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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 DECEMBER 31, 1997

      [ ]   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 February  11, 1998 there were  11,341,320  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
PART I--FINANCIAL INFORMATION                                             Number
                                                                          ------

Item 1  Financial Statements

        Consolidated balance sheets - December 31, 1997
           (unaudited) and June 30, 1997.................................    1
                                                                             
        Consolidated statements of operations - three and six months         
           ended December 31, 1997 and 1996 (unaudited)..................    2
                                                                             
        Consolidated statements of cash flows - six months ended             
           December 31, 1997 and 1996 (unaudited)........................    3
                                                                             
        Consolidated statement of stockholders' equity - six                 
           months ended December 31, 1997 (unaudited)....................    4
                                                                             
        Notes to consolidated financial statements.......................    5
                                                                             
Item 2  Management's Discussion and Analysis of Financial Condition          
         and Results of Operations.......................................    9
                                                                             
PART II--OTHER INFORMATION                                                   
                                                                             
Item 6  Exhibits and Reports on Form 8-K................................    12
                                                                             
Signatures..............................................................    13
                                                                           
<PAGE>

                                     PART I
                              FINANCIAL STATEMENTS

Item 1. Financial Statements

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

                                                         December 31,   June 30,
                                                             1997         1997
                                                         -----------   ---------
                                                         (Unaudited)
ASSETS
Current Assets:
   Cash and cash equivalents ............................  $  1,335    $  4,185 
   Accounts receivable, net of                                         
     allowance for doubtful                                            
     accounts of $150 and $73                                          
     at December 31, 1997                                              
     and June 30, 1997, respectively ....................     2,852       1,439
   Prepaid expenses .....................................       357         341
   Deposits and other current assets ....................       121         120
                                                           --------    --------
Total current assets ....................................     4,665       6,085
Property and equipment, net of accumulated                             
   amortization of $2,038 and $1,537 at                                
   December 31, 1997 and June 30, 1997,                                
   respectively .........................................     5,036       4,718
Intangible assets, net of accumulated                                  
   amortization of $601 and $367 at                                    
   December 31, 1997 and June 30, 1997,                                
   respectively .........................................     6,175       6,339
Notes receivable ........................................        34          33
                                                           --------    --------
Total assets ............................................  $ 15,910    $ 17,175
                                                           ========    ========

LIABILITIES AND STOCKHOLDERS' EQUITY 
Current Liabilities:              
   Accounts payable .....................................  $  2,173    $    542
   Accrued advertising costs ............................       172        --
   Accrued employee compensation ........................       152         321
   Accrued professional fees ............................       265         320
   Other accrued expenses ...............................       360         785
   Current portion of long-term debt ....................       766         949
                                                           --------    --------
Total current liabilities ...............................     3,888       2,917
Long-term debt ..........................................     4,409       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,10,286 and 9,861 shares
     issued and outstanding at December 31, 1997                              
     and June 30, 1997, respectively ....................       103          99
   Additional paid-in capital ...........................    22,621      20,421
   Accumulated deficit ..................................   (15,111)    (11,537)
                                                           --------    --------
Total stockholders' equity ..............................     7,613       8,983
                                                           --------    --------
Total liabilities and stockholders' equity ..............  $ 15,910    $ 17,175
                                                           ========    ========

                 See notes to consolidatedfinancial statements.


