareholders are parties to a
Shareholders Agreement setting out certain rights and restrictions on the
employment and stock ownership of the Minority Shareholders (the "Shareholders
Agreement").  Pursuant to the shareholders agreement and other agreements
between OzEmail and Voyager, OzEmail undertakes to provide its services and
intellectual property to Voyager at cost.  OzEmail has the power to select a
majority of the board of directors of Voyager.  In the event of termination of
employment of the Minority Shareholders, the Shareholders Agreement provides
that the Minority Shareholders have a right to sell their equity interest in
Voyager to the Company at fair value.  The Minority Shareholders are also
entitled to participate on a pro rata basis in any sale by OzEmail of its equity
interest in Voyager.  On January 2, 1997 the Minority Shareholders provided
formal notice to OzEmail that they wished to exercise their option under the
Shareholders Agreement to sell their shares in Voyager to the Company at fair
value. To date the parties have not reached a consensus on the price at which
such sale of shares would take place and are 

                                       12
<PAGE>
 
evaluating alternative ownership structures. The Company has provided for any
costs in settlement of this matter at a level which its directors believe is
reasonable.

     The Shareholders Agreement provided that NZ$435,000 (A$388,000) of
additional capital would be contributed by OzEmail and the Minority Shareholders
in proportion to their existing shareholding, and, if necessary, the next
NZ$200,000 (A$179,000) would be advanced by OzEmail as a loan.  Thereafter,
capital may be raised by new issues or by loans.  As at June 30, 1997, OzEmail
and the Minority Shareholders have contributed the additional capital and
OzEmail has advanced approximately NZ$836,000 (approximately A$757,000) as a
loan to Voyager.

NOTE 8 - JOINT VENTURES AND PARTNERSHIPS

OzEmail Telecommunications Partnership

     In November, 1996 the Company and Ideata, a third-party company registered
in Australia, entered into a  partnership agreement to develop and commercialize
devices for voice and fax digitisation and transmission through telephone,
Internet and other communications devices over the Internet.  The Company's
interest in the partnership was held through OzEmail Fax Investments Pty
Limited.

     In June 1997, the partnership agreement was rescinded following the sale of
the partnership's assets to OzEmail Interline. The Company holds 80% of OzEmail
Interline.

NOTE 9 - SUBSEQUENT EVENTS

Capital Expenditure commitments

     Subsequent to June 30, 1997, the Company has entered into capital
expenditure commitments which total approximately A$43,000.  The capital
commitments relate to network, communications and computer equipment.

OzEmail Interline

     In July, 1997, OzEmail Interline entered into a non-exclusive license and
service provider agreement with Concentric Network Corporation for the provision
of the OzEmail Interline service in the United States.

NOTE 10 - NET INCOME (LOSS) PER SHARE

     In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per Share." SFAS
No. 128 establishes a different method of computing net income per share than is
currently required under the provisions of Accounting Principles Board Opinion
No. 15. Under SFAS No. 128, the Company will be required to present both basic
net income per share and diluted net income per share. Basic net income (loss)
per share would have been A$(0.80) and A$0.01 per share for the three months
ended June 30, 1997 and 1996, respectively, and A$(0.83) and A$(0.09) for the
six months ended June 30, 1997 and 1996, respectively. Diluted net income (loss)
per share would have been A$(0.80) and A$0.01 per share for the three months
ended June 30, 1997 and 1996 respectively, and A$(0.83) and A$(0.09) for the six
months ended June 30, 1997 and 1996.  The Company plans to adopt SFAS No. 128 in
its fiscal quarter ending December 31, 1997 and at that time all historical net
income per share data presented will be restated to conform to the provisions of
SFAS No. 128.

