U.S.SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                                   FORM 10KSB40


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


                   For the Fiscal Year Ended December 31, 1997



Commission File Number: 0-19170

                            JUNIPER GROUP, INC.
                 (Name of small business issuer in Its Charter)

      Nevada                                   11-2866771
(State or other jurisdiction of     (I.R.S. Employer Identification Number)
incorporation or organization)

111 Great Neck Road, Suite 604,
Great Neck, New York                            11021
(address of principal executive offices)      (Zip Code)

Registrant's Telephone Number, including area code:    (516) 829-4670

Securities registered pursuant to Section 12(b) of the Exchange Act: NONE

Securities registered pursuant to Section 12(g) of the Exchange Act:

                              Title of Each Class:
                    Common Stock (par value $.001 per share)
      12% Non-Voting Convertible Redeemable Preferred Stock $.10 par value
                        Redeemable Class B Warrants

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or Section 15(d) of the Securities  Exchange Act of 1934 during the preceding
12 months (or for such shorter period that  Registrant was required to file such
reports)  and (2) has been subject to such filing  requirements  for the past 90
days. YES X NO

Check if disclosure  of delinquent  filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure  will be contained,  to the
best of registrant's  knowledge,  in definitive proxy or information  statements
incorporated  by reference  in Part III of this Form 10-KSB or any  amendment to
this Form 10-KSB [ X ]

State issuer's revenues for its most recent fiscal year. - $1,386,666.

     The aggregate  market value of the Common Stock held by  non-affiliates  of
the Registrant was  approximately  $2,899,631  based upon the $0.078 average bid
price of these  shares on the NASDAQ  Stock  Market for the period March 1, 1998
through March 16, 1998.

     As of March 16, 1998,  there were 48,964,879  outstanding  shares of Common
Stock, $.001 par value per share.



<PAGE>
                                    PART I


ITEM 1. DESCRIPTION OF BUSINESS

A.       Business Development

     Juniper Group, Inc.'s (the "Company")  principal businesses are composed of
two (2) segments,  healthcare and entertainment:  (i) the healthcare  operations
are  conducted  through  two  subsidiaries  of  Juniper  Medical  Systems,  Inc.
("JMSI"),  which is a wholly owned  subsidiary of the Company:  (a) PartnerCare,
Inc.  ("PCI",  formerly  Diversified  Health  Affiliates,  Inc.), a managed care
revenue  enhancement  company  providing  various  types  of  services  such as:
Physician Practice Management,  Managed Care Revenue Enhancement,  Comprehensive
Pricing  Reviews,  MSOs and  Liability  Assessment  Programs  to newly  evolving
integrated hospital and physician markets and (b) Juniper Healthcare Containment
Systems,  Inc.  ("Containment"),   which  develops  and  provides  full  service
healthcare  networks  for  insurance  companies  and managed care markets in the
Northeast  U.S.;  and (ii) the  entertainment  segment is conducted  principally
through  Juniper  Pictures,  Inc.  ("Pictures"),  a wholly owned  subsidiary  of
Juniper  Entertainment,  Inc. ("JEI"), a wholly owned subsidiary of the Company,
which engages in the  acquisition,  exploitation  and  distribution of rights to
films to the various  media (i.e.,  home video,  pay-per view,  pay  television,
cable television,  networks and independent  syndicated  television stations) in
the domestic and foreign marketplace.

     The Company was incorporated in July 1987 under the name Juniper  Features,
Ltd.  as a New York  corporation,  and  commenced  entertainment  operations  in
January 1988. In late 1991, the Company recognized an opportunity to expand into
healthcare,  and in December 1991, JMSI, acquired all of the outstanding capital
stock of PCI. Containment  commenced  operations in September 1992.  Containment
operates its business from the Company's  Great Neck location.  PCI operates its
business  from its Boca Raton,  Florida  location and the  Company's  Great Neck
location.

     During the second quarter of 1996, the Company took several actions that it
believes will improve the results of its hospital revenue enhancement management
business. It changed the name of its subsidiary that conducts that business from
Diversified Health Affiliates,  Inc. to PCI. The Company believes that this name
better  characterizes  the  nature of the  relationship  sought to be  developed
between PCI and the hospitals that it serves.  In addition,  PCI determined that
it was  necessary to  aggressively  and  strategically  redirect its efforts in
order to pursue new managed  care  markets  and  initiatives.

     In February  1997, at the Company's  annual  meeting of  shareholders  (The
"Annual Meeting"),  the shareholders approved a proposal to change the Company's
state of incorporation  from New York to Nevada.  Reincorporation in Nevada will
allow the Company to take  advantage of certain  provisions of the corporate law
of Nevada but will not result in any change in the business, management, assets,
liabilities or net worth of the Company.

     In order to effect the Company's  reincorporation  in Nevada,  in 1997, the
Company was merged into a newly formed,  wholly-owned  subsidiary of the Company
incorporated in Nevada.  The Nevada  subsidiary,  named Juniper Group, Inc., was
formed on January 22, 1997.

B.       Business of Issuer

         (i)  Healthcare Cost Containment Services and Revenue Enhancement

             (a)  Managed Care Revenue Enhancement Program ("MCREP")

     During the last two years,  the country  experienced an explosive growth of
managed care markets.  The  Company's new direction  into the managed care arena
parallels the evolving growth within these markets.  The New York Times recently
reported  that  managed care plans  enrolled 85% of employees in 1997,  which is
substantially higher than the 48% enrollment just five years ago. PartnerCare is
riding a wave of new  opportunities,  especially those arising from the plethora
of contracts executed between hospitals, physicians and managed care companies.
<PAGE>
     PCI also recruited new management, whose marketing skills and experience in
managed care would  better serve the future needs and  direction of the Company.
The Company then pursued a series of initiatives  which has produced new product
lines and eliminated those which  demonstrate  poor sales  opportunities or were
unprofitable.  It redirected the  Diagnostic  Related  Groups  ("DRG")  audit
business to the Managed Care Revenue Enhancement business.

     PCI has  developed  a  comprehensive  program  that  addresses  the  entire
spectrum of business and revenue  issues  pertaining to the  hospital's  managed
care relationships.  PCI ensures that hospitals obtain all the dollars that they
are entitled to under their managed care agreements.

     PCI's program also includes the profiling of managed care contracts and the
performance  benchmarking of these agreements.  PCI validates whether or not the
projected  financial value anticipated from these  arrangements can be obtained.
PCI's  assessments  include line item audits of claims  generated  through these
relationships,  as well as trending  reviews to identify,  and document  "Silent
PPO" activity.  PCI also  identifies  managed  care  claims  that have not been
properly  paid, or have been  written-off . PCI then actively  pursues payors to
expedite payments to the hospital for rebilled claims.

     This  transition  has given the  Company a new  opportunity  to service the
growing  number  of  hospitals  and  integrated  networks  that are  facing  the
complexities associated with managed care contracts.  These relationships result
in payment  errors on claims  and  non-compliance  issues  that  foster  sizable
revenue  losses to hospitals.  PCI's new product lines target these problems and
provides  services  which  recapture  loss  revenue.

     The  vision  of the  Company's  new  direction  has  been  complemented  by
management's  commitment to developing a growing  relevance in evolving  managed
care  markets and  meeting  the needs of its new  clients.  PCI  emphasizes  the
importance of maintaining an atmosphere of customer  support and appreciates the
need to meet client needs in an unobtrusive manner. PCI's staff of professionals
come  from  the  insurance  and PPO  industries  and are also  sensitive  to the
importance of payor relationships.

     PCI's MCREP business consists of the essential ingredients needed to assist
hospitals in maximizing the business value of their managed care contracts.  The
components of this Program are as follows:

1) Managed Care Contract Compliance

     PCI  identifies  all managed  care  contracts  and  benchmarks  performance
requirements  for each  contract.  Its clients are provided with  comprehensive,
easy to read profiles of the managed care contracts in the hospital's portfolio.
PCI evaluates claims actively  generated by each payor for contract  compliance.
Per diems and percentage  discounts  taken by payors are validated in accordance
with hospital expectations. MCREP provides the hospital with an immediate source
of  additional  revenue from closed  accounts.  MCREP becomes a second filter of
claims  adjudication.  The quality process results in a correct bill and assures
the hospital that all revenue due is properly billed.

2) Line Item Reviews and Administration

     PCI's team identifies and recovers all charges overlooked subsequent to the
presentation of the final hospital bill, as well as reviews previously submitted
claims. PCI's unique Line Item Reviews  simultaneously match units of service to
the medical  record  documentation  at the time of discharge.  Line Item Reviews
identify  the claims under and over charged by the payor.  While  reviewing  the
bills,  PCI is  simultaneously  auditing  the  medical  records.  This  critical
component  of the Managed  Care  Revenue  Enhancement  Program  also serves as a
quality  assurance  review of the  hospital's  medical  records.  By ensuring an
accurate final bill for submission to the insurance company, the hospital avoids
additional billing and collection expenses.

               (b) Comprehensive Pricing Review

     CPR encompasses CPT-4/HCPCS Charge Master updates, CPT-4/HCPCS Optimization
Reviews  and  Comprehensive  Pricing  Strategies  as well as UB 92 Revenue  Code
Validation.  The purpose of CPR is to evaluate the quality of Outpatient  coding
and determine the effect on hospital  reimbursement.  As part of the  outpatient
coding  validation,  PCI  reviews a cross  section  of  records  comprised  of a
sampling from ambulatory  surgery,  outpatient  services and the emergency room.
Hospitals are then provided with a detailed  report which  identifies  trends in
lost  revenues.  This  provides  the  hospital  with the  opportunity  to obtain
anticipated  revenue  from  the  initial  claim  while   simultaneously   saving
additional re-billing expenses.
<PAGE>

     PCI's team of reimbursement  specialists apply specific codes to applicable
claims,  eliminating  unlisted  code denials on the  hospital's  Explanation  of
Benefits.  PCI also works  closely  with the  hospital's  departments  utilizing
surgical  intervention  codes ensuring that services are listed and  identifying
allowable unbundling to maximize reimbursement.

               (c) Liability Assessment Program

     LAP is designed  to minimize  financial  losses  from  insurance  companies
audits  of  patient  bills.  PCI's  analysts  identify  and  analyze  trends  in
overcharges by contract,  by payor,  by claim and by  department.  Hospitals are
able to evaluate the  efficiency  of their  billing  system  utilizing  the data
provided by PCI.

Competition

    Based upon data  generated by the healthcare  industry and U.S.  Government
sources,  healthcare expenditures have increased from $249 billion in 1980 (9.1%
of gross  national  product) to an estimated  $700 billion in 1990 (12% of gross
national product). It is anticipated that healthcare expenditures will exceed $1
trillion  in the year  2000.  Many have  modified  their  traditional  insurance
coverage or made available to their  employees the opportunity to participate in
HMOs and PPOs. In a national survey by Foster Higgins,  reported by the New York
Times on January 20,  1998,  "managed  care plans  enrolled  85% of employees in
1997,  up from 77% in 1996,  and only 48%  five  years  ago."  The same  article
reported that 1997 was "the biggest one year shift out of traditional  indemnity
coverage  since  1994."  This has  enabled  them to take a more  active  role in
managing  healthcare  benefits  and  costs.  In  response  to the trend  towards
self-insurance  and increasing  competition  from HMOs and PPOs, group insurance
carriers have sought to control premium  increases  through the adoption of cost
containment programs.

     Although its MCREP services are significantly  different from those offered
by other  hospital  consulting  services,  the Company  competes for  consulting
business primarily with  revenue-optimization  services  companies.  The Company
competes  for its MCREP  clients  by  distinguishing  its  services  from  those
provided by revenue optimization  service companies,  which generally do not use
benchmark  performance  levels of managed care agreements or target "Silent PPO"
practices  as does  the  Company.  Numerous  companies  of  varying  size  offer
revenue-optimization  services  that  may be  considered  competitive  with  the
Company.  The  Company  does  not  believe  that  any  single  company  commands
significant  market share.  Larger,  more  established  consulting firms have an
enhanced competitive  position,  due in part to established name recognition and
direct access to hospital clients through the provision of other services. Small
firms, although not necessarily offering those particular services comparable to
those of the Company, compete on the basis of price.

     The  managed  care  industry is highly  competitive.  The  Company's  MCREP
programs  will compete with other  providers of healthcare  services,  including
regional groups as well as national firms. Based upon these competitive factors,
the Company believes that it will be able to compete successfully in the markets
by adhering to its business  strategy,  although  there can be no assurance that
the Company will be able to compete successfully.

Sales and Marketing

     The  Company's  1997  growth  initiative  has also  driven  new  sales  and
marketing strategies, resulting in a growing interest in PCI's new product lines
which  capture  unrecovered  dollars that  hospitals are entitled to under their
managed  care  agreements.  The  initiatives  have  also been  received  well by
national hospital chains,  regional hospital networks, and larger hospitals that
have numerous managed care contracts. The result has been a growing portfolio of
hospital  contracts in Florida and in the New York/New  Jersey  Region.  Efforts
have been underway to address these  requirements  which,  when completed,  will
foster greater sales opportunities.

