<PAGE>   1

                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                   FORM 10-K

                       FOR ANNUAL AND TRANSITION REPORTS
                    PURSUANT TO SECTIONS 13 OR 15(d) OF THE
                        SECURITIES EXCHANGE ACT OF 1934

(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934 [NO FEE REQUIRED, EFFECTIVE OCTOBER 7, 1996]

For the fiscal year ended DECEMBER 31, 1996
                          ------------------------------------------------------

                                      OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934 [NO FEE REQUIRED]



For the transition period from               to                .  
                              ---------------  ----------------

                        Commission file number 33-98756


                           PETRACOM HOLDINGS, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
<S>                                                                  <C>   
DELAWARE                                                             59-3324165
--------------------------------------------------------------       -------------------------------------
(State or other jurisdiction of incorporation or organization)       (I.R.S. employer identificati on no.)


1527 N DALE MABRY HWY, SUITE 105, LUTZ, FL                 33549
-------------------------------------------                ------------
(Address of principal executive offices)                   (Zip code)
</TABLE>
           

Registrant's telephone number, including area code (813) 948- 2554
                                                   ----------------------------

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

Title of each class                   Name of each exchange on which registered
-------------------------             -----------------------------------------

NONE
-------------------------             -----------------------------------------


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

NONE
-------------------------------------------------------------------------------
                                (Title of class)


Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requiremen ts for the past 90 days. Yes X  No
                                              ---   ---


Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporate d by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. [ ]



<PAGE>   2




                   AGGREGATE MARKET VALUE OF THE VOTING STOCK
                    HELD BY NON-AFFILIATES OF THE REGISTRANT

                                      None


                   INDICATE THE NUMBER OF SHARES OUTSTANDING
              OF EACH OF THE REGISTRANT'S CLASSES OF COMMON STOCK,
                       AS OF THE LATEST PRACTICABLE DATE
240,000 shares of Class A Voting Common Stock, par value $.01 per share, and
60,000 shares of Class B Non-Voting Common Stock, par value $.01 per share,
were outstanding at March 18, 1997



                    DOCUMENTS INCORPORATED BY REFERENCE
                                      None




<PAGE>   3



                                    PART I


ITEM 1. BUSINESS

Petracom Holdings, Inc., a Delaware corporation ("Petracom" or the "Company")
is a holding company that through its subsidiaries owns and operates five
television stations and four radio stations. The Company's predecessor ,
Petracom, Inc., was formed in January 1990 for the purpose of acquiring and
operating television and radio broadcast properties. The Company has owned and
operated WQRF-TV in Rockford, Illinois and KAYD-AM/KAYD-FM since 1990 and
KQHN-AM/KQXY-FM in Beaumont, Texas since 1994. On August 1, 1995, the Company
completed the acquisition of the following four television stations: KDEB-TV in
Springfield, Missouri; WTVW-TV in Evansville, Indiana; KARD-TV in Monroe,
Louisiana; and KLBK-TV in Lubbock, Texas.

The following table sets forth certain information with respect to the Company's
Television Stations and Radio Stations:

<TABLE>
<CAPTION>


                STATION                           MARKET                         DMA/MSA(1)              AFFILIATION
            ---------------         ----------------------------------         ---------------         ----------------
            <S>                     <C>                                              <C>                     <C> 
            KDEB-TV                 Springfield, Missouri                             76                     FOX
            WTVW-TV                 Evansville, Indiana                               97                     FOX(2)
            KARD-TV                 Monroe, Louisiana                                133                     FOX
            WQRF-TV                 Rockford, Illinois                               135                     FOX
            KLBK-TV                 Lubbock, Texas                                   147                     CBS
            KAYD-AM                 Beaumont, Texas                                  128                      --
            KAYD-FM
            KQHN-AM                 Beaumont, Texas                                  128                      --
            KQXY-FM
</TABLE>

1.       Television Stations indicate Designated Market Area (DMA) ranking; 
         Radio Stations indicate Metropolitan Statistical Area (MSA)
         ranking.  Sources: A.C. Nielsen Company and The Arbitron Company,
         respectively.

2.       WTVW-TV switched affiliations from ABC to FOX in December 1995.
-----------


OPERATING
STRATEGY

Petracom's business strategy is to focus on building operating cash flow by
maximizing revenues and controlling costs. The Company has been successful
in improving and maintaining relatively strong operating results at its original
stations through the development and implementation of the strategies explained
below. Further, the Company believes that the television stations acquired on
August 1, 1995 have many characteristics similar to WQRF-TV and operating
strategies provide an opportunity to increase revenues and operating cash flow.

Maximize Revenue Through Aggressive Sales. Petracom emphasizes sales
effectiveness and excellence, through recruiting, training and performance.
Emphasis is placed on developing each individual employee by providing extensive
sales training and support. The Company's sales force is trained to work        
aggressively with existing advertisers to steadily increase their levels of
advertising and to increase demand for advertising time by aggressively
targeting current non-advertisers in its markets as potential revenue sources
and by working with these potential customers to develop integrated media
strategies. One technique is to provide a comprehensive media plan, of which
television or radio advertising is a part, to target and solve the customer's
media needs. Through these methods, the Company seeks to increase overall market
revenues while attempting to gain a greater share of the existing market.

Target Programming to a Particular Market. Petracom places great importance in
analyzing a market's demographic data to help determine the optimal programming 
for a given market. The Company uses research to determine whether local news,
talk shows, situation comedies or news magazines will maximize revenues in a
particular market and seeks to purchase and schedule its programming
accordingly. The Company believes that


<PAGE>   4



operating cash flow can be increased by focusing on maximizing revenues and
controlling, rather than minimizing, expenses. Management believes additional
advertising revenues generated from high quality programming more than offsets
the incremental costs. The Company has acquired and will continue to acquire,
what management believes to be some of the best available programming in order
to capitalize on the premium advertising rates top programs typically command.
Petracom's commitment to this strategy is demonstrated by the acquisition of the
syndication rights to programs such as Seinfeld, Home Improvement, Friends,
Frasier, Grace Under Fire, Wheel of Fortune and Jeopardy.

The Company's radio stations also provide target programming to the market's
listeners. Petracom utilizes research and consultants along with management to
determine the proper music and other programming to attract its target audience.
The Company attempts to hire the best available on-air talent and provide the
most attractive music.

Strong Local News. Currently, two Petracom television stations, WTVW-TV and
KLBK-TV, produce and carry local news. The Company has focused on building the
local news programming at these stations into the market leaders. News coverage,
staffs and programming have been expanded at WTVW-TV in Evansville,
Indiana and KLBK-TV in Lubbock, Texas. Petracom is committed to having strong
news departments at these two stations. A strong local news product
differentiates local broadcast stations from cable system competitors, which
generally do not provide this service. The Company believes that a successful
news operation is primarily a result of (i) strong on-air talent, (ii) timely,
relevant and accurate news stories, and (iii) professional and high quality
productions. Local news programming can be commercially valuable because of its
high viewership levels, the attractiveness to advertisers of the demographic
characteristics of the typical news audience and improved ratings programs
adjacent to successful news programming. The Company believes that in addition
to generating revenue, local news programming allows a station to increase its
community presence and helps the perception of being a top station in its
market.

Attract Experienced Management. In addition to its corporate staff, the
Company's station management teams have extensive experience in broadcasting.
Petracom is committed to attracting and retaining the highest quality local
station management feasible. The Company plans to use its various stations to
allow both lateral and vertical promotions, designed to keep its top performers
within the Company.

Maintain a High Profile in the Community. Petracom believes that a broadcasting
station performs to its highest level when it is considered an integral part of
its community. The Company engages its stations in a variety of community events
and promotions designed to increase the station's image and presence in its
markets. Each of the Company's stations seeks to achieve a distinct local
identity. WTVW-TV and KLBK-TV create their own identities principally through
their local news programming. Additionally, all Petracom stations serve the
local communities with special programming and marketing events. Each market
develops and provides public service, sports and information-oriented
programming that is tailored to the needs of their community. Management and
on-air talent are actively involved in community affairs to better understand
the issues of the community and to contribute to improving the community.
Management believes that these strategies generally result in the creation of
new sources of revenue by both attracting new advertisers and increasing
viewership.

ACQUISITION STRATEGY

Petracom intends to pursue selective station acquisitions opportunities.
However, at the present time the Company has no plans for any such acquisitions
and there can be no assurance that any such acquisitions will occur. The Company
seeks the following characteristics in its markets and potential acquisitions:
(i) small and medium-sized markets with less intense competition for advertising
revenues from broadcast and other media; (ii) markets which currently enjoy
and/or project economic and population growth beyond national and regional
averages; (iii) markets which demonstrate stability and growth in key
demographics; (iv) markets which are not vulnerable economically to a single key
industry or company; (v) stations which are under performing relative to
national averages and to other stations in that market; (vi) television stations
with a network affiliation or independents within a market where a clear need
exists for alternative programming; and (vii) radio stations where duopoly
opportunities exist.


DESCRIPTION OF TELEVISION STATIONS

Each Television Station is currently affiliated with either the FOX or CBS
television networks pursuant to network affiliation agreements. The Company
switched the network affiliation of WTVW-TV from ABC to FOX effective December
4, 1995.


<PAGE>   5

FOX Stations. WQRF-TV, Rockford; KDEB-TV, Springfield; KARD-TV, Monroe; and
WTVW-TV, Evansville (the "FOX Stations") each are affiliated with FOX pursuant
to substantially similar affiliation agreements (the "FOX Affiliation
Agreements"). Each FOX Affiliation Agreement provides the station with the right
to broadcast all programs transmitted by FOX, which include regular programming
from FOX as well as from the FOX Children's Network ("FCN"). In exchange, FOX
has the right to sell a substantial majority of the advertising time associated
with such programs and to retain the revenue therefrom. During NFL games and the
pre-game shows, FOX has the right to retain a substantial portion of the
advertising time, and the station is entitled to sell the remainder and retain
the associated advertising revenue. The station is also compensated by FOX
according to a ratings-based formula for FOX programming and is entitled to a
share of the programming net profits of the FCN programming, as specified its
FOX Affiliation Agreement. The compensation rate is subject to increases or
decreases by FOX during the term of each FOX Affiliation Agreement, with
provisions for advance notice and right of termination by the station in the
event of a substantial rate reduction.

Each of the FOX Affiliation Agreements expires December 5, 2005 and is renewable
for successive two-year terms, at the discretion of FOX and upon acceptance by
Petracom. Each FOX Affiliation Agreement may be terminated generally: (a) by FOX
upon (i) a material change in the station's transmitter location, power,
frequency, programming format or hours of operation, with 30 days' written
notice, (ii) acquisition by FOX or any of its affiliates of a significant
ownership and/or controlling interest in a television station in the same
market, with 60 days' written notice; (iii) assignment or transfer by the
station of their respective FCC broadcast license, with 30 days' written notice;
(iv) three or more unauthorized preemptions of FOX programming within a 12 month
period, with 30 days' written notice; or (v) failure by FOX and the station to
agree upon the retransmission or "must carry" status with the respective cable
companies, upon 30 days' written notice, or (b) by either FOX or the station
upon occurrence of a force majeure event which substantially interrupts FOX's
ability to provide programming or the station's ability to broadcast the
programming.

FOX has given the Company certain guarantees pertaining to the net revenues of
WTVW-TV for the first two years subsequent to December 4, 1995, the date the
station became a FOX affiliate. FOX will pay the Company $750,000 for each of
the first two years after WTVW-TV switches its affiliation to FOX, subject to a
reduction of such payments by two-thirds of the amount by which the station's
net revenues exceed certain amounts as defined in the agreement. However, the
Company must repay these amounts to FOX if net revenues exceed certain
established thresholds in the subsequent three year period.

CBS Station. KLBK-TV, Lubbock is affiliated with CBS pursuant to an affiliation
agreement (the "CBS Affiliation Agreement"). The CBS Affiliation Agreement
provides KLBK-TV, Lubbock with the right to broadcast all programs transmitted
by CBS. In return, CBS has the right to sell a substantial majority of the
advertising time during such broadcasts. In exchange for broadcasting the CBS
Network programming, CBS pays KLBK-TV, Lubbock a variable fee for each hour
broadcast, depending on the time of day. Upon advance notice to KLBK-TV,
Lubbock, network compensation rates are subject to increase or decrease by CBS
during the term of the CBS Affiliation Agreement, with provisions for a right of
termination by KLBK-TV, Lubbock in the event of a reduction in rates. The CBS
Affiliation Agreement's current term is from August 1, 1995 through August 1,
2005, and is automatically renewed for successive five-year terms, unless six
months' written notice of termination or non-renewal is given by either party.
In addition, the CBS Affiliation Agreement may be terminated generally: (a) by
CBS upon (i) assignment or transfer by KLBK-TV, Lubbock of its FCC broadcast
license, (ii) a change by KLBK-TV, Lubbock affecting its transmitter location,
power, frequency or hours of operation, or (iii) the station's owner filing a
bankruptcy petition, taking advantage of any insolvency law or if a receiver or
trustee is appointed and not removed within 30 days, or (b) by either party at
any time with six months written notice to the other party.