                                       13
<PAGE>
 
NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION
 
<TABLE>
<CAPTION>
                                                                     SIX MONTHS ENDED
                                                                          JUNE 30
                                                                     1996       1997
                                                                    -------   -------
                                                                      (In thousands)
<S>                                                                  <C>      <C>
Cash paid for interest.............................................. A$  89   A$  166
Cash paid for tax...................................................    366        76
Non cash investing and financing:
Property and equipment acquired under capitalized leases............      -     5,000
</TABLE>

                                       14
<PAGE>
 
ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

     Except for historical information contained herein, the matters discussed
in this report contain forward-looking statements that involve risks and
uncertainties.  The Company's actual results could differ materially from those
anticipated by these forward-looking statements as a result of various factors,
including those set forth in the Company's Annual Report on Form 10-K for the
year ended December 31, 1996.  Factors that could cause or contribute to such
differences include those discussed herein as well as those included in the
documents that the Company files from time to time with the Securities and
Exchange Commission.  The Company disclaims any obligation to update its
forward-looking statements.

OVERVIEW

     In June 1997 the Company completed a transaction with Metro that is
intended to expand the presence of the OzEmail Phone and OzEmail Fax service
internationally. In November, 1996 the Company, through OzEmail Fax Investments,
a wholly owned subsidiary of OzEmail, entered into a partnership agreement with
Ideata, a company incorporated in Australia, to develop and commercialize
devices for voice and fax digitisation and transmission through telephone,
Internet and other communications systems as developed by or on behalf of
Ideata. The voice/fax system, business, intellectual property in the system, and
other assets of this partnership were then transferred to OzEmail Interline and
the partnership was dissolved. Following this transaction, OzEmail Fax
Investments owns a 80% equity interest in OzEmail Interline.

     During June 1997, the Company via OzEmail Fax Investments, and its
partnership interest, entered into agreements with subsidiaries of Metro
Holdings AG ("Metro") under the terms of which (1) the partnership agreed to
grant an exclusive license to a subsidiary of Metro in respect to certain
Internet telephony technology for US$9,400,000 (A$12,655,000) and (2) Metro
would purchase a 40% equity interest in OzEmail Interline on a ratable basis
from the current shareholders for US$5,600,000 (A$7,539,000) of which 80% being
US$4,480,000 (A$6,031,000) was accounted for by OzEmail Fax Investments and the
remaining 20% being accounted for by Ideata.  During April 1998, the Company,
for a number of reasons, agreed to repurchase the equity interest in OzEmail
Interline held by Metro and rescind the licence agreement in exchange for
issuing to Metro 5,400,000 Ordinary Shares (represented by 540,000 ADSs).  Metro
has agreed to act as an agent in Europe for the Company's prepaid phone card
service.

     As the equity interest in OzEmail Interline held by Metro was repurchased
within one year of sale, in accordance with Securities and Exchange Commission
Staff Accounting Bulletin Topic 5-H the Company has restated its previously
reported quarterly results to reverse the gain recorded on the initial sale of
the equity interest in OzEmail Interline. The Company has also reversed 
previously recorded license revenues. Amounts received from Metro totalling
A$18,686,000 are reflected as "Deposits under agreements with Metro" in the
accompanying Balance Sheet as of June 30 1997.

     The Company's repurchase of the equity interest in OzEmail Interline held
by Metro and the termination of the license agreement will be recorded as 1998
transactions in the Company's statutory accounts and amounts received from Metro
will be subject to taxation in 1997 under Australian tax laws.

     The Company retained its Australian peak connect-time charges at A$5.00
(US$3.71) in the second quarter of 1997. The current industry environment
remains very dynamic and competitive. As a result of increasing competition in
the Internet access and services industry, the Company expects to encounter
significant pricing pressure, which in turn could result in  reductions in the
average selling price of the Company's services.

POTENTIAL FLUCTUATIONS IN OPERATING RESULTS

     The Company's prospects should be considered in the light of the risks,
expenses and difficulties frequently encountered by companies in the early stage
of development, particularly companies in new and evolving markets.  

