<PAGE>
 
________________________________________________________________________________

                                   FORM 10-Q

                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549

[X]  Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
     Act of 1934

For the quarterly period ended September 30, 1996.

[_]  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 0-13102


                          THE NOSTALGIA NETWORK, INC.
            (Exact name of registrant as specified in its charter)

          DELAWARE                                    84-0923659
(State or other jurisdiction of           (I.R.S. Employer Identification No.)
 incorporation)
 
650 MASSACHUSETTS AVENUE NW WASHINGTON,DC                                  20001
(Address of principal executive office)                               (Zip Code)
 
                                (202) 289-6633
             (Registrant's telephone number, including area code)

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

                                                             YES [X]     NO [_]

The number of shares of the Registrant's Common Stock, $.04 par value as of the
close of the period covered by this Report was 20,274,371.

________________________________________________________________________________
<PAGE>
 
                               TABLE OF CONTENTS
                               -----------------

<TABLE>
<CAPTION>
                                                                        Page No.
                                                                        --------
<S>       <C>                                                           <C> 
PART I.   FINANCIAL INFORMATION
 
Item 1.   Financial Statements
 
          Balance Sheets as of
          September 30, 1996 and December 31, 1995                          3
 
          Statements of Operations
          For the Three and Nine Months Ended September 30, 1996 and 1995   4
           
          Statements of Cash Flows
          For the Nine Months Ended September 30, 1996 and 1995             5
           
          Notes to Financial Statements                                     6
 
Item 2.   Management's Discussion and Analysis of
          Financial Condition and Results of Operations                   7 - 12
          
PART II.  OTHER INFORMATION
 
Item 4.   Submission of Matters to a Vote of Securities Holders            12
 
Item 5.   Other Information                                                12
 
Index to Exhibits                                                          14
 
Exhibit 27 - Financial Data Schedule                                       15
</TABLE>

                                     - 2 -
<PAGE>
PART I.   FINANCIAL INFORMATION

Item 1.   Financial Statements

                          THE NOSTALGIA NETWORK, INC.
                                BALANCE SHEETS

<TABLE> 
<CAPTION> 
                                                                                   (Unaudited)
                                                                                September 30, 1996       December 31, 1995
                                                                                ------------------       -----------------
<S>                                                                             <C>                      <C>
                    ASSETS

CURRENT ASSETS
     Cash and cash equivalents                                                            $213,284                $855,739
     Accounts receivable, less allowance of $2,154,000
       and $2,258,000, respectively                                                        650,763               1,304,596
     Prepaid legal fees                                                                     72,963                  75,000
     Prepaid expenses                                                                       42,530                 106,265
     Cablecast rights                                                                    6,855,000               6,800,000
                                                                                ------------------       -----------------
          Total current assets                                                           7,834,540               9,141,600

Programming and cablecast rights - net                                                   8,833,936              13,185,348
Property and equipment - net                                                             1,581,619               1,612,582
Other assets                                                                                18,404                  16,031
                                                                                ------------------       -----------------
          Total assets                                                                 $18,268,435             $23,955,541
                                                                                ==================       =================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES
     Current maturities of long-term obligations                                        $6,151,410              $6,355,493
     Accounts payable                                                                    1,058,607               1,406,840
     Accrued expenses and other liabilities                                                919,886                 834,306
                                                                                ------------------       -----------------
          Total current liabilities                                                      8,129,903               8,596,639
                                                                                ------------------       -----------------
LONG-TERM OBLIGATIONS, LESS CURRENT MATURITIES
     Notes and interest payable - related parties                                       18,032,520              10,925,346
     Accrued interest payable and other                                                     54,277                  54,747
     Cablecast licenses and fees Payable                                                 7,965,430              11,901,542
                                                                                ------------------       -----------------
          Total long-term liabilities                                                   26,052,227              22,881,635
                                                                                ------------------       -----------------
          Total liabilities                                                             34,182,130              31,478,274
                                                                                ------------------       -----------------
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT)
     Preferred stock: $2 par value, 125,000 shares authorized
       3,250 issued and outstanding                                                          6,500                   6,500
     Common stock: $0.04 par value, 30,000,000 shares
       authorized, 20,274,371 and 20,274,371 shares issued
       and outstanding, respectively                                                       810,975                 810,975
     Additional paid-in-capital                                                         30,213,554              30,213,554
     Deficit                                                                           (46,944,724)            (38,553,762)
                                                                                ------------------       -----------------
          Total stockholders' equity (deficit)                                         (15,913,695)             (7,522,733)
                                                                                ------------------       -----------------
          Total liabilities and stockholders' equity (deficit)                         $18,266,435             $23,955,541
                                                                                ==================       =================
</TABLE>

