U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                   Form 10-QSB

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

For the quarterly period ended September 30, 1998

Commission file number 333-12979

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

              Delaware                                         13-3896031
    (State or other jurisdiction                              (IRS Employer
  of incorporation or organization)                        Identification No.)

                           300 Park Avenue, 17th Floor
                               New York, NY 10022
                    (Address of principal executive offices)

                                 (212) 399-6682
                           (Issuer's telephone number)


--------------------------------------------------------------------------------
                 (Former name, former address and former fiscal
                       year, if changed since last report)

     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: 3,261,550.


<PAGE>


                                 VOICENET, INC.
                                      INDEX

Part I - Financial Statements:
            Balance Sheets - September 30, 1998 and December 31, 1997........  3

            Statement of Operations - For the Six Months Ended
            September 30, 1998 and September 30, 1997........................  4

            Statement of Cash Flows - For the Three
            Months Ended September 30, 1998 and September 30, 1997...........  5

            Statement of Stockholders' Equity - For the
            Period April 2, 1996 (Inception) through September 30, 1998......  6

            Notes to Unaudited Financial Statements..........................  7

            Management's Discussion and Analysis or
            Plan of Operation................................................  9



                                       2
<PAGE>


                                 VOICENET, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                                  BALANCE SHEET

<TABLE>
<CAPTION>
                                                                              September 30,         December 31,
                                                                                  1998                 1997
                                                                               (unaudited)           (audited)
                                                                              -------------         ------------
<S>                                                                            <C>                  <C>        
ASSETS
CURRENT ASSETS
 Cash and Cash Equivalents .................................................   $    63,389          $   909,217
 Accounts Receivable .......................................................        45,500
 Investments ...............................................................        27,965
 Prepaid Expenses ..........................................................        11,382               11,382
                                                                               -----------          -----------
            Total Current Assets ...........................................       148,236              920,599
            Organization Costs, Net ........................................         1,300                1,300
            Intangible Assets ..............................................     4,500,000            4,500,000
            Security Deposits ..............................................        15,090                2,600
                                                                               -----------          -----------
            Total Assets ...................................................   $ 4,664,626          $ 5,424,499
                                                                               ===========          ===========
CURRENT LIABILITIES
      Accounts Payable .....................................................   $    78,383          $   138,643
      Due to Parent Company ................................................            --              312,624
      Other ................................................................            --                4,000
                                                                               -----------          -----------
            Total Current Liabilities ......................................        78,383              455,267
                                                                               -----------          -----------
            Stockholders' Equity
            Preferred Stock, $.01 par value, 1,000,000
            shares authorized, no shares outstanding .......................           -0-                  -0-
            Common Stock, $.01 par value, 10,000,000
            shares authorized, 3,261,550 shares issued and outstanding .....        32,616               32,616
Additional Paid in Capital .................................................     5,552,671            5,552,671
Deficit accumulated during developmental stage .............................      (999,044)            (616,055)
                                                                               -----------          -----------
Total Stockholders' Equity .................................................     4,586,243            4,969,232
                                                                               -----------          -----------
Total Liabilities and Stockholders' Equity .................................   $ 4,664,626          $ 5,424,499
                                                                               ===========          ===========
</TABLE>


                      See notes to the financial statements


                                       3
<PAGE>



                                 VOICENET, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF OPERATIONS

<TABLE>
<CAPTION>
                                                                                             For the period
                                                                                              April 2, 1996
                                                      Three Months       Three Months      (date of inception)
                                                         Ended               Ended              through
                                                      September 30,      September 30,       September 30,
                                                         1998                1997                1998
                                                      (unaudited)         (unaudited)         (unaudited)
                                                      -----------        -------------     ------------------
<S>                                                   <C>                 <C>                 <C>        
Revenues ........................................     $    45,500                             $    45,500
Interest Income .................................           3,668         $        16              47,011
Other Income ....................................                                                  13,345
                                                      -----------         -----------         -----------
Total Income ....................................          49,108                  16             105,856
                                                      -----------         -----------         -----------
      Cost of Sales .............................           7,958                --                 7,958
      General and Administrative
          Expenses ..............................          99,642               4,000           1,096,942
                                                      -----------         -----------         -----------
      Loss from Operations ......................         (58,492)             (3,984)           (999,044)
                                                      -----------         -----------         -----------
      Net Loss ..................................     ($   58,492)        ($    3,984)        ($  999,044)
                                                      ===========         ===========         ===========
        Net Loss per Common Share ...............     $       .02         $       .00
                                                      ===========         ===========
        Weighted average number of
          shares outstanding during the
          period ................................       3,261,550           3,261,550
                                                      ===========         ===========
</TABLE>