                                       15
<PAGE>
 
The Company's operating results may fluctuate significantly in the future as a
result of a variety of factors, including user demand for Internet access and
services, capital expenditures and other costs relating to the maintenance and
expansion of operations, the number and mix of residential and business
customers, customer retention rates, pricing changes by the Company and its
competitors, new service introductions by the Company and its competitors,
delays or expense in obtaining necessary equipment, access to telecommunications
transmission capacity supplied by telecommunication carriers, economic
conditions in the Internet access and services industry, and general economic
conditions. There can be no assurance that the Company will be able to offset
the effects of any future price reductions or cost increases with increased
numbers of customers, higher revenue from enhanced services, cost reductions or
otherwise. There can be no assurance that revenue growth will continue or that
the Company will in the future sustain profitability on either a quarterly or
annual basis.

     The Company's expense levels are based in part on its expectations
regarding future revenues and are fixed to a large extent in the short term.  As
a result, the Company may be unable to adjust spending in a timely manner to
compensate for any unexpected revenue shortfall.  Any significant revenue
shortfall would therefore have a material adverse impact on the Company's
results of operations.

     The Company anticipates a decrease in demand during Australia and New
Zealand's summer months in December, January and February of each year.  There
can be no assurance that the Company's results in any future quarter will not be
negatively affected by such trends.

LITIGATION

     The Company, its chief executive officer and director and a former director
are named defendants in an action commenced in September 1995 by Trumpet
Software Pty Limited ("Trumpet") in the Federal Court of Australia, Hobart
District Registry.  The suit claims copyright infringement and violations of the
Trade Practices Act based on alleged modification, reproduction and distribution
of Trumpet's "Trumpet Winsock" software by the Company.

     On July 11, 1996 the Company reported that an adverse ruling had been
rendered by the Federal Court of Australia in the pending lawsuit against the
Company by Trumpet Software over alleged copyright infringements and violations
of Australia's Trade Practices Act.  Procedural matters are now underway with
respect to the damages hearing which is currently scheduled to be held in late
September, 1997.  Evidence received to date has not affected the advice of the
Company's litigation counsel that its monetary exposure in respect of the
damages component in this litigation is expected to be between A$50,000 and
A$350,000. The Company has accrued an estimated amount for such exposure that is
within this range and an estimate for potential payment of costs to Trumpet and
continues to believe that the ultimate disposition of this proceeding will not
have a material adverse effect on its business, results of operations or
financial position.

     On March 18, 1997, the Australasian Performing Rights Association ("APRA")
filed a statement of claim against the Company.  APRA claims that the Company
has infringed copyright in a variety of musical works owned and controlled by
APRA by permitting the Company's customers to download those works.  APRA seeks
injunctive relief and damages against the Company.  The Company is defending
this action.  The Company does not believe that this action will give rise to
any material liability.  There can be no assurance that the ultimate disposition
of this claim will not have a material adverse impact on the business, results
of operations or financial condition of the Company, or that the Company will
not be required to obtain a license or pay a license fee.

     From time to time, the Company has received, and may in the future receive,
notice of claims by other parties against the Company.  As of the date of this
Form 10-Q, the Company is not a party to any other legal proceedings, and is not
aware of any other pending or threatened proceedings the outcome of which, in
the opinion of management, would have a material adverse effect on the Company's
business, results of operations or financial condition.

                                       16
<PAGE>
 
  RESULTS OF OPERATIONS
 
     The following table sets forth consolidated operating results of the
Company as a percentage of net revenue.
 
