U.S. SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                   FORM 10-QSB

/ X /    QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND
         EXCHANGE ACT OF 1934


                 FOR THE QUARTERLY PERIOD ENDED AUGUST 31, 1997


/   /    TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE EXCHANGE ACT

         For the transition period from __________ to _______________

         Commission file number:            1-13360



                                ENTERACTIVE, INC.
        (Exact name of small business issuer as specified in its charter)


         DELAWARE                                          22-3272662
(State or other jurisdiction of                         (I.R.S. Employer
incorporation or organization)                          Identification No.)


              110 West 40th Street, Suite 2100, New York, NY 10018
                    (Address of Principal Executive Offices)

                                 (212) 221-6559
                (Issuer's Telephone Number, Including Area Code)


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

YES / X /         NO  /  /

         State the number of shares  outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:

                                                      Number Outstanding
     Title of Class                                    As of August 31, 1997
     --------------                                    ---------------------
Common Stock, $.01 Par Value                                7,679,441


Transitional Small Business Disclosure Format: Yes / /        No /X/

                                       1
<PAGE>
                                TABLE OF CONTENTS

PART I - FINANCIAL INFORMATION

                                                                            Page

Item 1    Financial Statements

          Consolidated Balance Sheets at August 31, 1997 
          and May 31, 1997                                                 5

          Consolidated Statements of Operations for the three 
          months ended August 31, 1997 and 1996                            5

          Consolidated Statements of Cash Flows  for the three 
          months ended August 31, 1997 and 1996                            5

          Notes to Financial Statements                                    5

Item 2.   Management's Discussion and Analysis of Financial 
          Condition and Results of Operations                              5

PART II - OTHER INFORMATION


                                                                            Page

Item 1.   Legal Proceedings                                               11

Item 2.   Change in Securities                                            11

Item 3.   Defaults upon Senior Securities                                 11

Item 4.   Submissions of Matters to a Vote by Security Holders            11

Item 5.   Other Information                                               11

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

SIGNATURES                                                                11

                                       2
<PAGE>
                        ENTERACTIVE INC. AND SUBSIDIARIES
                           CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
                                                                                   August 31                  May 31
                                                                                     1997                      1997
<S>                                                                          <C>                      <C>
ASSETS                                                                          (unaudited)
Current Assets
      Cash and cash equivalents                                                $     3,063,400          $       4,952,900
      Accounts receivable                                                              213,400                    224,400
      Assets held for sale                                                              62,700                    100,000
      Prepaid expenses and other                                                       143,600                     93,800
                                                                             ------------------       --------------------
         Total current assets                                                        3,483,100                  5,371,100


Affiliation Rights, net                                                                578,100                    593,800
Property and equipment, net                                                            351,800                    154,900
Other                                                                                   54,000                     61,500
                                                                             ------------------       --------------------
                                                                               $     4,467,000          $       6,181,300
                                                                             ------------------       --------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
      Accounts payable                                                         $       311,300          $         287,900
      Accrued expenses                                                                 570,200                    623,900
      Deferred revenue                                                                  19,600                     69,500
      Current maturities of long-term debt                                              40,200                     40,200
                                                                             ------------------       --------------------
         Total current liabilities                                                     941,300                  1,021,500

Commitments and contingencies

Stockholders' Equity
    Preferred Stock $.01 par value,
    2,000,000 shares authorized and 6,720
    shares issued and outstanding                                                          100                        100

    Common Stock $.01 par value, 50,000,000 shares authorized;
    7,679,441 issued and outstanding                                                    76,800                     76,800

    Additional paid-in capital                                                      28,038,400                 28,038,400

    Accumulated deficit                                                            (24,589,600)               (22,955,500)
                                                                             ------------------       --------------------
          Total stockholders' equity                                                 3,525,700                  5,159,800

    See notes to consolidated  financial
    statements.                                                                $     4,467,000          $       6,181,300
                                                                             ------------------       --------------------
</TABLE>

                                       3
<PAGE>
                        ENTERACTIVE INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                    Three Months Ended          Three Months Ended
                                                                         August 31                  August 31
                                                                           1997                        1996
                                                                  ----------------------      ---------------------
                                                                       (unaudited)                (unaudited)
<S>                                                                  <C>                      <C>             
Internet services revenues                                           $          142,400       $              -
Net product sales                                                                     -                    324,600
Product development revenue                                                           -                     40,700
Software licensing and royalty revenue                                           34,500                    177,700
                                                                  ----------------------      ---------------------
       Total revenues                                                           176,900                    543,000