                                       1
<PAGE>

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

                                          Three months ended   Six months ended
                                             December 31,         December 31,
                                          ------------------  ------------------
                                            1997      1996      1997      1996
                                            ----      ----      ----      ----
Net Revenues ...........................  $ 3,002   $ 1,755   $ 5,955   $ 2,673
Operating Expenses:
   Selling, general and
     administrative expenses ...........    3,654     1,858     6,922     2,883
   Corporate expenses ..................      801       694     1,435       931
   Depreciation and amortization .......      412       385       806       482
                                          -------   -------   -------   -------
Total operating expenses ...............    4,867     2,937     9,163     4,296
                                          -------   -------   -------   -------
Loss from operations ...................   (1,865)   (1,182)   (3,208)   (1,623)
Interest income ........................       25        28        65       190
Interest expense .......................     (171)      (91)     (326)     (109)
                                          -------   -------   -------   -------
Loss before provision for income taxes .   (2,011)   (1,245)   (3,469)   (1,542)
Provision for income taxes .............       59        78       105       104
                                          -------   -------   -------   -------
Net loss ...............................  $(2,070)  $(1,323)  $(3,574)  $(1,646)
                                          =======   =======   =======   =======
Net loss per basic common share ........  $ (0.21)  $ (0.15)  $ (0.36)  $ (0.19)
                                          =======   =======   =======   =======
Weighted average basic
   common shares outstanding ...........    9,904     8,654     9,883     8,654
                                          =======   =======   =======   =======

                 See notes to consolidated financial statements.


                                       2
<PAGE>

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

                                                              Six months ended
                                                                 December 31,
                                                          ----------------------
                                                             1997          1996
                                                             ----          ----
Cash Flows From Operating Activities:
Net loss ...........................................      $(3,574)      $(1,646)
Adjustments to reconcile net loss
 to net cash used in operating
 activities:
   Provision for bad debts .........................           77            24
   Depreciation and amortization ...................          806           482
   Changes in assets and liabilities:
     Increase in prepaid expenses ..................          (16)         (649)
     Increase in deposits and other
       current assets ..............................           (1)         --
     Increase in accounts receivable ...............       (1,490)       (1,841)
     Increase in accounts payable ..................        1,631         1,756
     Increase in accrued advertising
       costs .......................................          172           288
     (Decrease) increase in accrued
        employee compensation ......................         (169)           39
     (Decrease) increase in accrued
        professional fees ..........................          (55)          129
     (Decrease) increase in other
        accrued expenses ...........................         (425)          855
                                                          -------       -------
Net cash used in operating activities ..............       (3,044)         (563)
Cash Flows From Investing Activities:
   Capital expenditures ............................         (890)         (437)
   Notes receivable ................................           (1)         --
   Payment for business acquisitions ...............          (10)       (5,256)
   Sale of investments .............................         --           4,421
                                                          -------       -------
Net cash used in investing activities ..............         (901)       (1,272)
Cash Flows From Financing Activities:
   Net proceeds from sale of common stock ..........           60          --
   Proceeds from long-term debt ....................        5,125         4,250
   Repayment of long-term debt .....................       (4,030)          (94)
   Debt issuance costs .............................          (60)         --
                                                          -------       -------
Net cash provided by financing
  activities .......................................        1,095         4,156
                                                          -------       -------
Net (decrease) increase in cash and
  cash equivalents .................................       (2,850)        2,321
Cash and cash equivalents at beginning
  of period ........................................        4,185           267
                                                          -------       -------
Cash and cash equivalents at end of period .........      $ 1,335       $ 2,588
                                                          =======       =======
Supplementary cash flow information:
   Cash paid for interest ..........................      $   324       $    89
                                                          =======       =======
   Cash paid for income taxes ......................      $    78       $    40
                                                          =======       =======
   Debt assumed in connection with
     acquisitions ..................................      $  --             750
                                                          =======       =======

                 See notes to consolidated financial statements.


                                       3
<PAGE>

                           Network Event Theater, Inc.
                 Consolidated Statement of Stockholders' Equity
                For the period July 1, 1997 to December 31, 1997
                                 (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 ...................      --        --        --       (3,574)   (3,574)
Issuance of                                                  
  common stock .............       425         4     2,200       --       2,204
                              --------  --------  --------   --------   --------
Balances at                                                  
  December 31, 1997 ........    10,286  $    103  $ 22,621   $(15,111)  $ 7,613
                              ========  ========  ========   ========   ========

                 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 completed its Initial Public Offering in April,  1996,  whereby
it sold common stock and  warrants  and  realized net proceeds of  approximately
$9.7 million.