WQRF-TV, ROCKFORD, ILLINOIS

Acquired in 1990, WQRF, Channel 39, serves as the FOX Affiliate in Rockford,
Illinois. Rockford is the 135th ranked DMA and the second largest city in
Illinois. The population of the five county Rockford DMA is approximately
427,000 with approximately 162,000 television households. Total television
advertising revenues for 1996 in Rockford are estimated to be $ 24,000,000.
While Rockford is the number 135th ranked DMA, it ranks 109th in terms of total
market television revenue. Three UHF stations and one VHF station actively
compete for the television advertising revenue in the DMA.

KDEB-TV, SPRINGFIELD, MISSOURI


<PAGE>   6

Acquired in 1995, KDEB, Channel 27, serves as the FOX Affiliate in Springfield,
Missouri. Springfield is the 76th ranked DMA and the third largest city in
Missouri. The population of the 34-county DMA area is approximately 890,000 with
approximately 360,000 television households. Total television advertising
revenues for 1996 in Springfield are estimated to be $ 29,000,000. Two UHF
stations and two VHF stations actively compete for the television advertising
revenue in the DMA.

WTVW-TV, EVANSVILLE, INDIANA

Acquired in 1995, WTVW, Channel 7, serves as the FOX Affiliate in Evansville,
Indiana. Evansville is the 97th ranked DMA. The population of the 22 county DMA
area is approximately 679,000 with approximately 273,000 television households.
Total television advertising revenues for 1996 in Evansville are estimated to be
$35,000,000. WTVW-TV is the only VHF station along with three UHF stations that
actively compete for the television advertising revenue in the DMA, which serves
counties in Illinois, Indiana and Kentucky. The Company switched the affiliation
of WTVW from ABC to FOX effective December 4, 1995.

KARD-TV, MONROE, LA

Acquired in 1995, KARD, Channel 14, serves as the FOX Affiliate in Monroe,
Louisiana. Monroe is the 133rd ranked DMA. The population of the 18 county DMA
is approximately 455,000 with approximately 172,000 television households. Total
television advertising revenues for 1996 in Monroe are estimated to be
$16,000,000. Two VHF stations and one UHF station actively compete for the
television advertising revenue in the DMA, which serves counties in Louisiana
and Arkansas. KARD-TV switched affiliations from ABC to FOX in April 1994.

KLBK-TV, LUBBOCK, TEXAS

Acquired in 1995, KLBK, Channel 13, serves as the CBS Affiliate in Lubbock,
Texas. Lubbock is the 147th ranked DMA. The population of the 18 county DMA is
approximately 376,000 with approximately 141,000 television households. Total
television advertising revenues for 1996 in Lubbock are estimated to be
$22,000,000. Two VHF stations and three UHF stations actively compete for the
television advertising revenues in the DMA.

DESCRIPTION OF RADIO STATIONS

KAYD-AM/KAYD-FM AND KQHN-AM/KQXY-FM, BEAUMONT, TEXAS

Beaumont - Port Arthur, Texas is the 128th ranked Arbitron MSA market with
population in the MSA of approximately 371,000 and approximately 139,000 radio
households. Total radio advertising revenues for 1996 in Beaumont are estimated
to be $11,000,000. Nine radio stations actively compete for the radio
advertising revenues in the market.

In January 1990, Petracom acquired KAYD-AM/KAYD-FM. Both stations simulcast a
country music format. Country music is the dominant format in the market and the
Company directly competes for country music listeners and advertisers with
another FM station.

In March 1994, Petracom purchased KQHN-AM and KQXY-FM in Beaumont. The purchase
created the first duopoly in the market. The Company had operated these stations
for the prior 17 months pursuant to a time brokerage agreement. KQXY-FM is
programmed with a Hot Adult Contemporary format, while KQHN-AM is programmed
with a Sports/Talk format.

EMPLOYEES

As of December 31, 1996, Petracom had 260 full time and 53 part time employees.
None of the Company's employees are represented by unions. The Company believes
its relations with its employees are satisfactory.

SEASONALITY

The Company's operating revenues are generally highest in the second and fourth
quarters of the year. This seasonality is primarily due to increased
expenditures by advertisers in the Spring, increased viewership in the Fall and
increased advertising in anticipation of holiday retail spending.



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ADVERTISING SALES IN TELEVISION AND RADIO BROADCASTING

Television station revenues are primarily derived from local, regional and
national advertising and, to a lesser extent, from network compensation and
commercial production. Advertising rates are based upon a program's popularity
among the viewers an advertiser wishes to attract, the number of advertisers
competing for the available time, the size and demographic composition of the
market served by the station and the availability of alternative advertising
media in the market area. An advertiser wishing to reach a nationwide audience
usually purchases advertising time directly from the national networks. A
national advertiser wishing to reach a particular regional or local audience
usually buys advertising time from the local stations through independent
national advertising sales representative firms which are retained by local
stations to solicit such advertising. Local businesses generally purchase
advertising directly from the sales staff of local television stations. Because
broadcast television stations rely on advertising revenue, declines in
advertising budgets, particularly in recessionary periods, adversely affect the
broadcast industry, and, as a result, may contribute to a decrease in the
revenues of broadcast television stations. Typical local advertisers include
automobile dealerships, local grocery chains and fast food restaurants.

Radio station revenues are derived primarily from local, regional and national
advertising. Advertising rates are based upon a station's format and popularity
among the listeners an advertiser wishes to attract, the number of advertisers
competing for the available time, the size and demographic composition of the
market served by the radio station and the availability of alternative
advertising media in the market area.


COMPETITION IN TELEVISION BROADCASTING

Competition in the television industry occurs on several levels: competition for
audience, competition for programming and competition for advertisers. The
broadcasting industry is continually faced with technological change and
innovation, the possible rise in popularity of competing entertainment and
communications media, and governmental restrictions or actions of federal
regulatory bodies, including the FCC and the Federal Trade Commission ("FTC"),
any of which could have a material effect on the Company's operations.

Audience. Television stations compete for audience on the basis of program
content and popularity, which is significantly affected by network affiliation
and local programming activities. A portion of the daily programming for
network-affiliated television stations is supplied by FOX, ABC, CBS, NBC and by
recently created networks UPN and The WB Network. In those time periods, the
television stations are totally dependent upon the performance of the network
programs in attracting viewers. Non-network time periods are programmed by the
television stations with syndicated programs purchased for cash, cash and
barter, or barter-only. Television stations also broadcast sports, news, public
affairs and other entertainment programming.

The development of methods of television transmission of video programming other
than over-the-air broadcasting, and, in particular, the growth of cable
television, has significantly altered competition for audience in the television
industry. These other transmission methods can increase competition for a
broadcasting television station by bringing into its market distant broadcasting
signals not otherwise available to the television station's audience and also by
serving as a distribution system for non-broadcast programming distributed by
the cable system.

Other potential and current sources of competition include home entertainment
systems (including video cassette recorder and playback systems, videodiscs and
television game devices), Internet access, multi point distribution systems,
multichannel multi point distribution systems, wireless cable, satellite
systems, low-power television stations, television translator stations and some
low-power in-home satellite to home video distribution services. Television
stations also face competition from high-powered direct broadcast satellite
services which can transmit programming directly to homes equipped with special
receiving antennas or to cable television systems for transmission to their
subscribers.

Further advances in technology may increase competition for household audiences
and advertisers. Video compression techniques, now under development for use
with current cable television delivery systems or direct broadcast satellites
are expected to reduce the bandwidth required for television signal
transmission. These compression techniques, as well as other technological
developments are applicable to all video delivery systems, including
over-the-air broadcasting, and have the potential to provide vastly expanded
programming to highly targeted audiences. A reduction in the cost of creating
additional channel capacity could lower entry barriers for new channels and
encourage the development of increasingly specialized "niche" programming. This
ability to reach very defined audiences is expected to alter the competition for
advertising expenditures. The Company is unable to


<PAGE>   8



predict the effect that technological change will have on the broadcast
television industry or the future results of the Company's operations.

Programming. Competition for programming involves negotiating with national
program distributors or syndicators which sell first-run and rerun packages of
programming. Television stations compete against in-market broadcast station
competitors for off-network reruns (such as Seinfeld) and first run products
(such as Wheel of Fortune) for exclusive access to those programs in their
respective markets. Cable systems generally do not compete with local television
stations for programming, although it is becoming more common for national cable
networks to acquire programs that would have otherwise been offered to local
television stations.

The growing cross-ownership of broadcast stations, networks, cable systems,
cable networks and studios has begun to shrink the pool of programming available
to local television stations. For example, Warner Brothers is launching the WeB
cable channel. The plan calls for a television stations in ADI markets smaller
than 100 to partner with a local cable system. The local station will sell the
local advertising, Warner Brothers will provide the programming and the local
cable system will provide carriage of the channel. The partnership should
benefit one local station in each market, but the arrangement will also serve to
limit the amount of programming available to these smaller markets. Warner
Brothers will retain its programming for the WeB channel in these markets and
local stations will not be able to purchase this programming for their own use.

Advertising. Television stations compete for advertising revenues with other
television stations in their respective markets, as well as with other
advertising media, such as newspapers, radio, magazines, outdoor advertising,
transit advertising, yellow page directories, direct mail and local cable
systems. Competition for advertising dollars in the broadcasting industry occurs
primarily in individual markets. Generally, a television station in a particular
market does not compete with stations in other market areas.



COMPETITION IN RADIO BROADCASTING

As with television broadcasting, competition in the radio industry also occurs
on three levels: competition for audience, competition for programming and
competition for advertisers. Additional factors that are material to a radio
station's competitive position include signal coverage, assigned frequency,
audience characteristics, local program acceptance and the number and
characteristics of other stations in the market area. The broadcasting industry
is continually faced with technological change and innovation, the possible rise
in popularity of competing entertainment and communications media, and
governmental restrictions or actions of federal regulatory bodies, including the
FCC, any of which could have a material effect on the company's operations.

Audience. Radio stations compete for audience on the basis of the popularity of
the music, format and on-air talent/personality on the station, which have a
direct effect on advertising rates. As advertisers generally target certain
demographic groups to promote their products, radio stations compete to maximize
audience shares in demographic sex and age groups that appeal to the
advertisers.

Programming. Radio programming is generated primarily by the individual radio
station. Syndicated programming typically accounts for only a small portion of
the total broadcast time, if any, of the radio stations. Competition for radio
programming is generally limited to competition with other radio stations for
exclusive access to syndicated shows and programs such as countdowns and network
news briefs.

Advertising. Radio stations compete for advertising revenues with other radio
stations in their respective markets, as well as with other advertising media,
such as newspapers, television, magazines, outdoor advertising, transit
advertising, yellow page directories, direct mail and local cable systems.
Competition for advertising dollars in the radio broadcasting industry occurs
primarily in individual markets. Generally, a radio station does not compete
with radio stations in other market areas.

RATINGS

The price that television stations and radio stations can charge for advertising
time is determined in part by a station's overall audience ratings and share in
a given market, as well as the station's audience rating and share among a
particular demographic group that an advertiser may be targeting. In the U.S.,
there are more than 200 generally-recognized television "markets" that are 
ranked in size according to various formulae based upon actual or a


<PAGE>   9



potential audience. Each market is determined as an exclusive geographic area
consisting of all counties in which the home-market commercial stations receive
the greatest percentage of total viewing hours. Currently, only one national
audience measuring service, Nielsen, periodically publishes data on estimated
audiences for the television stations in the various markets throughout the
country. Similar market and audience data are published periodically with
respect to radio stations and their markets by Arbitron. Each specific
geographic market is called a "designated market area" by Nielsen for its
television ratings service; Arbitron labels radio markets "metropolitan survey
areas." MSAs are generally smaller than a market's DMA, and generally correspond
to the Metropolitan Statistical Areas as defined by the Federal government. For
television stations, estimated audiences are expressed in terms of the
percentage of the total potential audience in the market viewing a station (the
station's "rating") and of the percentage of the audience actually watching
television (the station's "share").


