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                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-K
                  Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

For the Fiscal Year Ended December 31, 1997                   Commission File
                                                                    No.
                                                                 33-72468
                                                                 33-72468-01

                             THE HELICON GROUP, L.P.
             (Exact name of registrant as specified in its charter)

          Delaware                     4841                     22-3248703
(State or other jurisdiction      (Primary Standard        (I. R. S. Employer
       of incorporation       Industrial Classification     Identification No.)
       or organization)             Code Number)

                              HELICON CAPITAL CORP.
             (Exact name of registrant as specified in its charter)

          Delaware                     4841                     22-3248702
(State or other jurisdiction      (Primary Standard        (I. R. S. Employer
       of incorporation       Industrial Classification     Identification No.)
       or organization)             Code Number)

                               630 Palisade Avenue
                       Englewood Cliffs, New Jersey 07632
                                 (201) 568-7720
               (Address, including Zip Code and telephone number,
        including area code, of registrants' principal executive offices)

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

           Securities registered pursuant to Section 12(g) of the Act:
                                      None

     Indicate by check mark whether the Registrants:  (1) have 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
Registrants  were required to file such  reports),  and (2) have been subject to
such filing requirements for the past 90 days. Yes __X__ No _____

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

      The aggregate market value of the voting stock (Common Stock) held by
               non-affiliates of the Registrants: Not applicable.

     The number of shares outstanding of the common stock of Helicon Capital
                        Corp., as of March 31, 1998:100

                      DOCUMENTS INCORPORATED BY REFERENCE:

   Registration Statement No. 33-72468 on Form S-4 effective, February 3, 1994

--------------------------------------------------------------------------------

<PAGE>


                                TABLE OF CONTENTS
                                    FORM 10-K

PART I                                                                    PAGE
------                                                                    ----

ITEM 1.   BUSINESS                                                          1
ITEM 2.   PROPERTIES                                                       15
ITEM 3.   LEGAL PROCEEDINGS                                                16
ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS              16


PART II
-------

ITEM 5.   MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
          STOCKHOLDER MATTERS                                              16
ITEM 6.   SELECTED FINANCIAL DATA                                          16
ITEM 7.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
          CONDITION AND RESULTS OF OPERATIONS                              16
ITEM 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA                      22
ITEM 9.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
          ACCOUNTING AND FINANCIAL DISCLOSURE                              22

PART III
--------

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT               22
ITEM 11.  EXECUTIVE COMPENSATION                                           24
ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
          AND MANAGEMENT                                                   25
ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS                   27


PART IV
-------

ITEM 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
          REPORTS ON FORM 8-K                                              28

SIGNATURES                                                                 33


<PAGE>


PART I

ITEM 1.  BUSINESS

General

     The Helicon  Group,  L.P.  ("THGLP" or the  "Company")  was  organized as a
limited  partnership  on August 10, 1993 under the laws of the state of Delaware
to  consolidate  the ownership  interests of Helicon  Group,  Ltd.  ("Helicon"),
Terrebonne Cablevision,  L.P., Roxboro Cablevision Associates,  L.P. and Vermont
Cablevision  Associates,  L.P.  (collectively,  the "Predecessor  Companies") in
connection with a roll-up plan completed on November 3, 1993 (the "roll-up"). As
a result of the roll-up, the Company acquired substantially all of the operating
assets and agreements of all the cable television  systems which were previously
owned by the Predecessor  Companies.  The  stockholders  and the partners of the
Predecessor  Companies  became  limited  partners  of the  Company.  The Company
operates under the name "Helicon Cable  Communications".  The general partner of
the Company is Baum  Investments,  Inc., a Delaware  corporation,  which is 100%
owned by Mr.  Baum.  On April 8, 1996,  the Company  became 99% owned by Helicon
Partners I, L.P. (HPI) and 1% owned by the Baum  Investments,  Inc., the general
partner,  (See "Certain  Relationships and Related Transactions"  section).  The
Company is managed by Helicon Corp., an affiliated management company.

     Helicon Capital Corp., a Delaware corporation and a wholly-owned subsidiary
of the Company,  was formed solely to be an co-issuer  along with the Company of
$115,000,000 aggregate principal amount of 11% Senior Secured Notes (the "Senior
Secured  Notes").  Helicon  Capital Corp.  had nominal assets as of December 31,
1996 and 1997 and had no operations from the date of  incorporation  to December
31, 1997.