     In addition to the above sales and marketing  efforts,  new initiatives are
also  underway  targeting  geographic  markets  which  are  characterized  by an
accelerated  growth of the managed care  industry.  Specifically,  resources and
sales  efforts were invested  into  developing  both the New York and New Jersey
markets.  This included  seminars as well as numerous  meetings  with  corporate
officers and  representatives  of hospital  chains that have a large presence in
Florida.  These markets represent a great deal of opportunity since managed care
revenue represents a growing revenue source to hospitals within these areas.

     As of December 31, 1997, PCI had fourteen contracts for its MCREP business,
an increase from one at December 31, 1996. For ten of these contracts, work will
begin sometime in 1998. Revenue to PCI is contingent upon generating revenue for
each  hospital  under  contract.  For each  contract in place,  based upon PCI's
experience,  each  contract may be expected to average  revenue on an annualized
basis of approximately $240,000. The annual revenue for each contract fluctuates
significantly  depending  upon many factors  including,  but not limited to, the
number of managed care agreements the hospital had entered,  the capacity of the
hospital's  information  system,  the nature of the work under  contract and the
length of the period under contract.

<PAGE>
                  (d)  Healthcare Cost Containment Services

     Containment is a provider of healthcare cost containment services for third
party  healthcare  payors.  Containment  provides  its clients  with  savings on
hospital expenditures through a geographically tailored network of high-quality,
cost-effective  healthcare  providers.  In  addition,  Containment  provides its
clients with timely, informative data claims analysis and reporting. Containment
assists  third  party  healthcare  payors,   including  group  health  insurance
companies,  in  reducing  their  costs  associated  with the  delivery of health
services.  Containment  arranges  with  networks  of  healthcare  providers  and
facilities (preferred provider organizations, "PPO's") to discount their charges
in return for prompt  payment and access to a higher  volume of patients.  Group
health  insurance  companies  agree to channel  their  enrollees  to a preferred
provider  organization  network,  resulting in lower insurance premiums to their
clients. Containment provides supervision through sub-contractors to ensure that
the appropriate and necessary  medical services are provided to the patient in a
cost effective manner.  Containment also provides health network coverage to its
insurance clients and their enrollees.

     Independent PPO cost management firms, such as Containment,  offer numerous
programs  designed to meet these collective  objectives.  PPO services have only
recently been offered on a commercially  significant  scale by independent firms
which are engaged  primarily in providing these types of services.  The industry
is currently highly fragmented with numerous independent firms providing medical
utilization  review and PPO  services,  the vast  majority of which provide such
services on a regional or local level.

     From 1992  through  December  17,  1997,  Containment  has had an  on-going
agreement  with  The  Guardian  Life  Insurance  Company  ("Guardian"),  whereby
Containment  was paid a percentage of the savings it generated for the insurance
company.  Containment  provided  this  service  for  Guardian  in New Jersey and
Connecticut.

     The  Company  has,  over the past  several  years,  worked  closely  with a
healthcare professional to bring the Company both health insurance company group
plan customers as well as professional  healthcare  providers and networks.  The
healthcare  professional has assisted in arranging the  relationships  among the
Company,  the Guardian,  and the network of providers  previously under contract
with  Containment.  The  agreement  with  the  healthcare  professional  for his
services continued until December 17, 1997 and provided that the Company pay the
healthcare  professional  commissions  at  varying  rates and grant  options  to
purchase  common stock if certain  contract  renewals  were  realized or certain
revenue levels were achieved.

     In 1996, the Company agreed with the healthcare  professional to reorganize
the manner in which its business  with health  insurance  company group plans is
structured.  The purpose of this  reorganization  was to provide new services to
healthcare  insurance  companies.  This  change,  which  occurred in early 1996,
resulted  in  conducting  such  business in the form of a joint  venture  with a
Company  affiliated with the healthcare  professional.  On December 1, 1997, the
healthcare  professional  and the Company  agreed upon a  settlement,  effective
December 17, 1997, for all amounts due between the two parties.  Pursuant to the
agreement,  the  healthcare  professional  received a payout of a balance due of
approximately  $29,000,  and 593,370 shares of the Company's  common stock.  The
Company will receive a continued  payment of a percentage  of selected  Guardian
related revenue recognized by the healthcare professional during 1998.

Major Customers

     In 1997, Guardian accounted for 62% of the total revenue of the Company. In
1996, Guardian accounted for 75% of the total revenue of the Company.  Effective
December 17, 1997, the Company no longer has any  contractual  arrangement  with
the  Guardian.  The loss of this  business has been  replaced  with a settlement
agreement  between  the  Company  and a  healthcare  professional  with whom the
Guardian is doing similar business.  The loss of the contract with Guardian will
have a material  adverse  effect on the  operations  of the Company  after 1998.
However, the Company is pursuing contracts with other insurance companies, which
if successful, may reduce the Company's dependence upon Guardian's business.

<PAGE>
         (ii)     Entertainment

     Pictures is engaged in the distribution of films through  licensing to home
video,  pay-per-view,  pay-cable,  and  commercial  television  broadcast  media
domestically as well as in foreign markets.  Pictures has exclusive distribution
rights to eighty-one  (81) films in various media within  various  international
markets.

     During 1998 and 1997,  the Company  significantly  curtailed its efforts in
the  distribution  of film  licenses  to commit and focus its  resources  on the
growth of the healthcare segment,  which during that time was, and currently is,
the most  efficient  and cost  effective  strategy  for the  Company to maximize
revenue.  In 1998, the Company began directing  efforts toward  reestablishing a
foothold in the film industry.  The Company expects to begin recognizing  growth
in revenues from the sale of film licenses in 1998.

     Pictures  acquires  worldwide rights to films which are saleable to various
markets.  In acquiring the rights to a film,  Pictures analyzes the viability of
the product for  distribution in an effort to target the film's audience appeal.
Armed with its analysis,  Pictures markets the film, using sales representatives
and the efforts of its officers,  to the various media in a selective manner. In
addition,  Pictures  aids the media to which it markets its films by producing a
strategy   for   the    presentation    of   the   film,    with   a   view   to
programming/counterprogramming  against competitive media in the same market and
directing  a film to the proper  demographic  population  (i.e.,  female,  male,
child,  teenager and middle age) in order to produce the most favorable  outcome
regarding ratings and advertising revenue.

     Pictures   acquires  its  film  rights  from  independent  film  production
companies.  Pictures monitors the industry for available films, concentrating on
content,  quality,  theme, actors and actresses,  plot, format and certain other
criteria to determine the film's  suitability for the home video,  pay-per-view,
pay/cable  and  commercial  media to which  Pictures  markets its product,  both
domestically and internationally.

     Pictures  markets its product through its sales  representatives,  who also
assist Pictures at domestic and  international  trade shows to market  Pictures'
film library.

     Pictures acquires domestic and/or foreign  distribution rights to films for
a license period that typically spans between 10 and 20 years, during which time
Pictures has the right to distribute  such films in various  media  (video,  pay
cable,  syndication and free T.V.).  Pictures earns a distribution fee, which is
based upon a percentage of gross receipts received for the license. In addition,
the Company recoups its expenses incurred in making the sale (i.e. market costs,
travel and  entertainment,  advertising,  fax, phone,  mail,  etc.),  along with
recouping any advances  made to producers  upon signing or within a fixed period
of time thereafter (minimum  guarantee) from the gross receipts.  The balance of
gross  receipts  after such  recoupment  is paid to the  producer.  Any  minimum
guarantees paid to the producer are payable over a period of 3-8 years.

Competition

     Competition is intense in the motion  picture  distribution  industry.  The
Company is in  competition  with other motion  pictures  distribution  companies
including  many which  have  greater  resources  than the  Company,  both in the
acquisition of  distribution  rights to movie  properties and the sales of these
properties to the various markets (i.e. pay, cable and television).

Employees

     As of March 17, 1998, the Company had 7 full-time employees and 4 part-time
employees. Of the full-time employees, all 7 work at the Company's offices, some
of whom spend portions of their time at clients.
<PAGE>
ITEM 2.  DESCRIPTION OF PROPERTY

     The  Company's  executive,  healthcare  and film  distribution  offices are
located at 111 Great Neck Road,  Suite 604,  Great Neck,  New York  11021.  This
property  consists  of  2,026  square  feet of  offices  and is  subleased  from
Entertainment  Financing  Inc.("EFI"),  an  entity  affiliated  with  the  Chief
Executive  Officer of the Company,  currently at $4,263 per month.  EFI's lease,
and the Company's sublease on this space expires on May 31, 2002. EFI has agreed
that for the term of the sub-lease the rent paid to it will be substantially the
same rent that it pays under its master lease to the landlord.  In addition,  in
January 1995, the Company opened an office in Boca Raton, Florida. This property
consists of 1900 square feet of offices and is sub-leased from EFI Funding, Ltd.
("Funding"),  an entity  affiliated  with the  Chief  Executive  Officer  of the
Company,  currently  at $1,150  per  month.  Funding's  lease and the  Company's
sublease on this space  expired on November  30, 1997,  and is  currently  being
leased on a month to month  basis.  Funding  has agreed that for the term of the
sub-lease the rent paid to it will be  substantially  the same rent that it pays
under its master lease to the landlord. Minor additional charges are made by EFI
and Funding to the Company to cover administrative costs.

ITEM 3. LEGAL PROCEEDINGS

     On May 22, 1996, Ordinary Guy, Inc. and Crow Productions, Inc. commenced an
action  against the  Company,  its CEO and an affiliate of the CEO in the United
States  District Court for the Eastern  District of New York seeking  damages in
the amount of $464,470.50, plus interest alleging that the Company has successor
liability  for a  judgment  entered in March of 1993 by the  Plaintiffs  against
Juniper Releasing,  Inc. ("Releasing"),  a company affiliated with the Company's
CEO.  It is  alleged  that the  Company  was  formed in 1989 as a  successor  to
Releasing and that the Company and others transferred assets out of Releasing to
avoid the payment of Releasing's creditors.  The Company is vigorously defending
the  allegations and has asserted that the claims are without merit and are time
barred.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     There were no matters  submitted to a vote of security  holders  during the
fourth quarter of the fiscal year ending December 31, 1997.

                                     PART II

ITEM 5. MARKET FOR THE REGISTRANT'S  COMMON EQUITY AND RELATED  STOCKHOLDER
MATTERS

     The Company's  common stock and Class B Warrants are traded on the National
Association of Securities Dealer Automated Quotation System ("NASDAQ") Small Cap
Market,  under the symbols  "JUNI" and "JUNIZ"  respectively.  The Company's 12%
Convertible  Redeemable  Preferred  Stock  ("Preferred  Stock") is traded in the
Over-the-Counter  Market on the NASD OTC Bulletin  Board.  The Company's Class A
Warrants expired on May 1, 1997 The following constitutes the high and low sales
prices for the common  stock,  the Class A Warrants  and the Class B Warrants as
reported  by NASDAQ for each of the  quarters of 1997 and 1996.  The  quotations
shown below reflect  inter-dealer prices,  without retail mark-up,  mark-down or
commission and may not represent actual transactions.

                 1997                              HIGH               LOW

FIRST QUARTER
Common Stock .............................         0.219              0.063
Class A Warrants .........................          (1)                (1)
Class B Warrants .........................          (1)                (1)

SECOND QUARTER
Common Stock .............................         0.156              0.063
Class A Warrants .........................          (1)                (1)
Class B Warrants .........................         0.031              0.031

THIRD QUARTER
Common Stock .............................         0.281              0.063
Class B Warrants .........................         0.063              0.031

FOURTH QUARTER
Common Stock .............................         0.172              0.063
Class B Warrants .........................         0.219              0.094
<PAGE>
                1996                               HIGH               LOW

FIRST QUARTER
Common Stock .............................         0.875              0.188
Class A Warrants .........................         0.125              0.125
Class B Warrants .........................         0.125              0.125

SECOND QUARTER
Common Stock .............................         0.344              0.188
Class A Warrants .........................         0.125              0.125
Class B Warrants .........................         0.125              0.125

THIRD QUARTER
Common Stock .............................         0.375              0.125
Class A Warrants .........................          (1)                (1)
Class B Warrants .........................          (1)                (1)


FOURTH QUARTER
Common Stock .............................         0.219              0.031
Class A Warrants .........................         0.125              0.125
Class B Warrants .........................         0.125              0.125

     (1) Issue did not trade

     Preferred  Stockholders  are  entitled  to  receive  out of assets  legally
available  for  payment a dividend  at a rate of 12% per annum of the  Preferred
Stock  liquidation  preference  of $2.00 (or $.24 per annum) per share,  payable
quarterly  on March 1, June 1,  September 1 and December 1, in cash or in shares
of Common Stock having an equivalent fair market value.  Unpaid dividends on the
Company's  Preferred Stock cumulate.  The quarterly  payments due on September 1
and December 1, 1992,  and all payments due in 1993,  in 1994, in 1995, in 1996,
and in 1997 and the  payment due on March 1, 1998 have not yet been paid and are
accumulating.  These dividends have not been declared  because earned surplus is
not available to pay a cash dividend.  Accordingly,  dividends  will  accumulate
until such time as earned surplus is available to pay a cash dividend or until a
post  effective  amendment to the Company's  registration  statement  covering a
certain  number of common  shares  reserved for the payment of  Preferred  Stock
dividends is filed and declared  effective,  or if such number of common  shares
are  insufficient  to pay cumulative  dividends,  then until  additional  common
shares are  registered  with the Securities and Exchange  Commission  (SEC).  No
dividends  shall be declared or paid on the Common  Stock (other than a dividend
payable  solely  in  shares  of  Common  Stock)  and no  Common  Stock  shall be
purchased,  redeemed or acquired by the Company unless full cumulative dividends
on the Preferred  Stock have been paid or declared,  or cash or shares of Common
Stock have been set apart which is sufficient  to pay all  dividends  accrued on
the Preferred Stock for all past and then current dividend periods.

