================================================================================

                     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 SEPTEMBER 30, 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 October 30, 1998 there were 11,353,546 shares of Common Stock, $.01 par value
outstanding.

Transitional Small Business Disclosure Format (check one):

Yes ___   No _X_
           
================================================================================

<PAGE>

                           Network Event Theater, Inc.
                                   Form 10-QSB
                                      Index

                                                                           Page
PART I--FINANCIAL INFORMATION                                             Number
                                                                          ------
Item 1  Financial Statements

        Consolidated balance sheets - September 30, 1998
           (unaudited) and June 30, 1998...................................   1

        Consolidated statements of operations - three months
            ended September 30, 1998 and 1997 (unaudited)..................   2

        Consolidated statements of cash flows - three months ended
           September 30, 1998 and 1997 (unaudited).........................   3

        Consolidated statement of stockholders' equity - three
           months ended September 30, 1998 (unaudited).....................   4

        Notes to consolidated financial statements.........................   5
        
Item 2  Management's Discussion and Analysis of Financial Condition
         and Results of Operations.........................................   7

PART II--OTHER INFORMATION

Item 6  Exhibits and Reports on Form 8-K...................................   9

Signatures ................................................................  10

<PAGE>

                                     PART I
                              FINANCIAL STATEMENTS

Item 1. Financial Statements

                           Network Event Theater, Inc
                           Consolidated Balance Sheets
                                 (In thousands)

                                                         September 30,  June 30,
                                                            1998          1998
                                                         -----------    --------
                                                         (Unaudited)
ASSETS
Current Assets:
   Cash and cash equivalents ..........................   $  3,433     $  2,271 
   Accounts receivable, net of allowance for doubtful                
     accounts of $148 and $137 at September 30, 1998                 
     and June 30, 1998, respectively ..................      4,104        1,539
   Prepaid expenses ...................................      1,346          348
   Deposits and other current assets ..................        265          181
                                                          --------     --------
Total current assets ..................................      9,148        4,339
Property and equipment, net of accumulated                           
   amortization of $3,024 and $2,664 at                              
   September 30, 1998 and June 30, 1998, respectively .      4,842        4,861
Deferred financing costs, net of accumulated                         
   amortization of $74 and $12 at September 30, 1998                 
   and June 30, 1998, respectively ....................      1,068           77
Intangible assets, net of accumulated amortization                   
   of $981 and $857 at September 30, 1998 and                        
   June 30, 1998, respectively ........................      6,275        6,399
                                                          --------     --------
Total assets ..........................................   $ 21,333     $ 15,676
                                                          ========     ========
LIABILITIES AND STOCKHOLDERS' EQUITY                                 
Current Liabilities:                                                 
   Accounts payable ...................................   $  1,223     $    914
   Accrued employee compensation ......................        442          520
   Accrued professional fees ..........................        145          225
   Other accrued expenses .............................      2,392          537
   Deferred revenues ..................................        229          689
   Current portion of long-term debt ..................        842          789
                                                          --------     --------
Total current liabilities .............................      5,273        3,674
Long-term debt ........................................      8,239        3,459
Commitments and contingencies .........................       --           --
Stockholders' Equity:                                                
   Preferred stock, $.01 par value, 1,000 shares                     
     authorized, no shares issued and outstanding .....       --           --
   Common stock, $.01 par value, 32,000 shares                       
     authorized, 11,347 shares issued and outstanding                
     at September 30, 1998 and June 30, 1998 ..........        113          113
   Additional paid-in capital .........................     27,938       27,198
   Accumulated deficit ................................    (20,230)     (18,768)
                                                          --------     --------
Total stockholders' equity ............................      7,821        8,543
                                                          --------     --------
Total liabilities and stockholders' equity ............   $ 21,333     $ 15,676
                                                          ========     ========