REGULATION OF TELEVISION AND RADIO BROADCASTING

The ownership, operation and sale of television and radio stations, including
the Company's Television Stations and Radio Stations, are subject to the
jurisdiction of the FCC, which acts under authority granted by the
Communications Act. Among other things, the FCC issues, renews, revokes and
modifies station licenses; determines whether to approve changes in ownership or
control of station licenses; regulates equipment used by stations; adopts and
implements regulations and policies that directly or indirectly affect the
ownership, operation and employment practices of stations; and has the power to
impose penalties for violations of its rules or the Communications Act.
Television stations and radio stations are from time to time subject to such
investigative and enforcement proceedings as the FCC may initiate concerning
their broadcast operations.

License Renewal. Broadcasting licenses are granted by the FCC for maximum terms
of eight years for television and radio stations, and are subject to renewal
upon application to the FCC for a maximum term of eight years. During certain
periods, petitions to deny license renewal can be filed by interested parties,
including members of the public. The FCC is required to hold evidentiary,
trial-type hearings on renewal applications, if the FCC is unable to determine
that the "public interest, convenience and necessity" would be served by a grant
thereof, or if a petition to deny raises a "substantial and material question of
fact" as to whether the grant of the renewal application would be prima facie
inconsistent with the public interest, convenience and necessity.

The FCC broadcast licenses of each of the television stations and radio stations
have the following expiration dates under former regulations providing for
maximum terms of five years for television stations and seven years for radio
stations:

         WQRF-TV                    Rockford, IL              December 1, 1997
         WTVW-TV                    Evansville, IN            August 1, 1997
         KDEB-TV                    Springfield, MO           February 1, 1998
         KLBK-TV                    Lubbock, TX               August 1, 1998
         KARD-TV                    West Monroe, LA           June 1, 1997
         KAYD-AM                    Beaumont, TX              August 1, 1997
         KAYD-FM                    Beaumont, TX              August 1, 1997
         KQHN-AM                    Nederland, TX             August 1, 1997
         KQXY-FM                    Beaumont, TX              August 1, 1997

Petracom has begun the renewal process for the licenses that expire in 1997. The
Company fully expects a grant of the renewal applications for the maximim terms
of eight years.

Ownership Matters. The Communications Act prohibits the assignment of a
broadcast license or the transfer of control of a broadcast licensee without the
prior approval of the FCC. In determining whether to grant or renew a broadcast
license, the FCC considers a number of factors pertaining to the licensee,
including compliance with the Communication Act's limitations on alien
ownership, compliance with various rules limiting common ownership of broadcast,
cable and newspaper properties, and the "character" of the licensee of those
persons holding "attributable" interests in the licensee.

Under the Communications Act, broadcast licenses may not be granted to any
corporation having more than 20% of its capital stock owned of record or voted
by non-U.S. citizens (including non-U.S. corporations), foreign governments or
their representatives (collectively, "Aliens").  The Communications Act also
prohibits a corporation,


<PAGE>   10



without an FCC public interest finding, from holding a broadcast license if that
corporation is controlled, directly or indirectly by another corporation, more
than 25% of the capital stock of which is owned of record or voted by Aliens. As
a result of these provisions, the Company, which is a holding company for its
various television station and radio station licensee subsidiaries, cannot have
more than 25% of its capital stock owned of record or voted by Aliens.

The FCC also has instituted rule making inter alia to consider effective market
access as a factor in permitting non-citizen ownership of a licensee's parent
company in excess of 25%. Under this proposal, a citizen of a foreign country
may be permitted to own more than 25% of a broadcast licensee's parent company
if a U.S. citizen were permitted the same level of investment in a broadcast
licensee's parent company in the foreign investor's country. The Company cannot
predict whether the FCC proposal will be adopted or how these proposed changes
would affect the Company's business.

Multiple Ownership Rules. The FCC's television national multiple ownership rule
limits the audience reach of television stations in which an entity may hold an
attributable interest to 35% of total U.S. television households. Furthermore,
the FCC's television multiple ownership local contour overlap rule generally
prohibits ownership in two or more television stations which serve the same
geographic market by a party under, direct or indirect, common ownership,
operation or control ("single entity"). In radio markets with 45 or more radio
stations, a single entity may own eight radio stations, not more than five of
which are AM or FM. In radio markets with 30 to 44 (inclusive) radio stations, a
single entity may own seven radio stations, not more than four of which are AM
or FM. In radio markets with 15 to 29 (inclusive) radio stations, a single
entity may own six radio stations, not more than four of which are AM or FM. In
radio markets with fourteen or fewer radio stations, a single entity may own
five radio stations not more than three of which are AM or FM, except that a
single entity may not own more than 50% of the stations in such markets.

FCC Rules also generally prohibit or restrict the cross-ownership, operation or
control of a radio station and a television station serving the same geographic
market, and of a television station or a radio station and a daily newspaper
serving the same geographic market. Under these rules, absent waivers, the
Company would not be permitted to acquire any newspaper, radio or television
broadcast station in a geographic market in which it now owns or controls any
television or radio broadcast properties. The FCC's Rules and policies generally
provide for the liberal grant of waivers of the rule prohibiting common
ownership of radio and television stations in the same geographic market for
stations located in the top 50 television markets, if certain conditions are
satisfied. Nevertheless, expansion of the Company's broadcast operations may be
limited by these rules.

If an attributable stockholder of the Company violates any of these ownership
rules, the Company may be unable to obtain from the FCC one or more
authorizations needed to conduct its television station and radio station
businesses and may be unable to obtain FCC consents for certain future
acquisitions.

The FCC generally applies its ownership limits to "attributable" interests held
by an individual, corporation, partnership or other association. In the case of
a corporation holding a broadcast license, the interest of officers, directors
and those who, directly or indirectly, have the right to vote 5% or more of the
corporation's voting stock (or 10% or more of such stock in the case of
insurance companies, mutual funds, bank trust departments and certain other
passive investors that are holding stock for investment purposes only) are
generally deemed to be attributable, as are positions of an officer or director
of a corporate parent of a broadcast licensee.

Furthermore, the FCC has a "cross-interest" policy that under certain
circumstances could prohibit a person or entity with an attributable interest in
a broadcast station or daily newspaper from having a "meaningful"
non-attributable interest in another broadcast station or daily newspaper in the
same local market. Among other things, "meaningful" interests could include
significant equity interests (including non-voting stock, and limited
partnership interests) and significant employment positions. This policy may
limit the permissible investments a purchaser of the Company's common stock may
make or hold. If the FCC determines that a stockholder of the Company has
violated this cross-interest policy, the Company may be unable to obtain one or
more FCC authorizations needed to conduct its television station business and
may be unable to obtain FCC consents for certain future acquisitions.

The FCC has initiated rulemaking proceedings in which it has solicited comments
on whether it should alter its multiple ownership rules and ownership
attribution rules. In addition, bills have been introduced in the U.S. Congress
which would alter Alien and other regulatory limits affecting broadcasting and
the communications industry overall. The Company cannot predict whether any of
these proposals will ultimately be adopted by the


<PAGE>   11



FCC or Congress or the effect on the operations of the Company.

Programming and Operation. The Communications Act requires broadcasters to serve
the "public interest". Since the late 1970s, the FCC gradually has relaxed or
eliminated many of the more formalized procedures it had developed to promote
the broadcast of certain types of programming responsive to the needs of a
station's community of license. However, broadcast station licensees continue to
be required to present programming that is responsive to community problems,
needs and interests and to maintain certain records demonstrating such
responsiveness. Complaints from viewers concerning a station's programming will
be considered by the FCC when it evaluates license renewal applications of a
licensee, although such complaints may be filed at any time and generally may be
considered by the FCC at any time. Stations also must follow various rules
promulgated under the Communications Act that regulate, among other things,
political advertising, sponsorship identifications, the advertisements of
contests and lotteries, obscene and indecent broadcasts, programming for
children and commercial limits within such programming and technical operations,
including limits on radio frequency radiation. In addition, broadcast licensees
must develop and implement affirmative action programs designed to promote equal
employment opportunities ("EEO") and must submit reports to the FCC with respect
to EEO and children's programming annually and in connection with license
renewal applications.

Failure to observe these or other FCC rules and policies can result in the
imposition of various sanctions, including monetary forfeitures, the grant of
short renewal terms (i.e., less than the full eight year term) and, for
egregious violations, the denial of a license renewal application or the
revocation of a broadcast license.

OTHER RECENT DEVELOPMENTS, PROPOSED LEGISLATION AND REGULATION

The FCC has undertaken several initiatives to deregulate aspects of the
television and radio industries particularly with respect to broadcast
programming and station ownership restrictions. Significant areas of regulation
remain, however, and the FCC continues to enforce strictly its regulations in
several such areas. These include equal employment opportunities, "indecent"
programming restrictions, children's programming, the "character qualifications"
of licensees, political advertising, environmental concerns, technical operating
matters and antenna tower maintenance.

Cable. The Cable Television Consumer Protection and Competition Act of 1992 (the
"1992 Cable Act"), enacted in October 1992, requires television broadcasters to
make an election to exercise either certain "must carry" or, alternatively,
"retransmission consent" rights in connection with their carriage by cable
television systems in the station's local market. If a broadcaster chooses to
exercise its must carry rights, it may demand carriage on a specified channel on
cable systems within its Area of Dominant Influence ("ADI"). Must carry rights
are not absolute, and their exercise is dependent on variables such as the
number of activated channels on, and the location and size of, the cable system
and the amount of duplicative programming on a broadcast station. Under certain
circumstances, a cable system may decline carriage of a given station, which
action may adversely affect such station. If a broadcaster chooses to exercise
its retransmission consent rights, it may prohibit cable systems from carrying
its signal, or permit carriage under a negotiated compensation arrangement.
Compensation to the television stations for signal retransmission can
potentially be monetary, use of a second cable channel per station or in other
forms. However, the existence and level of compensation to the Company, if any,
may ultimately confer little or no benefit to the Company.

In the 1992 Cable Act, Congress established a mechanism to modify local
television markets, under which television stations licensed to communities in
one ADI may become qualified for "must carry" status on cable systems serving
communities outside their ADI and within an ADI of other television station
markets. If a television station licensed to a community not part of the ADI
should be expanded to include communities within the ADI of one of the
television stations, such station could demand "must carry" status on cable
television systems serving such community or communities. Carriage of the signal
of such a station on cable systems carrying the signal of one of the Company's
television stations could further fractionalize the audience of such television
station, particularly if the station seeking such market expansion has the same
network affiliation as the affected television station. Conversely, under the
market modification procedures established in the 1992 Cable Act, the television
stations have the opportunity of requesting the FCC to expand their own
respective ADIs under certain circumstances, in order to qualify for "must
carry" status on cable systems serving communities presently outside such ADIs.

A three-judge panel of the U.S. District Court for the District of Columbia
upheld the constitutionality of the
        

<PAGE>   12



legislative must carry provisions on April 8, 1993. On April 29, 1993 the United
States Supreme Court refused to stay that decision and on June 27, 1994, the
Supreme Court remanded the must carry decision back to the three judge panel of
the U.S. District Court for the District of Columbia for the purpose of
gathering additional evidence. The majority of the Court essentially found good
cause for the conclusion that the must carry rules were constitutional but
required that the parties introduce additional evidence to support the
Congressional conclusions. The three-judge panel has received such evidence and
concluded that the must carry rules are constitutional. The case is presently on
appeal before the Supreme Court and action thereon is expected in 1997. In the
meantime, the must carry rules are still in effect. The Company cannot predict
the outcome of such challenges or the effect on the Company's business,
financial performance or future prospects if the must carry or retransmission
consent provisions of the Cable Act are found to be unconstitutional or
otherwise unlawful.

Prime Time Access. The FCC recently decided to eliminate the prime time access
rule ("PTAR"), effective August 30, 1996. PTAR had limited a station's ability
to broadcast network programming (including syndicated programming previously
broadcast over a network) during prime time hours. The elimination of PTAR could
increase the amount of network programming broadcast over a station affiliated
with ABC, NBC or CBS. Such elimination also could result in (i) an increase in
the compensation paid by a network to a station (due to the additional prime
time during which network programming could be aired by a network-affiliated
station) and (ii) increased competition for syndicated network programming that
previously was unavailable for broadcast by network affiliates during prime
time.