     Helicon Telephone Co., a Delaware corporation, is a wholly owned subsidiary
and  Helicon  Telephone  Pennsylvania,  LLC, a  Pennsylvania  limited  liability
company, is a 99% owned subsidiary of the Company. Such subsidiaries, along with
certain other 99% owned limited liability companies which have not yet commenced
operations, were formed for the purpose of providing local exchange,  intrastate
and interstate  telecommunications  services.  As of December 31, 1997,  Helicon
Telephone  Co. , Helicon  Telephone  Pennsylvania,  LLC, and the other 99% owned
limited  liability  companies had nominal assets and had no operations  from the
dates of  incorporation  to December  31, 1997.  On December  16, 1996,  Helicon
Telephone Company, LLC filed an application with the Pennsylvania Public Utility
Commission for  certification  as a competitive  local  exchange  carrier in the
service territory of Bentleyville  Telephone  Company.  As of December 31, 1997,
this application was still pending.

                                  Page 1 of 33

<PAGE>


     The Company operates cable television systems located in Pennsylvania, West
Virginia, North Carolina,  Louisiana, Vermont and New Hampshire (the "Systems").
At  December  31,  1997,   the  Company's   cable   television   systems  passed
approximately 136,243 homes with 98,231 subscribers (customers). The Company has
typically  established  itself in a state  through a large  acquisition  and has
added to the initially  acquired  system through  acquisitions of nearby systems
and line  extensions.  In addition to  acquisitions  of systems in the  ordinary
course of its business, the Company acquired large groups of subscribers in 1989
in Terrebonne  and  LaFourche,  Louisiana,  in 1992 in Barre and St.  Johnsbury,
Vermont and  Haverhill,  New  Hampshire and in 1997 in Watauga  County,  Blowing
Rock, Beech Mountain and the Town of Boone, North Carolina.

     Helicon Corp. is responsible  for the day-to-day  management of the Systems
pursuant  to an  existing  management  agreement.  Helicon  Corp.  is owned  and
controlled by Mr.  Theodore  Baum.  Management  fees relating to the Systems are
payable  monthly in an amount equal to five percent (5%) of gross  revenues from
the operation of the Systems subject to certain limitations.

     A cable television  system receives  television,  radio and data signals at
the system's "headend" site by means of over-the-air  antennas,  microwave relay
systems  and  satellite  earth  stations.  These  signals  are  then  modulated,
amplified  and   distributed,   primarily   through   coaxial  and  fiber  optic
distribution  systems,  to deliver a wide  variety  of  channels  of  television
programming,  primarily entertainment and informational video programming to the
homes of subscribers who pay fees for this service generally on a monthly basis.
A cable television system may also originate its own television  programming and
other information services for distribution through the system. Cable television
systems  generally  are  constructed  and  operated  pursuant  to  non-exclusive
franchises or similar licenses granted by local  governmental  authorities for a
specified period of time.

     The Company's  Systems offer  customers  various  levels of cable  services
consisting  of  broadcast   television  signals  of  local  network  affiliates,
independent and educational  television stations, a limited number of television
signals  from  so-called   "super   stations,"   numerous   satellite-delivered,
non-broadcast  channels,  programming originated locally by the respective cable
television  system and informational  displays  featuring news,  weather,  stock
market and  financial  reports and public  service  announcements.  For an extra
monthly charge,  the Systems also offer "premium"  television  services to their
customers.  For an  additional  event  charge,  the Systems  offer  pay-per-view
services  consisting of recently  released  movies and special events  including
boxing and wrestling matches, other sporting events and concerts.

     A customer generally pays an initial  installation charge and fixed monthly
fees for basic, premium and new product tier ("NPT") television services and for
other  services  (such as the rental of  converters  or other  equipment).  Such
monthly  service fees constitute the primary source of revenues for the Systems.
The  Systems  currently  offer  customers  various  levels  of cable  television
services  consisting  of a  combination  of  broadcast  television  signals  and
satellite television signals.

                                  Page 2 of 33

<PAGE>


     The  service  options  offered by the  Company  vary from System to System,
depending  upon a System's  channel  capacity  and viewer  interests.  Rates for
services  also vary from market to market and  according to the type of services
selected.  Since September 1, 1993, when the Federal  Communications  Commission
(the "FCC") rate regulation commenced,  each of the Systems,  except the Vermont
System,  has offered  customers  both broadcast  services and satellite  ("cable
programming")  services  as its  basic  package,  and  super-stations  and other
satellite  services on a new programming  service tier basis, as well as several
premium services.  The Vermont System offers both a broadcast basic, an expanded
level of basic with only  satellite  services,  an NPT tier package,  as well as
several premium  services.  Each channel within an NPT package is also available
on an individual a la carte basis.

