UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549


                                   FORM 10-QSB


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

For the quarterly period ended December 31, 1996 or


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

For the transition period from ______________ to ______________

Commission file number 000-21659


                                   EDnet, INC.

        (Exact name of small business issuer as specified in its charter)


Colorado                                                     84-1273795
--------------------------------------------------------------------------------
State or other jurisdiction                                  (I.R.S. Employer
of incorporation or organization)                            Identification No.)


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


Issuer's telephone number, including area code               (415) 274-8800
                                                             -------------------

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

Number of shares  outstanding  of the  issuer's  common stock as of December 31,
1996: 4,910,465

Transitional Small Business Disclosure Format (Check one):        Yes      No X 
                                                                     ---     ---

<PAGE>

Part I.  FINANCIAL INFORMATION

<TABLE>
                                  EDnet, Inc.
                       CONSOLIDATED STATEMENTS OF INCOME
          For the Three and Six Months ended December 31, 1996 & 1995


<CAPTION>
                                                                         Three Months                            Six Months
                                                                        Ended December 31                     Ended December 31
                                                                          (Unaudited)                            (Unaudited)
                                                                --------------------------------------------------------------------
                                                                     1996              1995               1996               1995
                                                                --------------------------------------------------------------------
<S>                                                                <C>                <C>              <C>                  <C>    
Revenues:
  Equipment sales and installation                             $   345,927        $   349,298        $   641,705        $   697,824
  Site development and services                                    347,488               --              575,875               --
  Access, Usage, and Hosting fees                                  424,590            293,456            801,864            505,253
  Other fees                                                        33,479             25,616             58,639            129,182
                                                                -----------        -----------        -----------        -----------
                                                                 1,151,484            668,370          2,078,084          1,332,259

Cost of sales                                                      596,935            424,550          1,203,816            819,104
                                                                -----------        -----------        -----------        -----------

  Gross Profit                                                     554,549            243,820            874,268            513,155

Research & Development                                             764,532               --              923,096               --
Sale and Marketing Expenses                                        245,364              2,832            437,872              7,670
General and Administrative expenses                                614,257            370,700          1,111,318            661,260
                                                                -----------        -----------        -----------        -----------
   Loss from operations                                         (1,069,604)          (129,712)        (1,598,018)          (155,775)
                                                                -----------        -----------        -----------        -----------

Other income (expense):
  Interest income                                                      508               --                  524               --
  Interest expense                                                (100,920)            (5,858)          (157,566)           (11,783)
                                                               -----------        -----------        -----------        -----------
Total other income (expense), net                                 (100,412)            (5,858)          (157,042)           (11,783)
                                                               -----------        -----------        -----------        -----------

  Loss before provision for income taxes                        (1,170,016)          (135,570)        (1,755,060)          (167,558)

Income taxes                                                          --                 --                 --                 --
                                                               -----------        -----------        -----------        -----------
  Net Loss                                                     $(1,170,016)       $  (135,570)       $(1,755,060)       $  (167,558)
                                                               ===========        ===========        ===========        ===========

Net Loss Per Common Share                                      $     (0.26)       $     (0.06)       $     (0.39)       $     (0.07)
                                                               ===========        ===========        ===========        ===========

Weighted Average Number
  of Shares Outstanding                                          4,536,020          2,261,945          4,536,020          2,261,945
                                                               ===========        ===========        ===========        ===========


<FN>
                      The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>

                                                                  2
<PAGE>

                                  EDnet, Inc.
                           CONSOLIDATED BALANCE SHEETS
                    As of December 31, 1996 and June 30, 1996



                                      ASSETS
<TABLE>
<CAPTION>
                                                               12/31/96       6/30/96
                                                             (Unaudited)
                                                             -----------    -----------
<S>                                                          <C>            <C>        
CURRENT ASSETS
     Cash                                                    $   181,196    $   221,875
     Accounts Receivable, net                                    737,994        478,076
     Inventories                                                 296,843        147,409
     Other Current Assets                                        159,110         14,298
                                                             -----------    -----------
               TOTAL CURRENT ASSETS                            1,375,143        861,658