Fin-syn. The FCC also recently rescinded its remaining financial interest and
syndication ("fin-syn") rules. The fin-syn rules restricted the ability of ABC,
CBS and NBC to obtain financial interests in, or participate in syndication of,
prime-time entertainment programming created by independent producers for airing
during the networks' evening schedules. (The FCC previously had lifted the
financial interest rules and restraints on foreign syndication.)

Distribution of Video Services by Telephone Companies. Local telephone companies
were previously prohibited from providing video programming directly to
subscribers in their telephone service areas. This prohibition was successfully
challenged in several Federal courts before the prohibition was eliminated by
the Telecom Act of 1996. The Telecom Act permits telephone companies to provide
video services as a cable system, a multichannel video programming distributor
or through a newly created "open video" system. An open video system will allow
users access to video programming and interactive services utilizing their
existing telephone service connections. The FCC recently instituted rule making
to implement the "open video" system. In addition, competition in the video
services market is growing. The Company cannot predict how the provision of
video services and other interactive services by local and regional telephone
companies could affect its properties, and cannot predict the outcome of the
regulatory proceedings ongoing at the FCC.

Even prior to the court rulings described in the preceding paragraph, the FCC
had authorized a broadened role for telephone companies in the video marketplace
in its "video dialtone" ("VDT") decision. VDT is defined by the FCC as the
provision of a basic video platform to multiple video programmers on a
nondiscriminatory, common carrier basis. If a local telephone company provides
such a basic platform, it also may provide enhanced and unregulated services
related to the provision of video programming. The FCC has already approved
several applications to construct and operate VDT systems and has begun
processing tariffs filed to govern the rates and terms of VDT offerings
although, most recently, some telephone companies have indicated that they are
reassessing their timetable and possible approach in developing VDT. The Telecom
Act repealed the video dialtone rules; however, video dialtone systems approved
as of the effective date of the Telecom Act will not need to be terminated.

Advanced Television Service. The FCC has proposed the adoption of rules for
implementing advanced television service ("ATV") in the United States. ATV
refers to any technology that uses digital techniques to provide advanced
television services such as high definition TV or other advanced features and
services. Implementation of ATV will improve the technical quality of
television. Under certain circumstances, however, conversion to ATV operations
may reduce a station's geographical coverage area. The FCC is considering an
implementation proposal that would allot a second broadcast channel to each
full-power commercial television station for ATV operation. Under the proposal,
stations would be required to phase in their ATV operations on the second
channel over a discrete (but as yet undetermined) period following adoption of a
final table of allotments and to surrender their non-ATV channel at the end of
the transition period. Implementation of advanced television service will impose
substantial additional costs on television stations providing the new service,
due to increased equipment costs. Environmental, zoning, tower site
availability, signal strength, equipment availability, implementation schedule,
public acceptance, and other major issues may present formidable hurdles. At the
same time, there may be a


<PAGE>   13



potential for increased revenues derived through the use of the digital
transmission format. The FCC is expected to issue final ATV rules in 1997.

There is currently substantial debate regarding whether the spectrum necessary
to provide ATV services should be awarded through an auction process. Some
Congressional lawmakers view the availability of the spectrum necessary to
provide ATV services as an opportunity to raise revenue for the Federal
treasury. The broadcast industry has opposed that approach. The Senate Commerce
Committee has scheduled a series of hearings to explore the issue of broadcast
spectrum auctions. In the event that an auction process is adopted, there can be
no assurance that the Company will have sufficient resources to be the
successful bidder in any or all of its television markets. Although the Company
believes the FCC will authorize ATV service, the Company cannot predict when or
at what cost such authorization might be given, or the effect such authorization
might have on its business or capital expenditures requirements.

Direct Broadcast Satellite and Multipoint Distribution Systems. The FCC has
authorized the provision of video and aural programming directly to home
subscribers through direct broadcast satellites ("DBS") and multipoint
distribution (Wireless Cable) systems. Local broadcast stations are not carried
on DBS systems. Proposals recently advanced in Congress include a prohibition on
restrictions that inhibit a viewer's ability to receive video programming
through DBS services. There is also ongoing litigation between some of the DBS
operators and some of the major networks, including some local broadcast
stations. The networks and local broadcast stations are attempting to restrict
the DBS operators from carrying out-of-market affiliated stations on the DBS
systems. The Company is unable to predict the impact of these new services upon
its business, operations, financial performance or future prospects.

In September 1992, the FCC imposed certain restrictions on local joint ventures
that involve "time brokerage," or joint programming of radio stations. The FCC
is now conducting a rulemaking proceeding to consider changes to the multiple
ownership rules that could (i) permit the common ownership of AM, FM and/or
television stations in same geographic market; (ii) under certain limited
circumstances permit common ownership of television stations with overlapping
service areas; (iii) restrict television time brokerage agreements; and (iv)
alter the ownership attribution rules. In addition, in 1996, the FCC adopted
rules, implementing the Children's Television Act of 1990, increasing the
obligation of television stations to present programming specifically directed
to the "educational and informational" needs of children. In 1996, the FCC also
adopted more restrictive standards for the exposure of the public and workers to
potentially harmful radio frequency radiation emitted by broadcast station
transmitting facilities. Other matters which could affect the Company's
broadcast properties include technological innovations affecting the mass
communications industry, such as the Internet.

There are additional FCC regulations and policies, and regulations and policies
of other federal agencies affecting the business and operations of broadcast
stations. The Company cannot predict the resolution of the rulemaking and
proposed legislation discussed above, although their outcome could over a period
of time affect, either adversely or favorably, the revenues of the broadcasting
industry, including those of the Company.

Proposed Changes. The Congress and the FCC have under consideration, or may in
the future consider and adopt, new laws, regulations and policies regarding a
wide variety of matters that could, directly or indirectly: (i) affect the
operation, ownership and profitability of the Company and its broadcast
stations; (ii) result in the loss of audience share and advertising revenues of
the Company's television broadcast stations; and (iii) affect the ability of the
Company to acquire additional broadcast stations or finance such acquisitions.
Such matters include, for example, proposals to impose spectrum use or other
governmentally-imposed fees upon licensees; proposals to alter the FCC's equal
employment opportunity rules and other matters relating to minority and female
involvement in broadcasting; proposals to increase the benchmarks or thresholds
for attributing ownership interest in broadcast media; proposals to change rules
or policies relating to political broadcasting; technical and frequency
allocation matters, including those relative to the implementation of ATV;
proposals to restrict or prohibit the advertising of beer, wine and other
alcoholic beverages on broadcast stations; and proposals to limit the tax
deductibility of advertising expenses by advertisers.

The Company cannot predict the ultimate effects any of the above proposed
changes and any other matters which might be considered in the future, nor can
it predict what impact, if any, the implementation of any of these proposals or
changes might have on its business, operations, financial performance or future
prospects.




<PAGE>   14



ITEM 2.  PROPERTIES.

<TABLE>
<CAPTION>

                                            OWNED/             APPROX.                  EXPIRATION
OPERATION, LOCATION                         LEASED             SIZE                     DATE
-------------------                         ------             --------                 ----------
<S>                                         <C>                <C>                      <C>
Corporate Headquarters, Lutz, FL
--------------------------------
Office Building                             Leased              2,000 sq. Ft.            2/1/99

WQRF-TV, Rockford IL
--------------------
Office/Studio Building                      Leased             12,500 sq. ft.            7/1/98
Transmitter Building                        Owned               1,000 sq. ft.            n/a
Tower/Transmitter Land                      Leased                  2 Acres              none

KAYD-AM/FM, Beaumont, TX
------------------------
Office/Studio Building                      Owned               4,000 sq. ft.            n/a
Office/Studio Land                          Owned                   6 acres              n/a

KQXY-FM/KQHN-AM, Nederland, TX
------------------------------
Office/Studio Building                      Leased              3,200 sq. ft.            3/15/99
Tower/ FM Transmitter Land                  Leased                 20 acres              1/1/03
Tower/AM Transmitter Land                   Leased                 10 acres              2/1/99

KDEB-TV, Springfield, MO
------------------------
Office/Studio Building                      Leased              8,000 sq. ft.            8/31/00
Office/Studio Land                          Leased                  2 acres              8/31/00
Transmitter Building                        Owned               2,000 sq. ft.            n/a
Tower/Transmitter Land                      Owned                 114 acres              n/a
Translator Building                         Owned                  15 sq. ft.            n/a
Translator Land                             Owned                 250 sq. ft.            n/a

WTVW-TV, Evansville, IN
-----------------------
Office/Studio Building                      Owned              14,000 sq. ft.            n/a
Office/Studio Land                          Owned              71,000 sq. ft.            n/a
Transmitter Buildings                       Owned               2,900 sq. ft.            n/a
Tower/Transmitter Land                      Owned                  19 acres              n/a
Owensboro Offices                           Leased                450 sq. ft             12/31/99

KARD-TV, Monroe, LA
-------------------
Office/Studio Building                      Leased              9,000 sq. ft.            7/31/97
Transmitter Building                        Owned               2,000 sq. ft             n/a
Tower/Transmitter Land                      Leased                  2 acres              9/30/35

KLBK-TV, Lubbock, TX
--------------------
Office/Studio/Tower/Transmitter Building    Owned              27,000 sq. ft.            n/a
Office/Studio/Tower/Transmitter Land        Owned                   9 acres              n/a
</TABLE>



ITEM 3.  LEGAL PROCEEDINGS.

On July 31, 1996, the holder (the "Plaintiff") of 1,000 shares (100%) of the
Class A Preferred Stock of Petracom Broadcasting of Rockford, Inc.
("Petracom-Rockford), filed a lawsuit in the 13th Judicial Circuit Court for
Hillsborough County, Florida against Petracom-Rockford. Petracom-Rockford
(formerly known as Petracom, Inc.) is a wholly-owned subsidiary of Petracom and
a Florida corporation. The Plaintiff claims that he is entitled to redemption of
his preferred stock of Petracom-Rockford. On March 17, 1997, the court granted
partial summary judgment to the Plaintiff as to the issue of liability, but did
not decide the amount of damages. The Company believes the amount of any
liability to be immaterial. Additionally, any payment would not effect earnings
because such payment would be accounted for as an equity transaction for the
repurchase of outstanding stock. As of the date of this 10-K Annual Report, the
Company and the Plaintiff are in settlement discussions. However, if such


<PAGE>   15



discussions do not result in a satisfactory settlement, Petracom will appeal the
partial summary judgement decision and continue to vigorously defend this
lawsuit.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
                                     None

                                   PART II

                                       

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
         STOCKHOLDER MATTERS.
                                     None

ITEM 6.  SELECTED FINANCIAL DATA

The following table and information set forth selected financial information for
Petracom for the years 1992 through 1996. The Company completed an acquisition
in 1994 and an acquisition and restructuring in 1995 that are reflected in the
consolidated selected financial data. In March 1994, Petracom purchased KQHN-AM
and KQXY-FM in Beaumont. The Company had operated these stations for the prior
17 months pursuant to a Time Brokerage Agreement. On August 1, 1995, the Company
completed the acquisition of the following four television stations: KDEB-TV in
Springfield, Missouri; WTVW-TV in Evansville, Indiana; KARD-TV in Monroe,
Louisiana; and KLBK-TV in Lubbock, Texas. In connection with the acquisition, on
August 1, 1995 Petracom issued the following securities: (i) 240,000 shares of
its Class A Voting Common Stock in exchange for all of the outstanding common
stock of Petracom, Inc., (ii) $41,354,000 aggregate principal amount of Senior
Discount Notes and warrants to purchase up to 100,000 shares of the Company's
Class C Non-Voting Common Stock, (iii) a Junior Subordinated Note in the
principal amount of $13,500,000, and (iv) 60,000 shares of the Company's Class B
Non-Voting Common Stock for $1,500,000 and entered into a $55,000,000 Term and
Revolving Credit Facility. The proceeds were used to acquire the four television
stations, repay existing debt, repurchase outstanding preferred stock interests,
provide additional working capital and to pay all fees and expenses related to
the transactions.

The selected financial data should be read in conjunction with Petracom's
Consolidated Financial Statements and notes thereto included elsewhere in this
report. The selected financial data is derived from the Company's Audited
Financial Statements. Operating cash flow reported below is defined as income
from operations, excluding trade and barter, plus depreciation and amortization
of intangibles and programming rights less payments for programming rights.
Although operating cash flow is not a measure of performance calculated in
accordance with generally accepted accounting principles (GAAP), the Company
believes that operating cash flow is useful to investors to measure the
Company's ability to service debt and as a industry measure of the Company's
performance.