     For an  extra  monthly  charge,  the  Systems  offer  "premium"  television
services  to  their  customers.  These  services  (such as  HBO(R),  Cinemax(R),
Showtime(R),  The Movie  Channel(R),  The Disney  Channel(R) and regional sports
networks) are  satellite-delivered  channels that consist principally of feature
films, live sporting events,  concerts and other special entertainment features,
usually presented without commercial  interruption.  Approximately  eighty-eight
percent of the subscribers are offered  pay-per-view ("PPV") which allow them to
purchase current release movies (after  theatrical  distribution) and other top,
live sporting events (primarily boxing and wrestling matches) and concerts.  The
Systems  receive  additional fees from customers for such PPV  programming,  and
from the sale of available advertising spots on  advertiser-supported  satellite
channels. The Systems also offer home shopping services to their customers,  and
the Systems share in the revenues from sales of products in the Systems' service
areas.

     In recent years, the Company has begun to install converters in the Systems
that can be "addressed" by sending coded signals from the headend over the cable
network.  Addressable  converters  enable the system operator  automatically  to
change the customer's  level of service  without  visiting the customer's  home.
Addressable  converters  improve  system  programming  flexibility,  enable  the
operator  to simplify  its billing  procedures,  allow  customers  the option of
changing their levels of service on short notice and enable  customers to select
and  order  pay-per-view   programming  events  using  the  converter's  on-line
capability.

     In  1996,  the  Company  began  to  purchase  advanced  analog  addressable
converters   manufactured   by  General   Instrument   ("CFT-2200's")   for  its
Pennsylvania  system.  In 1997,  the  Company  began  offering  the  interactive
StarSight  navigational program guide, which enables customers to make on-screen
selections of any programs  available,  in its  Pennsylvania  and North Carolina
systems.

     In March 1996, the Company began  providing  dial tone Internet  Service to
customers in its Pennsylvania  system. On April 1, 1997, the Company transferred
the net assets of the telephone  dial-up  internet access  provider  business to
HPI.

     On  April 8,  1996,  the  Company  acquired  a 1%  equity  interest  in HPI
Acquisition Co., LLC, a newly formed affiliated entity organized for the purpose
of acquiring and operating cable systems.

                                  Page 3 of 33

<PAGE>


     On August 1996, the Company  entered into a contract with a national paging
company and began  offering  paging service in its Louisiana  cable systems.  In
1997, the Company offered paging service in its  Pennsylvania  and Vermont cable
systems.  The Company is planning to offer  paging  service to some of its other
cable systems in 1998.

     In January 1997,  the Company began offering  private data network  systems
and cable modems to customers and is planning to offer these  services to all of
its cable systems in 1998.

Programming

     The United  States  Congress  has  enacted  the Cable  Television  Consumer
Protection and  Competition Act of 1992 ("the 1992 Cable Act") under which cable
television  operators  are  required  to  obtain  retransmission   consent  from
commercial  broadcast  stations,   except  for  established   superstations  and
noncommercial  educational stations ("exempt stations"), in return for the right
to continue to carry their television signals. Alternatively, a local commercial
broadcaster  can  demand  carriage  under  the  1992  Cable  Act's  "must-carry"
provisions,  although in such event the cable  television  operator  cannot seek
compensation  from the local  broadcaster for such carriage.  Historically,  the
Company has not paid fees for  retransmission  of local broadcast  signals other
than mandatory copyright fees. The Company obtained  retransmission consents for
the signals of all the commercial broadcast stations which it carries (and which
are not "exempt  stations" or stations  which invoke must carry  provisions)  on
terms which will not have a material  adverse  effect on the Company.  Under the
1992 Cable Act, stations must elect "must carry" or retransmission consent every
three  years.  The next  election is in the fall of 1999.  The Company  does not
anticipate any material changes from the current signal carriage structure.

     Helicon Corp., a management  company  managing the Company's  Systems,  has
various  contracts to obtain basic,  satellite and premium  programming  for the
Systems from program  suppliers with  compensation  being  generally  based on a
fixed fee per customer or a percentage of the gross  receipts for the particular
service.  Some program  suppliers  provide volume  discount  pricing  structures
and/or offer  marketing  support to Helicon Corp.  Helicon  Corp.'s  programming
contracts  are  generally  for fixed  periods of time  ranging from three to ten
years and are subject to negotiated  renewal.  Helicon Corp.  currently supplies
the programming it receives to THGLP pursuant to a Programming  Supply Agreement
with THGLP dated  November 3, 1993.  THGLP pays to Helicon Corp.  only the costs
incurred  by Helicon  Corp.  under the  respective  programming  agreements.  No
assurances can be given that Helicon Corp.'s programming costs will not increase
substantially in the near future,  or that other  materially  adverse terms will
not be added to Helicon  Corp.'s  programming  contracts.  Management  believes,
however, that Helicon Corp.'s relations with its programming suppliers generally
are good.