                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
                                                            September 30,
                                                      ------------------------
                                                        1998            1997
                                                      --------        --------
Net Revenues ..................................       $  3,425        $ 2,953 
Operating Expenses:                                                
   Selling, general and administrative expenses          3,356          3,268
   Corporate expenses .........................            774            634
   Depreciation and amortization ..............            484            394
                                                      --------        -------
Total operating expenses ......................          4,614          4,296
                                                      --------        -------
Loss from operations ..........................         (1,189)        (1,343)
Interest income ...............................             58             40
Interest expense ..............................           (294)          (155)
                                                      --------        -------
Loss before provision for income taxes ........         (1,425)        (1,458)
Provision for income taxes ....................             37             46
                                                      --------        -------
Net loss ......................................       $ (1,462)       $(1,504)
                                                      ========        =======
Net loss per basic and diluted common share ...       $  (0.13)       $ (0.15)
                                                      ========        =======
Weighted average basic and diluted common                          
   shares outstanding .........................         11,347          9,861
                                                      ========        =======

                See notes to consolidated financial statements.


                                       2
<PAGE>

                           Network Event Theater, Inc.
                      Consolidated Statements of Cash Flows
                                 (In thousands)
                                   (Unaudited)

                                                            Three months ended
                                                                September 30,
                                                           ---------------------
                                                             1998         1997
                                                             ----         ----
Cash Flows From Operating Activities
Net loss .............................................     $(1,462)     $(1,504)
Adjustments to reconcile net loss to
   net cash used in operating activities:
   Provision for bad debts ...........................          11            9
   Depreciation and amortization .....................         484          394
   Amortization of deferred financing costs ..........          62         --
   Changes in assets and liabilities:
     Increase in prepaid expenses ....................        (998)      (1,061)
     (Increase) decrease in deposits and
        other current assets .........................         (84)          39
     Increase in accounts receivable .................      (2,576)      (2,942)
     Increase in accounts payable ....................         309          141
     Decrease in accrued employee compensation .......         (78)         (27)
     Decrease in accrued professional fees ...........         (80)        (157)
     (Decrease) increase in deferred revenues ........        (460)       1,237
     Increase in other accrued expenses ..............       1,855        1,794
                                                           -------      -------
Net cash used in operating activities ................      (3,017)      (2,077)
Cash Flows From Investing Activities
   Capital expenditures ..............................        (341)        (556)
   Notes receivable ..................................        --             (1)
                                                           -------      -------
Net cash used in investing activities ................        (341)        (557)
Cash Flows From Financing Activities
   Sale of warrants ..................................         188         --
   Proceeds from long-term debt ......................       4,499          125
   Repayment of long-term debt .......................        (167)        (169)
                                                           -------      -------
Net cash provided by financing activities ............       4,520          (44)
                                                           -------      -------
(Decrease) increase in cash and cash equivalents .....       1,162       (2,678)
Cash and cash equivalents at beginning of period .....       2,271        4,185
                                                           -------      -------
Cash and cash equivalents at end of period ...........     $ 3,433      $ 1,507
                                                           =======      =======
Supplemental cash flow information;
   Cash paid for interest ............................     $    99      $   105
                                                           =======      =======
   Cash paid for income taxes ........................     $    37      $    42
                                                           =======      =======
   Issuance of warrants in connection with
      long-term debt .................................     $   552      $   --
                                                           =======      =======

                See notes to consolidated financial statements.


                                       3
<PAGE>

                           Network Event Theater, Inc.
                 Consolidated Statement of Stockholders' Equity
                For the period July 1, 1998 to September 30, 1998
                                 (In thousands)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                     Common Stock       Additional                
                                                ----------------------   Paid-in     Accumulated  
                                                 Shares        Amount     Capital      Deficit        Total
                                                 ------        -------    ------       -------       ------
<S>                                              <C>            <C>       <C>         <C>           <C>    
Balances at June 30, 1998..............          11,347         $113      $27,198     $(18,768)     $ 8,543
Issuance of warrants in connection
   with long-term debt.................             --           --           740          --           740
Net loss...............................             --           --           --        (1,462)      (1,462)
                                                 ------         ----      -------      -------      -------
Balances at September 30, 1998.........          11,347         $113      $27,938     $(20,230)     $ 7,821
                                                 ======         ====      =======      =======      =======
</TABLE>

                See notes to consolidated financial statements.