Cost of internet services revenues                                               99,500                          -
Cost of product sales                                                                 -                    236,100
Cost of development revenue                                                           -                     27,600
Research and development expenses                                               399,500                    820,800
Marketing and selling expenses                                                  799,000                    696,500
General and administrative expenses                                             566,600                    439,300
                                                                  ----------------------      ---------------------
       Total costs and expenses                                               1,864,600                  2,220,300

Operating loss                                                               (1,687,700)                (1,677,300)
                                                                  ----------------------      ---------------------

Other income (expense):
      Interest expense                                                                -                    (17,400)
      Interest income                                                            53,600                     57,000
                                                                  ----------------------      ---------------------

            Loss before income taxes                                         (1,634,100)                (1,637,700)
Income tax benefit                                                                    -                          -
                                                                  ----------------------      ---------------------
            Net loss                                                 $       (1,634,100)          $     (1,637,700)
                                                                  ----------------------      ---------------------

            Loss per common and
                                                                                                                 $
               common equivalent share                               $            (0.21)                     (0.21)
                                                                  ----------------------      ---------------------
            Weighted average shares of common
                stock and common stock equivalents                            7,679,441                  7,678,989

See notes to consolidated financial statements.
</TABLE>

                                       4
<PAGE>
                        ENTERACTIVE INC. AND SUBSIDIARIES
                      CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                        Three Months Ended    Three Months Ended
                                                                                          August 31               August 31
                                                                                            1997                     1996
                                                                                        -----------              -----------
                                                                                         (unaudited)              (unaudited)
<S>                                                                                     <C>                      <C>         
Net Loss                                                                                $(1,634,100)             $(1,637,700)
Adjustments to reconcile net loss to net cash used in operating activities                                      
                                                                                                                
             Depreciation and amortization                                                   46,600                  148,600
             Stock option consulting expense                                                   --                    118,800
Changes in assets and liabilities                                                                               
             Accounts Receivable                                                             11,000                 (344,700)
             Assets held for sale                                                            37,300                     --
             Inventories                                                                       --                   (113,300)
             Prepaid expenses and other                                                     (49,800)                 (35,100)
             Other assets                                                                     7,500             
             Accounts payable                                                                23,400                 (402,500)
             Accrued expenses                                                               (53,700)                (641,900)
             Deferred revenue                                                               (49,900)                    --
                                                                                        -----------              -----------
                         Net cash used in operating activities                           (1,661,700)              (2,907,800)
                                                                                        -----------              -----------
                                                                                                                
CASH FLOWS FROM INVESTING ACTIVITIES                                                                            
             Purchases of property and equipment                                           (227,800)                 (14,500)
                                                                                                                
                                                                                        -----------              -----------
                         Net cash used in investing activities                             (227,800)                 (14,500)
                                                                                        -----------              -----------
                                                                                                                
CASH FLOWS FROM FINANCING ACTIVITIES                                                                            
             Proceeds from exercise of stock options                                           --                     73,800
             Principal payments under long-term debt                                           --                   (110,400)
                                                                                        -----------              -----------
                         Net cash provided by financing activities                             --                    (36,600)
                                                                                        -----------              -----------
                         Net increase (decrease) in cash and cash equivalents            (1,889,500)              (2,958,900)
                                                                                                                
CASH AND CASH EQUIVALENTS                                                                                       
             Beginning of year                                                            4,952,900                6,005,400
                                                                                        -----------              -----------
             End of period                                                              $ 3,063,400              $ 3,046,500
                                                                                        ===========              ===========
                                                                                                                
See notes to consolidated financial statements                                                       
</TABLE>

                                       5
<PAGE>
                                ENTERACTIVE, INC.
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1.       GENERAL

         The accompanying  unaudited financial  statements have been prepared in
         accordance  with the  instructions to Form 10-QSB and in the opinion of
         management contain all adjustments (consisting of only normal recurring
         entries)  necessary to present fairly the Company's  financial position
         as of August 31, 1997,  and the results of its  operations and its cash
         flows for the three  months  ended  August 31,  1997 and 1996.  Certain
         information  and footnote  disclosures  normally  included in financial
         statements  prepared in accordance with generally  accepted  accounting
         principles have been omitted.  The interim financial  statements should
         be read in  conjunction  with the Company's  financial  statements  and
         related  notes in the May 31, 1997 Annual  Report on Form  10-KSB.  The
         results  for the three  month  period  ended  August  31,  1997 are not
         necessarily indicative of the results to be obtained for the full year.