     Cable  programming  costs are  expected to continue to increase  due to the
additional  programming provided to basic customers,  increased costs to produce
or purchase  cable  programming,  inflationary  increases,  regulation and other
factors.  Increases in the cost of premium programming services have been offset
in part by additional volume discounts as a result of increases in the number of
customers  of the  systems  managed by  Helicon  Corp.  In 1995,  1996 and 1997,
programming  costs as a  percentage  of  revenues  were  19.2%,  19.3% and 20.9%
respectively.  The 1992 Cable Act permits full  recovery of regulated  basic and
cable  programming  tier  program  cost  increases  under its rate  "price  cap"
regulations.

                                  Page 4 of 33

<PAGE>


     Cooperative.  The Company became a member of the National Cable  Television
Cooperative  ("NCTC")  in  1986.  Through  the  NCTC's  8.5  million  subscriber
membership  purchasing  power,  the Company  has been able to obtain  additional
favorable programming discounts.  This has enabled the Company to reduce many of
its programming expenses to levels similar to some of the major cable television
multi-system operators.  NCTC has announced that it will attempt to acquire bulk
rate  pricing for its members for  purchases of digital  converters.  If NCTC is
successful, the cost of digital converters to the Company will decrease.

Franchises

     Cable television systems generally operate under  non-exclusive  franchises
granted by local governmental  authorities.  These franchises  typically contain
many  conditions,  such as time  limitations on  commencement  and completion of
construction;  conditions  of service,  including  number of  channels  types of
programming  and the  provision  of free  service to schools and  certain  other
public  institutions;  and the  maintenance of insurance and indemnity bonds and
non-compliance penalties,  forfeiture and termination clauses and other material
provisions.  Certain  provisions  of local  franchises  are  subject  to Federal
regulation under both the 1984 Cable Act, which created  national  standards and
guidelines for the regulation of cable  television  systems,  and the 1992 Cable
Act.

     The 1984 Cable Act provides,  among other things,  for an orderly franchise
renewal  process in which renewal of franchise  licenses  issued by governmental
authorities will not be unreasonably withheld or, if renewal is withheld and the
franchise authority chooses to acquire the system, such franchise authority must
pay the operator  either (i) the "fair market value"  (without value assigned to
the franchise) for the system covered by such franchise if the franchise did not
exist  before the October 1984  effective  date of the 1984 Cable Act, or if the
franchise was  pre-existing  but the  franchise  agreement did not provide for a
buyout, or (ii) in the case of pre-existing  franchises with buyout  provisions,
the price set forth in such franchise  agreements.  In addition,  the 1984 Cable
Act establishes comprehensive renewal procedures which require that an incumbent
franchisee's  renewal  application be assessed on its own merits and not as part
of a comparative  process with  competing  applications.  See  "Legislation  and
Regulation", below. The Company believes that it has good relationships with its
franchising communities.  To date, the Company has never had a franchise revoked
for any of the Systems,  and no request of the Company for franchise renewals or
extensions has been denied,  although such renewed or extended  franchises  have
frequently  resulted in franchise  modifications  on terms  satisfactory  to the
Company.

     The 1984  Cable Act also  established  buyout  rates for  franchises  which
post-date the existence of the 1984 Cable Act or pre-date the 1984 Cable Act but
the franchise  agreement  does not contain buyout  provisions;  in the event the
franchise  is  terminated  "for cause" and the  franchise  authority  desires to
acquire the system, the franchise authority must pay the operator an "equitable"
price. If the franchise pre-dates the 1984 Cable Act and the franchise agreement
does  provide  for a  buyout  in the  event  of  termination,  the  terms of the
franchise agreement govern. To date, none of the Company's  franchises have been
terminated. See "Legislation and Regulation", below.

                                  Page 5 of 33

<PAGE>


     As of December 31, 1997, the Systems held 92 franchises.  These  franchises
generally  provide  for the  payment of fees to the  issuing  authority.  Annual
franchise fees imposed on the Systems range up to 5% of the Subscriber  revenues
generated by a System. For the past three years,  franchise fee payments made by
THGLP have averaged approximately 1.8% of total gross System revenues. Franchise
fees are  passed  directly  through to the  customers  on their  monthly  bills.
General business or utility taxes may also be imposed in various  jurisdictions.
The 1984 Cable Act prohibits  franchising  authorities  from imposing  franchise
fees in excess of 5% of gross  revenues and also  permits the cable  operator to
seek  re-negotiation and modification of franchise  requirements if warranted by
changed circumstances.  Most of the Company's franchises can be terminated prior
to their stated expirations for uncured breaches of material provisions.

     The following  table groups the Company's  Subscribers by year of franchise
expiration, where applicable.