     As stated above,  pursuant to the terms of the Preferred Stock, the Company
has the option of making quarterly dividend payments in cash or shares of Common
Stock.  The Company does not intend to pay any Preferred Stock dividends in cash
in the foreseeable future.  Prospectively,  subject to the Company's  Prospectus
being current,  and a sufficient  number of common shares being  registered with
the SEC, the Company anticipates making quarterly dividend payments in shares of
Common  Stock  for the  foreseeable  future  including  the  quarterly  dividend
payments which were due on September 1 and December 1, 1992; and all payment due
in 1993; in 1994;  in 1995,  in 1996, in 1997 and March 1, 1998,  which have not
yet been paid.  The total cash value of the  arrearage  of unpaid  dividends  is
$326,000.

     The Company has not  declared  cash  dividends on its Common Stock and does
not  intend  to do so in  the  foreseeable  future.  If  the  Company  generates
earnings,  management's  policy is to retain such earnings for further  business
development.  It plans to maintain  this policy as long as  necessary to provide
funds for the Company's  operations.  Any future  dividend  payments will depend
upon the full payment of Preferred  Stock  dividends,  the  Company's  earnings,
financial  requirements and other relevant factors,  including  approval of such
dividends  by the Board of  Directors.
<PAGE>
     As of  March  16,  1998,  there  were 209  shareholders  of  record  of the
Company's common stock, excluding shares held in street name.

     As of December  31, 1997,  the Company has  approximately  198,000  Class B
Warrants  outstanding.  Each Class B Warrant entitles the holder to purchase, at
any time through May 31, 1998 (at which time they expire), one common share at a
price equal to $5.00, subject to adjustment.

Recent Sales of Unregistered Securities

     From June through  December of 1997, the Company sold  3,416,667  shares of
the  Company's  common  stock  issued to  non-U.S.  persons in  offerings  under
Regulation S under the  Securities  Act of 1933, as amended,  for  $150,500,  at
prices from $.03 per share to $.06 per share.  In September and October of 1997,
the  Company  sold  3,100,005  shares of the  Company's  common  stock  upon the
exercise of options issued to  consultants  under Section 4(2) of the Securities
Act of 1993, as amended, for $203,500.  The exercise price of the options varied
from $.06 per share to $.095.

ITEM 6.  MANAGEMENT'S  DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS

RESULTS OF OPERATIONS

Fiscal Year 1997 vs Fiscal Year 1996

     The Company's  revenues  decreased to $1,387,000 in 1997 from $2,503,000 in
1996, representing a 45% decrease.

     Revenue related to the Healthcare  segment decreased to $1,367,000 in 1997,
from  $2,389,000 in 1996,  representing a 43% decrease.  The decrease in revenue
during 1996 was  predominately  attributed to Containment,  which had revenue of
$854,000 in 1997,  compared to revenue of $1,872,000  in 1996.  This decrease is
largely  attributed  to a decline in claims  processed.  This is a result of the
following two factors:  (1) a reduction in indemnity  claims due to the national
trend in the markets toward  managed care;  and (2) a joint venture  arrangement
(which  ceased  effective  December  17,  1997),  which  replaced  Containment's
previous  arrangement  and resulted in lower gross  revenue,  but  substantially
greater gross profit margins.  PCI's revenue decreased to $513,000 in 1997, from
$516,000 in 1996.  This was the result of PCI's change in  direction  from a DRG
audit company to a Managed Care Revenue Enhancement company.

     Revenue related to entertainment decreased to $20,000 in 1997 from $115,000
in 1996.

     Operating  costs decreased to $606,000 in 1997 from $1,319,000 in 1996, a
54% decrease.  The Healthcare  operating  costs  decreased to $599,000 in 1997
from $1,259,000 in 1996, a 52% decrease.  As a percentage of revenue,  operating
costs for the Healthcare segment decreased to 44% in 1997 from 53% in 1996.

     Operating costs for  Entertainment  include film amortization and producers
royalties.  Where the  Company  acquires  licensing  rights  through  guaranteed
payments,  it records such guarantees on its balance sheet.  The amortization of
such  licensing  rights is  calculated  under  the film  forecast  method.  Film
amortization   represents   amortization  of  the  original   acquisition  price
capitalized on the balance sheet.  Producers  royalties  reflect current amounts
due  producer's  for their  share of current  revenue  for films with no minimum
guarantee obligation.

     Selling,  general and  administrative  expenses  increased to $1,902,000 in
1997 from $1,875,000 in 1996, a 1% increase.  The increases in selling,  general
and administrative expenses were primarily attributable to the following: Public
Relations  expenses of  $160,000  and Bad Debt  expenses  of $85,000;  offset by
decreases  in Salaries of $71,000;  Legal  Expenses of $60,000;  Commissions  of
$35,000; Rent Expense of $21,000; and Employee Benefits of $18,000.

LIQUIDITY AND CAPITAL RESOURCES

     The  Company  had a working  capital  deficiency  at  December  31, 1997 of
$765,000.  The ratio of  current  assets  to  current  liabilities  was .42:1 at
December  31,  1997.  Cash flow used by  operating  activities  during  1997 was
$699,000.
<PAGE>
     The Company has no material  commitments  for capital  expenditures  or the
acquisition  of films.  If cash flow  permits,  however,  the  Company  plans to
enhance its information system  capabilities to more efficiently and effectively
provide its health  healthcare  services and to acquire  additional films during
1997.

     During  1997,  the Company  raised an  aggregate  of  $150,500  through the
private sales of the Company's stock,  pursuant to Section 4(2) and Regulation S
under the Securities Act of 1933, as amended (the "Act").

     The Company  believes  that it will need  additional  financing to meet its
operating cash  requirements for the current level of operations during the next
twelve  months,  and will  require  additional  capital in order to complete its
planned  expansion.  The Company has developed a plan to reduce its  liabilities
and improve cash flow through expanding  operations and raising additional funds
either  through  issuance of debt or equity.  From January 1, 1998 through March
16, 1998,  the Company  raised  $157,000  from the sale of common stock  through
offerings  under  Regulation S of the  Securities  Act of 1933, as amended,  and
other  private  placements.  Additionally,  on March 27, 1998,  the Company sold
$250,000 of convertible debentures. The Company anticipates that it will be able
to raise the  necessary  funds it may require for the  remainder of 1998 through
public or private sales of securities. If the Company is unable to fund its cash
flow needs the Company may have to reduce or stop planned expansion, or possibly
scale back operations. The Company currently does not have any lines of credit.

     The Company has issued  shares of its Common Stock on a number of occasions
without offering preemptive rights to existing Shareholders or procuring waivers
of their preemptive  rights.  No Shareholder has alleged any damage resulting to
him as a result of the sale of shares of  Common  Stock by the  Company  without
offering  preemptive  rights.  The amount of damages incurred by Shareholders by
reason of the failure to offer  preemptive  right, if any, is not  ascertainable
with any degree of accuracy.  The Company  believes that if any such claims were
asserted, the Company may have valid defenses.

     During 1997 and 1996,  the Company  focused its  resources on the growth of
the healthcare  segment,  which, during that time, was and currently is the most
efficient  and  cost-effective  strategy  for the Company to  maximize  revenue.
Although  resources and capital remain limited,  the Company has begun directing
efforts  toward  reestablishing  a foothold  in the film  industry.  The Company
expects  to  continue  recognizing  growth  in  revenues  from  the sale of film
licenses in 1998.

  Healthcare

     The transition of PCI from a DRG audit company  offering  limited  services
and markets,  to a full service  Managed  Care Revenue  Enhancement  company has
required a major  investment  of time,  manpower  and  Company  resources.  This
engendered  a period of the  phasing  out old  services,  while at the same time
committing  increased  resources  to  non-revenue  producing,  but  nevertheless
critical development activities.

     The  transition  to a Managed  Care  Revenue  Enhancement  company has also
required a retooling of the Company's  infrastructure as well as the development
of new marketing  strategies and materials.  The Company incurred  approximately
$9,000  and  $130,000  for this  retooling  and  development  in 1997 and  1996,
respectively.  New contracts  which clearly  define PCI's new services have been
developed. In addition,  these contracts create payment terms which expedite the
collection process of PCI revenue from its new books of business.

     This also required new staffing  including the  recruitment  of experienced
personnel  from  the  insurance  and  managed  care   industry.   Infrastructure
initiatives,  especially those associated with information systems capabilities,
are continuing to be addressed  through  investments in new hardware,  software,
staffing and technical support, and the Company incurred  approximately  $31,000
and $45,000 on these initiatives in 1997 and 1996, respectively.

     PCI  will  also  need  to  invest  in the  upgrading  of its  communication
resources,  since  telemarketing and sales initiatives  associated with national
companies  require  improvement  in the  number and  quality  of  communications
equipment.  These  additional costs have also been factored into PCI's expansion
into the national managed care arena. Fax capabilities,  electronic  mailing and
other  considerations to improve connectivity between PCI's clients, its Florida
office and its New York office have been actively reviewed and addressed.

     With increasing  sales efforts to seek out national  market  opportunities,
the Company  intends to  continue  to invest  resources  in  underwriting  costs
associated  with travel and lodging and sales  contacts.  PCI has also developed
revenue incentive arrangements with established  individuals in the managed care
industry.  Their contacts and recognition of our services' value,  will serve as
another source of sales opportunities.
<PAGE>
 Entertainment

     During the latter part of 1996,  the Company was  involved in  negotiations
and discussions with a number of television buyers in the TV broadcast  markets,
for thematic  picture  packages.

     Although the Company's  resources and capital remain  limited,  the Company
has  begun  directing  efforts  toward  reestablishing  a  foothold  in the film
industry.  The Company expects to continue  recognizing  growth in revenues from
the sale of film licenses in 1998.

     In 1998, the Company will consider  searching for full time sales personnel
and utilizing outside sales representatives.  Initially,  the Company will begin
promoting its film library in the domestic television markets.  Secondarily,  it
will  utilize  representatives  to attend  film  festivals  and  penetrate  film
markets.

ITEM 7.  FINANCIAL STATEMENTS

     The  response  to this item  follows  Item 13,  and is hereby  incorporated
herein.


ITEM 8. CHANGES IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON ACCOUNTING AND
        FINANCIAL DISCLOSURE

                                    NONE

                                    PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(a) OF THE EXCHANGE ACT.

     The Company's Certificate of Incorporation  provides for no less than three
(3) Directors.  Each Director shall hold office until the next annual meeting of
shareholders  and until his  successor  has been elected and  qualified.  At the
present time there are a total of three (3) Directors. The Board of Directors is
empowered to fill vacancies on the Board. The Company's  Directors and Executive
Officers are listed below:

                                   POSITIONS
         NAME             AGE      W/COMPANY                 DIRECTOR SINCE

Vlado Paul Hreljanovic     50       Chairman of the Board,        1987
                                    President, CEO and
                                    acting CFO

Harold A. Horowitz         47       Director                      1991

Peter W. Feldman           53       Director                      1995

Yvonne T. Paultre          57       Secretary                       -

Richard O. Vazquez         45       President-PCI                   -


DIRECTORS

     Vlado Paul Hreljanovic has been the President,  Chief Executive Officer and
Chairman of the Board since 1987. Upon graduation  from Fordham  University,  he
joined  KPMG  (formerly  Peat  Marwick  Mitchell  & Co.) as an  accountant.  Mr.
Hreljanovic  is and has been the  sole  shareholder,  officer  and  director  of
Entertainment  Financing,  Inc. and EFI Funding, Ltd., which only business is as
lessee of the Company's offices in Great Neck, New York and Boca Raton, Florida,
and the  sub-lessors of such premises to the Company.