              See accompanying notes to the financial statements.            -3-
<PAGE>

                  THE NOSTALGIA NETWORK, INC. AND SUBSIDIARY
                           STATEMENTS OF OPERATIONS
                                  (Unaudited)

<TABLE>
<CAPTION>
                                                             For the Three Months               For the Nine Months
                                                             Ended September 30,                Ended September 30,
                                                         --------------------------         ---------------------------
                                                             1996          1995                  1996          1995
                                                         -----------    -----------         ------------   ------------
<S>                                                      <C>            <C>                 <C>            <C>
OPERATING REVENUES
  Affiliate revenue                                       $  938,866    $ 1,011,044          $3,034,100      $3,236,391
  Advertising sales revenue                                1,237,646      1,239,588           4,340,394       4,346,602
  Other                                                            -        314,580                   -         909,096
                                                         -----------    -----------         -----------     -----------

     Total operating revenues                              2,176,512      2,565,212           7,374,165       3,339,820
                                                         -----------    -----------         -----------     -----------

OPERATING EXPENSES
  Programming, production and transmission                 1,329,665      1,287,816           4,224,165       3,339,820
  Programming amortization                                 1,660,009      1,494,350           5,077,586       4,669,587
  Sales and marketing                                      1,009,451      1,075,094           3,308,159       3,465,902
  Finance, general and administration                        922,878      1,202,659           2,612,704       3,466,479
  Relocation, litigation settlement and other                      -              -            (150,000)              -
                                                         -----------    -----------         -----------     -----------

     Total operating expenses                              4,922,003      5,059,919          15,072,614      14,941,788
                                                         -----------    -----------         -----------     -----------

LOSS FROM OPERATIONS                                      (2,745,491)    (2,494,707)         (7,698,120)     (6,449,699)
                                                         -----------    -----------         -----------     -----------

OTHER INCOME AND (EXPENSE)
     Interest income (expense) - net                        (258,235)      (136,337)           (692,842)       (325,592)
                                                         -----------    -----------         -----------     -----------

LOSS BEFORE PROVISION FOR FEDERAL INCOME TAXES            (3,003,726)    (2,631,044)         (8,390,962)     (6,775,291)

PROVISION FOR FEDERAL INCOME TAXES                                 -              -                   -               -
                                                         -----------    -----------         -----------     -----------

NET LOSS                                                 $(3,003,726)   $(2,631,044)        $(8,390,962)    $(6,775,291)
                                                         ===========    ===========         ===========     ===========

NET LOSS PER COMMON SHARE                                     $(0.15)        $(0.13)             ($0.41)         ($0.33)
                                                         ===========    ===========         ===========     ===========

WEIGHTED AVERAGE SHARES OUTSTANDING                       20,274,371     20,274,371          20,274,371      20,266,038
                                                         ===========    ===========         ===========     ===========
</TABLE>
<PAGE>
                          THE NOSTALGIA NETWORK, INC.
                           STATEMENTS OF CASH FLOWS
                                  (Unaudited)

<TABLE> 
<CAPTION>
                                                                For the Nine Months
                                                                Ended September 30,
                                                          -------------------------------
                                                               1996             1995
                                                          --------------   --------------
<S>                                                       <C>              <C> 
CASH FLOWS FROM OPERATING ACTIVITIES
  Net loss                                                  $(8,390,962)     $(6,775,291)
  Adjustments to reconcile net loss to net cash
   used in operating activities:
     Depreciation and amortization                            5,255,486        4,716,187
     Provision for losses on accounts receivable               (104,000)         854,000
  Net change in operating assets and liabilities:
     (Increase) decrease in accounts receivable                 757,833         (229,991)
     Decrease in prepaid expenses and other assets               63,463          182,961
     (Decrease) in accounts payable                            (348,233)        (441,384)
     Increase in accrued expenses
      and other liabilities                                      85,580          161,925
     Increase in interest and other payables -                
      related parties                                           607,174          329,168
                                                          --------------   --------------