Year of                              Numb          Percentage of       Number of
Franchise Expiration               Subscribers       Subscribers      Franchises
--------------------               -----------       -----------      ----------
1998                                       897               .9%               1
1999-2003                               45,262             46.1%              40
2004-2008                               22,686             23.1%              35
2009 and after                           3,582              3.6%               5
No expiration                           16,847             17.2%              11
No Franchise                             3,462              3.5%              --
Grandfathered under 1984
  Cable Act                              5,495              5.6%              --
                                        ------            -----           ------
  Total                                 98,231              100%              92
                                        ======            =====           ======

     The Company operates certain systems which serve multiple  communities and,
in some  circumstances,  portions  of such  systems  serving  approximately  203
subscribers,  comprising approximately 0.2% of the Company's subscribers, extend
into jurisdictions for which the Company believes no franchise is necessary.  In
addition,  the Company has been  operating in six  communities  in West Virginia
without any  franchise  having been  formally  issued,  although the Company has
applied for the grant of such franchises. In view of the length of time that the
Company  has  been  operating  in such  communities  and  the  small  number  of
subscribers  located therein,  the Company believes that there is no significant
risk that it will be unable to continue  operating  therein without a franchise.
The  non-franchised  communities serve 4,429  subscribers,  in West Virginia and
1,066  subscribers  in  Pennsylvania,   comprising  approximately  5.6%  of  the
subscribers in all of the Systems.

Competition

     The Systems  compete with other  communications  and  entertainment  media,
including  conventional  over-the-air local broadcast television service.  Cable
television  systems  also  are  susceptible  to  competition  from  other  video
programming  delivery systems,  from other forms of home  entertainment  such as
video cassette recorders, and, in varying degrees, from sources of entertainment
in the community,  including motion picture theaters,  live theater and sporting
events.  The  Telecommunications  Act of 1996 has  increased  the  potential for
competition,  especially from telephone and electric  utilities,  significantly.
(See discussion of the 1996 Act below).

                                  Page 6 of 33

<PAGE>


     In recent years, the FCC has adopted policies  encouraging new technologies
and  providing a more  favorable  operating  environment  for  certain  existing
technologies  that  compete  with  cable  television.  Such  policies  have  the
potential  to  create  substantial   additional   competition  to  cable.  These
technologies include, among others, DBS services whereby signals are transmitted
by  satellite  to  receiving  facilities  located  on the  premises  of the  DBS
subscribers.  Earth stations designed for private home use now enable individual
households  to  receive  much of the  satellite-delivered  programming  services
formerly available only to cable television  subscribers.  Although DBS does not
provide subscribers with local broadcast  stations,  recently some DBS providers
have announced their intention to do so, subject to favorable action by Congress
and/or the U.S.  Copyright Office to approve such service.  DBS service has been
successfully marketed throughout the country,  including areas where the Company
operates Systems.  The Company believes,  that,  compared to DBS operators,  the
Company is a lower cost provider of comparable programming to customers.  It is,
however, anticipated that DBS operators will, in the future, package programming
on a more desirable basis for customers  and/or lower the high costs  associated
with DBS when compared to the cost of obtaining cable  television  service.  The
Company expects increasing competition from DBS providers.

     Cable   television   systems  also  may  compete  with   wireless   program
distribution services which generally utilize low power microwave frequencies to
transmit  television  programming  over-the-air  to  subscribers  ("MMDS").  The
ability of MMDS to compete with cable television systems has been limited in the
past by the limited amount of frequency capacity. Under amended FCC regulations,
MMDS systems compete more  effectively  with cable  television  systems by using
additional  frequencies.  The Company  currently  competes with Wireless One, an
MMDS operator in its Terrebonne Parish, Louisiana System.

     Additional competition exists from private cable television systems serving
condominiums,  apartment complexes and other private  residential  developments.
The  operators  of these  private  systems  known as Master  Antenna  Television
("MATV") and Satellite  Master Antenna  Television  ("SMATV"),  often enter into
exclusive  agreements with apartment building owners or homeowners  associations
that preclude  operators of  franchised  cable  television  systems from serving
residents of such private complexes. Moreover, a private cable television system
normally  is  free  of  the  regulatory  burdens  imposed  on  franchised  cable
television  systems.  The Company currently does not compete with SMATV and MATV
systems in its areas and only serves an  insignificant  number of  customers  in
apartment complexes.