     Harold A.  Horowitz has been a Director of the Company  since January 1991.
Since  October 1, 1995,  he has been a  principal  and  Chairman of the Board of
In-Stock Business Forms and Paper Products,  Ltd., and an independent consultant
to various public and private companies. Until October 1, 1995, Mr. Horowitz was
a Partner of the law firm of  Finkelstein,  Bruckman,  Wohl,  Most and  Rothman,
which firm was securities  counsel to the Company.  Mr. Horowitz received his JD
degree in 1976 from  Columbia  University  School of Law and  masters  degree in
economics  from  Columbia  University  in 1973.  He received  his BA degree from
Yeshiva University in 1971.
<PAGE>
     Peter W.  Feldman was elected to the Board of  Directors  of the Company on
February  1, 1995.  Mr.  Feldman is  actively  involved  in  physician  practice
management and consulting  services for physician based business in the state of
Florida.  Mr. Feldman has been the Managing Director of a Kentucky Fried Chicken
franchise  since  1972.  He was a Director  and  officer  of Labels For Less,  a
discount  women's  clothing  chain,  from 1975 through 1990.  Additionally,  Mr.
Feldman was Chief  Financial  Officer  and  Administrator  of Morris  Industrial
Builders, a real estate developer,  from 1985 through 1991. Mr. Feldman has been
the  principal  of  International  Food and  Development,  Inc.,  a company that
develops and operates restaurants throughout the Caribbean.

OTHER OFFICER

     Yvonne  T.  Paultre  has  been  Secretary   since  1991.  Ms.  Paultre  has
supervisory responsibilities for the Company's employees, customer relations and
office  policies.  She is  also  responsible  for  operations  of the  Company's
television syndication area.

KEY EMPLOYEE

     Richard O. Vazquez was formerly Vice President for  Integrated  Networks at
MultiPlan,  Inc.  During  his  tenure  he was  responsible  for  developing  and
marketing  all  integrated  strategies  for  MultiPlan.  This  included  network
contracting  throughout the USA, Latin America and the Caribbean.  Prior to that
he was the Associate Executive Director of Elmhurst Hospital and Medical Center,
responsible   for  all  capital   programs,   including  a  $230  million  major
modernization  project.  He has been a speaker  and guest  lecturer  at numerous
managed care  conferences  and forums,  as well as being published on healthcare
issues.  He is a National  Urban  Fellow,  having  attained  an MPA from  Baruch
College and a BA from New York University.

Section 16(a) Beneficial Ownership Reporting Complaince

     To the Company's knowledge,  based solely on a review of copies of Forms 3,
4 and 5  furnished  to the Company  and  written  representations  that no other
reports  were  required  during the fiscal year ended  December  31,  1997,  the
Company's officers, directors, and 10% shareholders complied with all applicable
Section 16(a) filing requirements.

ITEM 10. EXECUTIVE COMPENSATION

     The following table sets forth information with respect to the compensation
of the Chief  Executive  Officer of the  Company  for  services  provided to the
Company and its subsidiaries in 1997, 1996 and 1995. No other executive  officer
received salary and bonus in excess of $100,000 in any such year.
<TABLE>
<CAPTION>
                           SUMMARY COMPENSATION TABLE
                                                                                                                      Long Term
                                                                                                                      Compensation
                                                                                                                    --------------
                                          Annual Compensation                                                          Securities
                 Name and                                                                          Other Annual        Underlying
            Principal Position                    Year             Salary           Bonus          Compensation        Options (#)
    ------------------------------------   -------------------- -------------    -------------    ---------------    ---------------

<S>                                               <C>               <C>               <C>     <C>        <C>     <C>
    Vlado Paul Hreljanovic, Chairman of           1997              $172,757          $19,500 (1)        $52,900 (2)        -
    the Board and Chief Executive Officer
                                                  1996              $167,774          $45,931 (3)        $56,800 (4)        -

                                                  1995              $163,363             -               $45,200 (5)

</TABLE>

(1) Paid in 650,000  shares of the  Company's  unregistered  common  stock,
valued at $19,500 issued on June 18, 1997, in recognition of efforts  exerted by
Mr. Hreljanovic on behalf of the Company and its subsidiaries.

(2) Other compensation for Mr.  Hreljanovic in 1997 was primarily  comprised of,
among other  things,  automobile  payments,  including  lease,  maintenance  and
insurance of $30,600, and health and life insurance of $22,300.

(3) Other compensation for Mr.  Hreljanovic is 1996 was primarily  comprised of,
among other things,  automobile  payments,  including  lease,  maintenance,  and
insurance of $29,300, and health and life insurance of $27,500.

(4) Paid in 670,000 shares of the Company's  unregistered common stock valued at
$45,931,  which were issued to Mr. Hreljanovic on July 1, 1996 (560,000 shares),
and December 24, 1996 (110,000 shares), in recognition of efforts exerted by Mr.
Hreljanovic on behalf of the Company and its subsidiaries.

(5) Other compensation for Mr.  Hreljanovic in 1995 was primarily  comprised of,
among other  things,  automobile  payments  including  lease,  maintenance,  and
insurance of $25,000 and health and life insurance of $18,600.
<PAGE>
<TABLE>
<CAPTION>

    Aggregate Option Exercises in Last Fiscal Year and Year-End Options

    --------------------------------------------------------------------------------------------------------------------
                                                                                  Number of
                                                                                  Securities         Value of
                                                                                  Underlying       Unexercised
                                                                                 Unexercised       In-the-Money
                                                 Shares                           Options at        Options at
                   Name                         Acquired                         Year-End (#)      Year-End ($)
                    and                            on              Value         Exercisable/      Exercisable/
            Principal Position                  Exercise          Realized       Unexercisable    Unexercisable
    ------------------------------------   -------------------- -------------    --------------------------------
<S>                                                                               <C>     <C>         <C>
    Vlado Paul Hreljanovic, Chairman of             -                -            250,000/0           $0/$0
    the Board and Chief Executive Officer
</TABLE>
     Compensation  of  Directors:  In 1997,  Mr.  Horowitz and Mr.  Feldman were
issued 200,000 Shares each respectively,  of the Company's  unregistered  common
stock, valued at $6,000 each, in recognition of efforts exerted on behalf of the
Company as Board Members during 1997. Mr. Horowitz received $2,820 as additional
compensation as a member of the Board of Directors.

     Non-employee  directors are entitled to five hundred  ($500.00) dollars for
each meeting attended and to reimbursement for their  out-of-pocket  expenses in
attending such meetings.

     Employment Agreements: Mr. Hreljanovic has an Employment Agreement with the
Company which expires on April 30, 2000, and that provides for his employment as
President and Chief Executive  Officer at an annual salary adjusted annually for
the CPI Index and for the reimbursement of certain expenses and insurance. Based
on the  foregoing  formula,  Mr.  Hreljanovic's  salary  in 1997  was  $172,757.
Additionally, the employment agreement provides that Mr. Hreljanovic may receive
shares of the Company's common stock as consideration  for raising funds for the
Company.  Due to a working  capital  deficit,  the  Company  was not able to pay
salary in cash to Mr. Hreljanovic pursuant to his employment agreement. Further,
additional  amounts  have  accrued  to Mr.  Hreljanovic  for  achieving  certain
performance  benchmarks  for  obtaining  new  hospital  contracts.  In the  best
interests of the Company,  in lieu of cash, Mr. Hreljanovic has agreed to accept
and the Board of Directors  has approved the issuance of shares of the Company's
common stock as payment for unpaid salary.  The Company issued  6,091,006 shares
of common stock to Mr.  Hreljanovic  in 1998 to liquidate the amount owed to him
for his salary and the additional compensation.

     Under the terms of this employment  agreement,  the Chief Executive Officer
of the  Company  is  entitled  to receive a cash  bonus of a  percentage  of the
Company's  pre-tax  profits if the Company's  pre-tax profit  exceeds  $100,000.

     Additionally, if during the term, the employment agreement is terminated by
the Company after a changein control (as defined by the agreement),  the officer
is entitled to a lump sum cash payment  equal to  approximately  three times his
base salary.

     Mr. Vazquez has an employment agreement, as amended, with PCI which expires
on June 30, 1998 and provides for his employment as President of PCI with annual
compensation  of $135,000.  In  accordance  with an  amendment to Mr.  Vazquez's
employment  agreement,  in February 1998 he received options to purchase 800,000
shares of the  Company's  common  stock at $.075 per share in  consideration  to
forego receipt of 368,320 shares of common stock.  Additionally,  Mr. Vazquez is
entitled to an annual  bonus to be determined  by the Board of Directors of the
Company and options to purchase  1,180,000  shares of the Company's Common Stock
under the Company's 1996 Incentive  Stock Option Plan. Such options will vest as
Mr.  Vazquez  achieves  certain  annual gross revenue  thresholds,  ranging from
$1,000,000  to  $5,000,000  during  the term of his  employment  agreement.  The
exercise  price of these  options  will be equal to the fair market value of the
shares on each date such options vest.

STOCK OPTION PLANS

1989 Restricted  Stock,  Non-Qualified  and Incentive Stock Option Plan

     On December 7, 1989, a restricted stock,  non-qualified and incentive stock
option plan was adopted.  The Company has  authorized  375,000  shares of common
stock to be  reserved  for  issuance  thereunder.  Under the terms of this plan,
restricted   stock   awards  are   authorized   for   employees.   Additionally,
non-qualified  options may be granted to employees,  directors,  consultants and
others who render  services to the Company.  269,600 shares of restricted  stock
have been issued to  employees,  pursuant  to the plans.  In  addition,  250,000
options  have been issued to the Chief  Executive  Officer  under the Plan.  The
Company  intends to increase  the number of shares  authorized  under this Plan.
Under the terms of the restricted  stock awards,  restricted stock may be issued
to  employees  in  consideration  of (i) cash in an amount not less than the par
value thereof or such greater  amount as may be  determined by the  Compensation
Committee of the Board of Directors  and (ii) the  continued  employment  of the
employees during the restricted period,  which will in no event be less than one
year.
<PAGE>

     Under the Non-Qualified  Option aspect of the Incentive  Compensation Plan,
options may be granted to employee, directors, consultants and other individuals
who render  services to the Company.  The option  price for each option  granted
will be determined by the Compensation  Committee.  Each option will have a term
of not more  than 10 years  from the  date of grant  and may be  exercisable  in
installments as prescribed by the Compensation Committee.

     The Company's  Incentive Stock Option aspect of the Incentive  Compensation
Plan provides for granting  incentive options to employees to purchase shares of
common  stock of the Company at option  prices  which are not less than the fair
market value of the Company's common stock at the date of grant, except that any
Incentive  Option granted to an employee  holding 10% or more of the outstanding
voting  securities of the Company must be for an option price not less than 110%
of fair market value.

     Incentive Options granted under the Incentive Compensation Plan will expire
not more than 10 years from the date of the grant  (five  years from the date of
the grant in the case of a 10% Stockholder), and the Incentive Option agreements
entered into with the holders will specify the extent to which Incentive Options
may be exercised during their respective  terms. The aggregate fair market value
of the shares of common  stock  subject to  Incentive  Options that become first
exercisable  by an  optionee  in a  particular  calendar  year  may  not  exceed
$100,000.

1996 Stock Option Plan

     On February  12, 1997,  the  shareholders  of the Company  adopted the 1996
Stock Option Plan. The Plan  supplements  the Company's 1989  Restricted  Stock,
Non-Qualified  and Incentive  Stock Option Plan. This Plan allows the Company to
grant   incentive   stock  options,   non-qualified   stock  options  and  stock
appreciation rights  (collectively  "options") to purchase up to an aggregate of
5,000,000  shares of  common  stock to  employees,  including  officers,  and to
non-employees involved in the continuing development and success of the Company.
The terms of the options are to be determined by the Board of Directors. Options
will not have expiration dates later than ten years from the date of grant (five
years from the date of the grant in the case of a 10%  stockholder).  The option
prices may not be less than the fair  market  value of the common  shares on the
date of grant, except that any option granted to an employee holding 10% or more
of the outstanding  voting securities of the Company must be for an option price
not less than 110% of fair market value. An option to purchase 590,000 shares of
common stock was granted to Mr.  Vazquez  under the plan.  No other options have
been granted as of the date of this report.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The  following  table sets forth,  as of March 16,  1998:  (i) the name and
address  of each  person  who owns of  record  or who is  known by the  Board of
Directors to be beneficial owner of more than five percent (5%) of the Company's
outstanding common stock, (ii) each of the Company's Directors, and (iii) all of
the Company's Executive Officers and Directors as a group.

      NAME AND             BENEFICIAL                PERCENT OF COMMON
      ADDRESS              OWNERSHIP                 STOCK OUTSTANDING

Vlado Paul Hreljanovic
111 Great Neck Road
Suite 604
Great Neck, NY 11021      10,028,119 (1)                    20.5%

Harold A. Horowitz
111 Great Neck Road
Suite 604
Great Neck, NY 11201         645,000                         1.3%

Peter W. Feldman
777 Yamato Road
Suite 135
Boca Raton, FL  33134        982,500                         2.0%

Officers and Directors as a
group (4 Persons)         11,790,119 (1)                    24.1%


(1) Includes options to purchase 250,000 shares.
<PAGE>
ITEM 12.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The  Company  paid  rent  under two  sub-leases  during  1997 and 1996,  to
companies  affiliated with the Chief Executive Officer of the Company. The rents
paid and terms under the subleases are substantially the same as those under the
affiliate's  lease  agreements  with the  landlords.  Rent expense for the years
ended December 31, 1997 and 1996 was $75,000 and $95,000, respectively. In prior
years,  the Company made advances to or received  advances from these  companies
for working  capital  requirements.  As a result,  at  December  31,  1997,  the
balances due from(to) the affiliates were approximately $4,800 and ($2,800.)