<TABLE>
<CAPTION>
                                            THREE MONTHS ENDED         SIX MONTHS ENDED 
                                                JUNE 30,                   JUNE 30,
                                         -----------------------     --------------------
                                           1996           1997         1996         1997
                                         --------       --------     --------    -------- 
<S>                                      <C>           <C>           <C>          <C>
 
 Revenues                                 100  %        100   %      100   %      100   %
 Costs and expenses
Cost of revenues - network                   
 operations and support                    22.5          29.4         23.5         29.4 
Cost of revenues - communications           
 and other                                 34.5          35.2         35.4         33.8 
Sales and marketing                        26.2          23.0         29.5         24.2
Product development                         1.2          26.2          1.1         21.4
General and administrative                 11.0          26.8         19.1         20.7
                                          -----         -----        -----        ----- 
 Total costs and expenses                  95.4         140.6        108.6        129.5
                                          -----         -----        -----        ----- 
 
Income (loss) from operations               4.6         (40.6)        (8.6)       (29.5)
Interest and other income                   
 (expense) net                              2.7           3.4          1.5          8.1 
Foreign exchange gain                      11.3             -          7.0          0.0
Income (loss) before provision             
 for income taxes and minority
 equity interest                           18.7         (37.2)        (0.0)       (21.4) 
 Net income (loss)                         12.0%        (63.4)%       (0.5)%      (36.1)%
</TABLE>
                                                                               
  COMPARISON OF REVENUES FOR THREE MONTHS ENDED JUNE 30, 1997, WITH REVENUES FOR
THREE MONTHS ENDED JUNE 30, 1996
 
     Revenues consist primarily of hourly connect-time charges for Internet
access, one-time registration charges, monthly connection charges, sales of the
Company's value added services, set-up and establishment fees, advertising and
subscription fees associated with NetGuide Magazine and NetGuide Online, and
advertising revenue from the provision of the Company's online content. From
May, 1997, the Company has also recognized timed charge revenue from OzEmail
Phone customers in Australia.
 
     Revenues grew by 100.3% to A$13,077,000 in the second quarter of 1997 from
A$6,529,000 in the second quarter of 1996.  The increase in revenues was
attributable primarily to growth in the number of active customers using the
Company's services and increases in billable hours; revenue from the provision
of Internet services to the New South Wales Department of School Education;
increased revenue from the sale and usage of ISDN connections and permanent
modems; and increased sales from the Company's value added services.  As of June
30, 1997, the Company's active customer base consisted of 121,000 active
customers as compared to 82,000 active customers as at June 30, 1996.
 
  COMPARISON OF REVENUES FOR SIX MONTHS ENDED JUNE 30, 1997, WITH REVENUES FOR
SIX MONTHS ENDED JUNE 30, 1996
 
     Revenues grew by 125.1% to A$23,829,000 in the six months ended June 30,
1997 from A$10,585,000 in the six months ended June 30, 1996. The increase in
revenues was primarily attributable to growth in the number of active customers
using the Company's services and increases in billable hours; revenue from the
provision of Internet services to the New South Wales Department of School
Education; increased revenue from the sale and usage of ISDN connections and
permanent modems; and increased sales from the Company's value added services.
 
  COMPARISON OF COSTS AND EXPENSES FOR THREE MONTHS ENDED JUNE 30, 1997, WITH
COSTS AND EXPENSES FOR THREE MONTHS ENDED JUNE 30, 1996

                                       17
<PAGE>
 
     Cost of Revenues - Network Operations and Support.  Cost of revenues -
network operations and support includes: technical and customer support staff;
network and equipment maintenance and support; depreciation  and amortizaton
expense on network equipment; and applicable overhead costs.  Cost of revenues -
network operations and support increased 161.4% to A$3,842,000 in the second
quarter of 1997 from A$1,470,000 in the second quarter of 1996, and increased as
a percentage of net revenues to 29.4% from 22.5%, respectively.  The increase in
cost of revenues  was primarily attributable to expansion of the Company's
customer base and the concurrent increases in the size and complexity of the
Company's telecommunications network and support infrastructure for Internet
access and installation of the OzEmail Phone and OzEmail Fax networks.