     Since the Systems operate under non-exclusive  franchises,  other operators
(including municipal  franchising  authorities  themselves as well as, telephone
and electric  utilities) may obtain permission to build cable television systems
in areas in which the Systems presently  operate.  To date, there is competition
from such  operators in less than 0.5% of the existing  mileage in the Company's
franchise areas. In the Fall of 1996,  Bentleyville  Telephone  Company ("BTC"),
which  operates  local  telephone   service  in  the  Borough  of  Bentleyville,
Pennsylvania, began to build a cable system in the Borough of Bentleyville where
the Company  provides  services to  approximately  862 customers and in February
1997, BTC began offering a

                                  Page 7 of 33

<PAGE>


42 channel  basic cable  service in  competition  with the  company's 62 channel
basic cable service.  The Company has been able to effectively compete with BTC.
The  Company  also  anticipates  that,  over  time,  it will  become  subject to
increasing competition from other telephone companies. This may have a material,
but as yet undeterminate, impact on the Company's operations.

     The Telecommunications Act of 1996, Public Law 104-104, enacted on February
8, 1996,  ("1996 Act")  instituted  sweeping  changes in the  telecommunications
industries. The 1996 Act allows telephone companies, including the regional bell
operating  companies  and others,  to compete in their local  telephone  service
areas with cable operators by repealing the telephone  company cable  television
cross-ownership  ban,  thereby  allowing  direct  ownership of franchised  cable
systems.  Cable  systems could be placed at a  competitive  disadvantage  if the
delivery  of  video  program  services  by  local  telephone  companies  becomes
widespread  because  cable  systems are required to obtain local  franchises  to
provide cable service and must comply with a variety of  obligations  under such
franchises.  Issues of  cross-subsidization  by local  telephone  companies pose
strategic  disadvantages  for cable  operators to compete  with local  telephone
companies  providing  video services.  Additionally,  the 1992 Cable Act insures
that telephone  company providers of video services will have the opportunity to
acquire and offer to subscribers all significant cable programming services.

     The 1996 Act amends the Public  Utilities  Holding  Company Act and permits
electric  utilities  to  provide  telecommunication  services  (including  cable
television),  provided they do so through separate subsidiaries.  It is expected
that many large utility  companies,  which have already installed fiber backbone
for signaling and metering purposes,  will now become significant competitors to
cable television.

     The 1996 Act also  substantially  eliminates  the barriers to  competitors,
including  cable  operators,  entering  into the  business  of  local  telephone
exchange service and other telecommunications services traditionally provided by
the  local  exchange  carrier.  It  declares  that no  state  or  local  laws or
regulations  may prohibit or have the effect of  prohibiting  the ability of any
entity to provide  any  interstate  or  intrastate  telecommunications  service.
Nevertheless, many states and local authorities have continued to erect barriers
to cable operators desiring to provide telecommunications services.


     On  December  16,  1996,  Helicon  Telephone  Pennsylvania,  LLC  filed  an
application with the Pennsylvania Public Utility Commission for certification as
a competitive  local exchange  carrier in the service  territory of Bentleyville
Telephone Company. At December 31, 1997 this application was still pending.

     Advances in  communications  technology and changes in the  marketplace are
constantly  occurring.  Therefore,  it is not  possible to predict the extent to
which the Company will be adversely  affected by competition or the effect which
ongoing future developments might have on the Systems or on the cable television
industry generally.

                                  Page 8 of 33

<PAGE>


Employees

     At December 31, 1997, the Company had 180 full-time employees.  The Company
considers  its  relations  with  its  employees  to be  good.  In the  Company's
Pennsylvania System, 40 employees (18 technical and 22 clerical) are represented
by  two  unions  and  are  covered  by  collective  bargaining  agreements.  The
collective  bargaining  agreement  covering  technical  employees  was  recently
reviewed  and will expire on December  31,  1999 and the  collective  bargaining
agreement  covering  clerical  employees  is scheduled to expire on December 31,
1998. No other employees of the Company are represented by unions.

Legislation and Regulation

     The  cable  television  industry  is  subject  to  extensive   governmental
regulation  at  the  Federal,  state  and  local  level.  In  addition,  various
legislative and regulatory proposals, such as tax reform proposals and proposals
to revise the Copyright Act of 1976, may materially  affect the cable television
industry.  The  following  is a summary of  Federal  laws and  regulations  that
currently  materially  affect the growth and  operation of the cable  television
industry, and a summary of certain state and local regulations.

     This  section  does not purport to be a summary of all present and proposed
Federal,  state and local  regulations  and  legislation  relating  to the cable
television industry.  Other existing Federal  regulations,  copyright licensing,
and,  in  many   jurisdictions,   state  and  local   franchise  and  regulatory
requirements,  currently  are the subject of a variety of judicial  proceedings,
legislative  hearings,  and administrative and legislative proposals which could
change,  in  varying  degrees,  the  manner in which  cable  television  systems
operate.  Neither the  outcome of these  proceedings  nor their  impact upon the
cable industry or the Company can be predicted at this time.