2.       BUSINESS

         Headquartered in New York, New York, Enteractive,  Inc. (the "Company")
         offers products and services to customers for the design,  development,
         operation  and  maintenance  of  customer  Intranets  or  sites  on the
         Internet  and World  Wide Web and  publishes  multimedia  titles to the
         home.  As  described  below,  the  Company  recently  entered  into  an
         agreement,  which  provides  that the  Company  will sell its  domestic
         distribution rights, inventory and certain accounts receivable from its
         interactive  multimedia  publishing  business  to a  third  party.  The
         Company's  address is 110 West 40th Street,  Suite 2100,  New York, New
         York 10018 and its telephone  number is (212) 221-6559.  Its World Wide
         Web site address is http://www.crstone.com.

         Throughout  the first half of fiscal  1997 the  Company  was  primarily
         engaged in the  development,  publishing  and  marketing of  multimedia
         interactive  software  with an  emphasis on the CD-ROM  platform.  As a
         result  of a  rigorous  review  of the  CD-ROM  market,  the  Company's
         performance  and the related  risks of continuing to develop and market
         interactive  multimedia  titles,  the Company  concluded  that it could
         capitalize on what the Company believes to be a vibrant market and upon
         its expertise in  development  by  redirecting  its business to provide
         network and web-related solutions,  products and services to businesses
         and other entities.

         The Company plans to,  directly or in  cooperation  with third parties,
         design, develop, install, maintain and host customer Intranets or sites
         on the Internet and World Wide Web.  According to an August 1996 report
         by Forrester Research the number of Web sites is projected to grow from
         43,000 at the end of 1996 to 657,000 at the end of 2000.  In  addition,
         businesses are demanding more complex Web sites,  as these sites become
         increasingly  important  first  points  of  contact  with  current  and
         prospective  customers.   Accordingly,  the  Company  believes  that  a
         company's  web site is  becoming a  mission-critical  component  of the
         enterprise.  Companies  are also  increasingly  deploying  Intranets to
         manage  their  internal  corporate  communications  because they enable
         employees and business associates to receive corporate  information and
         training  efficiently,  communicate  through  e-mail,  use the internal
         network's client  applications and access  proprietary  information and
         legacy databases.

         On  December  4, 1996,  the  Company  entered  into an  agreement  (the
         "Enteractive  Affiliates  Agreement") with USWeb Corporation  ("USWeb")
         pursuant to which the Company became an affiliate of USWeb and a member
         of USWeb's  network of independent  affiliates  (the "USWeb  Network").
         Under the Affiliates Agreement, the Company paid $625,000 for the right
         to operate USWeb affiliate  offices in certain  localities for 10 years
         as provided below. USWeb is a relatively new venture,  which has raised
         approximately $34 million to date. Principal investors include Softbank
         Corporation,  which owns Comdex and Ziff-Davis Publishing, 21st Century
         Communications  Partners L.P., Wheatly Partners L.P. and Reuters. USWeb
         is seeking to capitalize on the service opportunities  presented by the
         increasing use of the Internet and Intranets as commercial  tools.  The
         Company has formed a subsidiary,  Enteractive  Network  Solutions Inc.,
         doing  business  as USWeb  Cornerstone,  which is intended to provide a
         full range of Internet and Intranet-based business solutions, including
         Website design,  hosting and management,  design and  implementation of

                                       6
<PAGE>
         database and e-commerce solutions, educational programs and Web-related
         strategic  consulting  and  marketing.  The Company is obligated to pay
         USWeb monthly  royalty and service and marketing and  advertising  fees
         equal in the  aggregate  to 7% of  Adjusted  Gross  Revenues  from this
         business,  as  defined  in the  agreement,  but not less  than  certain
         contractual fee levels.