                      See notes to the financial statements


                                       4
<PAGE>


                                 VOICENET, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                             STATEMENT OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                        For the period
                                                                                                         April 2, 1996
                                                                    Three Months                      (date of inception)
                                                                       Ended                               through
                                                                    September 30,      Year Ended        September 30,
                                                                        1998          December 31,           1998
                                                                     (unaudited)          1997            (unaudited)
                                                                    -------------     ------------    ------------------
<S>                                                                 <C>               <C>               <C>
Cash Flows from Operating Activities

      Net Loss ...............................................      $   (58,492)      $  (615,330)      $  (999,044)
                                                                    -----------       -----------       -----------

      Adjustments to reconcile net loss to net cash
          provided by operating activities:
          (Increase) in Accounts Payable .....................          (45,500)                            (45,500)
          Increase (Decrease) in Accounts Payable
              and Due to Related Parties .....................            9,449            64,614          (238,241)
          Amortization Expense ...............................                                400               700
          Increase in Prepaid Expense ........................                            (11,382)          (11,382)
          Increase in Security Deposit and investments .......              (15)           (2,600)          (43,055)
                                                                    -----------       -----------       -----------

          Total Adjustments ..................................          (36,066)           51,032          (337,478)
                                                                    -----------       -----------       -----------
          Net cash provided by operating activities ..........          (94,558)         (564,298)       (1,336,522)
                                                                    -----------       -----------       -----------
      Cash Flows used in Investing Activities

          Payments for Organization Costs ....................              -0-               -0-            (2,000)
                                                                    -----------       -----------       -----------
          Net cash used for investing activities .............              -0-               -0-            (2,000)
                                                                    -----------       -----------       -----------
      Cash Flows from Financing Activities

          Proceeds from issuance of stock ....................                          1,172,921         1,197,941
          Net advances from Parent Company ...................                            287,624           312,624
          Advances from Related Party Company ................                              4,000             4,000
          Payments for deferred offering costs ...............                                -0-          (112,654)
                                                                    -----------       -----------       -----------
          Net cash used in financing activities ..............              -0-         1,464,545         1,401,911
                                                                    -----------       -----------       -----------
          Net (decrease) increase in cash and cash equivalents          (94,558)         (533,690)           63,389

          Cash and cash equivalents, beginning of period .....          157,947             8,970               -0-
                                                                    -----------       -----------       -----------
          Cash and cash equivalents, end of period ...........      $    63,389       $   909,217       $    63,389
                                                                    ===========       ===========       ===========
</TABLE>

                      See notes to the financial statements


                                       5
<PAGE>


                                 VOICENET, INC.
                          (A Development Stage Company)
                       STATEMENTS OF STOCKHOLDERS' EQUITY

       For the Period April 2, 1996 (Inception) Through September 30, 1998

<TABLE>
<CAPTION>
                                                                                                       Deficit
                                                                                                     Accumulated
                                                                                      Additional     during the
                                                               Common Stock             Paid-in      Development
                                                           Shares         Amount        Capital         Stage          Total
                                                        -----------    -----------    -----------    -----------    -----------
<S>                                                       <C>          <C>            <C>            <C>            <C>        
    Initial issuance of shares ......................         1,000    $         1    $    25,019          $ -0-    $    25,020
    Stock split .....................................     2,499,000         24,999        (24,999)                          -0-
    Net loss for the period April 2, 1996 (inception)
        through December 31, 1996 ...................                                                       (725)          (725)
                                                        -----------    -----------    -----------    -----------    -----------
    Balance - December 31, 1996 .....................     2,500,000         25,000             20           (725)        24,295
    Issuance of shares in connection with the initial
        public offering, net of offering costs ......       188,250          1,583        971,984                       973,867
    Issuance of shares on December 30, 1997 .........        10,800            108         86,292                        86,400
    Conversion of debt to common shares .............       562,500          5,625      4,494,375                     4,500,000
    Net loss for the year ended December 31, 1997 ...                                                   (615,330)      (615,330)
                                                        -----------    -----------    -----------    -----------    -----------
    Balance - December 31, 1997 .....................     3,261,550    $    32,616    $ 5,552,671    $  (616,055)   $ 4,969,232
                                                        ===========    ===========    ===========    ===========    ===========
    Nine months ended September 30, 1998 ............            --             --             --       (382,989)      (382,989)
                                                        -----------    -----------    -----------    -----------    -----------
        Net loss ....................................     3,261,550    $    32,616    $ 5,552,671    $  (999,044)   $ 4,586,243
                                                        ===========    ===========    ===========    ===========    ===========
</TABLE>