        Net cash used in operating activities                (2,073,659)      (1,202,425)
                                                          --------------   --------------

CASH FLOWS FROM INVESTING ACTIVITIES
     Purchases of programming and cablecast rights             (483,174)      (1,847,747)
     Purchases of property and other assets                    (146,957)        (166,140)
                                                          --------------   --------------

        Net cash used in investing activities                  (630,131)      (2,013,887)
                                                          --------------   --------------

CASH FLOWS FROM FINANCING ACTIVITIES
     Repayments of long-term obligations                     (4,438,665)      (4,119,360)
     Proceeds from bridge financing                           6,500,000        5,500,000
                                                          --------------   --------------

        Net cash provided by financing activities             2,061,335        1,380,640
                                                          --------------   --------------

NET DECREASE IN CASH AND CASH EQUIVALENTS                      (642,455)      (1,835,672) 

CASH AND CASH EQUIVALENTS - beginning                           855,739        2,782,683
                                                          --------------   --------------

CASH AND CASH EQUIVALENTS - ending                          $   213,284      $   947,011
                                                          ==============   ==============

NONCASH INVESTING AND FINANCING ACTIVITIES:
     Vendor financing of programming rights                 $   404,500      $19,387,500
                                                          ==============   ==============
</TABLE> 

              See accompanying notes to the financial statements.

                                                                             -5-
<PAGE>
 
                          The Nostalgia Network, Inc.


                         NOTES TO FINANCIAL STATEMENTS

1.   The financial information included herein is submitted pursuant to the
     requirements of Form 10-Q and does not include all disclosures required by
     generally accepted accounting principles.  It is suggested that these
     unaudited financial statements be read in conjunction with the financial
     statements and notes thereto included in the Company's annual report on
     Form 10-K for the fiscal year ended December 31, 1995 filed with the
     Securities and Exchange Commission, which are incorporated herein by
     reference.  The accompanying interim financial statements reflect all
     adjustments (consisting of normal recurring accruals only) which are, in
     the opinion of management, necessary for a fair statement of the results
     for the interim periods presented.  The results of operations for interim
     periods are not necessarily indicative of the results to be obtained for
     the entire year.

2.   Certain reclassifications have been made to the financial statements for
     the comparative period of the prior fiscal year for consistency with the
     presentation for the current period.

3.   Cash Flow - Cash equivalents include highly liquid debt instruments with a
     maturity of three months or less.

4.   During the nine months ended September 30, 1996, the Company executed
     promissory notes in favor of Concept Communications, Inc. ("Concept")
     totaling $6,500,000,  bearing interest ranging from 4.89% to 5.31%.
     Subsequent to September 30, 1996, the Company executed additional
     promissory notes in favor of Crown Communications, Inc., ("Crown")
     Concept's parent company, totaling $2,500,000, bearing interest at 8.25%.
     The proceeds of these notes are to provide bridge financing for working
     capital purposes until such time as Concept and the Company can agree upon
     a price at which the Company will sell its securities to Concept.    These
     notes are covered by the terms of a certain Security Agreement between
     Concept and the Company dated January 4, 1996, as amended.    Concept has
     stated it does not intend to call its outstanding notes prior to February
     1, 1997 unless replaced by an equity investment.

                                     - 6 -
<PAGE>
 
Item 2.   Management's Discussion and Analysis of Financial Condition and
          Results of Operations

This report contains forward-looking statements which involve risks and
uncertainties. The Company's actual results may differ significantly from the
results discussed in the forward-looking statements. For a discussion of the
risks that may have an impact on the Company's results, see the Company's report
on Form 10-K for the year ended December 31, 1995.

