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

                                   FORM 10-QSB

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

           For the quarterly period ended MARCH 31, 1998

      [ ]  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: 0-27556

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

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

   529 Fifth Avenue, New York, New York                    10017
 (Address of Principal Executive Offices)               (Zip Code)

                                 (212) 622-7300
              (Registrant's Telephone Number, Including Area Code)

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

Yes _X_    No ___


At May 11, 1998 there were  11,346,880  shares of Common  Stock,  $.01 par value
outstanding.

Transitional Small Business Disclosure Format (check one):

Yes ___     No _X_

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<PAGE>

                           Network Event Theater, Inc.
                                   Form 10-QSB
                                      Index

                                                                        Page
                                                                       Number
                                                                       ------
PART I--FINANCIAL INFORMATION

Item 1  Financial Statements

        Consolidated balance sheets - March 31, 1998
           (unaudited) and June 30, 1997................................  1

        Consolidated statements of operations - three and nine months
            ended March 31, 1998 and 1997 (unaudited)...................  2

        Consolidated statements of cash flows - nine months ended
           March 31, 1998 and 1997 (unaudited)..........................  3

        Consolidated statement of stockholders' equity - nine
           months ended March 31, 1998 (unaudited)......................  4

        Notes to consolidated financial statements......................  5

Item 2  Management's Discussion and Analysis of Financial Condition
         and Results of Operations......................................  8

PART II--OTHER INFORMATION

Item 6  Exhibits and Reports on Form 8-K................................ 11

Signatures ............................................................. 12


<PAGE>

                                     PART I
                              FINANCIAL STATEMENTS

Item 1. Financial Statements

                           Network Event Theater, Inc
                           Consolidated Balance Sheets
                                 (In thousands)
                                                           March 31,    June 30,
                                                             1998         1997
                                                           ---------    --------
                                                          (Unaudited)
ASSETS
Current Assets:
   Cash and cash equivalents ...........................   $  4,532    $  4,185
   Accounts receivable, net of allowance for doubtful
     accounts of $170 and $73 at March 31,1998 and
     June 30, 1997, respectively .......................      3,488       1,439
   Prepaid expenses ....................................        596         341
   Deposits and other current assets ...................        125         120
                                                           --------    --------
Total current assets ...................................      8,741       6,085
Property and equipment, net of accumulated amortization
   of $2,313 and $1,537 at March 31, 1998 and

   June 30, 1997, respectively .........................      4,959       4,718
Intangible assets, net of accumulated amortization
   of $733 and $367 at March 31, 1998 and
   June 30, 1997, respectively .........................      6,373       6,339
Notes receivable .......................................       --            33
                                                           --------    --------
Total assets ...........................................   $ 20,073    $ 17,175
                                                           ========    ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
   Accounts payable ....................................   $  1,381    $    542
   Accrued advertising costs ...........................        191        --
   Accrued employee compensation .......................        335         321
   Accrued professional fees ...........................        172         320
   Other accrued expenses ..............................        961         484
   Deferred revenues ...................................      1,240         301
   Current portion of long-term debt ...................        781         949
                                                           --------    --------
Total current liabilities ..............................      5,061       2,917
Long-term debt .........................................      4,228       5,275
Commitments and contingencies ..........................       --          --
Stockholders' Equity:
   Preferred stock, $.01 par value, 1,000 shares
     authorized, no shares issued and outstanding ......       --          --
   Common stock, $.01 par value, 17,000 shares
     authorized, 11,347 and 9,861 shares issued and
     outstanding at March 31, 1998 and
     June 30, 1997, respectively .......................        113          99
   Additional paid-in capital ..........................     27,132      20,421
   Accumulated deficit .................................    (16,461)    (11,537)
                                                           --------    --------
Total stockholders' equity .............................     10,784       8,983
                                                           --------    --------
Total liabilities and stockholders' equity .............   $ 20,073    $ 17,175
                                                           ========    ========

                See notes to consolidated financial statements.