                                       6
<PAGE>


                                 VOICENET, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO THE FINANCIAL STATEMENTS
                                   (UNAUDITED)
Note 1 - Basis of Presentation

The  financial  statements  included  herein have been  prepared by the Company,
without  audit,  pursuant to the rules and  regulations  of the  Securities  and
Exchange  Commission  and reflect all  adjustments  which are, in the opinion of
management, necessary to present fairly the information required herein. Certain
information  and  footnote   disclosures  normally  included  in  the  financial
statements prepared in accordance with generally accepted accounting  principles
have been omitted  pursuant to such rules and regulations,  although  management
believes that the disclosures are adequate to make the information presented not
misleading.  The  results  of  operations  for the three and nine  months  ended
September 30, 1997 are not  necessarily  indicative of the results of operations
to be expected  for the full year.  For  information  concerning  the  Company's
significant accounting policies,  reference is made to the Company's filing with
the  Securities  and Exchange  Commission  on Form SB-2,  as filed on October 7,
1997.

Note 2 - Nature of Business

Voicenet,  Inc. (the  "Company"),  a Delaware  corporation,  was incorporated on
April 2, 1996. The Company was established for the marketing and distribution of
continuous speech and voice recognition  systems and of digital audio reporting,
transcription, archiving and retrieval systems in North America, Central America
and South America.  The Company has not commenced operations and is considered a
developmental stage company in accordance with Statement of Financial Accounting
Standards No. 7. The Company is  majority-owned  (63%) by Voicenet  (Aust.) Ltd.
("VNA"), an Australian company.

Note 3 - Net Loss Per Common Share

Net loss per share is computed based on the weighted average number of shares of
common  stock  outstanding  for the periods  presented.  The effect of the stock
options and warrants on the net loss per share was  antidilutive for the periods
presented.

Note 4 - Purchase of Technology

On August 1, 1996 the  Company  entered  into a  Technology  Sales and  Purchase
Agreement (the  "Technology  Agreement")  with VNA to acquire certain  exclusive
rights and ownership with respect to the development,  use, marketing, sales and
distribution  of  a  continuous   computer  based  digital  voice   compression,
recognition  and  recording  technology.  The term of the  agreement  is for the
longer of  twenty-five  (25)  years or the life of any  patents  and  extensions
granted under the patent  applications.  The rights acquired are for territories
including North America,  Central  America and South America.  These rights were
purchased for $4,500,000 in the form of a  noninterest-bearing  promissory note,
further described below.


                                       7
<PAGE>


                                 VOICENET, INC.
                          (A DEVELOPMENT STAGE COMPANY)
                        NOTES TO THE FINANCIAL STATEMENTS
                                   (UNAUDITED)

On August 31, 1996, as amended effective November 1, 1996 and December 31, 1996,
the  Company  executed a  $4,500,000  promissory  note  payable to  Southern  in
conjunction  with the  above  agreement.  The note was  noninterest-bearing  and
payable as follows: (a) $2.5 million upon the earlier of October 31, 1997 or the
successful closing of the Company's public securities  offering,  (b) $1 million
upon the earlier of October 31, 1997 or the first signed  installation  contract
for a COURTSMART  system in the United  States of at least  $30,000,  and (c) $1
million on October 31, 1997. If not earlier paid, the full outstanding principle
shall be due in full on October 31,  1997.  The Company has granted to Southern,
as collateral, a security interest in all assets of the Company. See Note 6.

Note 5 - Due to Parent Company

The Company was advanced monies by VNA for start-up  purposes.  Such amounts are
noninterest  bearing and have no definitive  repayment  terms. The balance as of
December 31, 1997 amounted to $312,624. The amounts due were repaid in the first
quarter of 1998.

Note 6 - Stockholders' Equity

At  inception,  the Company  authorized  3,000  shares of $.001 par value common
stock and issued 1,000 of these shares for $25,000.

On September  15, 1996 the Company  increased  its number of  authorized  Common
Shares to  10,000,000  and  changed  its par  value of these  shares to $.01 per
share. In addition,  the Company authorized 1,000,000 shares to Preferred Stock,
par value $.01 per share.

On  September  15,  1996 the  board  of  directors  of the  Company  declared  a
2,500-for-1 stock split. The financial  statements have been adjusted to reflect
this transaction.

On September 15, 1996,  the Company  adopted a  non-qualified  stock option plan
(the "Plan").  An aggregate of 500,000 shares of Common Stock are authorized for
issuance  under the Plan.  The Plan provides  that all regular  employees of the
Company except for directors who are members of the administrative committee are
eligible to  participate  in the Plan.  No options may be granted  subsequent to
September 15, 2006. There are no options issued and outstanding at September 30,
1997.