                                       4
<PAGE>

                           Network Event Theater, Inc.
                   Notes to Consolidated Financial Statements
                               September 30, 1998
                                  (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 owns and operates 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.  Additionally,  the Company owns and
operates collegiate media and marketing service businesses, which complement and
enhance the reach of its Network.  The Company operates in one industry segment,
which  provides media and marketing  services to  advertisers  who want to reach
young adults.

      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,  1999.  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,
1998.

2. Reclassifications

      Certain June 30, 1998 amounts in the consolidated  balance sheet have been
reclassified to conform to the current period's presentation.

3. Pro Forma Financial Data

      The  effect  of the On the  House,  Inc.  acquisition  in May 1998 was not
material to the reported net loss or net loss per share.

4. Long-Term Debt

      A summary of long-term debt is as follows:

                                                September 30,       June 30,
                                                    1998              1997
                                                  ----------       ----------
   Note Payable to Bank (A)....................   $2,905,000       $3,072,000
   Note Payable to Finance Company (B).........    1,000,000        1,000,000
   Note Payable - Private Placement (C)........    5,000,000             --
   Other.......................................      176,000          176,000
                                                  ----------       ----------
                                                   9,081,000        4,248,000
   Less current portion........................     (842,000)        (789,000)
                                                  ----------       ----------
                                                  $8,239,000       $3,459,000
                                                  ==========       ==========

     (A) This loan is secured by all of the assets of Campus  Voice,  Beyond the
Wall and American Passage (the  "Borrowers") and is guaranteed by NET. This loan
is payable in equal monthly  installments,  commencing in February 1998,  over a
maximum of six years (as  defined).  Interest  is  payable  monthly at a rate of
interest of 275 basis points above LIBOR for U.S.  dollar  deposits of one month
maturity.


                                       5
<PAGE>

                           Network Event Theater, Inc.
             Notes to Consolidated Financial Statements (Continued)
                               September 30, 1998
                                  (Unaudited)

      The  Borrowers  are also  party to an  interest  rate  exchange  agreement
converting  $3.0  million of the  aforementioned  floating  rate debt to a fixed
rate.  The balance of the interest  rate  agreement  at  September  30, 1998 was
$2,556,000.  Under the interest  rate  exchange  agreement,  the  Borrowers  are
required to pay interest at a fixed rate of 9.11% on the notional amount covered
by the  interest  rate  exchange  agreement.  In return,  the  Company  receives
interest  payments on the same notional amount at the prevailing LIBOR rate plus
275 basis points. The interest rate exchange agreement terminates in June 2002.

      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 1999.  The revolving  line of credit
facility  bears  interest  at the rate of the  bank's  prime  rate plus 25 basis
points and  interest is due  monthly.  Borrowings  under the  revolving  line of
credit are secured by the Borrower's  eligible accounts  receivable (as defined)
and are also  guaranteed by NET. As of September 30, 1998 the Borrowers have not
borrowed any amounts under this facility.

      (B)  Interest on this note is payable  monthly at a rate of 12% per annum,
with the principal due in June 2000. The note is secured by all of the assets of
Pik:Nik and is guaranteed by NET.

      (C) In July 1998, the Company realized net proceeds of approximately  $4.7
million from the sale of $5,000,000 of 11% Subordinated  Notes (the "Notes") and
375,000  warrants (see note 5). The Notes are due in July 2003.  Interest at the
rate of 11% per annum is due semi-annually.

5. Stockholders' Equity

      In July 1998, in  connection  with the sale of the Notes (see Note 4), NET
sold 375,000  warrants for  approximately  $188,000.  Each warrant  entitles the
holder to  purchase  one share of the  Company's  common  stock for  $4.125  and
expires in July 2003.