PROPERTY AND EQUIPMENT, NET                                      664,282        488,943
GOODWILL, NET                                                    758,357      1,088,568
OTHER ASSETS                                                     243,932         79,342
                                                             -----------    -----------
          TOTAL ASSETS                                       $ 3,041,714    $ 2,518,511
                                                             ===========    ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
     Accounts payable                                        $ 1,448,497    $   659,709
     Accrued expenses                                            646,213        390,002
     Deferred revenue                                             13,986         69,623
     Line of credit                                               16,522         16,638
     Notes payable                                             1,328,781        990,991
     Current portion of capital lease obligations                 39,460         24,493
                                                             -----------    -----------
          TOTAL CURRENT LIABILITIES                            3,493,459      2,151,456

CAPITAL LEASE OBLIGATIONS--LONG TERM                              33,097         43,622
                                                             -----------    -----------
          TOTAL LIABILITIES                                    3,526,556      2,195,078

STOCKHOLDERS' EQUITY
     Common stock; par value $.001 per share
     Authorized 50,000,000 shares,4,910,465
     and 4,468,322 shares issued and
     outstanding as of December 31, 1996                         4,910          4,468
     and June 30, 1996, respectively.

     Common stock warrants                                       222,920          --

     Capital paid in excess of par value
     of common stock                                           3,482,065      2,758,644

     Accumulated Deficit                                      (4,194,737)    (2,439,679)
                                                             -----------    -----------
               TOTAL STOCKHOLDERS' EQUITY                       (484,842)       323,433

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                   $ 3,041,714    $ 2,518,511
                                                             ===========    ===========




<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>

                                          3

<PAGE>


                                   EDnet, Inc.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                For the Six Months ended December 31, 1996 & 1995


                                                         12/31/96      12/31/95
                                                       (Unaudited)   (Unaudited)
                                                       -----------   -----------

Cash flows from operating activities:

   Net Loss                                           $(1,755,060)   $ (167,558)

   Adjustments to reconcile net loss to
   cash used in operating activities:

     Depreciation and amortization                        272,866        50,791
     Noncash compensation expenses                                       51,002
     Increase in Other Current Assets                     (19,075)      (10,561)
     Increase in Accounts Receivable                     (259,918)     (152,701)
     Increase in Inventory                               (149,434)     (225,721)
     Increase (Decrease) in Accounts Payable &
         Accrued Expenses                               1,044,883      (115,756)
     Decrease in Deferred Revenue                         (55,637)     (162,107)
                                                      -----------    ----------
       Net Cash used in operating activities             (833,685)     (732,611)
                                                      -----------    ----------

Cash flows from investing activities:

   Purchase of property and Equipment                    (263,336)      (16,246)
                                                      -----------    ----------
       Net cash used in investing activities             (263,336)      (16,246)
                                                      -----------    ----------

Cash flows from financing activities:

   Repayment on borrowings                               (372,256)     (126,725)
   Proceeds from borrowings                             1,000,000          --
   Repayments on capital leases                           (11,820)         --
   Issuamce of shares under Reg D                         528,108       997,500
                                                      -----------    ----------
       Net cash provided by financing activities        1,144,032       870,775
                                                      -----------    ----------

       Net (decrease) increase in cash                    (40,679)      121,918
                                                      ===========    ==========

Cash at beginning of period                               221,875        56,437
                                                      -----------    ----------
Cash at end of period                                 $   181,196    $  178,355
                                                      ===========    ==========

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

                                       4

<PAGE>


                                   EDNET, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


1.   Basis of Presentation
     In  the  opinion  of  management,   the  unaudited  consolidated  condensed
     financial  statements  included  herein have been  prepared on a consistent
     basis with the June 30, 1996 audited consolidated  financial statements and
     include  all  material   adjustments,   consisting   of  normal   recurring
     adjustments, necessary to fairly present the information set forth therein.
     As reported in the Company's audited financial statements of June 30, 1996,
     the  Company  has not been able to  generate  any  operating  profit  since
     inception,  and is  attempting  to raise  additional  funds as described in
     Notes 7 and 9. However, if the Company is unable to raise additional funds,
     it may not have the financial resources to continue as a going concern. The
     financial  statements do not contain any adjustments  that may be needed if
     the Company is unable to continue as a going concern.

2.   Consolidation
     The consolidated financial statements include the accounts of the Company's
     wholly owned  subsidiaries  Entertainment  Digital Network,  Inc. (EDN) and
     Internet Worldwide Business Solutions,  Inc. (IBS). Material  inter-company
     transactions and balances have been eliminated.