     Cost of Revenues - Communications and Other.  Cost of revenues -
communications and other includes: monthly telecommunications expenses;
consultancy fees related to communications costs;  editorial and production
costs related to the production of NetGuide in Australia; cost of domain name
registrations; and a fee payable as a percentage of revenue to the New South
Wales Government for revenues sourced from government customers. Cost of
revenues - communications and other increased 104.6% to A$4,604,000 in the
second quarter of 1997 from A$2,250,000 in the second quarter of 1996, and
increased as a percentage of net revenues to 35.2% from 34.5%, respectively.
The increase in cost of revenues was primarily attributable to: increases in the
use of the Company's services and network; and a consultancy fee payable to a
third party for services relating to the license of the OzEmail Phone and
OzEmail Fax technology in OzEmail Interline.

     Sales and Marketing.  Sales and marketing expenses include: sales and
marketing personnel; promotional expenses; expenses related to the provision of
the Company's online content services; and allocable overheads. Specific
marketing costs include advertising, co-operative disk bundling with computer
hardware and modem manufacturers and retailers, computer fairs and registration
starter disks.  Sales and marketing expenses increased 76.1% to A$3,013,000 in
the second quarter of 1997 from A$1,711,000 in the second quarter of 1996, but
decreased as a percentage of net revenues to 23.0% from 26.2% respectively.  The
increase in sales and marketing expenses was primarily attributable to:
increased promotional activities; and increased salaries and wages related to
the hiring of additional  staff for expansion of the Company's corporate sales
force, the OzEducate department and the provision of the Company's online
content services. OzEducate markets the Company's services to Australian
educational authorities and institutions.

     Product Development.  Product development expenses include: software
development; engineering staff; software development fees paid to consultants;
and allocable overheads.  Product development expenses increased to A$3,423,000
in the second quarter of 1997 from A$78,000 in the second quarter of 1996, and
increased as a percentage of net revenues to 26.2% from 1.2%, respectively.  The
increase in product development expenses was primarily attributable to costs
related to the commercialization of OzEmail Fax and OzEmail Phone.

     General and Administrative.  General and administrative expense includes:
administrative staff; depreciation of non-network equipment; travel expense of
management; allocable overheads; and allowance for bad and doubtful accounts and
bank charges.  General and administrative expenses increased 388% to A$3,502,000
in the second quarter of 1997 from A$717,000 in the second quarter of 1996, and
increased as a percentage of net revenues to 26.8% from 11.0%, respectively.
The increase in general and administrative expenses is primarily attributable
to: costs associated with increased provisioning in respect of  litigation;
increases in provisions for doubtful debts in line with receivables growth and
corporate policy; increased consultancy fees; and hiring of additional
management, finance and administrative staff to support the Company's expanding
customer base.

     Interest and Other Income and Expense.  Interest and other income decreased
to A$552,000 in the second quarter of 1997 from A$988,000 in the second quarter
of 1996. The decrease was primarily attributable to a foreign exchange gain of
$741,000 being recognised in the second quarter of 1996.  Interest expense
increased  to A$112,000 in the second quarter of 1997 from A$30,000 in the
second quarter of 1996. The increase was  attributable to finance costs related
to capital leases on  network equipment. Interest expense in the second quarter
of 1996 related to a shareholder loan and a bank overdraft.

     Income Taxes.  The Company's tax expense for the second quarter, 1997, is
based on its forecast tax 

                                       18
<PAGE>
 
provision for its Australian operations for the year ended December 31, 1997. At
June 30, 1997, the Company recorded net deferred tax assets of A$299,000 for its
Australian operations. Profits recorded under the sale of 40% of OzEmail
Interline to Ligapart, and profits on the exclusive licence agreement, although
reversed for US reporting as required under SEC Staff Accounting Bulletin 5-H,
are taxable under Australian taxation laws and have resulted in a significant
increase in income tax expense in the second quarter of 1997.