Results of Operations
---------------------

Total revenues decreased $1,117,595 or 13.2% (from $8,429,089 to $7,374,494) for
the nine months ended September 30, 1996 (the "Period") as compared with the
same period during 1995 and $388,700, or 15.1% (from $2,565,212 to $2,176,512)
for the three months ended September 30, 1996 (the "Quarter") as compared with
the same quarter during 1995. The decline resulted principally from decreases in
other revenues of $909,096 (from $909,096 to $0) for the Period and $314,580
(from $314,580 to $0) for the Quarter; and affiliate revenue decreases of
$202,291, or 6.3% (from $3,236,391 to $3,034,100) for the Period and $72,178, or
7.1% (from $1,011,044 to $938,866) for the Quarter.

Other revenues decreased due to the December 1995 termination of the Company's
contract for interactive home shopping services. During 1995 the Company had
allotted approximately 30 hours a week to interactive home shopping. Contractual
problems with RSTV Inc., which provided the service under the name Via TV!
("Via"), coupled with Via's poor product mix and services, caused the Company to
decide not to renew the contract. The air time allotted home shopping during
1995 is currently being sold as paid programming ("infomercials").

Advertising revenue remained relatively flat for the Period and the Quarter.
Infomercial sales increased by $81,934, or 3.0% (from $2,747,732 to $2,829,666)
for the Period and $71,400, or 9.8% (from $726,707 to $798,107) for the Quarter.
Total hours devoted to infomercials has increased significantly compared to the
same period in 1995; however, the composition consists of a higher volume of
lower priced overnight hours. During third quarter 1995 the Company completed
its efforts to eliminate infomercials during its mid-day programming and no
longer airs infomercials during the period from 10 am to 3 am, Monday through
Friday. Although these mid-day hours command the highest price, they were viewed
as a significant detriment to the Network's programming by cable system
operators. In January 1996 the bankruptcy of Via TV resulted in the Network's
overnight shopping hours being converted to infomercials. Although this resulted
in a significant increase in hours devoted to infomercials, the average rate for
those hours was significantly lower than the average rate for other infomercial
hours. The net effect of these changes was a 49% reduction in average hourly
rate. Additionally, the Network is experiencing a period of instability in
infomercial advertisers as they change products and renegotiate pricing,
resulting in lower overall pricing. Management has received indications that the
infomercial industry is softening and, accordingly, rate reductions might
continue. Management's plan is to identify alternative programming models for
its overnight 

                                     - 7 -
<PAGE>
 
block to replace the hours reverted to infomercials. Management currently has no
intentions to air infomercials during the hours from 10 am to 3 am, Monday
through Friday.

Revenues from conventional advertising decreased by $88,142, or 5.5% (from
$1,598,870 to $1,510,728) for the Period and $73,342, or 14.3% (from $512,881 to
$439,539) for the Quarter. Programming changes resulted in a 7% reduction in
commercial spot inventory. Additionally, the impact of airing make good spots
for national advertisers, which were required as a result of audience delivery
deficiencies, reduced the number of revenue producing spots. Offsetting these
reductions was a slight increase in the average rate per spot.

Increased competition continues to cause reductions in the Company's affiliate
revenues, which decreased by $202,291, or 6.3% (from $3,236,391 to $3,034,100)
for the Period and $72,178, or 7.1% (from $1,011,044 to $938,866) for the
Quarter. Competition from new programming services which have strong strategic
alliances has placed additional economic pressures on system operators to make
available already scarce channel capacity. Compounding these factors,
technological advances which were heralded to expand channel capacity have not
yet developed to commercially feasible standards within the time frame
originally anticipated, creating additional competition. The Network experienced
a series of affiliate drops in the Quarter due to channel capacity issues
resulting from new competitive services paying substantial launch and marketing
fees to secure channel space. The full financial impact of these drops will
further impact the results of the fourth quarter. Management anticipates that
this trend will continue as system operators renegotiate contracts and as new
system launches, which are provided a period of free service, replace paying
systems which have dropped the Network. Lingering perceptions of the Company's
past programming and former management have continued to make the Network
vulnerable to being dropped due to channel capacity issues.