                                       1
<PAGE>

                           Network Event Theater, Inc.
                      Consolidated Statements of Operations
                    (In thousands, except per share amounts)
                                   (Unaudited)

                                      Three months ended    Nine months ended
                                           March 31,             March 31,
                                      ------------------    -----------------   
                                        1998        1997       1998       1997
                                        ----        ----       ----       ----  
Net Revenues .....................   $  3,442    $ 2,265    $  9,397    $ 4,938
Operating Expenses:
   Selling, general and
     administrative expenses .....      3,537      2,900      10,459      5,783
   Corporate expenses ............        712        404       2,147      1,335
   Depreciation and amortization .        408        312       1,214        794
                                     --------    -------    --------    -------
Total operating expenses .........      4,657      3,616      13,820      7,912
                                     --------    -------    --------    -------
Loss from operations .............     (1,215)    (1,351)     (4,423)    (2,974)
Interest income ..................         29         57          94        247
Interest expense .................       (116)       (96)       (442)      (205)
                                     --------    -------    --------    -------
Loss before provision for income 
   taxes                               (1,302)    (1,390)     (4,771)    (2,932)
Provision for income taxes .......         48         61         153        165
                                     --------    -------    --------    -------
Net loss .........................   $ (1,350)   $(1,451)   $ (4,924)   $(3,097)
                                     ========    =======    ========    =======
Net loss per basic common share ..   $  (0.12)   $ (0.17)   $  (0.48)   $ (0.36)
                                     ========    =======    ========    =======
Weighted average basic common
   shares outstanding ............   $ 10,937    $ 8,654    $ 10,229    $ 8,654
                                     ========    =======    ========    =======
                
                See notes to consolidated financial statements.


                                       2
<PAGE>

                           Network Event Theater, Inc.
                      Consolidated Statements of Cash Flows
                                 (In thousands)
                                   (Unaudited)
                                                               Nine months ended
                                                                   March 31,
                                                               -----------------
                                                               1998       1997
                                                               ----       ----
Cash Flows From Operating Activities
Net loss .................................................   $(4,924)   $(3,097)
Adjustments to reconcile net loss to
   net cash used in operating activities:
   Provision for bad debts ...............................        97         42
   Depreciation and amortization .........................     1,214        794
   Changes in assets and liabilities:
     Increase in prepaid expenses ........................      (255)      (655)
     (Increase) decrease in deposits and
        other current assets .............................        (5)         1
     Increase in accounts receivable .....................    (2,146)    (3,222)
     Increase in accounts payable ........................       839        764
     Increase in accrued advertising costs ...............       191        817
     Increase in accrued employee compensation ...........        14        133
     (Decrease) increase in accrued professional fees ....      (148)        40
     Increase in deferred revenues .......................       939      1,282
     Increase in other accrued expenses ..................       477        151
                                                             -------    -------
Net cash used in operating activities ....................    (3,707)    (2,950)
Cash Flows From Investing Activities
   Capital expenditures ..................................    (1,089)    (2,369)
   Notes receivable ......................................        33       --
   Payment for business acquisitions .....................      (263)    (5,383)
   Sale of investments ...................................      --        5,392
                                                             -------    -------
Net cash used in investing activities ....................    (1,319)    (2,360)
Cash Flows From Financing Activities
   Net proceeds from sale of common stock ................     4,574       --
   Proceeds from long-term debt ..........................     5,125      6,122
   Repayment of long-term debt ...........................    (4,189)      (188)
   Debt issuance costs ...................................      (137)      --
                                                             -------    -------
Net cash provided by financing activities ................     5,373      5,934
                                                             -------    -------
Net (decrease) increase in cash and cash equivalents .....       347        624
Cash and cash equivalents at beginning of period .........     4,185        267
                                                             -------    -------
Cash and cash equivalents at end of period ...............   $ 4,532    $   891
                                                             =======    =======
Supplemental cash flow information;
   Cash paid for interest ................................   $   412    $   199
                                                             =======    =======
   Cash paid for income taxes ............................   $   105    $   142
                                                             =======    =======
   Debt assumed in connection with acquisitions ..........   $  --      $ 2,329
                                                             =======    =======

                See notes to consolidated financial statements.