COMPARISON OF COSTS AND EXPENSES FOR SIX MONTHS ENDED JUNE 30, 1997, WITH COSTS
AND EXPENSES FOR SIX MONTHS ENDED JUNE 30, 1996

     Cost of Revenues - Network Operations and Support. Cost of revenues -
network operations and support increased 181.6% to A$7,008,000 in the six months
ended June 30, 1997 from A$2,489,000 in the six months ended June 30, 1996, and
increased as a percentage of net revenues to 29.4% from 23.5%, respectively.
The increase in cost of revenues was primarily attributable to expansion of the
Company's customer base and the concurrent increases in the size and complexity
of the Company's telecommunications network and support infrastructure for
Internet access and installation of the OzEmail Phone and OzEmail Fax network.

     Cost of Revenues - Communications and Other. Cost of revenues -
communications and other increased 114.8% to A$8,050,000 in the six months ended
June 30, 1997 from A$3,748,000 in the six months ended June 30, 1996, and
increased as a percentage of net revenues to 33.8% from 35.4%, respectively.
The increase in cost of revenues in absolute terms was primarily attributable
to: increases in the use of the Company's services and network.

     Sales and Marketing.  Sales and marketing expenses increased 84.7% to
A$5,772,000 in the six months ended June 30, 1997 from A$3,125,000 in the six
months ended June 30, 1996, but decreased as a percentage of net revenues to
24.2% from 29.5% respectively.  The increase in sales and marketing expenses was
primarily attributable to: increased promotional activities; and increased
salaries and wages related to the hiring of additional sales and marketing
staff.

     Product Development.  Product development expenses increased to A$5,095,000
in the six months ended June 30, 1997 from A$109,000 in the six months ended
June 30, 1996, and increased as a percentage of net revenues to 21.4% from 1.1%,
respectively.  The increase in product development expenses was primarily
attributable to costs related to the commercialization of OzEmail Fax and
OzEmail Phone.

     General and Administrative. General and administrative expenses increased
144.5% to A$4,944,000 in the six months ended June 30, 1997 from A$2,022,000 in
the six months ended June 30, 1996, and increased as a percentage of net
revenues to 20.7% from 19.1%, respectively. The increase in general and
administrative expenses is primarily attributable to: costs associated with
increased provisioning in respect of  litigation; increases in provisions for
doubtful debts in line with receivables growth and corporate policy; increased
consultancy fees; and hiring of additional management, finance and
administrative staff to support the Company's expanding customer base.

     Interest and Other Income and Expense.  Interest and other income increased
to A$2,052,000 in the six months ended June 30,1997 from A$1,023,000 in the six
months ended June 30, 1996. The increase was primarily attributable to a profit
from the sale of the Web Wide Media business in the March quarter of 1997.
Interest expense increased  to A$123,000 in the six months ended June 30, 1997
from A$118,000 in the six months ended June 30, 1996. Interest expense for the
six months ended June 30, 1997  was  attributable to finance costs related to
capital leases on network equipment. Interest expense in the six months to June
30, 1996 related to a shareholder loan and a bank overdraft.

LIQUIDITY AND CAPITAL RESOURCES

     The Company has historically financed its operations to date through cash
flow from operations, sale and lease-back of equipment, shareholder loans, bank
advances and the issuance of equity securities.  In the second quarter of  1996,
the Company completed its initial public offering, raising net proceeds of
US$41,664,000 

                                       19
<PAGE>
 
(A$51,000,000). In the third quarter of 1996 the underwriters of the initial
public offering exercised an over-allotment option to acquire a further 150,000
ADSs at US$14 per Share.

     Net cash used in operating activities in the six months to June 30, 1997
totalled A$1,483,000 (US$1,101,000), as compared to net cash provided by
operating activities of A$653,000 (US$512,000) in the six months ended June 30,
1996.  The level of net cash flows used in operating activities in the six
months to June 30 relate primarily to an increase in expenditure in relation to
product development incurred in developing and expanding the OzEmail Fax and
Voice Telephony Network.