     As of December 31, 1997 and 1996, the balance due from a company affiliated
with the Chief  Executive  Officer  of the  Company  was  $13,805  and  $55,205,
respectively.  This balance is a result of advances made,  from time to time, to
the  affiliated  company  through  December 31, 1992.  Based upon the affiliates
inability to repay these amounts,  $41,400 of the  outstanding  balance has been
written-off during 1997.

     The  Company  acquired  distribution  rights  to two  films  from a company
affiliated  with the  Chief  Executive  Officer  of the  Company  for a ten year
license  period,  which expires on June 5, 1998. The Company is obligated to pay
such company  producers fees at the contract rate. Such payments will be charged
against earnings.  In 1997 and 1996, no payments were made to such company,  and
no revenue was recognized from such films.

     During 1997 and 1996, the Company's principal  shareholder and officer made
loans directly to the Company,  made payments to unaffiliated  parties on behalf
of the Company,  incurred  travel  expenses  while  conducting  business for the
Company,  and received  repayment of loans and reimbursement of certain expenses
during the year.  With regard to loans,  interest  accrues at 12% per annum.  At
December  31,  1997 and 1996,  the  balance  due  (to)from  the  Officer for all
activities above, was ($69,000) and $23,000, respectively.

     One of the  Company's  directors was a partner in a law firm engaged by the
Company as general counsel.  As  consideration  for his efforts on behalf of the
Company in 1997,  the Board member received 200,000 shares,  valued at $6,000
and $2,820 as  additional  compensation.  As  consideration  for his  efforts on
behalf of the Company in 1996, the Board member received  50,000 shares,  valued
at $4,500.  During  1997 and 1996,  the law firm  billed  nothing  in fees.  The
outstanding  balance  due the firm was  approximately  $100,000 in both 1997 and
1996.

     In January of 1998,  the Company's  President and Chief  Executive  Officer
received  approximately  $44,000  of the  balance  owed  to  him  (approximately
$69,000),  which was used specifically for the acquisition of an automobile.  As
inducement  to the Company for the  repayment  to him, the officer has agreed to
forego an auto  allowance  for the next  twelve  months to which he is  entitled
under his employment agreement.

     Due to a working capital deficit, the Company was not able to pay salary in
cash  to  Mr.  Hreljanovic  pursuant  to  his  employment  agreement.   Further,
additional  amounts  have  accrued  to Mr.  Hreljanovic  for  achieving  certain
performance  benchmarks  for  obtaining  new  hospital  contracts.  In the  best
interests of the Company,  in lieu of cash, Mr. Hreljanovic has agreed to accept
and the Board of Directors  has approved the issuance of shares of the Company's
common stock as payment for unpaid salary.  The Company issued  6,091,006 shares
of common stock to Mr.  Hreljanovic  in 1998 to liquidate the amount owed to him
for his salary and the additional compensation.

ITEM 13.  EXHIBITS, LIST AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit  Description

 2.1  Agreement  and Plan of Merger dated as of January 20, 1997 between the
      Registrant and Juniper Group, Inc., a Nevada corporation (2)

 3.1  Certificate of Incorporation of the Registrant, as amended (1)

 3.2  Amendment to the Certificate of Incorporation of the Registrant,  filed
      March 7, 1997 (3)

 3.3  Certificate of Incorporation of Juniper Group, Inc., a Nevada
      corporation.(2)

 3.4  By-Laws of the Registrant (1)

 3.5  Amendment to the By-Laws of the Registrant approved by the shareholders
      of the Registrant on February 12, 1997 (2)

 3.6  By-Laws of Juniper Group, Inc., a Nevada corporation (2)

 4.1  1996 Stock Option Plan (2)
<PAGE>

10.1  Employment Agreement between the Registrant and V. Paul Hreljanovic,
      as amended (1)

10.3  Agreement Between Juniper Healthcare Containment Systems, Inc. and the
      Guardian Life Insurance Company, effective January 1, 1996 (1)

10.4  Consulting Agreement between Registrant and Anthony V. Milone, dated June
      7, 1994, as amended August 31, 1994 and May 18, 1995 (1)

10.5  Employment Agreement between PCI, Inc. and Richard O. Vazquez, dated June
      7, 1996 (3)

10.6  Joint Venture Agreement between Juniper Healthcare Containment Systems,
      Inc. and Health Containment Corporation dated March 1, 1996 (3)

21.1  Subsidiaries

23.1  Consent of Independent Certified Public Accountants

27.1  Financial Data Schedule
______________________________


     (1) Incorporated by reference to the Company's annual report on Form 10-KSB
         for the fiscal year ended December 31, 1995

     (2) Incorporated  by reference to the  Company's  Proxy  Statement for its
         Annual Meeting held in February 1997

     (3) Incorporated by reference to the Company's annual report on Form 10-KSB
         for the fiscal year ended December 31, 1996

(b)      Reports on Form 8-K.

     The Company filed a Form 8-K on November 6, 1997,  relating to the sales of
1,783,332 shares of the Company's common stock at an offering prices of $.06 per
share in  accordance  with  Regulation S under the  Securities  Act of 1933,  as
amended.

     The Company filed a Form 8-K on November 14, 1997, relating to the sales of
2,017,682 shares of the Company's common stock at an offering prices of $.06 per
share in  accordance  with  Regulation S under the  Securities  Act of 1933,  as
amended.


<PAGE>

                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES


                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS






                                                                      Page

Report of Independent Certified Public Accountants................... F-2

Consolidated Balance Sheets as of December 31, 1997 and 1996........  F-3

Consolidated Statements of Income
for the two years ended December 31, 1997...........................  F-4

Consolidated Statements of Cash Flows
for the two years ended December 31, 1997...........................  F-5

Consolidated Statements of Shareholders'
Equity for the two years ended December 31, 1997.................     F-6

Notes to Consolidated Financial Statements............................F-7













































                                       F-1
<PAGE>





               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS





Board of Directors and Shareholders
JUNIPER GROUP, INC.


    We have audited the  accompanying  consolidated  balance  sheets of Juniper
Group,  Inc. and  subsidiaries as of December 31, 1997 and 1996, and the related
consolidated  statements of income, cash flows and shareholders' equity for each
of the  years  then  ended.  These  consolidated  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards.  Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management, as well as, evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

     In our opinion,  the consolidated  financial  statements  referred to above
present  fairly,  in all material  respects,  the financial  position of Juniper
Group,  Inc. and  subsidiaries as of December 31, 1997 and 1996, and the results
of their  operations  and their cash flows for each of the years then ended,  in
conformity with generally accepted accounting principles.

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming the Company will continue as a going concern. As discussed in Note 8 to
the consolidated financial statements, the Company has suffered recurring losses
from operations which raises  substantial doubt about its ability to continue as
a going concern.  Management's  plans regarding those matters are also described
in Note 8. The consolidated  financial statements do not include any adjustments
that might result from the outcome of this uncertainty.




                           /s/GOLDSTEIN & GANZ, CPA's, P.C.







Great Neck, New York
March 30, 1998





















                                       F-2

<PAGE>


                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

                           CONSOLIDATED BALANCE SHEETS


                                                       December      December
                   ASSETS                              31, 1997      31, 1996
                                                       ---------    -----------
Current Assets
  Cash ...........................................   $    30,187     $   14,593
  Accounts receivable - trade ....................       363,480        795,091
  Due from affiliates ............................        15,570         59,359
  Prepaid expenses and other current assets ......       141,098        105,995
  Due from officer ...............................          --           23,318
                                                      ----------     ----------
      Total current assets .......................       550,335        998,356

  Film licenses ..................................     2,954,562      2,963,729
  Property and equipment net of accumulated
    depreciation of $127,382 and $98,564
    respectively .................................        98,911        114,738
  Other assets ...................................         2,049          3,519
                                                     -----------    -----------
                                                     $ 3,605,857    $ 4,080,342
                                                     ===========    ===========

       LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Accounts payable and accrued expenses ..........   $   835,427    $ 1,177,736
  Notes payable - current ........................       342,571        105,587
  Due to producers - current .....................        62,086         67,556
  Due to officer .................................        68,662           --
  Due to shareholders ............................         7,000          7,000
                                                     -----------    -----------
     Total current liabilities ...................     1,315,746      1,357,879

Notes payable - long term ........................          --            1,069
Due to producers - long term .....................        93,814        196,741
                                                     -----------    -----------
       Total liabilities .........................     1,409,560      1,555,689
                                                     -----------    -----------

Shareholders' Equity
  12% Non-voting convertible redeemable
   preferred stock: $.10 par value, 875,000
   shares authorized, 235,900 shares issued
   and outstanding at December 31, 1997, and
   December 31, 1996: aggregate liquidation
   preference, $471,800 at December 31, 1997
   and December 31, 1996 .........................        23,590         23,590
  Common Stock - $.001 par value,300,000,000
   shares authorized, 37,995,083 and 19,027,516
   issued and outstanding at December 31, 1997
   and December 31, 1996, respectively ...........        37,995         19,027
  Capital contributions in excess of par:
   Attributed to preferred stock .................       210,303        210,303
   Attributed to common stock ....................     7,934,744      7,160,265
  Retained earnings (deficit) ....................    (6,010,335)    (4,888,532)
                                                     -----------    -----------
   Total shareholders' equity ....................     2,196,297      2,524,653
                                                     -----------    -----------
                                                     $ 3,605,857    $ 4,080,342
                                                     ===========    ===========

                See Notes to Consolidated Financial Statements

                                       F-3
                                     <PAGE>

                               JUNIPER GROUP, INC
                            AND SUBSIDIARY COMPANIES

                        CONSOLIDATED STATEMENTS OF INCOME





                                                 Year Ended December 31,
                                                  1997            1996
                                              ------------    ------------
Revenues:
     Healthcare ..........................   $   1,366,666    $  2,388,538
     Entertainment .......................          20,000         114,650
                                              ------------    ------------
                                                 1,386,666       2,503,188
                                              ------------    ------------

Operating Costs:
     Healthcare ..........................         598,702       1,258,746
     Entertainment .......................           7,338          59,797
Selling, general and administrative expenses     1,902,429       1,874,805
                                              ------------    ------------
                                                 2,508,469       3,193,348
                                              ------------    ------------

Net income (loss) .........................  $  (1,121,803)   $   (690,160)
                                              ============     ===========
Weighted average number of shares outstanding   25,043,863      17,149,602
                                              ============    ============
Net income (loss) per common share .......... $      (0.05)  $       (0.04)
                                              ============    ============



































                 See Notes to Consolidated Financial Statements

                                       F-4
<PAGE>

                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

                      CONSOLIDATED STATEMENTS OF CASH FLOWS

                                                     Year Ended December 31,
                                                       1997         1996
                                                     ---------    ---------
Operating Activities
Net income (loss) ................................  $(1,121,803)  $(690,160)
Adjustments to reconcile net cash provided
  by operating activities:
 Amortization of film licenses ...................        9,167      76,949
 Depreciation expense ............................       37,668      42,766
 Payment of various expenses with equity .........      134,589      19,676
 Payment of directors' compensation with equity ..       18,000       9,400
 Payment of employees' compensation with equity ..       32,208      64,063
Changes in assets and liabilities:
 Accounts receivable .............................      431,611       9,590
 Prepaid expenses and other current assets .......      (35,103)     44,153
 Other assets ....................................        1,470      (1,123)
 Due to/from officers and shareholders ...........       91,980     (27,884)
 Due from affiliates .............................       43,789      26,728
 Accounts payable and accrued expenses ...........     (342,309)    299,124
                                                      ---------   ---------
 Net cash provided from (used for)
   operating activities ..........................     (698,733)   (126,718)
                                                      ---------   ---------
Investing activities:
 Purchase of equipment ............................     (21,841)    (34,801)
 Purchase of film licenses ........................        --       (11,000)
                                                      ---------   ---------
                                                        (21,841)    (45,801)

Financing activities:
 Reduction in borrowings ...........................    (75,815)   (127,259)
 Proceeds from borrowings ..........................    466,730        --
 Payments to and on behalf of producers ............    (10,197)    (83,031)
 Proceeds from exercise of options .................    203,500     257,844
 Proceeds from private placements ..................    151,950      10,000
                                                      ---------   ---------
 Net cash provided from (used for)
   financing activities ............................    736,168      57,554
                                                      ---------   ---------
 Net increase (decrease ) in cash ..................     15,594    (114,965)
 Cash at beginning of period .......................     14,593     129,558
                                                      ---------   ---------
 Cash at end of period ............................. $   30,187   $  14,593
                                                      =========   =========


















                 See Notes to Consolidated Financial Statements


                                       F-5
<PAGE>


                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

                 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
                                        Preferred Stock               Common Stock
                                        ---------------               ------------
                                                    Capital                           Capital
                                                 Contributions                    Contributions   Retained
                                   Par Value       in excess       Par Value        in excess     Earnings
                                   at $.10          of par         at $.001           of par      (Deficit)           Total