         The  Company  has been  granted  exclusive  rights to develop new USWeb
         Affiliate offices in Long Island (Nassau-Suffolk County), Philadelphia,
         Baltimore,  Stamford, CT, and Bergen County and Newark, NJ. The Company
         has established a USWeb  Affiliate  office in New York City and in each
         of the above  territories.  The exclusive rights granted to the Company
         are subject to certain minimum  performance  standards set forth in the
         Affiliates  Agreement.  If the Company is unable to meet these  minimum
         performance standards, its exclusive rights may be terminated.

         On  August  15,  1997  the  Company   consummated   an  agreement  with
         Enteractive  Distribution  Company,  LLC ("EDC"), an unrelated company.
         Under the terms of the agreement EDC acquired the inventory and certain
         accounts  receivable  existing  August  15,  1997  resulting  from  the
         Company's  interactive  multimedia publishing business. In addition the
         Company has  assigned  its  domestic  distribution  contracts  with its
         domestic  distributors  to EDC and granted EDC an exclusive  license to
         market the Company's interactive multimedia titles in North America for
         a minimum  of two  years.  The sales  price  includes  the  greater  of
         $100,000 or 50% of EDC's proceeds from the sale of the inventory in the
         9 months  following  the  closing  and 50% of the  accounts  receivable
         balances collected by EDC within 24 months of closing. The Company will
         also  receive  royalties  on  sales  of  its  products   subsequent  to
         liquidation  of  existing  inventory  of 15% for  three  years  and 10%
         thereafter.  EDC will also pay the Company a 5% royalty  from the sales
         of any third party products it sells through August,  2002. The Company
         is evaluating  the most  appropriate  manner to continue  licensing its
         multimedia  titles  outside the United  States.  The  Company  does not
         believe that it will incur any future significant costs associated with
         the domestic or international distribution of its multimedia titles.

         As a result of the Company's agreement with EDC, the Company wrote down
         the majority of its interactive  multimedia  related business assets in
         the fourth  quarter of fiscal 1997 to the related  anticipated  minimum
         proceeds of $100,000.  These assets are  classified as "assets held for
         sale" in the  financial  statements  and in the  Company's May 31, 1997
         balance sheet in the Form 10-KSB.

3.       AFFILIATE RIGHTS

         Fees for  affiliation  rights  were paid to USWeb for the right to join
         the USWeb  network  and  operate  as an  affiliate  in the  territories
         indicated in note 2. The fee is being  amortized  over the 10 year life
         of the agreement with USWeb.  Affiliate  rights at August 31, 1997 were
         net of accumulated amortization of $46,900.

4.       USE OF ESTIMATES

         The  preparation of financial  statements in conformity  with generally
         accepted  accounting  principles  requires management to make estimates
         and  assumptions   that  affect  the  reported  amount  of  assets  and
         liabilities and disclosures of contingent assets and liabilities at the
         date of the financial  statements  and the reported  amount of revenues
         and expenses during the reporting  period.  Actual results could differ
         from those estimates.

5.       PRIVATE PLACEMENT

         On December  12, 1996 the Company  completed a private  placement of 84
         units each  consisting  of 80 shares of Class A  Convertible  Preferred
         Stock ("Preferred  Stock") and 50,000 Common Stock Purchase Warrants to
         purchase  in the  aggregate  4,200,000  shares  of  Common  Stock at an
         exercise  price  of  $4.00  per  share.   Proceeds  were  approximately
         $7,869,100,  net of related  expenses of $531,000.  The Preferred Stock
         has a stated value of $1,250 per share and each share is convertible at
         any time  after  April 30,  1998 into  such  whole  number of shares of
         Common Stock equal to the aggregate stated value of the Preferred Stock
         to be  converted  divided by the lesser of (I) $2.00 or (ii) 50% of the
         average  closing  sale  price  for the  Common  Stock  for the last ten
         trading  days  in the  fiscal  quarter  of the  Company  prior  to such
         conversion. 