     Net cash used in investing activities for the six months to June 30, 1997
totalled A$8,418,000 (US$6,253,000), as compared to net cash flows used in
investing activities of A$3,482,000 (US$2,731,000) for the six months to June
30, 1996.  The increase in net cash  used in investing activities in the six
months to June 30, 1997 as compared to the six months to June 30, 1996, is
primarily attributable to the acquisition of additional telecommunications and
computer plant and equipment.

     Net cash provided by financing activities totalled A$4,140,000
(US$3,075,000) in the six months to June 30, 1997, as compared to net cash
provided by financing activities of A$49,474,000 (US$38,807,000) in the six
months to June 30, 1996. Net cash provided by financing activities in the second
quarter of 1996 principally related to proceeds from the Company's initial
public offering. Net cash provided by financing activities in the six months to
June 30,1997, was primarily attributable to the sale and lease-back of equipment
under finance leases.

     The Company believes that its cash and cash equivalents of A$38,849,000
(US$28,857,000) as at June 30, 1997 will be sufficient to meet its presently
anticipated working capital and capital expenditure requirements for  the
remainder of the year to December 1997. It should be noted that the deposits
receivable from Metro will be extinguished via the issuance of shares in April
1998 and will therefore not result in a significant cash outflow.   However, the
Company may seek to expand its operations by making acquisitions or entering
into joint ventures or licensing agreements in domestic or international
markets, which may require additional capital.  Entrance into certain countries
or markets could require a significant commitment of resources, which could in
turn require the Company to obtain additional financing earlier than otherwise
expected. There can be no assurance that the Company will be able to
successfully obtain such financing in a timely fashion, and limitations imposed
on the foreign ownership of stock under the Australian Foreign Takeovers and
Acquisitions Act could frustrate such efforts.  The Company may from time to
time consider the acquisition of complementary businesses, products or
technologies which may require additional financing, although it has no present
understandings, commitments or agreements, nor is it engaged in any discussions
or negotiations, with respect to any such transaction, that may require
additional financing.

OTHER

     Under Australian law, foreign persons are prohibited from acquiring more
than a limited percentage of the shares in an Australian company without
approval from the Australian Treasurer, or in certain other limited
circumstances.  These limitations are set out in the Australian Foreign
Takeovers and Acquisitions Act.  At this time, any foreign person, together with
associates, is prohibited from acquiring 15% or more of the outstanding shares
in the Company, and the total holdings of all foreign persons must be less than
40% in the aggregate unless approval is granted by the Australian Treasurer.
Such investment restrictions could have a material adverse effect on the
Company's ability to raise capital as needed and could make difficult or render
impossible attempts by foreign entities to acquire the Company, including
attempts that might result in a premium over market prices to holders of the
Company's ADSs.

                                       20
<PAGE>
 
                                OZEMAIL LIMITED



PART II.  OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS.

     The Company, its chief executive officer and director and a former director
are named defendants in an action commenced in September 1995 by Trumpet
Software Pty Limited ("Trumpet") in the Federal Court of Australia, Hobart
District Registry.  The suit claims copyright infringement and violations of the
Trade Practices Act based on alleged modification, reproduction and distribution
of Trumpet's "Trumpet Winsock" software by the Company.

     On July 11, 1996 the Company reported that an adverse ruling had been
rendered by the Federal Court of Australia in the pending lawsuit against the
Company by Trumpet Software over alleged copyright infringements and violations
of Australia's Trade Practices Act.  Procedural matters are now underway with
respect to the damages hearing which is currently scheduled to be held in late
September, 1997.  Evidence received to date has not affected the advice of the
Company's litigation counsel that its monetary exposure in respect of the
damages component in this litigation is expected to be between A$50,000 and
A$350,000. The Company has accrued an estimated amount for such exposure that is
within this range and an estimate for potential payment of costs to Trumpet and
continues to believe that the ultimate disposition of this proceeding will not
have a material adverse effect on its business, results of operations or
financial position.