<S>               <C> <C>         <C>             <C>             <C>              <C>          <C>               <C>
Balance, December 31, 1995         $ 23,590        $210,303        $15,505          $6,741,804   $(4,198,372)      $2,792,830

Proceeds from private
  placements                             -               -              40               9,960           -             10,000
Shares issued to producers for
  acquisition of film licenses           -               -             350              48,650           -             49,000
Shares issued as payment for
  various expenses                       -               -             240              19,436           -             19,676
Shares issued as compensation
  to employees                           -               -             755              63,308           -             64,063
Shares issued to members of
  the Board of Directors                 -               -             150               9,250           -              9,400
Shares issued from exercise of
  stock options                                                      1,587             256,257           -            257,844
Shares issued to convert debt
  to equity                                                            400              11,600           -             12,000
Net loss for the year ended
  December 31, 1996                      -               -               -                -         (690,160)        (690,160)
                                   _______         ________        _______          __________   ___________       __________
Balance, December 31, 1996          23,590          210,303         19,027           7,160,265    (4,888,532)       2,524,653


Proceeds from private
  placements                             -               -           3,439             148,511           -            151,950
Shares issued as payment for
  various expenses                       -               -           2,984             131,605           -            134,589
Shares issued as compensation
  to employees                           -               -           2,467              29,741           -             32,208
Shares issued to members of
  the Board of Directors                 -               -             600              17,400           -             18,000
Shares issued from exercise of
  stock options                                                      3,100             200,400           -            203,500
Shares issued to convert debt
  to equity                                                          6,378             246,822           -            253,200
Net loss for the year ended
  December 31, 1997                      -               -               -                -       (1,121,803)      (1,121,803)
                                   _______         ________        _______          __________   ___________       __________
Balance, December 31, 1997         $23,590         $210,303        $37,995          $7,934,744  $ (6,010,335)      $2,196,297
                  === ====         =======         ========        =======          ==========   ===========       ==========
</TABLE>






                 See Notes to Consolidated Financial Statements

                                       F-6
<PAGE>
                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - Summary of Significant Accounting Policies

  Principles of Consolidation

     The  consolidated   financial   statements  include  the  accounts  of  all
subsidiaries.   Intercompany  profits,   transactions  and  balances  have  been
eliminated in consolidation.

  Joint Venture

     In 1996, one of the Company's  subsidiaries entered into a joint venture in
which it owns a 50% interest.  Accordingly,  50% of the assets,  liabilities and
items of income and expense have been  consolidated in the financial  statements
of the subsidiary,  which are included in the consolidated  financial statements
of the Company.  During 1997 and 1996,  the joint venture  accounted for 43% and
23% of the Company's  revenues,  respectively.  Effective December 17, 1997, the
Joint Venture Agreement was terminated.

  Use of Estimates in the Preparation of Financial Statements

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

  Financial Instruments

     The  estimated  fair values of accounts  receivable,  accounts  payable and
accrued expenses approximate their carrying values because of the short maturity
of these instruments. The Company's debt (i.e. Due to Producers,  Creditor Notes
and other obligations) does not have a ready market.  These debt instruments are
shown on a discounted  basis (see Notes 4 & 5) using market rates  applicable at
the effective  date. If such debt were  discounted  based on current rates,  the
fair value of this debt would not be materially  different  than their  carrying
value.

  Supplemental Cash Flow Information

     Cash  paid for  interest  totaled $12,237 and  $15,796 in 1997 and 1996,
respectively.

     During 1997, the following  transactions occurred which did not require the
use of cash,  but  instead  were paid by the  issuance of the  Company's  common
stock:  payments to producers  amounting to $98,200;  directors  compensation of
$18,000;  payment of corporate  debt  amounting to $155,000;  certain  corporate
expenses amounting to $134,589; and employee compensation amounting to $32,208.

     During 1996, the following  transactions occurred which did not require the
use of cash but instead were paid by the issuance of the Company's common stock:
payments to producers amounting to $49,000; director's compensation of $9,400;
employee compensation  of $64,063;  payment of  corporate  debt  amounting  to
$12,000;  certain corporate expenses amounting to $19,675.

  Accounts Receivable

     The Company estimates an allowance for doubtful  accounts,  which allowance
amounted to  approximately  $108,000 and $163,000 at December 31, 1997 and 1996,
respectively.

  Film Licenses

     Film  costs are  stated  at the lower of  estimated  net  realizable  value
determined on an individual film basis, or cost, net of amortization. Film costs
represent  the  acquisition  of film  rights  for  cash and  guaranteed  minimum
payments.  Producers retain a participation in the profits from the sale of film
rights, however, producer's share of profits is earned only after payment to the
producer  exceeds the guaranteed  minimum,  where minimum  guarantees  exist. In
these instances, the Company records as participation expense an amount equal to
the producer's  share of the profits.  The Company incurs expenses in connection
with its film licenses, and in accordance with license agreements, charges these
expenses  against the liability to producers.  Accordingly,  these  expenses are
treated as payments under the film license agreements.

     When the Company is  obligated to make  guaranteed  minimum  payments  over
periods  greater than one year,  all long term  payments are  reflected at their
present value.  Accordingly,  in such case, original acquisition costs represent
the sum of the  current  amounts  due and the  present  value of the  long  term
payments.

                                       F-7
<PAGE>



                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 1 - Summary of Significant Accounting Policies (Continued)

     The Company acquired distribution rights to eight films for which it has no
financial obligations unless and until the rights are sold to third parties. The
value of such  distribution  rights has not been reflected in the balance sheet.
The Company was able to acquire  these film rights  without  guaranteed  minimum
financial  commitments as a result of its ability to place such films in various
markets.

  Amortization of Film Licenses

     Amortization of film licenses is calculated under the film forecast method.
Accordingly,  licenses are amortized in the proportion  that revenue  recognized
for the period bears to the estimated  future revenue to be received.  Estimated
future  revenue  is  reviewed  annually  and  amortization  rates  are  adjusted
accordingly.

  Property and Equipment

     Property and equipment  including assets under capital leases are stated at
cost.  Depreciation  is  computed  generally  on the  straight-line  method  for
financial reporting purposes over their estimated useful lives.

 Recognition of Revenue from License Agreements

     Revenue from television licensing agreements is recognized when the license
period begins and the licensee and the Company  become  contractually  obligated
under a noncancellable agreement. All revenue recognition for license agreements
is in compliance with the Statement of Financial Accounting Standards No.53.

  Operating Costs

     Operating  costs include costs directly  associated  with earning  revenue.
PCI's  operating  costs  include  salary  or fees  and  travel  expenses  of the
individuals  performing  the  services,  and  sales  commissions.  Containment's
operating  costs  include  the cost of  sub-contractors  and sales  commissions.
Pictures operating costs include film amortization and producer's royalties.

  Major Customers

     During 1997 and 1996,  the  Company had  revenues  from The  Guardian  Life
Insurance Company  ("Guardian"),  that represented 62% and 75% of total revenue,
respectively.  Effective  December  17,  1997,  the  Company  no longer  has any
contractual  arrangement  with the Guardian.  The loss of this business has been
replaced  with a  settlement  agreement  between the  Company  and a  healthcare
professional with whom the Guardian is conducting similiar business. The Company
provided  services to Guardian  in New Jersey and  Connecticut.  The loss of the
contract with Guardian will have a material  adverse effect on the operations of
the Company after 1998.  However,  the Company is pursuing  contracts with other
insurance  companies,  which if successful,  may reduce the Company's dependence
upon Guardian's business.

  Net Income Per Common Share

     In February 1997, the Financial  Accounting  Standards  Board (FASB) issued
SFAS No. 128,  "Earnings per Share," which requires the presentation of both net
income per common share and net income per common share-assuming  dilution.  The
Company adopted the provisions of SFAS No. 128 effective  December 31, 1997. The
adoption  did not  impact  the  Company's  net  income  per  common  share.  The
provisions of SFAS No. 128 preclude the inclusion of any potential common shares
in the computation of any diluted  per-share amounts when a loss from continuing
operations exists. Accordingly, net income per common share-assuming dilution is
not presented.

  Reclassifications

     Certain  amounts in the 1996  financial  statements  were  reclassified  to
conform to the 1997 presentation.


                                       F-8

<PAGE>
                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 2 - Accounts Payable and Accrued Expenses

     At December  31,  1997 and 1996,  accounts  payable  and  accrued  expenses
consisted  primarily  of legal  fees of  $325,181  and  $303,226,  respectively,
commissions of $50,749 and $110,187, respectively, payroll taxes of $167,425 and
$90,542,  respectively, and the cost of Sub-contractors of $39,985 and $339,366,
respectively.  Other  accruals  relate to selling,  general  and  administrative
expenses incurred in the normal course of business.

NOTE 3 - Film Licenses

     At December  31, 1997 and 1996 film  licenses  amounted to  $2,954,562  and
$2,963,729, respectively. These reflect the Company's original acquisition price
less accumulated  amortization for the distribution  rights to 77 film licenses.
Such  amortization  amounted to $304,536  and  $295,369 at December 31, 1997 and
1996, respectively.

     The  Company has  directed  predominantly  all its time and efforts  toward
building the  healthcare  segment of the business.  Since early 1995, due to the
limited  availability  of capital,  personnel and resources,  the volume of film
sales activity was significantly  diminished.  Although the Company's  resources
and capital  remain  limited,  the Company has begun  directing  efforts  toward
reestablishing a foothold in the film industry. Growth in revenues from the sale
of film licenses is expected in 1998.

     Initially,  the Company  began  promoting  its film library in the domestic
television markets.  Secondarily, it will utilize representatives to attend film
festivals  and  penetrate  foreign  markets,  subject  to  the  Company  capital
resources.

     Based upon the  Company's  estimates  of future  revenue as of December 31,
1997,  approximately 36% of the amortized film licenses will be amortized during
the three years ended  December 31, 2000.  Management  expects that greater than
76% of the film  licenses  applicable  to related  television  and films will be
amortized by 2002.

     The Company's  policy is to amortize film licenses  under the film forecast
method.  Depending  upon the  Company's  success in marketing  and achieving its
sales forecast,  it is reasonably  possible that the Company's  estimate that it
will  recover the carrying  amount of its film  library from future  operations,
will change in the near term. As a result of this potential change, the carrying
amount of the film library may be reduced materially in the near term.

NOTE 4 - Notes Payable

     The  composition  of Notes  Payable at December 31, 1997 and 1996,  were as
follows:

                                                          1997             1996
                                                          ----             ----
Demand Notes bearing interest at varying rate
of up to 2% per month                                  $125,000         $   -

12% Convertible Secured Promisory Notes
 maturing at varying dates through July 31, 1998
 (see Note 6)                                           100,000             -

Settlement agreements and arbitration awards
 maturing at varying dates through
 September 1998                                          76,800           47,873

Capital equipment loans maturing July 1998
 bearing interest at varying rates to 9.0%
 requiring monthly payments of $2,031                    40,771           58,783
                                                       --------         --------
                                                        342,571          106,656

Less current portion .........................          342,571          105,587
                                                       --------         --------
Long term portion ............................         $  -             $  1,069
                                                       ========         ========

                                 F-9
<PAGE>

                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 5 - Producer's Minimum Guarantees and Participations

     Obligations  incurred in connection  with the acquisition of film licenses,
including minimum  guarantees,  producer's  participations  and settlements with
producers were $155,900 at December 31, 1997.  During 1997, the Company  reduced
its obligations to producers by $108,397.

     The  following  schedule  summarizes  the  maturities  of the  balances  at
December 31, 1997:

                      1998                   $ 62,086
                      1999                     43,020
                      2000                     11,929
                      2001                     34,370
                      2002                      4,495
                                             --------
                                             $155,900
                                             ========


NOTE 6 - Shareholders' Equity

     Throughout  1997, the Company issued common stock through  various  private
placements  and the  exercise  of  options.  The prices at which the shares were
negotiated  and  sold  varied,  depending  upon  the bid and ask  prices  of the
Company's  common stock quoted on the NASDAQ stock  exchange.  In the aggregate,
the Company received $355,450 for 6,539,172 shares,  and $267,800 for 1,627,000
shares of common stock in 1997 and 1996, respectively.

     In connection with payments to creditors for notes payable and indebtedness
to  producers  (including  for the  acquisition  of films),  the Company  issued
6,377,510 and 750,000 shares, valued at $253,200 and $61,000,  respectively.  In
connection with payables for operating activities,  the Company issued 2,984,136
shares,  valued at $134,589,  and 240,000  shares  valued at $19,676 in 1997 and
1996, respectively.  During the year, as compensation to its Board of Directors,
the Company  issued  600,000  shares of common  stock,  valued at  $18,000,  and
150,000 shares valued at $9,400 in 1997 and 1996, respectively.

     Also, in 1997 and 1996,  the Company  issued  2,466,749  shares and 755,829
shares  to   employees   as   compensation,   valued  at  $32,208  and  $64,063,
respectively.