3.   Amendment to Acquisition of Internet Worldwide Business Solutions,  Inc.
     On  December  31,  1996,  the Company  amended the terms of its  previously
     consummated  acquisition of its wholly-owned  subsidiary,  IBS, by dividing
     IBS  into  two  separate  corporations.  IBS's  Internet  service  business
     continues to operate as IBS. IBS licensed to  Breakthrough  Software,  Inc.
     (BSI) certain  software under  development  by IBS related to  development,
     operation,  and maintenance of world-wide web sites, and the Company agreed
     to lend BSI up to $250,000  (represented  by an unsecured  note),  of which
     approximately  $130,000 has been lent as of December  31, 1996,  to be used
     for specified purposes.  The Company retained ownership of 2,000,000 shares
     of BSI's convertible  preferred stock,  which represents,  after conversion
     into BSI non-voting common stock, 40% of BSI's outstanding common stock. At
     December 31, 1996, the Company recorded its net book value allocated to BSI
     of $166,667 as its investment.  Also as a part of the amendment,  remaining
     acquisition  notes  payable  from the Company to the founders of IBS in the
     amount of $250,000  were canceled  (Note 6), and the  remaining  term of an
     earn-out  plan  to such  founders  was  canceled  in  consideration  of the
     issuance of 100% of the outstanding voting common stock (Note 8).

4.   Loss per Share
     Loss per  share has been  computed  using the  weighted  average  number of
     common shares outstanding totaling 4,536,020 shares as of December 31, 1996
     and 2,261,945  shares as of December 31, 1995.  Due to the  Company's  loss
     position,  common  equivalent shares (stock options and warrants) have been
     excluded because they are anti-dilutive.

5.   Research and Development
     The Company  incurred  $764,532 of Research and Development  expense during
     the three  months  ended  December  31,  1996 a major  portion  of which is
     associated  with the  development of the Internet  software  product by IBS
     (which software has now been licensed by IBS to BSI effective  

                                       5

<PAGE>

     December 31, 1996  (Note  3)).  Total  six month expenditures on Research &
     Development were $923,096.

6.   Notes Payable

     In July,  August  and  September,  1996  the  company  borrowed  a total of
     $1,000,000 under three senior collateralized  promissory notes (the Notes),
     arranged by its  financial  advisor,  Morgan  Fuller  Capital Group (Morgan
     Fuller), as follows:

                 Date               Amount         Rate        Due Date
         July 5, 1996              $500,000        14%         November 15, 1996
         August 9, 1996             200,000        14%         November 15, 1996
         September 10, 1996         300,000        14%         November 15, 1996

     The  Notes  are  collateralized  by the  Company's  assets,  with  interest
     originally  payable  quarterly  starting  September 30, 1996.  Terms of the
     Notes  include a  provision  for  conversion  to a term loan with  interest
     increasing  to 18% and  principal  payments of $100,000  per month.  Morgan
     Fuller  subsequently sold  participations in the Notes to certain investors
     in a private placement offering.

     On November 15, 1996 the Notes were extended  through  January 31, 1997. In
     connection  with the Notes and extension,  the Company  issued  warrants as
     described in Note 8 and agreed to pay Morgan Fuller a loan extension fee of
     1.5%.  On January  31,  1997,  the Notes  converted  into a term  loan,  as
     described above, with monthly principal  payments  commencing  February 15,
     1997.

     In  conjunction  with  the  Company's  amendment  of the  terms  of the IBS
     acquisition  (Note 3),  $250,000 in notes payable that were associated with
     the  original  acquisition  were  canceled,  and  the  associated  goodwill
     eliminated.

7.   Equity Private Placements
     On November 30, 1996 the Company  completed a private  placement of 317,143
     shares of common  stock  priced at $1.75 per  share.  Each share was issued
     with a warrant to purchase an additional share through November 29, 1999 at
     a price of $2.50 per share.  Holders of this common stock and warrants have
     been  granted  piggyback  and Form S-3  registration  rights for the common
     stock and common stock underlying the warrants.

     On December 31, 1996,  the Company  initiated a private  placement of up to
     $5,000,000  of common  stock  priced at $1.00 per  share.  Holders  of this
     common stock will have piggyback and Form S-3 registration rights.