                                       8
<PAGE>


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

General

     The  Company was formed in April 1996.  The Company was  organized  for the
purpose of acquiring and marketing speech  recognition  technologies and systems
(the  "Speech  Technologies")  developed  by  Voicenet  (Aust.)  Ltd.  (formerly
Southern Group Limited) ("VNA"), an Australian publicly traded company listed on
the Australian Stock Exchange, which is the Company's majority shareholder.  The
Company is in the  development  stage and its  operations are subject to all the
problems,  expenses,  delays and other risks inherent in the  establishment of a
new business  enterprise,  as well as the problems  inherent in  developing  and
marketing  a new  product/service  and  in  establishing  a  name  and  business
reputation. The likelihood of the success of the Company must also be considered
in  connection  with the rapidly and  continually  changing  technology  and the
competitive  environment  in which the  Company  will  operate.  There can be no
assurance that the Company's operations will result in its becoming or remaining
economically  viable.  Potential  investors  should  be aware  of the  problems,
delays, expenses and difficulties  encountered by any company in a developmental
stage, many of which may be beyond the Company's control. These include, but are
not limited to, organization and hiring of sales,  administrative and management
personnel,  lack of customer  acceptance  of the Company's  products,  sales and
marketing problems, intense competition, product quality control, and inadequate
financial  resources.  The Company has had no revenues  from  operations to date
and,  because it is just beginning to enter the commercial  stage, it may likely
sustain operating losses for an indeterminate  time period.  Since its inception
in April 1996,  the Company  has  devoted  substantially  all of its efforts and
resources to raising  capital  through an initial public  offering of its common
stock. As of September 30, 1998, the Company had a total accumulated  deficit of
$999,044.

     Statements  included  in this  "Management's  Discussion  and  Analysis  of
Financial Condition and Results of Operations" Section, and in other sections of
this Report and in prior and future  filings by the Company with the  Securities
and Exchange Commission, in the Company's prior and future press releases and in
oral statements made with the approval of an authorized  executive which are not
historical or current facts are  "forward-looking  statements"  made pursuant to
the safe harbor  provisions of the Private  Securities  Litigation Reform Act of
1995 and are subject to certain risks and uncertainties  that could cause actual
results to differ materially from those presently anticipated or projected.  The
Company  wishes to  caution  readers  not to place  undue  reliance  on any such
forward-looking  statements,  which  speak only as of the date  made.  There are
important  risk factors that in some cases have affected and in the future could
affect  the  Company's  actual  results  and could  cause the  Company's  actual
financial and operating  performance to differ materially from that expressed in
any expressed in any  forward-looking  statement.  The following  discussion and
analysis should be read in conjunction  with the Financial  Statements and notes
thereto  appearing  elsewhere  in this report and the  Sections  entitled  "Risk
Factors" in the Company's Form SB-2 dated October 7, 1997 and in Form 10-KSB for
the year ended December 31, 1997.

     The Company had minimal revenues from continuing  operations from inception
through the quarter  ending  September  30, 1998.  Revenue  aggregating  $45,500
occurred in the third quarter of 1998. The Company has incurred net losses since
its inception in 1996.  The  Company's  losses  incurred  since  inception  have
resulted  principally from legal,  accounting,  priniting,  marketing and travel
expenditures  incurred in  pursuing  its capital  raising  activities,  and to a
lesser extent early stage product  marketing  expenses.  The Company  expects to
incur operating costs and possible losses  therefrom over the next several years
due  primarily  to  expanded   sales  and  marketing   efforts,   including  the
establishment  of  product  sales  office,  the  staffing  of such  office  with
marketing,  administrative  and  management  personnel,  and travel and  related
business  entertainment  expenses  incurred by the sales  personnel as they seek
potential  customers  for the Company's  products.  There can be no assurance of
when and whether the Company will  generate  revenues or become  profitable on a
sustained basis, if at all.  Although the Company  anticipates sales to continue
during 1998,  the Company's  results of operations may vary  significantly  from
quarter to quarter due to timing of payments  and other  factors.  The timing of
the Company's  revenues,  if any, may not match the timing of associated product
development of other expenses.


                                       9
<PAGE>


     The  Company's  ability to achieve sales and increase its levels of revenue
will  depend  upon its  ability  to  secure  capital  financing  and to sell the
Company's  products.  The Company's ability to generate  significant revenue and
become  profitable  is  dependent  in  large  part  on its  commercializing  the
Company's lead product,  the CourtScript system for digital recording of courts.
There can be no  assurance  that the  operations  of the Company  will  generate
significant revenue or will ever be profitable.