                                       7
<PAGE>
         The Company must use the proceeds, if any, derived from the exercise of
         the Company's currently outstanding public Common Stock Warrants, which
         expire in October  1997,  or 50% of the proceeds  from any other equity
         financing,  to redeem the Preferred Stock at 110% of stated value.  The
         Company also has the option to redeem all, or any portion on a pro rata
         basis of the  Preferred  Stock at any time upon 30 days  prior  written
         notice,  at a redemption  price equal to 110% of the stated value.  The
         Conversion Rate of the Convertible  Preferred Stock (when calculated on
         the basis of dividing  the Stated  Value by $2.00 only) will be subject
         to  adjustment  to  protect  against  dilution  in the  event  of stock
         dividends,    stock    splits,     combinations,     subdivision    and
         reclassifications.

6.       WARRANT EXCHANGE

         On September  16, 1997,  the Company  announced  that it is offering to
         exchange (the "Exchange  Offer") twenty of its  publicly-traded  Common
         Stock Purchase Warrants (the "Warrants")  expiring October 20, 1997 for
         one share of newly-issued  Common Stock, $.01 par value. As of the date
         of this Form 10-QSB, there are 5,121,468 Warrants outstanding. Thus, if
         all the Warrants are exchanged,  approximately 256,000 shares of Common
         Stock  will be  issued.  The fair  market  value of the  common  shares
         ultimately issued will be recorded as a financing expense in the second
         quarter of fiscal  year  1998.  Each  Warrant  currently  entitles  the
         registered holder to purchase through October 20, 1997 one share of the
         Company's  Common  Stock at an exercise  price of $4.00 per share.  The
         Exchange  Offer will expire at 5:00 P.M., New York City Time on October
         14, 1997, unless extended.  The purpose of the Exchange Offer is to (i)
         reduce the  overhang to the market for the  Company's  Common Stock and
         (ii) offer Warrant  holders the  opportunity to participate in any long
         term  appreciation  of  the  Company's  securities,  since  absent  the
         Exchange Offer, it is likely that the Warrants will expire  unexercised
         on October 20, 1997.

ITEM 2   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

         The discussion  and analysis  below should be read in conjunction  with
         the  Financial  Statements  of  Enteractive  and the Notes to Financial
         Statements included elsewhere in this Form 10-QSB.

         OVERVIEW
         Enteractive was formed in December 1993 to develop,  publish and market
         interactive  multimedia  software  products.  On  December  4, 1996 the
         Company  signed an  agreement  with USWeb  Corporation  under which the
         Company has established a subsidiary to operate USWeb affiliate offices
         in New York and the  exclusive  rights to develop  new USWeb  affiliate
         offices  in Long  Island,  Philadelphia,  Baltimore,  Stamford,  CT and
         Bergen  County and  Newark,  NJ.  USWeb  Cornerstone,  the  subsidiary,
         provides  a  full  range  of  Internet  and   Intranet-based   business
         solutions;  including Web site design,  hosting and management,  design
         and   implementation   of  database  and  e-commerce   solutions,   and
         Web-related strategic consulting and marketing.

         QUARTERLY RESULTS
         Since  signing the  affiliate  agreement  with USWeb  Corporation,  the
         Company has been building  infrastructure to support anticipated sales.
         As a result, expenses reflected in the fiscal 1998 financial statements
         are disproportionately high relative to the respective revenue amounts.
         As revenues  grow,  the Company will monitor and, if necessary,  adjust
         expense  levels to support the revenue  stream.  By May 31,  1997,  the
         Company no longer  utilized  significant  resources for  development or
         marketing of multimedia  products and consequently  most comparisons to
         the previous years' quarter are not applicable.

         The Company expects its quarterly results to vary  significantly in the
         future.   The  number  of  customer   contracts  signed  and  fulfilled
         significantly  influence  revenues.  Further  market  acceptance of the
         Company's  offerings is dependent on (1) the growth and  utilization of
         the  Internet  as a  medium  for  commerce,  (2) the  success  of USWeb
         establishing  and positioning the USWeb brand in the territories  where
         the  Company  operates  (3) the  degree  of  market  acceptance  of the
         Company's  offerings  and (4) the success of offerings by  competitors.
         The  Company  does not  expect  seasonal  factors  to be a  significant
         influence on revenues.



                                       8
<PAGE>

         RESULTS OF OPERATIONS - QUARTER ENDED AUGUST 31, 1997
         Net  product  sales  for the  quarter  ended  August  31,  1997 were $0
         compared  to  $324,600  for the  quarter  ended  August 31,  1996.  The
         decrease  is due to the  Company's  discontinuation  of  this  line  of
         business.  Prospectively, the Company does not expect any revenues from
         CD-ROM title sales other than royalty income as discussed below.