     All shares issued in 1997 and 1996,  were not registered and, as such, were
restricted shares under the Securities Act of 1933, as amended.

     Net income  (loss) per common share for 1997 and 1996 has been  computed by
dividing net income  (loss),  after  preferred  stock dividend  requirements  of
$56,616 in 1997 and 1996,  by the  weighted  average  number  of common  shares
outstanding throughout the year of 25,043,863 and 17,149,602, respectively.

  Options Granted

     In  January  1994,  in  connection  with  an  amendment  to the  Employment
Agreement for the  President and Chief  Executive  Officer,  the Company  issued
options to purchase  250,000 shares of common stock at $.407 per share,  110% of
the market value at the effective  date (see Note 9). The options are for a term
of five years. At December 31, 1997, none of the options had been exercised.

     On October 4, 1994, the Company  engaged a consultant to assist the Company
in  public  relations  and  marketing  of  certain  products  and  services.  In
consideration  for these services,  the consultant  received options to purchase
100,005 shares of the Company's common stock at $.31 per share. During 1997, the
option price was amended to $.06 per share and all options were exercised.

     On February  26,  1996,  the Company  granted  options to purchase  687,000
shares of common  stock to a  consultant  in  consideration  for  assistance  in
developing  new  markets in Latin  America in  healthcare  services  targeted to
ethnic markets.  During 1996,  400,000  options were exercised.  At December 31,
1997,  287,000  options  remained   outstanding.   On  February  28,  1998,  all
outstanding options expired.

                                      F-10
<PAGE>
                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 6 - Shareholders' Equity (Continued)

     On August 1, 1997,  the Company  entered  into a consulting  agreement  for
promoting  and  marketing  of  PCI's  products  and  services  in the  state  of
Connecticut. As consideration, the Company granted an option to purchase 500,000
shares of common stock at $.095 per share.  The term of the option was one year.
On September 30, 1997, all 500,000 options were exercised.

     On July 21, 1997,  the Company  entered into an agreement to receive public
relations  and  communication  services to  develop,  implement  and  maintain a
program  to  increase  the  investing  community's  awareness  of the  Company's
activities.  In addition  to  receiving a monthly  fee,  the Company  granted an
option to purchase 2,500,000 shares of common stock at an exercise price of $.06
per share.  The options were issued for a term through July 21, 2002. On October
1, 1997, all options were exercised.

     In accordance wth an amendment to the employment agreement of the President
of PCI, the Company issued  options to purchase  800,000 shares of the Company's
common stock at $.075 per share in  consideration  to forego  receipt of 368,320
shares of common stock issuable pursuant to the terms of his original agreement.
Additionally,  this key employee is entitled to an annual bonus to be determined
by the Board of  Directors  of the Company  and  options to  purchase  1,180,000
shares of the Company's  Common Stock under the Company's 1996  Incentive  Stock
Option Plan.  Such options will vest as certain annual gross revenue  thresholds
are achieved during the term of his employment agreement.  The exercise price of
these  options will be equal to the fair market value of the shares on each date
such options vest.

Warrants and Convertible Preferred Stock

     On May 1, 1997, the Company's  Class A Warrants  expired.

     Each of the Company's Class B Warrants  entitle the holder to purchase,  at
any time through May 1, 1998,  one share of Common Stock at a price of $5.00 per
share. The Company's Preferred Stock entitles the holder to dividends equivalent
to a rate of 12% of the  Preferred  Stock  liquidation  preference  of $2.00 per
annum  (or $.24 per  annum)  per  share  payable  quarterly  on March 1, June 1,
September  1,  December  1 in cash or  common  stock of the  Company  having  an
equivalent fair market value,  thereafter.  Further, each share of the Preferred
Stock is  convertible  at the holder's  option into two shares of Common  Stock.
Holders of warrants  are  protected  against  dilution  upon the  occurrence  of
certain  events.  Holders  of  warrants  do not have  voting  power  and are not
entitled to any dividends. The Company, upon not less than 30 days prior written
notice and  providing  the  average  closing  price for the common  stock for 10
consecutive trading days exceeds $2.50 or higher, may redeem all of the warrants
for $.05 per  warrant.  At December  31,  1997,  198,000  Class B Warrants  were
outstanding.

     At December 31, 1997,  235,900 shares of Convertible  Preferred  Stock were
outstanding.   Pending  effectiveness  of  a  post-effective  amendment  to  the
Company's  registration  statement,  the outstanding  Preferred  Stock,  Class B
Warrants cannot be converted or exercised.

     On May 31, 1995, the Company entered into an investment  banking  agreement
for a five year  period.  In  consideration,  the  Company  issued  warrants  to
purchase  567,503  shares of the Company's  common stock at an exercise price of
$.135 per share.  The warrants are  exercisable  for five years,  commencing  at
various  dates from May 31, 1996 to May 31,  2001.  At December  31,  1996,  all
warrants were outstanding.  In connection with the investment  banking agreement
and the services  provided to complete that  agreement,  the Company issued to a
consultant,  warrants to purchase 56,750 shares of the Company's common stock at
an exercise price of $.135 per share.  These warrants are  exercisable  for five
years,  commencing  at  various  dates  from May 31,  1996 to May 31,  2001.  At
December 31, 1996, all warrants were outstanding.

  Convertible Debt

     During July and August of 1997,  the Company issued a series of 12% Secured
Convertible Promissory Notes which, in the aggregate,  amounted to $100,000 (see
Note 4). The notes are secured by the Company's  Film  Licenses,  as well as the
personal guarantee, as to payment, of the President and Chief Executive Officer.
The notes are  convertible  after 90 days from the date  issued  into  2,000,000
shares of the Company's common stock (conversion price of $.05 per share).


                                      F-11
<PAGE>
                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 7 - Related Parties

     The  Company  paid  rent  under two  sub-leases  during  1997 and 1996,  to
companies  affiliated with the Chief Executive Officer. The rents paid and terms
under the subleases are  substantially  the same as those under the  affiliate's
lease  agreements with the landlords.  Rent expense for the years ended December
31, 1997, and 1996 was approximately $75,000 and $95,000, respectively (see Note
8). In prior years,  the Company made advances to or received  advances from the
affiliates for working capital requirements.  As a result, at December 31, 1997,
the balances due to one affiliate was approximately $2,800 and the balance due
from the second affiliate was approximately $4,800.

     The  Company  acquired  distribution  rights  to two  films  from a company
affiliated with the Chief Executive Officer for a ten year license period, which
expires  on June  5,  1998.  The  Company  is  obligated  to pay the  affiliated
producers  fees at the contract  rate.  Such  payments  will be charged  against
earnings.  In 1997 and 1996,  no  payments  were made to the  affiliate,  and no
revenue was recognized.

     The  Company  owns  distribution  rights to two films  which were  acquired
through  a company  affiliated  with the Chief  Executive  Officer,  that is the
exclusive  agent for the producers.  This  exclusive  agent is 100% owned by the
principal  shareholder of the Company, but receives no compensation for the sale
of the licensing rights. Additionally,  after recoupment of original acquisition
costs, the principal  shareholder has a 5% interest as a producer in the revenue
received by the  unaffiliated  entities.  The  Company  has  received no revenue
relating to these films during 1997 and 1996.


     As of December 31, 1997 and 1996, the balance due from a company affiliated
with the Chief  Executive  Officer  of the  Company  was  $13,805  and  $55,205,
respectively.  This balance is a result of advances made,  from time to time, to
the  affiliated  company  through  December 31, 1992.  Based upon the affiliates
inability to repay these amounts,  $41,400 of the  outstanding  balance has been
written-off during 1997.

     Throughout 1997, the Company's principal shareholder and officer made loans
to, and payments on behalf of the Company and received payments from the Company
from time to time. The largest net balance due from the officer was $34,250. The
net outstanding balance due to the officer at December 31, 1997, was $68,662.

     One of the  Company's  directors was a partner in a law firm engaged by the
Company as general counsel.  As  consideration  for his efforts on behalf of the
Company,  the Board Member  received  200,000 Shares,  valued at $6,000.  During
1997,  the law firm  billed  nothing in fees,  and at  December  31,  1997,  the
outstanding balance due the firm was approximately $100,000.

     The  Company's  President  and Chief  Executive  Officer  (see Note 6), was
issued 2,522,569 shares of common stock,  valued at $57,713, (of which,  200,000
shares  valued  at  $6,000,  was  for  services  as a  member  of the  Board  of
Directors).  Further,  the Company  issued  400,000  shares valued at $12,000 to
other outside directors.

NOTE 8 - Commitments and Contingencies

  Leases

     The Company  leased its New York office  facilities  under a sublease.  The
Florida office lease expired on November 30, 1997.  The rent is currently  being
paid on a month to month basis. The New York lease expires in May 2002 (see Note
7). Future minimum annual base rental commitments as of December 31, 1997 are as
follows:

                1998                       59,936
                1999                       61,962
                2000                       63,988
                2001                       66,014
                2002                       27,013
                                         --------
                                         $278,913
                                         ========


                                      F-12
<PAGE>
                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 8 - Commitments and Contingencies (Continued)

  License Agreements

     In some  instances,  film licensors have retained an interest in the future
sale of  distribution  rights owned by the Company above the guaranteed  minimum
payments.  Accordingly,  the Company may become obligated for additional license
fees as sales occur in the future.

  Employment Agreements

     In April 1996,  the Company  entered into an  amendment  to the  employment
agreement with the President and Chief Executive  Officer of the Company.  Under
the terms of the agreement, as amended, the officer will remain employed through
April 2000, at an annual salary of $150,000  adjusted annually for the CPI index
beginning  in 1995.  The  officer  will also  receive  reimbursement  of certain
expenses  and  insurance  (see Note 7) and certain  options to and shares of the
Company's  common  stock (see Note 6).  Additionally,  the  officer  may, in the
future,  receive  shares of the  Company's  common  stock as  consideration  for
raising funds for the Company.  Further, should the officer become disabled, the
Company is obligated to provide disability income for four years.

     Under the terms of this employment  agreement,  the Chief Executive Officer
of the Company is entitled  to receive a cash bonus when the  Company's  pre-tax
profit exceeds $100,000.

     Additionally,  if the  employment  agreement is  terminated  by the Company
after a change in control (as defined by the agreement), the officer is entitled
to a lump sum cash payment equal to approximately three times his base salary.

     Due to a working capital deficit, the Company was not able to pay salary in
cash  to  Mr.  Hreljanovic  pursuant  to  his  employment  agreement.   Further,
additional  amounts  have  accrued  to Mr.  Hreljanovic  for  achieving  certain
performance  benchmarks  for  obtaining  new  hospital  contracts.  In the  best
interests of the Company,  in lieu of cash, Mr. Hreljanovic has agreed to accept
and the Board of Directors  has approved the issuance of shares of the Company's
common stock as payment for unpaid salary.  The Company issued  6,091,006 shares
of common stock to Mr.  Hreljanovic  in 1998 to liquidate the amount owed to him
for his salary and the additional compensation.

     Mr. Vazquez has an employment agreement, as amended, with PCI which expires
on June 30, 1998 and provides for his employment as President of PCI with annual
compensation  of $135,000.  In  accordance  with an  amendment to Mr.  Vazquez's
employment agreement,  in 1998 he received options to purchase 800,000 shares of
the Company's common stock at $.075 per share in consideration to forego receipt
of 368,320 shares of common stock.  Additionally,  Mr. Vazquez is entitled to an
annual  bonus to be  determined  by the Board of  Directors  of the  Company and
options to purchase  1,180,000  shares of the  Company's  Common Stock under the
Company's  1996  Incentive  Stock  Option  Plan.  Such  options will vest as Mr.
Vazquez  achieves  certain  annual  gross  revenue   thresholds,   ranging  from
$1,000,000 to $5,000,000 during the term of his employment agreement.

Preemptive Rights

     Shareholders  of a New  York  corporation  have  preemptive  rights  unless
otherwise provided in the certificate of incorporation or bylaws. Until February
12, 1997, the Company's  Certificate of Incorporation did not limit or eliminate
the Shareholders' preemptive rights.  Accordingly,  if the Company were to offer
to sell for cash additional shares of common stock or shares convertible into or
exchangeable for common stock, each Shareholder would have the right to purchase
that number of shares as would enable him to maintain his proportionate interest
in the Company's common stock.

     The Company has recently determined that, notwithstanding the Shareholders'
preemptive  rights,  the  Company  has  issued  shares on a number of  occasions
without offering preemptive rights to existing Shareholders or procuring waivers
of their preemptive  rights.  No Shareholder has alleged any damage resulting to
him as a result of the sale of shares of  common  stock by the  Company  without
offering  preemptive  rights.  The amount of damages incurred by Shareholders by
reason of failure to offer preemptive  rights, if any, is not ascertainable with
any  degree  of  accuracy.  Management  believes  that if any such  claims  were
asserted, the Company may have valid defenses.