                                       3
<PAGE>

                           Network Event Theater, Inc.
                 Consolidated Statement of Stockholders' Equity
                  For the period July 1, 1997 to March 31, 1998
                                 (In thousands)
                                   (Unaudited)
                                                                     
                                 Common Stock  Additional
                                --------------   Paid-in  Accumulated           
                                Shares  Amount   Capital    Deficit      Total
                                ------  ------   -------    -------      -----
                                                
Balances at June 30, 1997 ....   9,861   $ 99    $20,421   $(11,537)   $  8,983
Net loss .....................    --      --        --       (4,924)     (4,924)
Issuance of common stock                        
   for debt                        413      4      2,140       --         2,144
Issuance of common stock                        
   upon exercise of warrants .      12    --          60       --            60
Issuance of common stock .....   1,061     10      4,511       --         4,521
                                ------   ----    -------   --------    --------
Balances at March 31, 1998 ...  11,347   $113    $27,132   $(16,461)   $ 10,784
                                ======   ====    =======   ========    ========
                                                                                
                See notes to consolidated financial statements.


                                       4
<PAGE>

                           Network Event Theater, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 1997
                                   (Unaudited)
                    
1. Organization and Basis of Presentation

      The accompanying consolidated financial statements include the accounts of
Network Event Theater, Inc. ("NET"), and its wholly-owned  subsidiaries American
Passage Media, Inc. ("American  Passage"),  Campus Voice, Inc. ("Campus Voice"),
Beyond the Wall, Inc.  ("Beyond the Wall") and Pik:Nik Media,  Inc.  ("Pik:Nik")
(collectively,  the "Company").  All significant intercompany  transactions have
been eliminated.

      The  Company was  organized  to  develop,  own and  operate a  proprietary
national network of theaters on college  campuses (the  "Network").  The Network
delivers  entertainment and educational events via satellite for display through
high  resolution  video  projectors on movie theater sized screens.  The Company
presently  provides a comprehensive  marketing service to advertisers,  sponsors
and  entertainment  companies  by helping  them  target  young adult and college
audiences  through a  variety  of media,  some of which are  proprietary  to the
Company,  including  the  sponsorship  of events  presented on the Network,  the
placement of advertisements in college  newspapers,  the placement of posters on
general and  proprietary  bulletin and wallboards on college  campuses,  and the
distribution of free postcards at selected venues, both on and off campuses.

      The accompanying  consolidated  financial statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information and with the  instructions to Form 10-QSB and Item 310 of Regulation
S-B. Accordingly, they do not include all the information and footnotes required
by generally accepted accounting  principles for complete financial  statements.
In the opinion of management,  all adjustments  (consisting of normal  recurring
accruals)  considered  necessary  for a fair  presentation  have been  included.
Operating  results for an interim period are not  necessarily  indicative of the
results  that may be  expected  for the year ended June 30,  1998.  Because  the
Company earns most of its revenues during the academic year  (September  through
May), the Company's second and third quarters generally reflect higher levels of
revenues  than  are  earned  in the  first  and  fourth  quarters.  For  further
information,  refer  to the  consolidated  financial  statements  and  footnotes
thereto  included  in  Company's  Form 10-KSB for the fiscal year ended June 30,
1997.

2. Pro Forma Financial Data

      The following  unaudited pro forma  information  for the nine months ended
March 31, 1997 is presented as if the Company had completed the  acquisitions of
American Passage, Campus Voice, Beyond the Wall and Pik:Nik as of July 1, 1996:

                                                          Nine months ended   
                                                            March 31, 1997      
                                                          ------------------
         Net revenue..................................       $ 7,093,000
         Net loss applicable to common stock..........        (3,703,000)
         Net loss per basic common share..............             (0.43)
         Basic common shares outstanding..............         8,654,000        

      The pro forma  information  for the nine months ended March 31, 1997 above
is not  necessarily  indicative  of the  results of  operations  that would have
occurred had the transactions actually been made as of July 1, 1996.