     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 the Company's Form 10-KSB for the fiscal year ended June 30,
1997 filed with the Securities and Exchange Commission on September 29, 1997.

2.   Pro Forma Financial Data

     The  following  unaudited  pro forma  information  for the six months ended
December 31, 1996 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:

                                                               Six months ended
                                                               December 31, 1996
                                                               -----------------
    Net revenue .........................................       $ 4,159,000
    Net loss applicable to common stock .................        (2,199,000)
    Net loss per basic common share .....................             (0.25)
    Basic common shares outstanding .....................         8,654,000

     The pro forma  information for the six months ended December 31, 1996 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 (Continued)
                                December 31, 1997
                                   (Unaudited)

3.   Long-Term Debt

     A summary of long-term debt is as follows:

                                                    December 31,     June 30,
                                                       1997            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) .....................    4,000,000          --
    Note Payable to Finance Company (F) ..........    1,000,000          --
    Other ........................................      175,000       224,000
                                                    -----------   -----------
                                                      5,175,000     6,224,000
    Less current portion .........................     (766,000)     (949,000)
                                                    -----------   -----------
                                                    $ 4,409,000   $ 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").  The Loan was  secured  by all of  American  Passage's  assets  and was
guaranteed by NET. The Loan was payable in quarterly installments with the final
installment  due in September  2001.  Interest was payable monthly at a variable
rate of interest  set each ninety days based  either on 400 basis  points  above
LIBOR for U.S.  Dollar deposits of ninety day maturity or 100 basis points above
the  prime  rate of the  bank.  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
bearing interest thereon at the rate of 8% per year, guaranteed by NET. The note
was payable in eight  equal  quarterly  installments  of  principal  and accrued
interest  commencing in December  1996. 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.  The debt accrued
interest at the rate of 12.0%, but no interest or principal payments were due to
be paid until June 1999.  Subsequent to such date,  interest was payable monthly
and principal payments were to be made annually until full repayment in December
2006. In December 1997,  the debt and all accrued  interest was satisfied by the
issuance of common stock in Network Event Theater, Inc. (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.  This senior debt accrued interest at the rate of
8.0% per annum and required  that the interest be paid monthly and was to be due
in December  1999.  Campus Voice was  obligated to apply its Free Cash Flow,  as
defined, to prepayment of the senior indebtedness.  In December,  1997, the debt
and all accrued  interest  was  satisfied  by the  issuance  of common  stock in
Network Event Theater, Inc. (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  


                                       6
<PAGE>

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

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 an 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 December  31, 1997 the  Borrowers  have not  borrowed  any amounts
under this facility.

     (F) In December 1997,  Pik:Nik borrowed $1.0 million from a finance company
and issued its 30 month secured note. 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.

     At December 31, 1997, the aggregate principal amounts of long-term debt due
during the next five years were as follows:

   Year Ending June 30,
     1998.....................................................     $     384,000
     1999.....................................................           740,000
     2000.....................................................         1,718,000
     2001.....................................................           667,000
     2002 and thereafter......................................         1,666,000
                                                                   -------------
                                                                    $  5,175,000
                                                                   =============

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.  The Company  realized  $60,000 as a result of this
exercise of the warrants.

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,  and where
necessary,  restated to conform to the Statement 128 requirements.  The adoption
of Statement 128 did not have a material  effect on the Company's  reported loss
per basic common share.

6.   Industry Segments

     In June 1997, the Financial  Accounting  Standard 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 


                                       7
<PAGE>

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

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.

7.   Subsequent Event

     In January and February  1998,  the Company  sold an aggregate of 1,055,556
shares of its common  stock.  The net  proceeds of those sales (an  aggregate of
approximately $4.7 million) are being used for general corporate  purposes.  The
Company is obligated to register  these shares under the  Securities Act of 1933
as soon as practicable.