<TABLE>
<CAPTION>
                                                      Year Ended December 31,
                                          (Dollars in thousands, except per share amounts)

                             1992            1993              1994               1995             1996
                             ----            ----              ----               ----             ----
<S>                        <C>              <C>               <C>               <C>              <C>
Net revenues               $ 5,111          $ 6,131           $ 7,031           $ 17,103         $ 29,982

Net income (loss)             (295)            (270)              664             (4,413)         (10,593)

Net income (loss)
per common share                (6)             (5)                13                (18)             (44)

Total Assets                 3,817            3,688             4,848             92,096           85,491

Long term obligations
and mandatorily
redeemable securities        3,940            3,645             3,606             92,226          101,123

Operating Cash Flow            696              752             1,671              5,056            9,949

</TABLE>



<PAGE>   16






ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
         AND RESULTS OF OPERATIONS.

RESULTS OF OPERATIONS
        
COMPARISON OF THE YEAR ENDED DECEMBER 31, 1996 TO THE YEAR ENDED DECEMBER 31,
1995
        
Net revenues, including trade and barter revenues, increased to $29,982,000 for
the year ended December 31, 1996 from $17,103,000 for the year ended December
31, 1995. Total operating expenses, including expenses related to engineering,
news, production, programming, selling, general and administrative expenses,
amortization of programming rights, trade and barter expenses and depreciation
and amortization of intangibles, increased to $27,111,000 for the year ended
December 31, 1996 from $15,461,000 for the year ended December 31, 1995. The
increases in net revenues and operating expenses resulted primarily from the
operations of WTVW-TV, KDEB-TV, KLBK-TV and KARD-TV which were acquired by the
Company on August 1, 1995. The acquired television stations generated
$20,712,000 in net revenues and $19,686,000 in operating expenses for the year
ended December 31, 1996. Inclusion of the acquired stations' operations for the
full year of 1996 resulted in significant revenue increases when compared to
1995, which includes the acquired station's results for only five months. All
stations, except WTVW-TV showed year-to-year revenue growth. The decrease in
advertising revenues of 18% on a year-to-year basis at WTVW-TV resulted from the
affiliation switch from ABC to FOX on December 4, 1995. Subsequent ratings books
from Nielsen reported decreases in audience ratings for time periods programmed
by the network. Since audience ratings are used to set advertising rates and to
attract advertising expenditures, the station's advertising revenues decreased
accordingly. Petracom expects the negative effect on revenues of the affiliation
switch to continue through the second quarter of 1997. The Company did not
anticipate such a large revenue decrease resulting from the affiliation switch
to FOX at WTVW-TV.

However, since the station did not achieve the net revenue guaranty amount as
described in its agreement with FOX, the station received its $750,000 payment
from FOX in 1996. Petracom also expects to receive a $750,000 payment from FOX
in 1997. The Company believes it is unlikely that it will need to repay any of
these amounts to FOX in future years. Petracom is unable to predict when, and if
at all, WTVW-TV's ratings and revenues will return to the levels achieved while
the station was an ABC affiliate.

Interest expense increased to $13,187,000 for the year ended December 31, 1996
from $5,532,000 for the year ended December 31, 1995. This increase resulted
primarily from interest expense on the debt incurred on August 1, 1995 to
acquire the four television stations, repay existing debt, repurchase
outstanding preferred stock interests, provide additional working capital and to
pay all fees and expenses related to the transaction.

The Company incured a net loss of $10,593,000 for the year months ended December
31, 1996 compared to a net loss of $4,413,000 for the year ended December 31,
1995. The increase in the loss resulted primarily from the items discussed
above.

COMPARISON OF THE YEAR ENDED DECEMBER 31, 1995 TO THE YEAR ENDED DECEMBER 31,
1994
        
Net revenues, including trade and barter revenues, increased to $17,103,000 for
the year ended December 31, 1995 from $7,031,000 for the year ended December 31,
1994. Total operating expenses, including expenses related to engineering, news,
production, programming, selling, general and administrative expenses,
amortization of programming rights, trade and barter expenses and depreciation
and amortization of intangibles, increased to $15,461,000 for the year ended
December 31, 1995 from $6,082,000 for the year ended December 31, 1994. The
increases in net revenues and operating expenses resulted primarily from the
operations of WTVW-TV, KDEB-TV, KLBK-TV and KARD-TV which were acquired by the
Company on August 1, 1995. The acquired television stations generated $9,145,000
in net revenues and $8,355,000 in operating expenses for the the period August
1, 1995 to December 31, 1995.

Interest expense increased to $5,532,000 for the year ended December 31, 1995
from $417,000 for the year ended December 31, 1994. This increase resulted
primarily from interest expense on the debt incurred on August 1, 1995 to
acquire the four television stations, repay existing debt, repurchase
outstanding preferred stock interests, provide


<PAGE>   17

additional working capital and to pay all fees and expenses related to the
transaction.
        
The Company incurred a net loss of $4,413,000 for the year ended December 31,
1995 compared to net income of $664,000 for the year ended December 31, 1994.
The change from net income to a net loss resulted primarily from depreciation
and amortization related to the stations acquired on August 1, 1995 and interest
expense from the related financing.

LIQUIDITY AND CAPITAL RESOURCES

The Company's primary sources of capital have been cash flow from operations and
the proceeds of borrowings incurred in connection with acquisitions described
above. Operating cash flow increased to $9,949,000 for the year ended December
31, 1996 from $5,056,000 for the year ended December 31, 1995. The increase
resulted primarily from the operations of the acquired television stations.
Operating cash flow for this purpose is defined as income from operations,
excluding trade and barter, plus depreciation and amortization of intangibles
and programming rights less payments for programming rights. Although operating
cash flow is not a measure of performance calculated in accordance with
generally accepted accounting principles (GAAP), the Company believes that
operating cash flow is useful to investors to measure the Company's ability to
service debt and as a measure of the Company's performance under the various
covenants of its borrowings.

The switch from ABC to FOX at WTVW-TV, Evansville, Indiana has created
uncertainty regarding future operating cash flow. Petracom has decreased its
original estimates of future cash flows, due to the decrease in revenues at
WTVW-TV, as previously discussed. As a result of the affiliation change,
improvements in operating cash flow at WTVW-TV will take longer than initially
expected. The Company expects the continued growth of operating cash flow at the
other television stations and the radio stations.

As of December 31, 1996, Petracom had $44,671,000 in outstanding indebtedness
under its $50,000,000 term bank credit facility and $5,000,000 in outstanding
indebtedness under its $5,000,000 revolving bank credit facility, collectively,
(the "Bank Credit Facility"). Effective December 31, 1996, the Company amended
the Bank Credit Facility. The amendment primarily defers scheduled loan
payments, adjusts certain covenant provisions and increases the effective
interest on outstanding indebtedness. The Company believed it was necessary to
amend the Bank Credit Facility as a result of disappointing results of
operations at WTVW-TV, as described above. Petracom is in compliance with the
revised covenants, but would have been in default of certain financial covenants
without the amendment.

During the year ended December 31, 1996, the Company made interest payments of
$4,974,000 under its Bank Credit Facility. Scheduled principal payments of
$5,329,000 were made under the term bank credit facility for the year ended
December 31, 1996. Principal payments under the Bank Credit Facility are
scheduled to resume on September 30, 1997 and continue quarterly with final
payment due September 30, 2002.

As of December 31, 1996, Petracom had $31,727,000 in outstanding indebtedness
under its 17.5% Senior Discount Notes with warrants. The amount due under the
Senior Discount Notes includes $6,728,000 of accrued interest at December 31,
1996. No interest or principal payments were required under the Senior Discount
Notes for the year ended December 31, 1996. Cash interest payments on the Senior
Discount Notes may begin after August 1,1998 and must begin after August 1,
2000, but the Company expects to issue promissory notes in lieu of cash interest
payments during the period from August 1998 through August 2000. The Senior
Discount Notes mature on February 1, 2003.

On March 31, 1996, the Company completed an exchange of its outstanding 17.5%
Senior Discount Notes for an identical amount of publicly-tradeable 17.5% Senior
Discount Notes which had been registered with the Securities and Exchange
Commission pursuant to a registered Exchange Offer which became effective
January 30, 1996.

As of December 31, 1996, Petracom had $17,696,000 in outstanding indebtedness
under its Junior Subordinated Note. The amount due under the Junior Subordinated
Note includes $4,196,000 of accrued interest at December 31, 1996. No interest
or principal payments were required under the Junior Subordinated Note for the
year ended December 31, 1996. Interest on the Junior Subordinated Note will
accrue and be added to the unpaid balance until maturity on August 1, 2003.

Petracom has been actively seeking alternative sources of capital to replace the
Senior Discount Notes and the Junior Subordinated Note. All options continue to
be evaluated and there has not been a final decision on the capital structure.


<PAGE>   18




During the year ended December 31, 1996 the Company purchased $750,000 of
capital equipment and made payments for broadcast program rights of $1,477,000.

ITEM 8.  FINANCIAL STATEMENTS.
                         See index on page F-1 hereof

ITEM 9.  CHANGES AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE.
                                     None

                                       

                                   PART III



ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.


<TABLE>
<CAPTION>
                                                                                          YEARS WITH
NAME                          AGE           POSITION                                        COMPANY
---                           ---           --------                                      ----------
<S>                           <C>           <C>                                                <C>
Henry A. Ash                  56            President, Director                                7

Gregory H. Graber             48            Vice President, Chief Operating                    7
                                            Officer

Howard R. Trickey             72            Executice Vice President of Operations             7

Joseph M. Fry                 39            Vice President, Chief Financial Officer,           1
                                            Treasurer and Assistant Secretary

</TABLE>




ITEM 11.  EXECUTIVE COMPENSATION.


                          SUMMARY COMPENSATION TABLE


<TABLE>
<CAPTION>
                                                                                         ANNUAL
                                                                                         ------
NAME, PRINCIPAL POSITION                                      YEAR               SALARY           BONUS
------------------------                                      ----               ------           -----
<S>                                                           <C>               <C>              <C>
Henry A. Ash, President                                       1996              $193,638         $    -

Gregory H. Graber, Chief Operating Officer                    1996               163,273          20,000

Howard R. Trickey, Executice Vice President                   1996                44,367           8,000

Joseph M. Fry, Chief Financial Officer                        1996                96,954          15,000

</TABLE>

<PAGE>   19



ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
  MANAGEMENT.


PRINCIPAL STOCKHOLDERS

The following table sets forth certain information as of March 18, 1997 with
respect to beneficial owners of 5% or more of the Company's Class A Voting
Common Stock, on a fully-diluted basis, before and after conversion of all
outstanding Class B Non-Voting Common Stock and Class C Non-Voting Common Stock
into Class A Voting Common Stock:


<TABLE>
<CAPTION>
                                                           BEFORE CONVERSION               AFTER CONVERSION1 
NAME AND ADDRESS OF BENEFICIAL OWNER                      NUMBER / PERCENTAGE             NUMBER / PERCENTAGE
------------------------------------                      -------------------             -------------------
<S>                                                         <C>                              <C>

Henry A. Ash(2)
1527 N. Dale Mabry Hwy.
Suite 105
Lutz, Florida  33549                                        240,000(3) / 100%                  240,000 / 60%

Fox Television Stations, Inc.
5746 Sunset Boulevard
Los Angeles, California  90028                                  0 / 0%                      60,000(4) / 15.0%(5)

Putnam Investment Management, Inc.(6)
One Post Office Square
Boston, Massachusetts  02110                                    0 / 0%                     100,000(7) / 25.0%(8)
                                                               --------                   ------------------
         Total                                              240,000 / 100%                   400,000 / 100%

</TABLE>

1.       The Class B Non-Voting Common Stock and the Class C Non-Voting Common
         Stock each are convertible into Class A Voting Common Stock upon a
         registration by the Company of its common stock for a public offering
         and in connection with certain "tag" and "drag" rights granted pursuant
         to agreements with FOX and Putnam, respectively. In addition, the Class
         C Non-Voting Common Stock is convertible upon sale pursuant to Rule 144
         under the Securities Act, and at any time so long as after conversion
         such Holder does not own more than 4.9% of the Common Stock of the
         Company. However, such conversions are subject to approval by the FCC.
         See Footnotes 5 and 8.
2.       Petracom Equity Partners, L.P., a Delaware partnership, is the record
         owner of these shares.  Henry A. Ash, as the General Partner 
         authorized to vote the Partnership's shares, is the beneficial owner.
3.       Class A Voting Common Stock.
4.       Class B Non-Voting Common Stock.
5.       Percentage may increase depending upon total number of shares issued
         upon exercise of the Warrants. Represents the maximum possible number
         of shares into which the Warrants are exercisable, on a fully-diluted
         basis. Pursuant to the Warrant Agreement, depending upon certain
         Company performance results, the minimum possible number of shares into
         which the Warrants are convertible is 33,333, representing 10% of the
         total equity of the Company. To the extent such number of Warrant
         shares is less than 100,000, the percentage ownership of the other
         stockholders will increase proportionately.
6.       Includes total investment by 17 affiliated Putnam investment funds.
7.       Class C Non-Voting Common Stock.  Represents the maximum number of 
         shares into which the Warrants are exercisable.  See footnote 8.
8.       Percentage may increase depending upon total number of shares issued
         upon exercise of the Warrants. 100,000 shares (25%) is the maximum
         possible number of shares into which the Warrants are exercisable, on a
         fully-diluted basis. Pursuant to the Warrant Agreement, depending upon
         certain Company performance results, the minimum possible number of
         shares into which the Warrants are convertible is 33,333, representing
         10% of the total equity of the Company. To the extent such number of
         Warrant shares is less than 100,000, the percentage ownership of the
         other stockholders will increase proportionately.