                                       5
<PAGE>

                           Network Event Theater, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 1997
                                   (Unaudited)

3. Long-Term Debt

   A summary of long-term debt is as follows:
                                                       March 31,      June 30,
                                                         1998           1997
`                                                      --------       --------
Note Payable to Bank (A) .........................   $      --      $ 3,500,000
Subordinated Promissory Note (B) .................          --          469,000
Junior Secured Promissory Notes ( C) .............          --        1,671,000
Senior Indebtedness - Working Capital Line (D) ...          --          360,000
Note Payable to Bank (E) .........................     3,833,000           --
Note Payable to Finance Company (F) ..............     1,000,000           --
Other ............................................       176,000        224,000
                                                     -----------    -----------
                                                       5,009,000      6,224,000
Less current portion .............................      (781,000)      (949,000)
                                                     -----------    -----------
                                                     $ 4,228,000    $ 5,275,000
                                                     ===========    ===========

      (A) In September  1996, in  conjunction  with the  acquisition  of certain
assets,  American  Passage  entered into a five year $3.5 million bank loan (the
"Loan").  In December  1997, a  refinancing  of the Loan  occurred,  whereby the
entire outstanding  principal and all accrued interest was completely satisfied.
See paragraph (E) for further information on this refinancing.

      (B) In  September  1996,  American  Passage  issued a two-year,  unsecured
subordinated  promissory note to the seller in the principal amount of $750,000.
In  December  1997,  a  refinancing  of this note  occurred,  whereby the entire
outstanding  principal and all accrued  interest was completely  satisfied.  See
paragraph (E) for further information on this refinancing.

      (C) In February  1997,  in  conjunction  with the  acquisition  of certain
assets, Campus Voice issued two junior secured promissory notes in the aggregate
amount of $1,563,000  with a maturity date in December  2006. In December  1997,
the debt and all accrued  interest was satisfied by the issuance to the creditor
of common stock in NET (see note 4).

      (D) In connection with the Campus Voice acquisition,  the seller agreed to
advance up to $660,000 of senior  indebtedness which was to be used as a working
capital  line for Campus  Voice.  In  December,  1997,  the debt and all accrued
interest  was  satisfied  by the issuance to the creditor of common stock in NET
(see note 4).

      (E) In December 1997, in conjunction  with the refinancing of certain debt
owed by American Passage to a bank, Campus Voice,  Beyond the Wall, and American
Passage (the "Borrowers") entered into a loan agreement with another bank. Under
the terms of this loan  agreement,  that bank  advanced  to the  Borrowers  $4.0
million that was used to repay all existing  long-term  indebtedness of American
Passage  (Notes A and B) in the  amount  of $3.8  million.  The  balance  of the
proceeds was used for working capital.  The loan is secured by all of the assets
of the  Borrowers and is guaranteed by NET. The loan is payable in equal monthly
installments,  commencing  February  2,  1998,  over a maximum  of six years (as
defined).  Interest is payable  monthly at a variable rate of interest set every
month at 275 basis  points  above  LIBOR for U.S.  Dollar  deposits of one month
maturity.  The Borrowers  also entered into a interest  swap  agreement for $3.0
million of the  outstanding  principal.  The swap agreement has a fixed interest
rate of 9.11%.

     In  conjunction  with this loan,  the bank has also made  available  to the
Borrowers a revolving  line of credit  with a maximum  principal  amount of $1.0
million.  All amounts  borrowed  under this  facility must be repaid by July 30,
1999.  The facility  bears interest at the rate of the bank's prime rate plus 25
basis points.  Interest on this facility is due monthly.  The note is secured by
the Borrower's  eligible accounts receivable (as defined) and is also guaranteed
by NET. As of March 31, 1998 the  Borrowers  have not borrowed any amounts under
this facility.


                                       6
<PAGE>

                           Network Event Theater, Inc.
                   Notes to Consolidated Financial Statements
                                December 31, 1997
                                   (Unaudited)

3. Long-Term Debt (continued)

      (F) In December 1997, Pik:Nik borrowed $1.0 million from a finance company
and is payable in 30 months.  Interest on the note is payable  monthly at a rate
of 12% per annum.  The note is  secured  by all of the assets of Pik:Nik  and is
guaranteed by NET. The proceeds may be used for working  capital for Pik:Nik and
NET.

4. Stockholders' Equity

      In December  1997,  NET issued  412,397 shares of common stock in exchange
for long-term debt, including accrued interest, in the amount of $2,154,772.