         Internet services revenue was $142,400 for the quarter ended August 31,
         1997.  These revenues are comprised of providing  custom  solutions and
         hosting of web sites.

         Royalty  revenue  for the  quarter  ended  August 31,  1997 was $34,500
         compared  to  $177,700  for the  quarter  ended  August 31,  1996.  The
         decrease is due to the Company's  assignment  of domestic  distribution
         rights to  Enteractive  Distribution  Company,  LLC  combined  with the
         Company's  focus on  increasing  revenues  through  sales  of  Internet
         related services.

         Cost of Internet  services  revenue  was $99,500 for the quarter  ended
         August  31,  1997.  These  costs  consist of labor,  related  benefits,
         overhead, software, and related equipment.

         Research and  development  expenses were $399,500 for the quarter ended
         August 31, 1997  compared to $820,800 for the quarter  ended August 31,
         1996. The decrease is due to the reduction in interactive media product
         development and consolidation of development  resources.  These amounts
         may  increase in the short  term,  but,  relative  to  revenue,  should
         decrease  over time as  development  resources  are utilized to fulfill
         contracts.

         Marketing  and selling  expenses  were  $799,000 for the quarter  ended
         August 31, 1997  compared to $696,500 for the quarter  ended August 31,
         1996.  The Company  has  recently  opened  multiple  sales  offices and
         incurred non-recurring costs to staff and equip each office. Similar to
         research and  development  expense,  selling expense as a percentage of
         revenues should decrease.

         General  and  administrative  expenses  include  costs for  accounting,
         information  systems,  human resources,  legal,  general facilities and
         senior executives.  General and  administrative  expenses were $566,600
         for the  quarter  ended  August 31, 1997  compared to $439,300  for the
         quarter  ended August 31, 1996.  This number has increased due to costs
         associated  with  restructuring  various  departments  to  support  the
         Company's new strategic direction.

         Interest  income  decreased  from $57,000 for the quarter  ended August
         31,1996 to $53,600 for the quarter  ended  August 31, 1997 due to lower
         cash balances.

         No income tax benefit was  recorded  for the quarter  ended  August 31,
         1997. The Company does not believe it will generate  taxable income for
         the period ending May 31, 1998.  Beyond such time,  using the standards
         set forth in Financial  Accounting  Standard No. 109, management cannot
         currently  determine  whether the Company will generate  taxable income
         during the period that the Company's  net operating  loss carry forward
         may  be  applied  towards  the  Company's   taxable  income,   if  any.
         Accordingly,  the Company has established a valuation allowance against
         its deferred tax asset.

         LIQUIDITY AND CAPITAL RESOURCES
         Since June 1, 1995,  the  Company's  principal  sources of capital have
         been as follows:

         (i) In a bridge  financing  consummated  in January  1996,  the Company
             received approximately  $2,460,000 in net proceeds from the sale of
             convertible notes and warrants.  Simultaneously with the closing on
             May 21, 1996 of the pubic  offering  described  below,  convertible
             notes with an aggregate principal of $2,250,000 were converted into
             740,734 shares of Common Stock, while $450,000 of convertible notes
             were repaid.

         (ii) On May 21,  1996,  the Company  consummated  a public  offering by
              issuing  2,415,000  shares of Common Stock to the public.  The net
              proceeds from this offering were $6,791,600.

                                       9
<PAGE>
         (iii)On December 12, 1996 the Company  completed a private placement of
              84 units  each  consisting  of 80  shares of  Preferred  Stock and
              50,000 Common Stock Purchase Warrants to purchase in the aggregate
              4,200,000 shares of common stock at an exercise price of $4.00 per
              share.  Proceeds  were  approximately  $7,869,000,  net of related
              expenses of $531,000.  The  Preferred  Stock has a stated value of
              $1,250 per share and each share is  convertible  at any time after
              April 30,  1998 into such whole  number of shares of common  stock
              equal to the aggregate  stated value of the Preferred  Stock to be
              converted  divided  by the  lesser of (i) $2.00 or (ii) 50% of the
              average  closing  sale price for the common stock for the last ten
              trading  days in the fiscal  quarter of the Company  prior to such
              conversion.  The Company must use the  proceeds,  if any,  derived
              from the exercise of the Company's  currently  outstanding  public
              common stock warrants, which expire in October 1997, or 50% of the
              proceeds from any other equity financing,  to redeem the Preferred
              Stock at 110% of the stated value. The Company also has the option
              to  redeem  the  Preferred  Stock at any time  upon 30 days  prior
              written notice,  at a redemption price equal to 110% of the stated
              value.