<PAGE>   20



MANAGEMENT

The following table sets forth the number and percentage of shares of the equity
securities of the Company beneficially owned by each director and each executive
officer and by all directors and executive officers as a group, as of March 18,
1997.



<TABLE>
<CAPTION>                                                             
                                         NUMBER OF             PERCENT OF
NAMES OF BENEFICIAL OWNER              CLASS A SHARES            CLASS
------------------------------         --------------         -----------
<S>                                       <C>                    <C>
Henry A. Ash(1)                           240,000                100%
 1527 N. Dale Mabry Hwy.
 Suite 105
 Lutz, Florida  33549

All Directors and Executive               240,000                100%
 Officers as a Group
</TABLE>


1.       Petracom Equity Partners, L.P., a Delaware partnership, is the record
         owner of these shares. Henry A. Ash, as the General Partner of the
         Partnership, is authorized to vote the Partnership's shares and thus is
         the beneficial owner of the shares.

DESCRIPTION OF CAPITAL STOCK

Pursuant to its Certificate of Incorporation, the Company has authority to issue
1,000,000 shares of capital stock in three classes, as follows:

               (i)         700,000 shares of Class A Voting Common Stock, 
                           $.01 par value per share;

              (ii)         100,000 shares of Class B Non-Voting Common Stock, 
                           $.01 par value per share; and

             (iii)         200,000 shares of Class C Non-Voting Common Stock, 
                           $.01 par value per share.

The Class A Voting Common Stock shares are the only shares entitled to vote on
matters on which the shareholders are entitled to vote, with one vote per share.
Holders of Class B Non-Voting Common Stock and Class C Non-Voting Common Stock
are not entitled to vote on any matters, other than voting as a class on
amendments to Article IV of the Company' Certificate of Incorporation (Capital
Structure) or any other provision of the Certificate of Incorporation which may
adversely affect the rights or such stock. Each class may receive dividends as
declared by the Board of Directors, and are equally entitled to assets upon
liquidation or dissolution.


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
                                     None

                                   PART IV


ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
   FORM 8-K.

FINANCIAL STATEMENTS AND SCHEDULES
See index on page F-1 hereof

REPORTS ON FORM 8-K
None


<PAGE>   21

SIGNATURES


Pursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.


                                    PETRACOM HOLDINGS, INC.
                                    
                                    
                                    By  /s/ HENRY A. ASH
                                      --------------------
                                       Henry A. Ash
                                       President
                                       Date: March 18, 1997


Pursuant to the requirements of 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 March 18, 1997.



<TABLE>
<CAPTION>
         <S>                                <C>
         /s/ HENRY A. ASH                   President and Director (principal executive officer
         ---------------------------                 and sole director)   
         Henry A. Ash                                                     


        /s/ JOSEPH M. FRY                   Vice President, Chief Financial Officer, Treasurer
        ----------------------------                 and Assistant Secretary (principal financial officer 
         Joseph M. Fry                               and principal accounting officer)                    

</TABLE>
                                                  





     SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO
SECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES
PURSUANT TO SECTION 12 OF THE ACT.

No annual report or proxy materials have been sent to security-holders of the
company
        





<PAGE>   22
PETRACOM HOLDINGS, INC.

<TABLE>
<CAPTION>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------------


<S>                                                                               <C>
Report of Independent Accountants                                                 F-2
                                                                               
Consolidated Balance Sheets at December 31, 1995 and 1996                         F-3
                                                                               
Consolidated Statements of Operations for the years ended                      
    December 31, 1994, 1995 and 1996                                              F-4
                                                                               
Consolidated Statements of Cash Flows for the years ended                      
    December 31, 1994, 1995 and 1996                                              F-5
                                                                               
Consolidated Statements of Stockholders' Deficit for the years                 
    ended December 31, 1994, 1995 and 1996                                        F-6
                                                                               
Notes to Consolidated Financial Statements                                        F-7
</TABLE> 


                                      F-1

         

<PAGE>   23





                      REPORT OF INDEPENDENT ACCOUNTANTS




To the Board of Directors and Stockholders of
Petracom Holdings, Inc.

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of cash flows, and of stockholders'
deficit present fairly, in all material respects, the financial position of
Petracom Holdings, Inc. and its subsidiaries at December 31, 1996 and 1995, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1996 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a reason
able basis for the opinion expressed above.


/s/ Price Waterhouse LLP

Price Waterhouse LLP
Atlanta, Georgia
February 28, 1997

                                     F-2

<PAGE>   24


PETRACOM HOLDINGS, INC.

<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS                                                     
(in 000's except share and per share amounts)
---------------------------------------------------------------------------------------------------------------------------------

                                                                                                       DECEMBER 31,
                                                                                                     1995        1996 
ASSETS                                                                                                               
<S>                                                                                               <C>          <C>
Current assets
   Cash and cash equivalents                                                                       $  2,180     $  1,831
   Accounts receivable, less allowance for doubtful accounts of $537 and $602                         5,401        5,861
   Trade receivables                                                                                    375          375
   Current portion of broadcast program rights                                                        1,907        1,825
   Prepaid expenses and other current assets                                                            688          884
                                                                                                   --------     --------  
           Total current assets                                                                      10,551       10,776

Property and equipment, net                                                                          13,318       12,351
Broadcast program rights                                                                              1,394        1,341
Intangible assets, net                                                                               66,833       61,023
                                                                                                   --------     --------    
           Total assets                                                                            $ 92,096     $ 85,491
                                                                                                   ========     ========
LIABILITIES, MANDATORILY REDEEMABLE SECURITIES
  AND STOCKHOLDERS' DEFICIT
Current liabilities
   Current portion of broadcast program rights contracts payable                                   $  1,970     $  2,041
   Current portion of long-term debt                                                                  5,873        1,603
   Accounts payable and accrued expenses                                                              1,834        1,907
   Income taxes payable                                                                                 105            -
   Trade payables                                                                                       491          710
   Accrued interest                                                                                     735          179
                                                                                                   --------     --------       
           Total current liabilities                                                                 11,008        6,440

Broadcast program rights contracts payable                                                            1,466        1,247
Long-term debt                                                                                       88,423       97,198
                                                                                                   --------     -------- 
           Total liabilities                                                                        100,897      104,885
                                                                                                   --------     --------    
Mandatorily redeemable securities
   Class B, non-voting, common stock, $.01 par value, 100,000 shares
      authorized, 60,000 shares issued and outstanding                                                1,625        1,966
   Warrants                                                                                             712          827
                                                                                                   --------     --------    
           Total mandatorily redeemable securities                                                    2,337        2,793
                                                                                                   --------     -------- 
Stockholders' deficit                                                                             
   Class A, voting, common stock, $.01 par value, 700,000 shares authorized                               3            3
   Class C, non-voting, common stock, $.01 par value, 200,000 shares
      authorized, no shares issued and outstanding                                                        -            -
   Accumulated deficit                                                                              (11,141)     (22,190)
                                                                                                   --------     --------    
           Total stockholders' deficit                                                              (11,138)     (22,187)
                                                                                                   --------     --------
Commitments and contingencies (Notes 9 and 10)                                                            -            -
           Total liabilities, mandatorily redeemable securities and                                --------     --------
             stockholders' deficit                                                                 $ 92,096     $ 85,491
                                                                                                   ========     ========
</TABLE>

      The accompanying notes are an integral part of these consolidated
                            financial statements.



                                     F-3

<PAGE>   25


PETRACOM HOLDINGS, INC.

<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF OPERATIONS
(IN 000'S)
------------------------------------------------------------------------------------------------------------

                                                 
                                                                                   YEAR ENDED DECEMBER 31,
                                                                                1994       1995       1996
<S>                                                                          <C>         <C>         <C>
Revenues                                                                     $  6,975    $ 17,550    $ 32,224
   Less - commissions                                                          (1,021)     (2,618)     (4,728)
                                                                             --------    --------    -------- 
                                                                                5,954      14,932      27,496
Barter and trade revenues                                                       1,077       2,171       2,486
                                                                             --------    --------    -------- 
      Total net revenues                                                        7,031      17,103      29,982
                                                                             --------    --------    -------- 
Expenses
   Operating                                                                      325         775       1,395
   Selling, general and administrative                                          3,424       7,100      12,228
   Programming                                                                  1,652       4,416       6,379
   Depreciation and amortization                                                  681       3,170       7,109
                                                                             --------    --------    -------- 
                                                                                6,082      15,461      27,111
                                                                             --------    --------    -------- 
Income from operations                                                            949       1,642       2,871
Other income (expense)
   Interest expense                                                              (417)     (5,532)    (13,187)
   Other                                                                           30        (250)        (95)
                                                                             --------    --------    -------- 
Income (loss) before income taxes                                                 562      (4,140)    (10,411)

Benefit (provision) for income taxes                                              102        (273)       (182)
                                                                             --------    --------    -------- 
Net income (loss)                                                            $    664    $ (4,413)   $(10,593)
                                                                             ========    ========    ========
</TABLE>                                                                     
                                                                              
       The accompanying notes are an integral part of these consolidated
                             financial statements.

                                       F-4

<PAGE>   26


PETRACOM HOLDINGS, INC.
<TABLE>
<CAPTION>

CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN 000'S)
------------------------------------------------------------------------------------------------------


                                                                            YEAR ENDED DECEMBER 31,
                                                                         1994        1995        1996
<S>                                                                    <C>         <C>         <C>
Cash flows from operating activities
   Net income (loss)                                                   $    664    $ (4,413)   $(10,593)
   Adjustments to reconcile net income (loss) to
      net cash provided by operating activities
        Depreciation                                                        601         955       1,954
        Amortization of intangible assets                                    80       2,215       5,155
        Amortization of deferred financing costs                             29         321         718
        Amortization of broadcast program rights                            293         986       1,464
        Payments for broadcast program rights                              (252)       (793)     (1,477)
        Trade revenue/expense, net                                         (102)         51         (18)
        Deferred federal income taxes                                      (236)        236           -
        Changes in assets and liabilities, net of
           the effect of acquisitions
              Accounts receivable                                          (370)       (732)       (460)
              Prepaid expenses and other current assets                     (12)       (493)       (196)
              Accounts payable and accrued expenses                        (107)      1,048          73
              Income taxes payable                                          134         (29)       (105)
              Accrued interest, including interest
              included in long-term debt                                      -       3,683       7,415
                                                                       --------    --------    --------  
                Net cash provided by operating activities                   722       3,035       3,930
                                                                       --------    --------    --------  

Cash flows from investing activities
   Acquisition of television stations                                         -     (84,005)          -
   Purchase of radio station assets                                        (700)          -           -
   Additions of property and equipment                                     (184)       (616)       (750)
   Additions to intangible assets                                             -           -         (63)
   Dispositions of property and equipment                                     -         306           -
                                                                       --------    --------    --------  
                Net cash used for investing activities                     (884)    (84,315)       (813)
                                                                       --------    --------    --------  

Cash flows from financing activities
   Proceeds from long-term debt                                             627      91,788       3,600
   Payments on long-term debt                                              (568)     (4,763)     (7,066)
   Issuance of mandatorily redeemable securities                              -       2,212           -
   Purchase of Petracom, Inc. preferred stock                                 -      (5,907)          -
                                                                       --------    --------    --------  
                Net cash provided by (used for)
                    financing activities                                     59      83,330      (3,466)
                                                                       --------    --------    --------  

Increase (decrease) in cash and cash equivalents                           (103)      2,050        (349)

Cash and cash equivalents, beginning of year                                233         130       2,180
                                                                       --------    --------    --------  
Cash and cash equivalents, end of year                                 $    130    $  2,180    $  1,831
                                                                       ========    ========    ======== 
Supplemental disclosure of cash flow information
   Cash paid during the period for interest                            $    414    $  1,528    $  5,032
                                                                       ========    ========    ======== 

   Cash paid during the period for income taxes                        $      -    $     67    $    287
                                                                       ========    ========    ======== 
</TABLE>



             The accompanying notes are an integral part of these
                      consolidated financial statements.