     On March 18, 1997, the Australasian Performing Rights Association ("APRA")
filed a statement of claim against the Company.  APRA claims that the Company
has infringed copyright in a variety of musical works owned and controlled by
APRA by permitting the Company's customers to download those works.  APRA seeks
injunctive relief and damages against the Company.  The Company is defending
this action.  The Company does not believe that this action will give rise to
any material liability.  There can be no assurance that the ultimate disposition
of this claim will not have a material adverse impact on the business, results
of operations or financial condition of the Company, or that the Company will
not be required to obtain a license or pay a license fee.

ITEM 2.  CHANGES IN SECURITIES.

None.

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

Not Applicable.

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

None.

ITEM 5.  OTHER INFORMATION.

None.

                                       21
<PAGE>
 
  ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K.
 
(a)  EXHIBITS
 
 
EXHIBIT   DOCUMENT DESCRIPTION
-------   --------------------
NUMBER
------
 
 3.1      Memorandum of Association.  (Incorporated by reference to Exhibit 3.1
          of the Company's registration statement under the Securities Act on
          Form F-1, Registration Statement No. 333-4794)
 
 3.2      Articles of Association.  (Incorporated by reference to Exhibit 3.2 of
          the Company's registration statement under the Securities Act on Form
          F-1, Registration Statement No. 333-4794)
 
 3.3      Constitution of Archbold Holdings Limited (Voyager New Zealand
          Limited) (Incorporated by reference to Exhibit 3.3 of the Company's
          registration statement under the Securities Act on Form F-1,
          Registration Statement No. 333-4794)
 
 3.4      Memorandum and Articles of Association of Cyber Publications Pty
          Limited.  (Incorporated by reference to Exhibit 3.4 of the Company's
          registration statement under the Securities Act on Form F-1,
          Registration Statement No. 333-4794)
 
 4.1      Form of Specimen of American Depositary Share Certificate
          (Incorporated by reference to Exhibit 4.1 of the Company's
          registration statement under the Securities Act on Form F-1,
          Registration Statement No. 333-4794)
 
 4.2      Form of Specimen of American Depositary Receipt.  (Incorporated by
          reference to Exhibit 4.2 of the Company's registration statement under
          the Securities Act on Form F-1, Registration Statement No. 333-4794)
 
 4.3      Form of Deposit Agreement among OzEmail Limited, Bank of New York as
          Depositary, and holders from time to time of ADSs issued thereunder.
          (Incorporated by reference to Exhibit 4.4 of the Company's
          registration statement under the Securities Act on Form F-1,
          Registration Statement No. 333-4794)

10.1      Representation Agreement between OzEmail Limited and FTR Holdings
          Limited, dated May 24, 1997. (Incorporated by reference to Exhibit
          10.1 of the Company's Quarterly Report on Form 10-Q under the
          Securities Exchange Act of 1934, as amended, filed with the Commission
          on August 14, 1997)
          
11.1      Computation of Pro forma Net Income (Loss) per Common and Equivalent
          Share
 

(b)  REPORTS ON FORM 8-K.
 
  There were no reports on Form 8-K for the quarter ended June 30, 1997.

                                       22
<PAGE>
 
                                  SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Amendment No. 1 to the Quarterly Report on Form
10-Q to be signed on its behalf by the undersigned thereunto duly authorized.

                                        OZEMAIL LIMITED


Date: May 19, 1998                  By:  /s/ Sean M. Howard
                                       ---------------------------------------
                                    Sean M. Howard
                                    Chief Executive Officer


Date: May 19, 1998                 By:  /s/ David M. Spence
                                      ---------------------------------------
                                    David M. Spence
                                    President and Chief Operating Officer


Date: May 19, 1998                 By:  /s/ Ian McGregor
                                      ---------------------------------------
                                    Ian McGregor
                                    Chief Financial Officer

                                       23
<PAGE>
 
                                 EXHIBIT INDEX

EXHIBIT NO.     DOCUMENT DESCRIPTION
----------      --------------------

  11.1          Computation of Pro Forma Net Income (Loss) per Common and 
                Equivalent Share.






                                      24