1984 Cable Act

     Congress  enacted the 1984 Cable Act to create uniform  national  standards
and  guidelines  for the  regulation of cable  television  systems.  Among other
things, the 1984 Cable Act affirmed the right of franchising  authorities (state
or local,  depending on the practice in individual  states) to award one or more
franchises within their  jurisdictions.  It also prohibited  post-1984 Cable Act
cable   television   systems  from   operating   without  a  franchise  in  such
jurisdiction.  In connection  with new  franchises,  the 1984 Cable Act provides
that in granting or renewing franchises,  franchising  authorities may establish
requirements  for  cable-related  facilities and equipment,  but may not specify
requirements for video  programming or information  services other than in broad
categories.

     The 1984 Cable Act preempted local control over rates for premium  channels
and  optional  program  tiers,  as well as  deregulating  rates for basic  cable
services  in  areas  where  the  cable   operator  was  subject  to   "effective
competition"  to be  defined  by the  FCC.  The  FCC's  original  definition  of
"effective  competition",  the  presence  of at least  three  off-air  broadcast
signals in the cable community,  effectively  de-regulated  rates for most cable
systems  following the 1984 Cable Act. This scheme was altered  significantly by
the 1992 Cable Act, discussed below.

                                  Page 9 of 33

<PAGE>


     Although  franchising  authorities may impose franchise fees under the 1984
Cable Act, such payments cannot exceed 5% of a cable television  system's annual
gross revenues.  In those communities in which franchise fees are required,  the
Company  currently  pays  franchise  fees ranging from flat annual fees equal to
less  than 1% of gross  revenues  to fees of 5% of gross  revenues.  Franchising
authorities   are  also   empowered  to  require  cable   operators  to  provide
cable-related  facilities,  equipment  and,  in the case of  pre-1984  Cable Act
franchises, services to the public and to enforce compliance with such franchise
requirements and voluntary  commitments.  When changed circumstances render such
compliance commercially impracticable,  however, the 1984 Cable Act provides for
franchising authorities to renegotiate franchise requirements and, under certain
circumstances, permits the cable operator to make changes in programming without
local approval.

     The 1984  Cable Act  established  renewal  procedures  designed  to protect
incumbent  franchisees  against  arbitrary  denials  of  renewal.  This  statute
requires that franchising  authorities  consider a franchisee's past performance
and renewal proposal on their own merits in light of community needs and without
comparison to competing applicants. Nevertheless, renewal is not assured, as the
franchisees must meet certain statutory standards. Moreover, even if a franchise
is renewed, a franchising authority may impose new and more onerous requirements
such as upgrading of facilities and equipment,  although the  municipality  must
take into account the costs of meeting such requirements.  Also, the franchising
authority  may  require  higher  franchise  fees,  up to the 5% of annual  gross
revenues limit established by the 1984 Cable Act, as a condition of renewal.

     The 1984 Cable Act permits local  franchising  authorities to require cable
television operators to set aside certain channels for public, educational,  and
governmental  access  programming.  The 1984 Cable Act  further  requires  cable
television  systems  with 36 or more  channels  to  designate a portion of their
channel capacity for commercial  leased access by third parties.  Although there
has been  limited  activity in this area  nationally,  it is possible  that such
leased  access will result in  competition  to services  offered  over the cable
television  system,  particularly  since the 1992  Cable Act,  discussed  below,
empowers the FCC to set the rates and conditions for such leased access channels
and the FCC has adopted rates and other rules designed to increase use of leased
channels by third party programmers.

1992 Federal Cable Legislation

     Congress enacted the 1992 Cable Act in order to effect  significant  change
in the regulatory framework under which cable television systems operate.  After
implementation  of the 1984 Cable Act, rates for cable  television  service were
unregulated  for  substantially  all of the Systems.  One of the purposes of the
1992 Cable Act was to re-impose rate regulations for most cable systems.

                                  Page 10 of 33

<PAGE>


     Rate Regulation

     The 1992 Cable Act  requires  each cable  television  system to establish a
basic service tier consisting,  at a minimum, of all local broadcast signals and
all non-satellite delivered distant broadcast signals which the system wishes to
carry and all public,  educational and governmental access  programming.  Nearly
all cable systems  became  subject to local rate  regulation  of basic  service.
Franchising  authorities  were empowered to apply FCC regulations to ensure that
basic  rates  were   reasonable   and  that  rates  for   equipment,   including
installation,  converters, and additional outlets, were based on actual cost. In
addition, the 1992 Cable Act provided for regulation by the FCC of the rates for
cable programming service ("CPS") tiers,  defined as tiers of service other than
the basic service tier.  Under this regulatory  scheme,  many cable systems were
required to reduce rates and to limit future rate  increases  for basic  service
and equipment, and for other tiers of service. Services offered on a per-channel
or per-program basis are not subject to rate regulation by either municipalities
or the FCC.