                                     F-5
<PAGE>   27


PETRACOM HOLDINGS, INC.


<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(in 000's)
----------------------------------------------------------------------------------------------------------------------------------

                                           CLASS A        PREFERRED STOCK       COMMON STOCK
                                         COMMON STOCK     (PETRACOM, INC.)    (PETRACOM, INC.)     
                                       ---------------     ---------------     --------------    ACCUMULATED
                                       SHARES   AMOUNT     SHARES   AMOUNT     SHARES  AMOUNT      DEFICIT          TOTAL
<S>                                    <C>      <C>        <C>       <C>       <C>      <C>      <C>              <C>
Balance, December 31, 1993                 -    $   -        100      $  1        50    $   5    $   (1,361)      $   (1,355)
                                    
Net income - 1994                          -        -          -         -         -        -           664              664
                                       -----    -----      -----     -----     -----    -----    ----------       ----------    
Balance, December 31, 1994                 -        -        100         1        50        5          (697)            (691)  
                                                       
Repurchase of preferred stock                          
   on August 1, 1995 (Note 1)              -        -        (99)       (1)        -        -        (5,906)          (5,907)
                                                       
Recapitalization on August 1, 1995                     
   Petracom, Inc. shares retired           -        -         (1)        -       (50)      (5)            -               (5)
                                       -----    -----      -----     -----     -----    -----    ----------       ----------    
   Petracom Holdings, Inc.             
      shares issued                      240        3          -         -         -        -             -                3
                                                                                
Dividends accrued on mandatorily                                                
   redeemable securities                   -        -          -         -         -        -          (125)            (125)
                                                                                
Net loss - 1995                            -        -          -         -         -        -        (4,413)          (4,413)
                                       -----    -----      -----     -----     -----    -----    ----------       ----------    
Balance, December 31, 1995               240        3          -         -         -        -       (11,141)         (11,138)
                                       -----    -----      -----     -----     -----    -----    ----------       ----------    
Dividends accrued on mandatorily                                                
  redeemable securities                    -        -          -         -         -        -          (341)            (341)
                                                                                
Accretion recorded on warrants             -        -          -         -         -        -          (115)            (115)
                                                                                
Net loss - 1996                            -        -          -         -         -        -       (10,593)         (10,593) 
                                       -----    -----      -----     -----     -----    -----    ----------       ----------    
Balance, December 31, 1996               240    $   3          -     $   -         -    $   -    $  (22,190)      $  (22,187)
                                       =====    =====      =====     =====     =====    =====    ==========       ==========
                                                                               
</TABLE>




       The accompanying notes are an integral part of these consolidated
                             financial statements.


                                     F-6
<PAGE>   28


PETRACOM HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


1.    BACKGROUND, RECAPITALIZATION AND ACQUISITIONS

      BACKGROUND
      Petracom Holdings, Inc. and its subsidiaries own and operate five 
      network-affiliated broadcast television stations located in Illinois,
      Indiana, Texas, Louisiana and Missouri and four radio stations located in
      Texas.

      The consolidated financial statements include the accounts of Petracom
      Holdings, Inc. and its wholly-owned subsidiaries (the Company). All
      significant intercompany accounts and transactions have been eliminated.

      RECAPITALIZATION 

      Effective August 1, 1995, the sole common stockholder of Petracom,
      Inc.exchanged all outstanding common stock of Petracom, Inc. for 100% of
      the outstanding shares of the Company, which totaled 240,000 shares of
      Class A voting common stock.  The shares were subsequently contributed to
      Petracom Equity Partners, L.P.  As a result of the exchange of shares,
      Petracom, Inc. became a wholly-owned subsidiary of the Company.  The
      acquisition of Petracom, Inc. has been accounted for as a
      recapitalization with no change in the historical basis of assets and
      liabilities.

      ACQUISITIONS
      On August 1, 1995, the Company acquired substantially all the assets of
      four television stations for $77,200,000, plus acquisition costs of
      $6,805,000 and liabilities assumed of $3,064,000. The acquisition was
      accounted for using the purchase method of accounting and, accordingly,
      the results of operations of these television stations have been included
      in the consolidated financial statements from the date of the acquisition.
      The acquisition was financed with a $50,000,000 term loan, a $4,000,000
      revolving credit facility, $25,000,000 of Senior Discount Notes with
      warrants and a $13,500,000 Subordinated Note, as well as the sale of
      60,000 shares of Class B non-voting common stock for $1,500,000. The
      Company was required to exchange publicly registered notes (the Exchange
      Notes) for the Senior Discount Notes. The exchange occurred on March 1,
      1996.

      The purchase price was allocated as follows (in 000's):
<TABLE>
<S>                                   <C>
Current assets                        $  3,629 
Property and equipment                  11,896
Noncurrent broadcast program rights      2,370
Intangible and other assets             69,174
                                      --------

                                        87,069

Liabilities assumed                     (3,064)
Acquisition expenses                    (6,805)
                                      --------

                                      $ 77,200
                                      ========
</TABLE>



                                      F-7


<PAGE>   29


PETRACOM HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------


      On March 15, 1994, a subsidiary of the Company purchased substantially all
      of the operating assets of two radio stations for $700,000. The acquired
      assets were recorded at their fair market value of $550,000. The Company
      previously operated the two radio stations under a local marketing
      agreement whereby the Company received substantially all of the radio
      station's operating revenues and paid their operating expenses.
      Accordingly, the acquisition did not have a significant effect on the
      Company's results of operations.


2.    SIGNIFICANT ACCOUNTING POLICIES

      USE OF ESTIMATES
      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported 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. The more significant estimates made by
      management include those relating to the allowance for doubtful accounts,
      the recoverability of broadcast program rights and the useful lives of
      intangible assets. Actual results could differ from those estimates.

      REVENUE RECOGNITION
      Advertising revenues are recognized in the period during which the spots
      are aired. Revenues from other sources are recognized in the period when
      the services are provided.

      CASH AND CASH EQUIVALENTS
      The Company has defined cash and cash equivalents as cash and investments
      with an original maturity when purchased of three months or less.

      CONCENTRATION OF CREDIT RISK
      A significant portion of the Company's accounts receivable are due from
      local and national advertising agencies. Such accounts are generally
      unsecured.

      BARTER AND TRADE TRANSACTIONS
      The Company barters advertising time for certain programming. These
      transactions are recorded at the fair value of the services involved as
      determined by management. At December 31, 1995 and 1996, broadcast program
      rights and broadcast program rights contracts payable include $838,000 and
      $1,021,000, respectively, for program material obtained through barter.

      The Company trades certain advertising time for various goods and
      services. These transactions are recorded at the estimated fair value of
      the goods or services received. The related revenue is recognized when the
      advertisements are broadcast while expenses are recognized when the goods
      or services are utilized.


                                      F-8

<PAGE>   30


PETRACOM HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


      BROADCAST PROGRAM RIGHTS AND CONTRACTS PAYABLE
      Broadcast program rights, primarily in the form of syndicated programs and
      feature films, represent amounts paid or payable to program suppliers for
      the limited right to broadcast the suppliers' programming and are recorded
      when available for use. Broadcast program rights are stated at the lower
      of unamortized cost or net realizable value. Broadcast program rights are
      amortized over the lives of the underlying contracts on the greater of
      straight-line over the license term or on a per-play basis. Amounts
      expected to be amortized within one year are classified as current assets.

      Broadcast program rights contracts payable represent the gross amounts to
      be paid to program suppliers over the life of the contracts. The portion
      of broadcast program rights contracts payable within one year are
      classified as current liabilities.

      PROPERTY AND EQUIPMENT
      Property and equipment is recorded at cost. Depreciation is computed over
      the estimated useful lives of the assets which range from 5 to 31 years on
      a straight-line basis.

      INTANGIBLE ASSETS
      Intangible assets acquired in the purchase of the television stations have
      been recorded based on their fair values at the date of acquisition. Such
      amounts are being amortized on a straight-line basis over their estimated
      useful lives.

      IMPAIRMENT OF LONG-LIVED ASSETS
      Statement of Financial Accounting Standards No. 121, "Accounting for the
      Impairment of Long-Lived Assets to be Disposed Of" (FAS 121), was
      implemented by the Company in fiscal 1996. FAS 121 states that if the
      carrying value of an asset, including associated intangibles, exceeds the
      sum of estimated undiscounted cash flows from the operation of the asset,
      an impairment loss should be recognized for the difference between the
      asset's estimated fair value and carrying value. As the Company's previous
      accounting policy was consistent with the provisions of FAS 121, there was
      no impact as a result of the new standard.

      INCOME TAXES
      The Company accounts for income taxes in accordance with Statement of
      Financial Accounting Standards No. 109, "Accounting for Income Taxes."
      Deferred income taxes are provided for differences in the treatment of
      income and expense items for financial reporting and income tax purposes.
      A valuation allowance is provided for deferred income taxes for which the
      future utilization is not assured.

      EARNINGS PER SHARE
      As a result of the recapitalization of the Company as discussed in Note 1,
      historical earnings per share for the years ended December 31, 1994 and
      1995 is not meaningful and therefore has not been presented. Pro forma
      earnings per share for the year ended December 31, 1994 and 1995

                                      F-9

<PAGE>   31


PETRACOM HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


      is disclosed in Note 12, as well as historical earnings per share for the
      year ended December 31, 1996.

      RECLASSIFICATION
      Certain prior year amounts have been reclassified to conform with the
      current year's presentation.


3.    PROPERTY AND EQUIPMENT

      Property and equipment consist of the following (in 000's):

<TABLE>
<CAPTION>
                                                                  DECEMBER 31,
                                                                1995        1996
         <S>                                                  <C>         <C>
         Broadcasting equipment                               $ 12,002    $ 12,996
         Land, buildings, and improvements                       3,040       3,176
         Furniture and other equipment                           1,042       1,253
         Construction in progress                                  455          21
                                                              --------    --------  
                                                                16,539      17,446
         Less - accumulated depreciation                        (3,221)     (5,095)
                                                              --------    --------
                                                              $ 13,318    $ 12,351
                                                              ========    ========
</TABLE>

4.    INTANGIBLE ASSETS

      Intangible assets consist of the following (in 000's):

<TABLE>
<CAPTION>
                                             AMORTIZATION 
                                                PERIOD             DECEMBER 31,
                                                (YEARS)        1995           1996
         <S>                                    <C>        <C>            <C>
         FCC license                            15         $   40,079     $    40,079
         Network affiliation agreements         10             23,290          23,290
         Deferred financing costs               6 to 8          5,488           5,313
         Other                                  5                 961             704
                                                           ----------     -----------
                                                               69,818          69,386
         Less - accumulated amortization                       (2,985)         (8,363)
                                                           ----------     -----------
                                                           $   66,833     $    61,023
                                                           ==========     ===========
</TABLE>

      The amortization of deferred financing costs is recorded as interest
      expense in the accompanying consolidated statements of operations.