      In December  1997,  NET issued 12,000 shares of common stock upon exercise
of  warrants  at $5.00  per  share.  NET  realized  $60,000  as a result of this
exercise of the warrants.

      In January and February 1998, NET issued  1,055,600 shares of common stock
in a private  placement  transaction and realized net proceeds of  approximately
$4,600,000.  In  addition,  NET  issued  5,560  shares  of  common  stock,  as a
commission,  in  connection  with the  issuance of a portion of the common stock
issued in February, 1998.

5. Loss Per Common Share

      In 1997,  the Financial  Accounting  Standards  Board issued  Statement of
Financial  Accounting Standards No. 128, "Earnings Per Share" ("Statement 128").
Statement  128  replaced  the  previously  reported  primary  and fully  diluted
earnings  per share with basic and diluted  earnings per share.  Unlike  primary
earnings per share,  basic earnings per share  excludes any dilutive  effects of
options,  warrants,  and convertible  securities.  Diluted earnings per share is
very similar to the previously  reported fully diluted  earnings per share.  All
earnings per share amounts for all periods have been presented to conform to the
Statement 128 requirements.

6. Industry Segments

      In June 1997, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards  No.  131,  "Disclosures  about  Segments of an
Enterprise and Related  Information"  ("Statement  131"), which is effective for
years beginning after December 15, 1997. Statement 131 establishes standards for
the way that public  business  enterprises  report  information  about operating
segments in annual  financial  statements  and requires  that those  enterprises
report  selected  information  about  operating  segments  in interim  financial
reports. It also establishes standards for related disclosure about products and
services,  geographic areas and major customers.  Statement 131 is effective for
financial  statements  for fiscal years  beginning  after December 15, 1997, and
therefore the Company will adopt the new requirements  effective with their June
30, 1999  consolidated  financial  statements.  Management has not completed its
review of Statement 131, but its adoption will not have a material effect on the
Company's  Statement of  Operations,  only on the  composition of its reportable
segments.


                                       7
<PAGE>

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

      The  following  discussion  of the  financial  condition  and  results  of
operations of the Company  should be read in conjunction  with the  consolidated
financial  statements  and  related  notes  thereto.  The  following  discussion
contains   certain   forward-looking   statements   that   involve   risks   and
uncertainties.  The Company's actual results could differ  materially from those
discussed  herein.  Factors that could cause or contribute  to such  differences
include, but are not limited to, the ability to obtain financing, integration of
recently  completed  acquisitions,  the management of growth,  changing consumer
tastes and general economic conditions.  The Company undertakes no obligation to
publicly  release  the  results  of  any  revisions  to  these   forward-looking
statements that may be made to reflect any future events or circumstances.

      The  Company's   consolidated   financial   statements  are  not  directly
comparable  from period to period due to  acquisition  activity.  The  following
financial analysis compares the three months and the nine months ended March 31,
1998  (unaudited)  to the three  months and nine  months  ended  March 31,  1997
(unaudited), respectively.

Results of Operations

      For the three months ended March 31,1998,  net revenues were $3,442,000 as
compared to $2,265,000 for the three months ended March 31,1997. The increase in
net revenues of $1,177,000 is primarily due to the acquisitions of Campus Voice,
Beyond the Wall, and Pik:Nik, which, in the aggregate,  accounted for $1,103,000
of this  increase.  The  remaining  $74,000 of this increase in net revenues was
generated by American Passage.

      For the nine months ended March 31, 1998, net revenues were  $9,397,000 as
compared to $4,938,000 for the nine months ended March 31, 1997. The increase of
$4,459,000 in net revenues is primarily due to the acquisitions of Campus Voice,
Beyond the Wall, and Pik:Nik which,  in the aggregate,  accounted for $3,113,000
of this increase. American Passage accounted for an additional $1,094,000 of the
increase in net revenues,  primarily due to the acquisition of American Passage,
whereby nine months of revenues were  accounted for in this period in 1998,  but
only six and one-half  months of revenues  were  accounted for in this period in
1997 as American  Passage  was  acquired in the middle of  September  1996.  The
remaining  amount of $252,000 of the increase in net  revenues was  generated by
the theater Network.