                                      F-13
<PAGE>
                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 8 - Commitments and Contingencies (Continued)

Litigation

     On May 22, 1996, two parties  commenced an action against the Company,  its
CEO and an affiliate of the CEO seeking damages in the amount of $464,470,  plus
interest  alleging  that the  Company  has  successor  liability  for a judgment
entered  in March of 1993 by the  Plaintiffs  against  Juniper  Releasing,  Inc.
("Releasing"),  a company  affiliated with the Company's CEO. It is alleged that
the  Company  was formed as a successor  to  Releasing  and that the Company and
others  transferred  assets out of Releasing to avoid the payment of Releasing's
creditors.  The Company is vigorously defending the allegations and has asserted
that the claims are without merit and are time barred.  Management  believes the
outcome  of this  matter  will not have a  material  effect  upon the  financial
condition of the Company.

Going Concern

As shown in the accompanying financial statements, the Company's:

* Revenue decreased to $1,387,000 in 1997, from $2,503,000 in 1996;
* Net loss increased to ($1,122,000) in 1997, from ($690,000) in 1996;
* Working capital  decreased from a negative  $360,000 at December 31, 1996,
  to a  negative $765,000 at December 31, 1997.

     Additionally,  the Company has, over the past several years, worked closely
with a  healthcare  professional  to bring the  Company  both  health  insurance
company group plan customers,  as well as, professional healthcare providers and
networks.   The   healthcare   professional   has  assisted  in  arranging   the
relationships  between the Company,  the Guardian,  and the network of providers
previously  under  contract with the Company.  Effective  December 17, 1997, the
Company no longer has any contractual  arrangement with the healthcare  provider
or the Guardian.  The loss of this business has been temporarily replaced with a
settlement agreement between the Company and a healthcare professional with whom
the Guardian is conducting  similar business.  The loss of the contract with the
Guardian will have a material  adverse  effect on the  operations of the Company
after 1998.

     The fact that the Company continued to sustain losses in 1997; has negative
working  capital at December  31, 1997;  still  requires  additional  sources of
outside cash to sustain operations, and has lost a material contract,  continues
to create  uncertainty  about  the  Company's  ability  to  continue  as a going
concern.

     Management  of the Company has  developed a plan to reduce its  liabilities
and improve cash flow through expanding  operations and raising additional funds
either  through the  issuance  of debt or equity.  The ability of the Company to
continue as a going  concern is dependent  upon the Company's  ability to raise
additional  funds either  through the issuance of debt or the sale of additional
common  stock and the success of  Management's  plan to expand  operations.  The
Company  anticipates  that it will be able to raise the  necessary  funds it may
require for the remainder of 1998 through public or private sales of securities.
The financial  statements do not include any adjustments that might be necessary
if the Company is unable to continue as a going concern.

NOTE 9 - Incentive Compensation Plans

1989 Restricted Stock, Non-Qualified and Incentive Stock Option Plan

     On December 7, 1989, a restricted stock,  non-qualified and incentive stock
option plan was adopted.  The Company has  authorized  375,000  shares of common
stock to be  reserved  for  issuance  thereunder.  Under the terms of this plan,
restricted   stock   awards  are   authorized   for   employees.   Additionally,
non-qualified  options may be granted to employees,  directors,  consultants and
others who render  services to the  Company.  Under the terms of the  restricted
stock awards,  restricted  stock may be issued to employees in  consideration of
(i) cash in an amount not less than the par value thereof or such greater amount
as may be determined by the Compensation Committee of the Board of Directors and
(ii) the continued employment of the employees during the restricted period. The
Compensation Committee sets the terms of the restricted period, which will in no
event be less than one year.  Pursuant to the plan, during 1995, 250,000 options
were issued to the President (see Note 6).


                                      F-14
<PAGE>
                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

NOTE 9 - Incentive Compensation Plans (Continued)

     During  1997,  the Board of  Directors  authorized  the issuance of 252,500
shares of restricted  common stock,  under the incentive  compensation  plans to
employees. These shares were valued at $7,575 (see Note 6).

     Under the Non-Qualified  Option aspect of the Incentive  Compensation Plan,
options  may  be  granted  to  employees,   directors,   consultants  and  other
individuals who render services to the Company. The option price for each option
granted will be determined by the Compensation Committee.  Each option will have
a term of not more than 10 years  from the date of grant and may be  exercisable
in installments as prescribed by the Compensation Committee.

     The Company's  Incentive Stock Option aspect of the Incentive  Compensation
Plan provides for the grant to employees of incentive options to purchase shares
of common stock of the Company at option prices which are not less than the fair
market value of the Company's common stock at the date of grant, except that any
Incentive  Option granted to an employee  holding 10% or more of the outstanding
voting  securities of the Company must be for an option price not less than 110%
of fair market value.

     Incentive Options granted under the Incentive Compensation Plan will expire
not more than 10 years from the date of the grant  (five  years from the date of
the grant in the case of a 10% Stockholder), and the Incentive Option agreements
entered  into with the holders  will  specify the extent to which the  Incentive
Options may be exercised  during their  respective  terms.  The  aggregate  fair
market  value of the shares of common stock  subject to  Incentive  Options that
become first  exercisable  by an optionee in a particular  calendar year may not
exceed $100,000.

1996 Stock Option Plan

     On February 12 , 1997,  the  shareholders  of the Company  adopted the 1996
Stock Option Plan. The Plan  supplements  the Company's 1989  Restricted  Stock,
Non-Qualified  and  Incentive  Stock  Option Plan.  This Plan,  which allows the
Company to grant incentive stock options,  non-qualified stock options and stock
appreciation rights (collectively "options"), to employees,  including officers,
and to non-employees  involved in the continuing  development and success of the
Company,  authorizes the grant of 5,000,000 shares of common stock. The terms of
the options are to be  determined  by the Board of  Directors.  Options will not
have  expiration  dates  later than ten years from the date of grant (five years
from the date of the grant in the case of a 10% Stockholder).  The Option Prices
may not be less than the fair market  value of the common  shares on the date of
grant,  except that any option granted to an employee holding 10% or more of the
outstanding  voting  securities  of the Company  must be for an option price not
less than 110% of fair market value.

Statement of Financial Accounting Standards No. 123

     At December 31, 1997, the Company had one  stock-based  compensation  plan,
which is described  above.  The Company  applies APB Opinion 25,  Accounting for
Stock Issued to Employees,  and related  Interpretations  in accounting  for its
plan. Accordingly,  no compensation cost has been recognized for its fixed stock
option plan or for options issued to non-employees for services  performed.  Had
compensation  costs for these options been determined,  based on the fair market
value at the grant  dates  consistent  with the  method of FASB  Statement  123,
Accounting for Stock-Based  Compensation,  the Company's net income and earnings
per share would have been reduced to the pro forma amounts indicated below:

                                                       1997         1996
                                                       ----         ----
Net income (loss) ................ As reported    $(1,121,803)   $(690,160)
                                   Pro forma      $(1,456,507)   $(988,824)

Earnings (loss) per share          As reported    $    (0.05)    $  (0.04)
                                   Pro forma      $    (0.06)    $  (0.06)


                                      F-15
<PAGE>
                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 10 - Income Taxes

     For the years ended  December 31, 1997 and 1996,  no provision was made for
Federal and state income taxes due to the losses  incured  during these periods.
As a result of losses  incurred  through  December 31, 1997, the Company has net
operating loss carryforwards of approximately  $4,741,000.  These  carryforwards
expire as follows:


                         2006           $  510,000
                         2007            1,451,000
                         2008              165,000
                         2009              716,000
                         2010              231,000
                         2011              568,000
                         2012            1,100,000
                                         ---------
                                        $4,741,000
                                        ==========


     In accordance with Financial  Accounting  Standards Board Statement No. 109
"Accounting  for Income Taxes",  the Company  recognized  deferred tax assets of
$1,944,000,  at December  31, 1997.  The Company is dependent on future  taxable
income to realize  deferred tax assets.  Due to the uncertainty  regarding their
utilization  in the  future,  the  Company  has  recorded  a  related  valuation
allowance of  $1,944,000.  Deferred  tax assets at December  31, 1997  primarily
reflect the tax effect of net operating loss carryforwards.

NOTE 11 - Business Segment Information

     The  operations  of the  Company are divided  into two  business  segments:
healthcare - consisting of managed care revenue  enhancement and healthcare cost
containment  services;  and  entertainment  - consisting of the  acquisition and
distribution  of rights to films.  The Company  markets its managed care revenue
enhancement   services   throughout  the  United  States;  its  healthcare  cost
containment services are predominantly  located in the Northeast;  and films are
available to be marketed throughout the world.

       Financial information by business segment is as follows:

                                1997           1996
                                ----           ----
Revenue:
      Healthcare ........   $ 1,366,666    $ 2,388,538
      Entertainment .....        20,000        114,650
                            -----------    -----------
                            $ 1,386,666    $ 2,503,188
                            ===========    ===========

 Operating Income (Loss):
      Healthcare ........   $  (246,006)   $   321,401
      Entertainment......       (90,790)     (186,974)
      Corporate .........      (785,007)     (824,587)
                            -----------    -----------
                            $(1,121,803)   $ (690,160)
                            ===========    ===========






                                      F-16
<PAGE>
                               JUNIPER GROUP, INC.
                            AND SUBSIDIARY COMPANIES

            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)


NOTE 11 - Business Segment Information (Continued)

                               1997         1996
                               ----         ----
Identifiable Assets:
     Healthcare .........   $  315,038   $  690,361
     Entertainment ......    3,157,157    3,262,841
     Corporate ..........      133,660      127,140
                            ----------   ----------
                            $3,605,855   $4,080,342
                            ==========   ==========

    Depreciation:
     Healthcare .........   $    7,383   $   11,850
     Corporate .                30,284       30,916
                            ----------   ----------
                            $   37,667   $   42,766
                            ==========   ==========

    Capital Expenditures:
     Healthcare .........   $    4,145   $    3,182
     Corporate ..........       17,696       31,619
                            ----------   ----------
                            $   21,841   $   34,801
                            ==========   ==========

NOTE 12 - Quarterly Results of Operations (Unaudited)

     Below is a summary of the quarterly  results of operations for each quarter
of 1997 and 1996:
<TABLE>
<CAPTION>

1997                                     First         Second          Third         Fourth
<S>                                  <C>            <C>            <C>            <C>

Revenue ..........................   $   496,089    $   302,493    $   311,654    $   276,430
Gross profit .....................       319,124        178,379        138,464        144,659
                                         -------        -------        -------        -------

Net income (loss) ................   $   (99,180)   $  (265,497)   $  (372,726)   $  (384,401)
                                         =======       ========       ========       ========
Net income (loss) per common share   $      (.01)   $      (.01)   $      (.02)   $      (.01)
                                            ====           ====           ====           ====

1996
Revenue ..........................   $   667,522    $   486,202    $   597,452    $   752,011
Gross profit .....................       255,754        190,197        285,266        453,428
                                         -------        -------        -------        -------
Net income (loss) ................   $   (69,705)   $  (140,519)   $  (162,415)   $  (317,521)
                                         =======         ======        =======       ========

Net income (loss)
   per common share ..............   $     (0.01)   $    (0.01)    $     (0.02)   $     (0.04)
                                           =====          =====          =====          =====
</TABLE>

NOTE 13 - Subsequent Events

     From January 1, 1998 to March 16, 1998,  4,878,790  shares of the Company's
common stock were sold for $157,000 through  offerings under Regulation S of the
Securities Act of 1933, as amended, and other private placements.  Additionally,
on March 27, 1998, the Company sold $250,000 of convertible debentures.

     In January  1998,  the  Company's  President  and Chief  Executive  Officer
received  approximately  $44,000  of the  balance  owed  to  him  (approximately
$69,000) at December 31, 1997,  which was used  specifically for the acquisition
of an  automobile.  As  inducement  to the Company for the repayment to him, the
officer has agreed to forego an auto  allowance  for the next  twelve  months to
which he is entitled under his employment agreement.


                                      F-17
<PAGE>








                                   SIGNATURES

     In accordance  with section 13 or 15(d) of the  Securities  Exchange Act of
1934,  the  Registrant  caused  this  report to be  signed  by the  undersigned,
thereunto duly authorized.


Date: March 30, 1998                        JUNIPER GROUP, INC.



                                            By: /s/ Vlado Paul Hreljanovic
                                                --------------------------
                                                  Vlado Paul Hreljanovic
                                                  President and
                                                  Chief Executive Officer


     In accordance  with the  Securities  Exchange Act of 1934,  this report has
been signed below by the following  persons on behalf of the  Registrant  and in
the capacities and on the dates indicated.


Signatures                             Titles                       Date


By:/s/ Vlado Paul Hreljanovic      Chairman of the Board,
   --------------------------      President, Chief Executive
   Vlado Paul Hreljanovic          Officer (Principal Executive
                                   and Financial Officer)       March 30, 1998


By: /s/ Harold A. Horowitz          Director                    March 30, 1998
   -----------------------
   Harold A. Horowitz


By:/s/Peter W. Feldman              Director                    March 30, 1998
   -------------------
   Peter W. Feldman


<PAGE>




                                EXHIBIT INDEX



Exhibit                            Description


21.1  Susidiaries

23.1  Consent of Independent Certified Public Accountants

27.1  Financial Data Schedule