8.   Stock, Options and Warrants
     On December 10, 1996,  the Company issued 125,000 shares of common stock to
     the two former  owners of IBS (then  employees  of IBS) earned as a part of
     the  revenue-based  earn-out plan  established at the time of  acquisition.
     These  shares were valued at $1.5625  per share,  the trading  price of the
     stock as of the date of  issuance  and  resulted in  increased  goodwill of
     $195,313.  As a part of the amendment to the IBS acquisition  (Note 3), the
     remainder of the earn-out plan was canceled.

     In  connection  with the Notes  arranged  by Morgan  Fuller  (Note 6),  the
     Company issued the following  warrants to purchase  shares of the Company's
     common stock to Morgan Fuller and its nominees:

                                       6

<PAGE>
                                 Number of     Exercise         Expiration
         Date                    Warrants        Price             Date
         July 5, 1996             58,824         $4.25        July 4, 1999
         September 11, 1996       67,806         $3.69        September 10, 1999

     In connection  with the extension of the Notes (Note 6), the Company issued
     55,970  warrants to Morgan  Fuller and nominees  with an exercise  price of
     $2.68 per share to be  exercised  prior to November  14,  1999.  Holders of
     these warrants have been granted piggyback and Form S-3 registration rights
     for the common stock underlying the warrant. The fair value of the warrants
     issued has been recorded as debt  issuance  costs and discount to the Notes
     and  amortized  over the term of the Notes.  Net amounts  included in Other
     Current  Assets and  offset to Notes  Payable  are  $123,661  and  $39,509,
     respectively, as of December 31, 1996.

     On December 31, 1996, the Company's Incentive Stock Option Plan for certain
     officers and executive  employees of the Company expired,  thereby reducing
     outstanding and reserved  incentive  options by 500,000 shares.  No options
     were exercised under the plan.

     There were no options or warrants exercised during the period.


9.  Subsequent Events

     Consulting Agreement with Liviakis Financial Communications, Inc.

     Pursuant to an agreement effective January 12, 1997 between the Company and
     Liviakis  Financial  Communications,  Inc.  (Liviakis),  Liviakis agreed to
     provide investor relations consulting services to the Company for a term of
     one year ending on January 2, 1998. As payment for its  services,  Liviakis
     will receive 490,000  unregistered shares of common stock from the Company,
     to be  valued  when  issued.  At  the  end of the  term  of the  consulting
     agreement,  Liviakis  shall  have the same  demand  registration  rights to
     register such shares with the Securities and Exchange  Commission  (SEC) as
     given to investors in the December 1996 private placement discussed in Note
     7.

     Consulting Agreement with NET Financial International, Ltd.

     On January 31, 1997, the Company  entered into a Consulting  Agreement with
     NET Financial International,  Ltd. (NET Financial) to assist the Company in
     raising  up to  $5,000,000  in a series  of  private  placements  of stock,
     discussed  below. The Company has agreed to pay NET Financial fees equal to
     10% of the total capital raised in the financing as well as issuing to it a
     warrant exercisable for two years allowing the purchase of shares of common
     stock with a value on the date of the closing of the financing  equal to 6%
     of the capital raised in the  financing,  at an exercise price equal to the
     closing  bid price of the  common  stock on the date of the  closing of the
     financing.  The  agreement  has a term of three  months and  thereafter  is
     terminable by either party upon ten days prior written notice. In addition,
     if the Company seeks  additional  financing  during the twelve month period
     after the execution of the NET Financial consulting agreement,  the Company
     must  give NET  Financial  the  right  of  first  refusal  to  obtain  such
     additional financing, upon the compensation terms described above.