The Network has responded by continuing to improve its programming content
through acquisitions and the production of original programming. The results of 
these efforts is best demonstrated by the Network's Nielsen Media Research 
ratings increase for Monday - Sunday primetime 8 - 11 p.m. from a 0.3 
in third quarter 1995 to 0.5 in third quarter 1996, a 67% increase, higher than 
any other basic cable Network's increase during the same period. The original
programming augments our successful prime time classic television series by
focusing on informational programs relevant to the Post 49 demographic. These
programs include More Money with the Dolans, which features Ken and Daria Dolan
providing practical financial advice in an interactive format; America with
Dennis Wholey, which features a penetrating look at the political, cultural and
social issues of the day; and Issues & Answers, a panel discussion of political
issues hosted by Ron Nessen that goes beyond partisan attack, political spin and
punditry. The Network also seeks to provide music programming that reflects the
tastes of our audience, either through original programs such as "Too Marvelous
for Words, a Singer/Songwriter Salute to Johnny Mercer" or through the
acquisition of music variety programs of the sixties and seventies. The Company
has also continued discussions with cable system operators and other potential
providers of distribution. The Network is also exploring opportunities with 
direct broadcast satellite distribution companies, which offer an alternative 
to traditional cable distribution and are currently experiencing higher levels 
of subscriber growth than traditional cable systems. The Company expects these 
measures will result in growth in the number of affiliates, but remains 
uncertain as to the effect competition and technology will ultimately have on 
average revenue per affiliate.

                                     - 8 -
<PAGE>
 
Total operating expenses increased $130,826, or 0.9% (from $14,941,788 to
$15,072,614) for the Period and decreased $137,916, or 2.7% (from $5,059,919 to
$4,922,003) for the Quarter. The increase for the Period was primarily a result
of an increase of $884,345, or 26.5% in programming, production and transmission
costs and $407,999, or 8.7% in programming amortization costs. Offsetting these
increases were decreases in sales and marketing costs of $157,743, or 4.5%;
finance, general and administrative costs of $853,775, or 24.6% and proceeds
from settlement of litigation in the amount of $150,000 compared to none in the
prior Period. The decrease for the Quarter was primarily a result of an increase
of $41,849, or 3.2% in programming, production and transmission costs and
$165,659, or 11.1% in programming amortization costs which was offset by a
decrease in sales and marketing costs of $65,643, or 6.1% as well as a decrease
in finance, general and administrative costs of $279,781, or 23.3%.

Programming, production and transmission costs have increased by $884,345, or
26.5%, (from $3,339,820 to $4,224,165) for the Period and $41,849, or 3.3% (from
$1,287,816 to $1,329,665) for the Quarter. These increases are primarily as a
result of costs associated with production of new original programs such Health
& Wellness, Issues & Answers, and America with Dennis Wholey, as well as
increased costs associated with improving the Network's on-air look. Programming
amortization costs have increased by $407,999, or 8.7% (from $4,669,587 to
$5,077,586) for the Period and $165,659, or 11.1% (from $1,494,350 to
$1,660,009) for the Quarter as a result of the Company's commitment to improved
programming. The Company expects to incur additional increases in future
programming amortization and studio production costs as a consequence of
upgrading the Network's programming and creation of new original programs. These
additional future expenditures will adversely impact the Company's results of
operations in the short-term but are critical to the Company's long-term
survival and growth.

Sales and marketing expenses have decreased by $157,743, or 4.6% (from
$3,465,902 to $3,308,159) for the Period and $65,643, or 6.1% (from $1,075,094
to $1,009,451) for the Quarter. Convention expenses have decreased by $110,750,
or 37.4% (from $296,123 to $185,373) for the Period and $49,813, or 57.9% (from
$86,049 to $36,236) for the Quarter primarily as a result of efficiencies gained
through the purchase of a new booth last year as well as timing of certain
events. Professional fees decreased by $94,845, or 38.8% (from $244,442 to
$149,597) for the Period and $25,767, or 31.3% (from $82,761 to $56,994) for the
Quarter primarily due to reduced marketing and ad sales research. Program guide
costs have decreased by $70,462, or 38.9% (from $181,170 to $110,708) for the 
Period and $33,353, or 43.8% (from $79,090 to $42,737) for the Quarter as a
result of efficiencies gained through restructuring the guide. Premium expense
increased by $72,338, or 84.9% (from $85,225 to $157,563) for the Period but
decreased by $18,171 or 69.5% (from $26,153 to $7,982) for the Quarter primarily
as a result of timing of bulk purchases. Advertising increased $87,315, or 30.6%
(from $285,693 to $373,008) for the Period and $59,744, or 75.8% (from $78,796
to $138,540) for the Quarter primarily due to increased advertising to the
satellite distribution markets and selected consumer advertising.