      In connection with the sale of the Notes and warrants,  the Company issued
150,000  warrants to the placement  agent.  Each warrant  entitles the holder to
purchase one share of the Company's  common stock for $4.125 and expires in July
2003.

      The 525,000  warrants  described  above were valued at $740,000 based on a
valuation from an independent third party.


                                       6
<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
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 following financial analysis compares the three months ended September
30, 1998 (unaudited) to the three months ended September 30, 1997 (unaudited).

Results of Operations

      For  the  three  months  ended  September  30,  1998,  net  revenues  were
$3,425,000  as compared to $2,953,000  for the three months ended  September 30,
1997. The increase of $472,000 is primarily due to increased  sales efforts as a
result of an increase in sales staff.

      For the three  months  ended  September  30,  1998,  selling,  general and
administrative  expenses were $3,356,000 as compared to $3,268,000 for the three
months ended  September  30, 1997.  The increase of $88,000 is primarily  due to
increased sales staff.

      For the three months ended  September  30, 1998,  corporate  expenses were
$774,000 as compared to $634,000 for the three months ended  September 30, 1997.
The increase of $140,000 is primarily due to increased  corporate  personnel and
related overhead expenses required to support the Company's growth.

      For  the  three  months  ended  September  30,  1998,   depreciation   and
amortization  was  $484,000 as compared to $394,000  for the three  months ended
September  30,  1997.  The increase of $90,000 is  primarily  due to  additional
equipment purchases during the period from October 1997 through September 1998.

      For the three months ended  September  30, 1998,  operating  expenses were
$4,614,000  as compared to $4,296,000  for the three months ended  September 30,
1997.  The increase of $318,000 is due to increased  personnel and  depreciation
relating to additional  equipment  purchases during the period from October 1997
through September 1998.

      For the three months ended September 30, 1998, interest income was $58,000
as  compared to $40,000 for the three  months  ended  September  30,  1997.  The
increase of $18,000 was due to higher cash balances.

      For the three  months  ended  September  30,  1998,  interest  expense was
$294,000 as compared to $155,000 for the three months ended  September 30, 1997.
The increase of $139,000  primarily related to $5,000,000 of debt issued in July
1998.

      For the three months ended  September 30, 1998, net loss was $1,462,000 as
compared to  $1,504,000  for the three months  ended  September  30,  1997.  The
decrease of $42,000 was due to increased  revenues  that were offset by selling,
general and administrative expenses, corporate expense and interest expense.

Impact of Year 2000

      The Company believes that its computer  programs and systems are year 2000
compliant.

Liquidity and Capital Resources

      In July 1998,  the Company  realized  net proceeds of  approximately  $4.7
million  from the sale of  $5,000,000  of 11%  Subordinated  Notes  and  375,000
warrants.

      The Company used approximately $3.0 million in its operating activities in
1998 as compared to $2.1  million in 1997.  The increase of  approximately  $0.9
million  represents the decrease in short-term  liabilities  and the increase 


                                       7
<PAGE>

in  accounts  receivable  and  long  term  assets  offset  by  the  increase  in
depreciation  and  amortization.  Cash used in investing  activities  in 1998 of
approximately $0.3 million is composed primarily of capital  expenditures.  Cash
provided  by  financing  activities  in 1998 of  approximately  $4.5  million is
primarily attributable to the issuance of long term debt and related warrants.

      The Company's primary capital  requirements with respect to its operations
have been to fund corporate  overhead and the operation of its Network of campus
theaters.  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.

      As of September 30, 1998,  the Company had  approximately  $3.4 million in
cash and cash  equivalents.  The  Company  believes  that  such  amount  will be
sufficient  to  fund  working  capital,  including  debt  service  and  interest
requirements,  at least  through  the  fiscal  year  ended  June 30,  1999.  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,
acquiring  additional  media and  marketing  services  businesses or to fund its
operations. 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.


                                       8
<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.


                                       9
<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.

November 16, 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


                                       10