                                       7

<PAGE>

     Equity Private Placement

     Pursuant to a Certificate of Designation filed with the Colorado  Secretary
     of State on February 2, 1997, the Company's  Articles of Incorporation were
     amended  to allow  the  Company  to issue  Series A  Preferred  Shares.  On
     February 3, 1997,  the  Company  offered up to  $1,750,000  of its Series A
     Preferred  Stock at $1,000  per share to  non-United  States  persons in an
     offering exempt from registration  under Regulation S of the Securities Act
     of 1933, as amended,  under its  agreement  with NET  Financial,  described
     above.  The shares are convertible  into common stock at any time until the
     third  anniversary  of their  issuance  at the  lesser  of 70% of:  (i) the
     average of the  closing bid price of the common  stock on the five  trading
     days preceding  conversion (the "Market Price"); or (ii) the average of the
     closing bid price for the common stock on the five  trading days  preceding
     the closing  (the  "Closing  Price"),  or (iii) if the Market  Price or the
     Closing  Price is less than $1.43 per share,  the  minimum  price  shall be
     deemed to be $1.43 per share (the "Floor").  The Series A Preferred  Shares
     are also subject to mandatory  conversion on the third anniversary of their
     issuance  at the lesser of 70% of the Market  Price or the  Closing  Price,
     subject to the Floor.  Upon  conversion,  the holders of Series A Preferred
     Shares will be paid a 6%  cumulative  dividend  measured  from the issuance
     date  through the  conversion  date,  payable in common stock valued at the
     Market Price. The Series A Preferred  Shares have a liquidation  preference
     of $1,000 per share and all other  stock of the Company is  subordinate  to
     such  preference.  Holders of Series A Preferred  Shares or the  underlying
     conversion common stock will be granted piggyback and Form S-3 registration
     rights for the underlying common stock.


                                       8

<PAGE>

                                   EDNET, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS


Results of Operations

For the three  months  ended  December  31,  1996,  the  Company's  revenues  of
$1,151,484  increased  72%  compared to  revenues of $668,370 in the  comparable
period last year.  Revenues for the six months ended December 31, 1996 increased
56% to $2,078,084,  compared to revenues of $1,332,259 in the comparable  period
last year.  Increases in revenue are  attributed to increases in network  access
and usage fees associated  with a larger  installed base and the addition of web
development and hosting revenues associated with the acquisition of IBS.

Gross Profit  increased to $554,549,  or 48% of sales, in the three months ended
December  31, 1996  compared to  $243,820,  or 36% of sales,  in the  equivalent
period  last year.  For the six months  ended  December  31,  1996 gross  profit
increased to $874,268,  or 42% of sales, from $513,155,  or 39% of sales, in the
equivalent period last year.  Increases in gross profit as a percentage of sales
are  attributed  to sales of a more  profitable  product  mix,  growth  in usage
revenues,  which  carry  a  higher  profit  margin,  and  the  addition  of  web
development and hosting revenues, which carry a high profit margin.

Operating  expenses  (including  Research &  Development,  Sales & Marketing and
General and  Administrative)  increased to  $1,624,153 in the three months ended
December 31, 1996 compared to $373,532 in the  equivalent  period last year. For
the  six  months  ended  December  31,  1996  operating  expenses  increased  to
$2,472,286  from  $668,930  in the  equivalent  period  last  year.  Significant
non-recurring  expenditures in the three months ended December 31, 1996 included
$764,532  of  Research  &  Development  expense,  a major  portion  of  which is
associated with the development of the Internet  software  product by IBS (which
software has now been licensed by IBS to BSI  effective  December 31, 1996 (Note
3)).  Total six month  expenditures  on Research &  Development  were  $923,096.
Operating  expenses for the three and six month periods ending December 31, 1996
also include $36,000 and $204,000  respectively,  which represent  non-recurring
legal and accounting costs  associated with the IBS  acquisition,  the Company's
initial three-year audit, the filing of a Form 10-SB registration statement with
the SEC,  and fees  associated  with  the  Notes.  With  these  items  excluded,
operating  expenses were  $823,621 for the three months ended  December 31, 1996
and $1,345,190  for the six months ended December 31, 1996,  representing a 121%
and 101% increase  respectively  over the comparable  periods in the prior year.
This  increase is  consistent  with the  necessary  addition  of  infrastructure
associated with the Company's increase in sales. Current year operating expenses
also include  public and investor  relations,  and other costs  associated  with
being a public company that were not incurred in comparable periods of the prior
fiscal year.

Other expenses increased to $100,412 in the three months ended December 31, 1996
compared to $5,858 in the equivalent  period last year. For the six months ended
December  31, 1996 other  expenses  increased  to $157,042  from  $11,783 in the
equivalent period last year. The increase in other expenses was due to increases
in interest  expense and  amortization of debt issuance costs and note discounts
associated with the placement of the Notes (See Note 6).