RESULTS OF OPERATIONS FOR THREE MONTHS ENDING SEPTEMBER 30, l998;  COMPARED WITH
SEPTEMBER 30, l997.

     Net losses  increased from $3,984 for the three months ending September 30,
l997 to $58,492 for the three months ending  September 30, l998. The Company had
no revenue or  operating  income  for the  quarter  ended  September  30,  l997.
Revenues for the three months ended September 30, 1998 approximates $45,500. The
Company had interest  income of $3,608 for the three months ended  September 30,
l998 and $16 in the comparable prior period.  Total general,  administrative and
development expenses were $99,642 for the three months ending September 30, 1998
in comparison to $4,000 in the  comparable  prior period.  The increase in these
costs from l997 to l998 was in most expense categories.

                         LIQUIDITY AND CAPITAL RESOURCES

     The  Company had  working  capital as of  December  31, 1997 of $465,332 in
comparison  $69,853 as of  September  30, l998.  The Company had an  accumulated
deficit of $616,055 as of December  31,  1997 in  comparison  to an  accumulated
deficit of $999,044 as of September  30, l998.  The increase in the  accumulated
deficit  is  primarily  related  to  continuing  operating  costs  with  minimal
operating  income.  For the three months ended  September 30, l998 the Company's
cash  requirements  were  satisfied  from the cash reserves in its operating and
investment accounts.

     On November 5, 1997, the Company  successfully  completed an initial public
offering of its common stock. In the public  offering,  562,500 shares of common
stock were issued to VNA at a conversion price of $8.00 per share in payment and
satisfaction  of a $4.5 million  promissory  note which the Company had executed
and  delivered  to  VNA in  August  1996  pusuant  to the  purchase  of  digital
technology from VNA under a Technology  Purchase Agreement dated August 1, 1996,
and 188,250 shares of common stock were sold to new shareholders at the price of
$8.00 per share.  After the underwriters  selling  commission and discount,  the
Company had net proceeds of  approximately  $973,867.  In addition,  the Company
incurred  approximately  $532,133 in  transaction  costs in connection  with the
offering,  including filing fees,  attorneys fees,  accountants  fees,  printing
costs, tranfser agent's fees, travel expenses and other costs and expenses.


                                       10
<PAGE>


The Company does not  currently  possess a bank source of financing  and has had
minimal  revenues.  The Company  cannot be certain that its existing  sources of
cash will be adequate to meet its liquidity requirements. Therefore, the Company
is considering the following options to meet its liquidity requirements:

     (a)  attempting  to raise  additional  funds  through  the  sale of  equity
securities  to persons or entities  who are not  presently  stockholders  of the
Company;

     (b) attempting to obtain a bank line of credit; and

     (c) should  insufficient  funds be available  from the  foregoing  sources,
reducing the  Company's  present  rate of  expenditures  which might  materially
adversely affect the ability of the Company to produce competitive  products and
services and to market them effectively.

     The Company believes that its existing cash and cash equivalents  excluding
any potential cash flow from operating revenues,  will be sufficient to meet its
operating expenses and capital expenditures requirements for at least the next 6
months.  The Company's  future  capital  requirements,  however,  will depend on
numerous factors,  including (i) the effectiveness of product  commercialization
activities and marketing activities,  including the creation and progress of its
sales and marketing operations,  (ii) the effect of competing  technological and
market  developments,  from  competitors  that have greater  resources  than the
Company. However, if operating expenses are higher than expected or if cash flow
from  operations is lower than  anticipated,  there can be no assurance that the
Company will have sufficient capital resources to be able to continue as a going
concern.

     Unless  the  Company  is able to  generate  revenues  or obtain  additional
financing in the future,  the continuing  losses  incurred by the Company in its
development  phase  raise  substantial  doubt  about the  Company's  ability  to
continue as a going  concern.  Therefore,  the Company's  ability to continue in
business  as a going  concern  depends  upon its  ability to sell  products,  to
generate  fees from the sale of its services,  to conserve  liquidity by setting
marketing  and other  priorities  and  reducing  expenditures,  to  obtain  bank
financing and to obtain additional funds through offering of its securities. The
Company's  ability to obtain funds through an offering of its debt securities is
limited by its lack of significant  revenue. In any event, there is no assurance
that any expenditure  reductions,  financings or other measures that the Company
may be able to effect will enable it to meet its working capital requirements.


                                       11
<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 17, 1998

                                                 VOICENET, INC.
                                                 By: /s/ Howard Messer
                                                 ------------------------------
                                                 Howard Messer
                                                 Principal Accounting Officer




                                       12