                                     - 9 -
<PAGE>
 
Finance, general and administrative costs decreased by $853,775, or 24.6% (from
$3,466,479 to $2,612,704) for the Period and $279,781, or 23.3% (from $1,202,659
to $922,878) for the Quarter. This decrease was primarily attributed to legal
and professional fees which decreased by $549,598, or 50.3% (from $1,092,086 to
$542,488) for the Period and $90,910, or 29.9% (from $304,530 to $213,620) for
the Quarter due to resolution of various legal matters which were outstanding in
the first half of 1995. Bad debt expense decreased by $604,529, or 57.3% (from
$1,054,529 to $450,000) for the Period and $338,531, or 69.3% (from $488,531 to
$150,000) for the Quarter as a result of additional reserves required in the
prior year for the bankruptcy of Via TV. Salaries, wages and other employee
costs increased by $209,021, or 30% (from $696,487 to $905,508) for the Period
and $87,831, or 37.4% (from $235,164 to $322,995) for the Quarter primarily due
to costs associated with transitioning of the Company's president and other
staffing changes.

As a result of decreased revenues ($1,117,595); increased programming,
production and transmission costs ($884,345); increased programming amortization
costs ($407,999); offset by decreased sales and marketing expenses ($157,743);
decreased finance general and administrative expenses ($853,775); and litigation
settlement awards of $150,000, the Company's loss from operations increased
$1,248,421, or 19.4% for the Period. As a result of decreased revenues
($388,700); increased programming, production and transmission costs ($41,849);
increased programming amortization costs ($165,659); offset by decreased sales
and marketing expenses ($65,643); and decreased finance general and
administrative expenses ($279,781); the Company's loss from operations increased
$250,784, or 10% for the Quarter.

Other expense increased $367,250, or 112.8% (from $325,592 to $692,842) for the
Period and $121,898, or 89.4% (from $136,337 to $258,235) for the Quarter,
primarily as a result of interest on bridge loans provided by Concept
Communications, Inc., ("Concept"), the Network's majority shareholder.

Liquidity and Capital Resources
-------------------------------

Cash decreased from $855,739 at December 31, 1995 to $213,284 at September 30,
1996, principally due to cash outlays to cover increased operating losses and
repayments of certain debts, offset by $6,500,000 bridge financing received in
the first half 1996. Working capital decreased from $544,961 at December 31,
1995 to a deficit of ($295,363) at September 30, 1996 principally as a result of
greater reductions in cash and accounts receivable than corresponding reductions
in current maturities of long-term debt and accounts payable . Cablecast rights
have decreased by $4,296,412 (21.5%) since year-end as a result of amortization
of the Network's investment in its prime-time line up, offset by programming
acquisitions. Total liabilities increased primarily due to $6,500,000 in bridge
financing reduced by payments on liabilities related to programming.

                                    - 10 -
<PAGE>
 
Cash flows from operating activities decreased by $871,234, or 72.5% during the
Period compared to the same Period in 1995 from using $1,202,425 to using
$2,073,659, principally as a result of $1,615,671 increased loss from operations
due to decreases in revenues combined with increased costs. Amortization expense
increased by $539,299 as a result of further enhancements to the Network's
programming. Provision for loss on receivables was reduced by $958,000 due to
additional reserves required in 1995 in connection with the failure of Via TV.
Receivables have decreased by $987,824 as a result of increased collection
efforts and lower revenues. Prepaid expenses and other assets decreased by
$63,463 as a result of timing for advance payments and deposits. Interest and
other payables to related parties increased by $278,006 primarily as a result of
interest accruing on additional notes payable to Concept.