For the three months ended December 31, 1996, the Company incurred a net loss of
$1,170,016,  or  ($0.26)  per share  based on a weighted  average  of  4,536,020
shares,  compared  with a net loss of $135,570,  or ($0.06) per share based on a
weighted average of 2,261,945 shares in the prior year. The

                                       9

<PAGE>

Company  incurred  a net loss for the six  months  ended  December  31,  1996 of
$1,755,060,  or ($0.39) per share based on  4,536,020  weighted  average  shares
outstanding,  compared with a net loss of $167,558,  or ($0.07) per share, based
on 2,261,945 weighted average shares outstanding for the same period last year.


Financial Condition, Liquidity, and Capital Resources

At December 31, 1996,  the Company's  accumulated  deficit  since  inception was
$4,194,737  and its  working  capital  deficit  was  $2,118,316.  The  Company's
financial  condition has been  adversely  affected by a delay in completing  the
financings  described  in  Notes  7 and 9 to  the  unaudited  interim  financial
statements  which  are  necessary  to fund  the  Company's  growth,  by  certain
non-recurring  operating  expenses  discussed  above,  and by high  expenditures
associated  with research and  development of the IBS software  product that was
licensed to BSI on December 31, 1996 (Note 3).

The Company has  implemented  a plan of  operation  to address  these issues and
believes  that  such  plan  should  enable  the  Company  to  satisfy  its  cash
requirements  during the upcoming twelve months. Key components of the plan are:
(1) the IBS/BSI  transactions  described  in Note 3 will  relieve the Company of
making any substantial additional funding for the research and development costs
and marketing expenses of the IBS website software that was licensed to BSI, (2)
the Company  believes that  conversion  of the Notes  described in Note 6 into a
term loan is preferable to paying off the entire balance of the Notes,  and will
enable to Company to use its capital for  operations,  (3) on December 31, 1996,
the Company initiated a private placement of up to $5,000,000 of common stock to
finance  operations and service the Notes, of which it has raised $165,000 as of
February 10 (Note 9), and (4) the Company has  retained a  consultant  to assist
the Company in raising up to  $5,000,000  in private  placements  of stock,  the
first phase of which commenced on February 3, 1997 (Note 9).

Management  believes that if a total of $5,000,000 in the offerings discussed in
the plan of operation above is raised, such amount will be sufficient to provide
the financial resources necessary to allow the Company to continue to expand its
operations and achieve profitability.  Should this not occur, Management may act
to  reduce  the  amount  of the  Company's  spending  devoted  to  research  and
development,  or take other  actions to match  spending to the amount of capital
raised. Management is continually monitoring the Company's cash position and the
status of these offerings.


Disclosure Pursuant to the Private Securities Litigation Reform Act of 1995

When used in this Management's  Discussion and Analysis, the words "anticipate,"
"estimate,"   "expect"  and  similar   expressions   are  intended  to  identify
forward-looking  statements.  These  statements are subject to certain risks and
uncertainties,  including,  but not limited to, the following:  risks associated
with  fundraising  and the company's  ability to secure  resources  necessary to
fully develop business products;  business conditions in the telecommunications,
entertainment,  and advertising industries, and the general economy; competitive
factors such as rival networking technology, competing products, and competitive
pricing; risks associated with development,  introduction, and acceptance of new
products;  the  company's  ability to manage its rapid  growth and  attract  and
retain  key  employees;  and other  risk  factors.  Actual  results  may  differ
materially from management expectations as discussed here.


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<PAGE>

PART II  OTHER INFORMATION


Item 1.   Legal Proceedings

None


Item 2.  Changes in Securities

Pursuant to a Certificate  of Designation  filed with the Colorado  Secretary of
State on February 2, 1997, the Company's  Articles of Incorporation were amended
to allow the  Company  to issue  Series A  Preferred  shares  (see Note 9 to the
unaudited consolidated condensed financial statements).

Item 3.  Defaults Upon Senior Securities

None


Item 4.  Submission of Matters to a Vote of Security Holders

None


Item 5.  Other Information

None


Item 6.  Exhibits and Reports on Form 8-K

(a) (27) Financial Data Schedule
(b)      No reports on Form 8-K were filed during the quarter ended December 31,
         1996.

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<PAGE>


SIGNATURE

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




                                            EDNET, INC.




February 19, 1997                           By: ________________________________
                                                Tom Kobayashi
                                                Chairman of the Board and
                                                Chief Executive Officer






                                            By: ________________________________
                                                Alan K. Geddes
                                                Vice President, Finance and
                                                Chief Financial Officer




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