                                       8
<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 six months ended  December 31, 1997
(unaudited)  to the  three  months  and  six  months  ended  December  31,  1996
(unaudited), respectively.

Results of Operations

     For the three months ended December  31,1997,  net revenues were $3,002,000
as compared to  $1,755,000  for the three months  ended  December  31,1996.  The
increase in net revenues of $1,247,000 is primarily due to the  acquisitions  of
Campus Voice, Beyond the Wall, and Pik:Nik,  which, in the aggregate,  accounted
for $590,000 of this  increase.  Additionally,  $450,000 of this increase in net
revenues  was  generated by American  Passage.  The  remaining  $207,000 of this
increase was generated by the theater Network.

     For the six months ended December 31, 1997, net revenues were $5,955,000 as
compared to $2,673,000  for the six months ended December 31, 1996. The increase
of  $3,282,000 in net revenues is primarily  due to the  acquisitions  of Campus
Voice,  Beyond the Wall,  and Pik:Nik  which,  in the  aggregate,  accounted for
$2,009,000  of this  increase.  American  Passage  accounted  for an  additional
$1,015,000  of the  increase in net  revenues,  primarily  because six months of
revenues were  accounted for in this period in 1997, but only three and one-half
months of revenues were accounted for in this period in 1996 as American Passage
was acquired in the middle of September  1996. The remaining  amount of $258,000
of the increase in net revenues was generated by the theater Network.

     For the  three  months  ended  December  31,  1997,  selling,  general  and
administrative  expenses were $3,654,000 as compared to $1,858,000 for the three
months ended  December 31, 1996. The increase of $1,796,000 was primarily due to
the  acquisitions  of Campus Voice,  Beyond the Wall and Pik:Nik which accounted
for   approximately   $127,000,   $232,000  and   $629,000  of  this   increase,
respectively.  Additionally,  $206,000  of the  increase  was  due  to  American
Passage.  The  remaining  increase of $602,000  was due to the  expansion of the
theater  Network and  increases in the number of sales,  management  and support
staff.

     For  the  six  months  ended  December  31,  1997,  selling,   general  and
administrative  expenses were  $6,922,000 as compared to $2,883,000  for the six
months ended  December 31, 1996. The increase of $4,039,000 was primarily due to
the  acquisitions  of Campus Voice,  Beyond the Wall and Pik:Nik which accounted
for   approximately   $227,000,   $887,000  and  $1,163,000  of  this  increase,
respectively.  American  Passage  accounted for an additional  $1,107,000 of the
increase in selling,  general and administrative  expenses primarily because six
months of expenses were accounted for in this period in 1997, but only three and
one-half  months  of  expenses  were  accounted  for in this  period  in 1996 as
American  Passage was acquired in the middle of September  1996.  The  remaining
increase  of  $655,000  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  December 31,  1997,  corporate  expenses  were
$801,000 as compared to $694,000 for the three  months ended  December 31, 1996.
The increase of $107,000 is due to increased staff and overhead expenses.

     For the six  months  ended  December  31,  1997,  corporate  expenses  were
$1,435,000  as compared to $931,000 for the six months ended  December 31, 1996.
The increase of $504,000 is due to increased staff and overhead expenses.


                                       9
<PAGE>

     For the three months ended December 31, 1997, depreciation and amortization
was $412,000 as compared to $385,000  for the three  months  ended  December 31,
1996,  an  increase  of $27,000  primarily  due to  additional  Network  theater
installations.

     For the six months ended December 31, 1997,  depreciation  and amortization
expense was $806,000 as compared to $482,000  for the six months ended  December
31, 1996,  representing an increase of $324,000.  The increase was primarily due
to  acquisitions of Campus Voice,  Pik:Nik and Beyond the Wall,  which accounted
for $138,000 of the total. American Passage accounted for an additional $116,000
of the increase in this expense  primarily  because six months of expenses  were
accounted  for in this  period in 1997,  but only three and  one-half  months of
expense  were  accounted  for in this  period in 1996 as  American  Passage  was
acquired  in the middle of  September  1996.  The  remainder  of $70,000 was the
result of additional theater Network installations.