Cash used in investing activities decreased $1,383,756, or 68.7% (from
$2,013,887 to $630,131) during the Period compared to the same Period in 1995
principally due to a $1,364,573 decrease in purchases of programming and
cablecast rights. Purchases of programming rights has decreased this year as a
result of multi-year purchases made in the prior year as well as a result of
increased production of new original programming.

Cash flows from financing activities increased $680,695, or 49.3% during the
Period compared to the same Period in 1995 due principally to bridge financing
increases of $1,000,000, or 18% (from $5,500,000 to $6,500,000) offset by
increased repayment of long-term obligations of $319,305, or 7.7% (from
$4,119,360 to $4,438,665).

The Company has received a total of $16,500,000 in bridge financing from
December 1994 through September 30, 1996, from Concept with rates varying from
4.89% to 8.59%. Concept has committed to provide up to an additional $4,500,000
in debt financing during the balance of the calendar year, $2,500,000 of which
has been received subsequent to September 30, 1996 from Concept's parent
company, Crown. Management believes that these funds will be sufficient to
satisfy its operating needs for 1996. In connection with the additional
borrowings and Concept's agreement to extend the due dates on the bridge
financing to February 1, 1997, the Company has entered into a security agreement
covering substantially all the Company's assets in favor of Concept. Concept has
informed the Company that it desires to convert this debt to equity if Nostalgia
and Concept are able to reach a mutual agreement as to the terms of such
conversion, but there can be no assurance such a conversion will be achieved.

The Company believes that, in order to survive in the highly competitive market
for cable television programming, the Company will need significant additional
investment over the next four to five years. Such additional investment is
necessary to improve programming and increase distribution which the Company
anticipates will ultimately increase advertising revenues and result in
substantial long term revenue increases. Management has considered various steps
the Company might take to achieve profitability. It now believes that the
Company's best alternative would be to form an alliance with a strategic
partner, such as a cable company or a diversified media company. By entering
into an alliance, the Company would 

                                    - 11 -
<PAGE>
 
have greater bargaining power in its dealings with cable system operators,
programming providers and advertisers. It might also gain better access to
distribution.

The Company's Board of Directors has directed its Executive Committee to study
the question of whether the Company should enter into a strategic alliance, and
to make recommendations to the Board regarding this proposal. The Executive
Committee is now actively engaged in this study.

Because of the unpredictable factors involved in the search for a strategic
alliance, and the dynamic changes taking place in the industry, there is
considerable uncertainty about what the Company's needs will be in future years.
There can be no assurance either that the Company will be able to locate
sufficient funding in excess of the funds committed for 1996, or that it will be
able to achieve a strategic alliance.


PART II.  OTHER INFORMATION

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

There were no matters submitted to a vote of security holders during the quarter
ended September 30, 1996.

Item 5.  Other Information

In September 1996 the Network commenced airing The Rockford Files on a cable
exclusive run of this classic detective series. In an effort to keep its viewers
informed on issues relative to the Presidential election, the Network joined the
Free TV Coalition in airing two-and-a-half minute spots highlighting the views
of the two major Presidential candidates. Additionally, the Network broadcast
two special editions of Issues & Answers from the major conventions including
special guests Gerald Ford at the Republican convention and George McGovern at
the Democratic convention. Currently, the Network is developing a new original
program series More Money with the Dolans, which features Ken and Daria Dolan
providing practical financial advice in an interactive format.

                                    - 12 -
<PAGE>
 
                                  SIGNATURES

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


Dated  November 14, 1996


                                                     THE NOSTALGIA NETWORK, INC.



                                          By: /s/ SQuire D. Rushnell
                                              ----------------------------
                                          SQuire D. Rushnell, President and
                                          Chief Executive Officer

                                    
                                          By: /s/ Martin A. Gallogly
                                              ----------------------------
                                          Martin A. Gallogly, Vice President, 
                                          Treasurer and Chief Financial Officer

                                      13
<PAGE>
 
<TABLE> 
<CAPTION> 
                               INDEX TO EXHIBITS

EXHIBIT NO.                              DESCRIPTION                                   PAGE NO.
-----------                              -----------                                   -------
<S>           <C>                                                                      <C>                                         

27            Financial Data Schedule as required by Item 601 (c) of Regulation S-K       16
</TABLE> 

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