      For  the  three  months  ended  March  31,  1998,  selling,   general  and
administrative  expenses were $3,537,000 as compared to $2,900,000 for the three
months  ended  March  31,  1997.  The  increase  of  $637,000  was  due  to  the
acquisitions  of Campus Voice,  Beyond the Wall and Pik:Nik which  accounted for
approximately $20,000, $542,000 and $590,000 of increases,  respectively, offset
by reduced selling,  general and administrative expenses of American Passage and
the theater Network of approximately $134,000 and $381,000, respectively.

      For  the  nine  months  ended  March  31,  1998,   selling,   general  and
administrative  expenses were $10,459,000 as compared to $5,783,000 for the nine
months ended March 31. 1997. The increase of $4,676,000 was primarily due to the
acquisitions  of Campus Voice,  Beyond the Wall and Pik:Nik which  accounted for
approximately   $237,000,   $1,429,000   and   $1,753,000   of  this   increase,
respectively.  American  Passage  accounted  for an  additional  $973,000 of the
increase in selling,  general and administrative expenses primarily because nine
months of expenses were  accounted for in this period in 1998,  but only six and
one-half  months  of  expenses  were  accounted  for in this  period  in 1997 as
American  Passage was acquired in the middle of September  1996.  The  remaining
increase  of  $284,000  was due to the  expansion  of the  theater  Network  and
increases in the number of sales, management and support staff.

      For the  three  months  ended  March 31,  1998,  corporate  expenses  were
$712,000 as compared to $404,000 for the three months ended March 31, 1997.  The
increase of $308,000 is due to increased staff and overhead expenses.

      For the  nine  months  ended  March  31,  1998,  corporate  expenses  were
$2,147,000 as compared to  $1,335,000  for the nine months ended March 31, 1997.
The increase of $812,000 is due to increased staff and overhead expenses.

     For the three months ended March 31, 1998,  total  operating  expenses were
$4,657,000 as compared to $3,616,000  for the three months ended March 31, 1997.
The increase of $1,041,000 was due to the acquisitions of Campus Voice,  Pik:Nik
and  Beyond  The  Wall  of   approximately   $55,000,   $549,000  and  $629,000,
respectively, offset by reduced total operating expenses at American Passage and
the theater Network of $107,000 and $85,000, respectively.


                                       8
<PAGE>

      For the nine months ended March 31, 1998,  total  operating  expenses were
$13,820,000  as compared to $7,912,000 for the nine months ended March 31, 1997.
The increase of  $5,908,000  was  primarily  due to the  acquisitions  of Campus
Voice,  Pik:Nik and Beyond The Wall.  Operating  expenses for these subsidiaries
were approximately $368,000, $1,450,000 and $1,830,000,  respectively.  American
Passage  accounted  for an  additional  $1,117,000  of  the  increase  in  total
operating expense primarily because nine months of expense were accounted for in
this period in 1998, but only six and one-half months of operating expenses were
accounted  for in this  period in 1997 as American  Passage was  acquired in the
middle of September 1996. The remaining amount of the increase of $1,143,000 was
due to the  expansion  of the  theater  Network and  increases  in the number of
sales, management and support staff.

      For the three  months  ended March 31, 1998,  net loss was  $1,350,000  as
compared to $1,451,000  for the three months ended March 31, 1997.  The decrease
in the net  loss  of  $101,000  was  primarily  due to  increased  revenues  and
decreased operating costs in American Passage and the theater Network.

      For the nine  months  ended March 31,  1998,  net loss was  $4,924,000  as
compared to $3,097,000 for the nine months ended March 31, 1997. The increase of
$1,827,000 was a result of increased  operating expenses from  acquisitions,  an
increase  in the  number  of  management,  sales  and  support  staff  resulting
therefrom and the costs of further expansion of the theater Network.

Impact of Year 2000

      Some of the  Company's  computer  programs  and  systems are not year 2000
compliant.  The  Company's  use of computer  applications  is not  complex.  The
Company  expects it will have to modify or replace  portions of its  software so
that its computer  systems will  function  properly with respect to dates in the
year 2000 and thereafter. Management does not believe such related costs will be
significant.