         In May 1996,  the Company  consummated an agreement with certain of its
         officers pursuant to which the Company repurchased  1,000,000 shares of
         Common  Stock at $1.00 per  share.  Under  the  purchase  agreement  as
         amended,  the  Company  paid all but $40,200 of the  purchase  price by
         August 31, 1997.

         At August  31,  1997,  the  Company  had cash and cash  equivalents  of
         $3,063,400.  The decrease of  $1,889,500  in cash and cash  equivalents
         from May 31,  1997  reflects  the  funding of  operating  activities  -
         $1,661,700,  and the purchase of fixed assets - $227,800.  The decrease
         in both accounts  receivable and inventory are related to the Company's
         adjusting  those balances  related to its multimedia  products to their
         net realizable value based on the sale of that line of business.

         Capital  expenditures  were  $227,800 for the quarter  ended August 31,
         1997  compared to $14,500 for the quarter  ended August 31,  1996.  The
         Company anticipated higher capital expenditures in the first quarter as
         a result of acquiring equipment required for the US Web affiliate field
         offices, companywide wide area network, new employees, web site hosting
         and  development  centers.  Prospectively,  the Company expects capital
         expenditures  to  stabilize  as much of the  expenditures  in the first
         quarter fiscal year 1998 were non-recurring.

         The Company  believes that its existing cash and cash  equivalents  and
         anticipated  revenues will be sufficient to meet its liquidity and cash
         requirements for at least the next 9 months.  However,  these funds may
         not be sufficient to meet the Company's  longer-term cash  requirements
         for  operations.   Based  on  management's  assessment  of  the  future
         marketability of its titles and demand for Internet  related  services,
         the Company may  significantly  alter the level of expenses both within
         the next 9 months and thereafter.

         FORWARD LOOKING STATEMENTS
         This Form 10-QSB contains certain forward-looking statements within the
         meaning of Section 27A of the  Securities  Act of 1933,  as amended and
         Section 21E of the Securities  Exchange Act of 1934, as amended,  which
         are  intended  to be  covered  by the  safe  harbors  created  thereby.
         Investors are cautioned  that all  forward-looking  statements  involve
         risks and uncertainty, including without limitation, the ability of the
         Company to develop its products,  the success of its USWeb  Cornerstone
         subsidiary  as well  as  general  market  conditions,  competition  and
         pricing.  Although the Company believes that the assumptions underlying
         the forward-looking  statements contained herein are reasonable, any of
         the  assumptions  could be inaccurate,  and therefore,  there can be no
         assurance  that the  forward-looking  statements  included in this Form
         10-KSB will prove to be accurate. In light of significant uncertainties
         inherent  in  the  forward-looking   statements  included  herein,  the
         inclusion   of  such   information   should  not  be   regarded   as  a
         representation  by the Company or any other person that the  objectives
         and plans of the Company will be achieved.

         INFLATION
         The past and  expected  future  impact of  inflation  on the  financial
         statements is not significant.

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<PAGE>
         Item 1.  Legal Proceedings

         None

         Item 2.  Change in Securities

         None

         Item 3.  Defaults upon Senior Securities

         None

         Item 4.  Submissions of Matters to a Vote Security Holders

         None

         Item 5.  Other Information

         On August 15, 1997,  the Company  completed  the  previously  announced
         distribution  contract  with  EDC.  See Note 2 of  Notes  to  Condensed
         Consolidated Financial Statements.

         Item 6.           Exhibits and Reports on Form 8-K

         None

         SIGNATURES

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

                                    ENTERACTIVE, INC.
                                    -----------------
                                    (Registrant)

Date October 14, 1997               /s/ Kenneth Gruber
                                    ------------------------------
                                    Kenneth Gruber
                                    Chief Financial Officer and
                                    Principal Accounting Officer



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