                                      F-10

<PAGE>   32


PETRACOM HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


5.    LONG-TERM DEBT

      Long-term debt consists of the following (in 000's):
<TABLE>
<CAPTION>
                                         
                                                       DECEMBER 31,
                                                  1995             1996
           <S>                                 <C>             <C>
           Term loan                           $    50,000     $    44,671
           Revolving credit facility                 3,000           5,000
           Exchange Notes                           26,111          31,016
           Subordinated Note                        14,625          17,696
           Other                                       560             418
                                               -----------     -----------
                                                    94,296          98,801
           Less - current maturities                (5,873)         (1,603)
                                               -----------     -----------
                                               $    88,423     $    97,198
                                               ===========     ===========
</TABLE>

      The term loan accrues interest at the LIBOR rate plus a variable margin
      (8.19% at December 31, 1996). Quarterly principal payments are due in
      varying amounts ranging from $500,000 to $4,724,000, with the balance due
      September 30, 2002. Interest payments are due quarterly or upon expiration
      of each LIBOR contract, if earlier.

      The revolving credit facility accrues interest at the same rate and
      payment terms as the term loan. The $5,000,000 revolving credit facility
      availability will be reduced by $2,500,000 on June 30, 2002 and $2,500,000
      on September 30, 2002. The Company pays commitment fees of 0.5% per annum
      on the average unborrowed portion of the total amount available for
      borrowing.

      The term loan and revolving credit facility are collateralized by
      substantially all of the Company's assets.

      In 1995, the Company entered into interest rate agreements with a notional
      principal amount of $28,500,000 related to the term loan and revolving
      credit facility which established LIBOR interest rate caps and floors. The
      Company purchased three interest rate agreements with caps at 8.00% and
      with floors at 4.99% to 5.48%. The agreements expire from August to
      September 1998. A payment of approximately $7,000 was paid in 1996 as the
      market rate went below the floor.

      The Exchange Notes accrue interest at 17.5% per annum. Interest will
      accrete on the unpaid balance through August 1, 1998 and will be payable
      in cash thereafter, unless such payment of cash interest would not be
      allowed under the term loan and revolving credit facility agreements, in
      which case such interest may be paid in kind by issuing additional notes.
      The note balance as of December 31, 1995 and 1996 includes interest of
      $1,823,000 and $6,728,000, respectively.


                                      F-11
<PAGE>   33


PETRACOM HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------


      The Subordinated Note accrues interest at 20% per annum. Interest will
      accrue and be added to the unpaid balance until maturity on August 1,
      2003. The note balance as of December 31, 1995 and 1996 includes interest
      of $1,125,000 and $4,196,000, respectively.

      These agreements contain various restrictive covenants including the
      maintenance of certain financial ratios and restrictions on the incurrence
      of additional debt, making dividend payments, sales of stock or assets and
      certain other transactions. The term loan and revolving credit facility
      agreements were amended effective December 31, 1996 to revise certain of
      its financial covenants, payment terms, and variable margin on the
      interest rate. If such amendment had not occurred, the Company would have
      been in default under certain of the financial covenants. The Company is
      in compliance with these debt covenants, as amended.

      At December 31, 1996, aggregate principal maturities of long-term debt are
      as follows (in 000's):

<TABLE>
<CAPTION>

                     YEAR ENDING    
                     DECEMBER 31,
                     <S>              <C>
                         1997         $     1,603
                         1998               4,080
                         1999               6,088
                         2000               8,097
                         2001              11,049
                      Thereafter           67,884
                                      -----------
                                      $    98,801
                                      ===========
</TABLE>



6.    MANDATORILY REDEEMABLE SECURITIES

      The Class B common stock is subject to a put option which results in the
      accretion of a minimum 20% return. The stockholder may require the Company
      to repurchase the Class B common stock upon retirement of the Subordinated
      Note. The Class B common stock can be converted into Class A common stock
      upon the occurrence of certain events defined in the Subordinated Note
      agreement.

      The Exchange Notes were issued with detachable warrants to purchase shares
      of the Company's Class C non-voting common stock. The number of warrants
      granted will depend on the future cash flows of the Company with the
      minimum and maximum number of warrants being granted ranging from 33,000
      to 100,000, respectively. There were 100,000 warrants issued and
      outstanding as of December 31, 1995 and 1996. The number of warrants
      issued can be reduced in future periods if the Company meets certain
      operating results as defined in the agreement. The warrants are
      exercisable at $0.01 per share commencing August 1, 1998 or at an earlier
      date


                                     F-12
<PAGE>   34


PETRACOM HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------------------------------------------


      depending on certain transactions occurring as defined in the agreement.
      These transactions include an initial public offering, a merger, sale or
      change in control of the Company and certain other transactions. The
      warrants may be redeemed for cash at their fair market value at the option
      of the warrant holder after February 1, 2003 or at an earlier date
      depending on certain transactions occurring as defined in the agreement.
      The warrants expire on August 1, 2005.


7.    INCOME TAXES

      The income tax benefit (expense) consists of the following (in 000's):
<TABLE>
<CAPTION>

                                                     YEAR ENDED
                                                    DECEMBER 31,
                                               1994     1995     1996
             <S>                              <C>      <C>      <C>
             Current
               Federal                        $(134)   $(197)   $    -
               State                              -      (13)    (182)
             Deferred                           236      (63)        -
                                              -----    -----    ------
                                              $ 102    $(273)   $ (182)
                                              =====    =====    ======      
</TABLE> 

      The provision for income tax (benefit) expense differs from the U.S.
      federal statutory tax rate as a result of the following differences (in
      000's):

<TABLE>
<CAPTION>
                                                                             YEAR ENDED
                                                                             DECEMBER 31,
                                                                     1994       1995       1996
<S>                                                               <C>        <C>        <C>
U.S. federal statutory tax rate, applied to
   income (loss) before income taxes, of 34%                      $   191    $(1,408)   $(3,540)
Increase (decrease) in taxes resulting from:
   Utilization of net operating loss carryforwards                   (191)      (102)         -
   Increase (decrease) in valuation allowance                        (102)     1,357      2,600
   Nondeductible interest expense                                       -        351        949
   State taxes, net                                                     -          -        120
   Other permanent differences                                          -         75         53
                                                                  -------    -------    -------
                                                                  $  (102)   $   273    $   182
                                                                  =======    =======    =======
</TABLE>
        




                                     F-13
<PAGE>   35


PETRACOM HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


      The deferred tax assets (liabilities) were comprised of the following (in
      000's):

<TABLE>
<CAPTION>
                                                 
                                                                     DECEMBER 31,
                                                                   1995       1996
<S>                                                              <C>        <C>
Assets
    Accrued interest                                             $   653    $ 2,456
    Net operating loss carryforwards                                 322      1,454
    Amortization of intangible assets                                272        742
    Alternative minimum tax credit carryforwards                      64         64
    Bad debt provision                                                70         94
                                                                 -------    -------
                                                                   1,381      4,810
Liabilities
    Depreciation of property, plant and equipment                   (119)      (948)
                                                                 -------    -------
                                                                   1,262      3,862
Less:  valuation allowance                                        (1,262)    (3,862)
                                                                 -------    -------
                                                                 $     -    $     -
                                                                 =======    =======
</TABLE>   

      The valuation allowance increased due to the uncertain future realization
      of the temporary differences at December 31, 1995 and 1996.


8.    EMPLOYEE BENEFIT PLANS

      STOCK OPTION PLAN
      Officers and certain other key employees of the Company are eligible to
      participate in the 1996 Option Plan (the Plan) of Petracom Equity
      Partners, L.P. (the Partnership), the owner of the 240,000 outstanding
      shares of Class A common stock. Pursuant to the Plan, participants may
      receive rewards of nonqualified options to purchase Class C Limited
      Partnership interests in the Partnership. No options have been awarded
      under the Plan. Under the terms of the Plan, the option price will be
      equal to the fair value of the stock at the date of the grant.

      PENSION PLAN
      The Company sponsors a defined contribution 401(k) retirement plan
      covering substantially all of its employees. Contributions to the 401(k)
      retirement plan are determined annually by the Company and totaled
      $29,000, $36,000 and $80,000 for the years ended December 31, 1994, 1995
      and 1996, respectively.




                                     F-14
<PAGE>   36


PETRACOM HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
-------------------------------------------------------------------------------

9.    PREFERRED STOCK (PETRACOM, INC.)

      On August 1, 1995, all of the outstanding 50,000 shares of the Class B
      preferred stock and 49,000 shares of the Class A preferred stock of
      Petracom, Inc. were repurchased for $5,907,000. The remaining 1,000 shares
      of Class A preferred stock in a subsidiary of the Company, after the
      recapitalization of the Company on August 1, 1995, are held by one
      stockholder.

      The remaining stockholder (plaintiff) filed a lawsuit in the State of
      Florida seeking redemption of the 1,000 shares. The plaintiff has been
      awarded a summary judgment subsequent to December 31, 1996. Upon final
      resolution, the Company will account for the payment as an equity
      transaction for repurchase of outstanding stock. Management believes the
      resolution of the lawsuit will not have a material adverse impact on the
      financial condition of the Company.


10.   COMMITMENTS AND CONTINGENCIES

      BROADCAST PROGRAM RIGHTS
      At December 31, 1996, the Company has executed contracts for broadcast
      program rights totaling approximately $2,372,000 for which the broadcast
      period has not yet begun. Accordingly, the asset and related liability are
      not recorded at December 31, 1996.

      LEASES
      The Company has operating lease agreements for broadcast studios, office
      space and tower sites. Rent expense for the years ended December 31, 1994,
      1995, and 1996 totaled $66,000, $125,000 and $220,000, respectively.
      Minimum required annual payments under noncancelable operating leases are
      approximately as follows (in 000's):

<TABLE>
<CAPTION>

                YEAR ENDING
                DECEMBER 31,
                   <S>                                         <C>
                   1997                                        $    165
                   1998                                             103
                   1999                                              61
                   2000                                              39
                   2001                                               8
                   Thereafter                                       297
                                                               --------

                                                               $    673
                                                               ========
</TABLE>

      FOX GUARANTEE 
      Fox Television Stations, Inc. (FOX) has given the Company certain
      guarantees pertaining to the net revenues of one of the Company's
      television stations after it became a FOX affiliate on


                                     F-15
<PAGE>   37


PETRACOM HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


      December 4, 1995. FOX will pay the Company a total of $1,500,000 for the
      first two years after the station's switch to FOX affiliation, subject to
      reduction in such payments by which the station's net revenues exceed
      certain amounts each year as defined in the agreement. However, the
      Company must repay these amounts to FOX if net revenues exceed certain
      established thresholds in the subsequent three year period. The Company
      recognized $812,500 related to this agreement in the year ended December
      31, 1996. No contingent liability has been recorded as management believes
      that these guarantees will not be paid back to FOX, based on the Company's
      revenue projections.

      ADVERTISING EXPENSE
      Advertising expense for the years ended December 31, 1994, 1995 and 1996
      totaled $301,000, $409,000 and $464,000, respectively.


11.   FAIR VALUE OF FINANCIAL INSTRUMENTS

      The carrying amounts of cash and cash equivalents, accounts receivable,
      broadcast program rights, accounts payable and accrued expenses
      approximate fair value due to the short maturity of those instruments. The
      Company believes the December 31, 1995 and 1996 value of the Exchange
      Notes, the Subordinated Note and the mandatorily redeemable securities
      approximate fair value as there has been no significant fluctuation in
      market interest rates since the recapitalization of the Company during
      fiscal 1995. The fair value of cash program rights contracts payable
      approximates $2,300,000 and $2,000,000 at December 31, 1995 and 1996,
      respectively, based on the Company's incremental borrowing rate.


12.   EARNINGS PER SHARE

      The following table reflects the primary earnings per share for the year
      ended December 31, 1996. Additionally, the table reflects the unaudited
      pro forma combined results of operations of the Company assuming that the
      August 1, 1995 acquisition of the television stations occurred at the
      beginning of 1994 and 1995 (in 000's except per share information):
<TABLE>
<CAPTION>

                                                       YEAR ENDED DECEMBER 31,
                                                1994            1995             1996
                                             (UNAUDITED)     (UNAUDITED)
           <S>                            <C>              <C>              <C>
          Net revenue                     $      26,667    $      29,244    $      29,982
          Net loss                               (9,795)         (11,187)         (10,593)
          Loss per share applicable to
            common shareholders                  (33.65)          (38.29)          (44.14)


</TABLE>


                                     F-16
<PAGE>   38
                                      

PETRACOM HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

      The pro forma information does not purport to be indicative of the results
      which would have been obtained had the acquisition occurred on the dates
      indicated or to project those that will be realized in the future.





                                     F-17
<PAGE>   39
                                EXHIBIT INDEX

Exhibit Number                  Description
--------------                  -----------
     27                         Financial Data Schedule (for SEC use only)