Liquidity and Capital Resources

      The Company consummated an initial public offering of its common stock and
warrants on April 9, 1996 (the "Initial Public Offering"),  pursuant to which it
raised net proceeds of approximately $9.7 million, of which $500,000 was used to
repay  previously  existing  Company  indebtedness.  Since  the  Initial  Public
Offering,  the  Company  has  purchased  approximately  $1.6  million of Network
theater equipment and invested approximately $1.5 million in the acquisitions of
American  Passage,  Campus Voice,  Beyond the Wall and Pik:Nik (the remainder of
the cash portion of the purchase  prices having been  borrowed).  The balance of
the proceeds have otherwise been used to fund the Company's operations.

      On June 24, 1997, the Company sold an aggregate of 1,015,873 shares of its
common stock. The net proceeds of that sale of $3.8 million was used to fund the
Company's operations.

      In January and February,  1998, the Company sold an aggregate of 1,055,600
shares of its common stock in a private placement transaction.  The net proceeds
of $4.6 million was used to fund the Company's operations.

      The Company used approximately $3.7 million in operating activities during
the nine months ended March 31, 1998 as compared to $3.0 million during the nine
months  ended  March 31,  1997.  The  increase  of  approximately  $0.7  million
represents the increase in net loss and accounts receivable offset substantially
by increases in short-term liabilities. Cash used in investing activities during
the nine months ended March 31, 1998 of  approximately  $1.3 million is composed
primarily of capital expenditures. Cash provided by financing activities in 1998
of  approximately  $5.4 million is primarily  attributable  to the sale of NET's
common stock.

     The Company's  primary capital  requirements with respect to its operations
have been to fund  corporate  overhead,  the  operation of its Network of campus
theaters and the operation of Pik:Nik. In the event that the Company's plans and
assumptions with respect to its Network change or prove to be inaccurate, if its
assumptions with respect to American Passage,  Campus Voice, Beyond the Wall and
Pik:Nik being able to fund their  operations  and to make debt service  payments
out of their  own cash  flow in the  future  prove to be  inaccurate,  or if the
working capital or capital expenditure  requirements of American Passage, Campus
Voice,  Beyond the Wall or Pik:Nik  prove to be greater  than  anticipated,  the
Company could be required to seek additional financing.  The inability to obtain
additional  financing  will  have a  material  adverse  effect  on the  Company,
including possibly  requiring the Company to significantly  curtail or cease its
operations.


                                       9
<PAGE>

      As of March 31, 1998, the Company had  approximately  $4.5 million in cash
and cash equivalents.  The Company believes that such amounts will be sufficient
to fund working capital,  including debt service and interest  requirements,  at
least  through the fiscal year ending June 30, 1998.  The  Company's  ability to
improve its operations will be subject to prevailing  economic conditions and to
legal,  financial,  business,  regulatory,  industry and other factors,  many of
which are beyond the Company's control.

      The Company may also seek additional debt or equity  financing to fund the
cost of  additional  expansion  of its  Network  and the cost of  developing  or
acquiring additional media and marketing services businesses. To the extent that
the Company finances its requirements  through the issuance of additional equity
securities,  including  the  exercise of warrants  issued in the Initial  Public
Offering,  any such  issuance  would result in dilution to the  interests of the
Company's shareholders.

      Additionally, to the extent that the Company incurs indebtedness or issues
debt  securities in connection  with financing  activities,  the Company will be
subject to all of the risks associated with incurring substantial  indebtedness,
including  the risk  that  interest  rates  may  fluctuate  and cash flow may be
insufficient to pay principal and interest on any such indebtedness. The Company
has  no  current  arrangements  with  respect  to,  or  sources  of,  additional
financing.  There can be no  assurance  that any  additional  financing  will be
available to the Company on acceptable terms, if at all.


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<PAGE>

                                     PART II

                                OTHER INFORMATION

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

     (a) Exhibits.

         27.1  Financial Data Schedule.

     (b) Reports on Form 8-K.

         None.


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<PAGE>

                                   SIGNATURES

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

May 15, 1998

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

                                             BY:  /s/ BRUCE L. RESNIK
                                                  ----------------------------- 
                                                      Bruce L. Resnik
                                                 Executive Vice President
                                                Chief Financial Officer and
                                                 Chief Accounting Officer


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