     For the three months ended December 31, 1997, total operating expenses were
$4,867,000  as compared to $2,937,000  in 1996.  The increase of $1,930,000  was
primarily due to the acquisitions of Campus Voice,  Pik:Nik and Beyond The Wall.
Operating expenses for these subsidiaries were approximately $169,000,  $649,000
and  $240,000,  respectively.   Additionally,  $204,000  was  due  primarily  to
increased  selling  costs at  American  Passage  which  resulted  in a  $450,000
increase in net  revenues . The  remaining  increase of $668,000  was due to the
expansion  of the  theater  Network  and  increases  in  the  number  of  sales,
management and support staff.

     For the six months ended December 31, 1997,  total operating  expenses were
$9,163,000 as compared to $4,296,000 for the six months ended December 31, 1996.
The increase of  $4,867,000  was  primarily  due to the  acquisitions  of Campus
Voice,  Pik:Nik and Beyond The Wall.  Operating  expenses for these subsidiaries
were approximately  $313,000,  $1,201,000 and $901,000,  respectively.  American
Passage  accounted  for an  additional  $1,223,000  of  the  increase  in  total
operating  expense  primarily because six months of expense was accounted for in
this period in 1997,  but only three and one-half  months of operating  expenses
were  accounted  for in this period in 1996 as American  Passage was acquired in
the middle of September  1996. It should be noted that  increased  selling costs
resulted in increased  net  revenues.  The  remaining  amount of the increase of
$1,229,000 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 December 31, 1997,  interest  income was $25,000
as compared to $28,000 for the three months ended December 31, 1996. For the six
months  ended  December  31,  1997,  interest  income was $65,000 as compared to
$190,000 for the six months ended  December  31,  1996.  This income  represents
interest on cash balances which has fluctuated from period to period.

     For the three months ended December 31, 1997, interest expense was $171,000
as compared to $91,000 for the three months ended December 31, 1996. For the six
months ended  December 31,  1997,  interest  expense was $326,000 as compared to
$109,000 for the six months ended December 31, 1996.  Interest  expense  relates
primarily to the debt incurred related to the acquisitions of American  Passage,
Campus Voice, and Pik:Nik.

     For the three  months  ended  December  31,  1997,  income tax  expense was
$59,000 as compared to $78,000 for the three months ended December 31, 1996. For
the six months  ended  December  31,  1997,  income tax expense was  $105,000 as
compared to $104,000 for the six months ended  December 31, 1996.  The provision
represents state taxes imposed on revenues and net assets.

     For the three months ended  December 31, 1997,  net loss was  $2,070,000 as
compared to $1,323,000 for the three months ended December 31, 1996. For the six
months  ended  December  31,  1997,  net  loss was  $3,574,000  as  compared  to
$1,646,000 for the six months ended December 31, 1996. The increases of $747,000
and $1,928,000 for the three and six month periods, respectively,  were 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.


                                       10
<PAGE>

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  $1.5  million of Network
theater equipment and invested approximately $1.3 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.

     The Company used approximately $3.0 million in operating  activities during
the six months ended  December  31, 1997 as compared to $563,000  during the six
months  ended  December 31, 1996.  The  increase of  approximately  $2.4 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 six months  ended  December 31, 1997 of  approximately  $901,000 is composed
primarily of capital expenditures. Cash provided by financing activities in 1997
is primarily due to taking on additional long-term debt.

     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.

     As of December 31, 1997, the Company had approximately $1.3 million in cash
and cash  equivalents.  The Company  believes that such amounts plus  additional
amounts of $4.7 million which have been raised through private  placement of the
Company's common stock in January and February,  1998 will be sufficient to fund
working  capital,  including  debt service and interest  requirements,  at least
through the fiscal year ended 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.


                                       11
<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.


                                       12
<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.

February 13, 1997

                                                    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


                                       13