     In June 1995, the FCC  instituted  rules  granting  significant  regulatory
relief to "small cable companies" and "small  systems",  those serving 15,000 or
fewer  subscribers  owned by  companies  of 400,000 or fewer  subscribers.  Such
systems are allowed to use a simplified  rate formula which presumes rates up to
$1.24 per channel are reasonable.  "Small system" status transfers if the system
is  subsequently  sold to a large  company.  Moreover,  under the 1996  Act,  as
discussed  below,  the Company  qualifies  for small cable system  status and is
effectively deregulated.

     Under  the  1992  Cable  Act,  cable  television  systems  may not  require
subscribers  to  purchase  any  service  tier  other  than the  basic  tier as a
condition of access to video programming offered on a per-channel or per-program
basis.  Cable  television  operators  who  do not  already  have  the  necessary
equipment in place to comply with this requirement must implement the technology
to facilitate this access by the year 2002.  Currently,  only the North Carolina
System does not have such technology in place.

Carriage of Television Broadcast Signals.

     Commercial  television  broadcast  stations  which are  "local"  to a cable
system, i.e., the system is located in the station's Area of Dominant Influence,
must elect every three  years  whether to require the cable  system to carry the
station,  subject  to  certain  exceptions,  or whether  the cable  system  must
negotiate and compensate the broadcaster for  "retransmission  consent" to carry
the station.  Local  noncommercial  television  stations  also are given similar
mandatory   carriage  rights,   but  are  not  given  the  option  to  negotiate
retransmission consent for the carriage of their signals.

Other Requirements

     In addition,  the 1992 Cable Act (i) requires cable television  programmers
under certain  circumstances  to offer their  programming  to present and future
competitors  of cable  television  such as MMDS,  SMATV and DBS operators at not
unreasonably  discriminatory  prices,  (ii) directs the FCC to set standards for
limiting the number of channels that a cable  television  system  operator could
program with programming  services controlled by such operator and prohibits new
exclusive  contracts  with program  suppliers  without FCC approval,  (iii) bars
municipalities  from  unreasonably  refusing  to  grant  additional  competitive
franchises,  (iv) regulates the ownership by cable television operators of other
media such as MMDS and SMATV.

                                  Page 11 of 33

<PAGE>


     The FCC has imposed new  regulations  under the 1992 Cable Act in the areas
of customer  service,  technical  standards,  compatibility  with other consumer
electronic  equipment such as "cable ready"  television  sets and video cassette
recorders,  equal employment  opportunity,  subscriber privacy, rates for leased
access channels,  obscenity and indecency,  and disposition of a customer's home
wiring.  In October  1997 the FCC  revised  its rules to permit,  under  certain
circumstances,  competitive  SMATV  and MMDS  services  to take  over the  cable
operator's  wiring  inside the  common  areas of a multiple  dwelling  unit.  In
addition,   further  rule  changes,  which  are  intended  to  further  increase
competition  to  cable  systems  serving  multiple  dwelling  units,  are  under
consideration by the FCC.

The Telecommunications Act of 1996.

     The  Telecommunications  Act of 1996, Public Law 104-104,  ("1996 Act") was
enacted on February 8, 1996. This new law  significantly  alters federal,  state
and local regulation of telecommunications providers and services, including the
cable television industry and the Company. The following is a summary of the key
provisions of the 1996 Act which could  materially  affect the cable  television
industry and the Company.

     Competition to Cable Television

     The  1996  Act  instituted  sweeping  changes  in  the   telecommunications
industries  and has  significantly  increased the potential for  competition  to
cable television, especially from telephone and electric utilities.

     (See discussion under the previous topic "Competition)

     Cable Rate Regulation.  Under the 1996 Act, the Company qualifies for small
cable system  status and is  effectively  deregulated.  Immediate  CPS tier rate
regulation relief is afforded to "small cable operators",  those with fewer than
approximately  600,000  subscribers  and less than  $250  million  gross  annual
revenues and with less than 50,000  subscribers in the rate regulated  franchise
area. The 1996 Act  eliminates as of March 31, 1999, all rate  regulation of any
upper cable  program  service "CPS" tier service,  although  certain  members of
Congress  and FCC  officials  have called for  postponement  of this  regulatory
sunset and have also urged more rigorous rate regulation generally. The 1996 Act
does not  disturb  existing or pending  CPS tier rate  settlements,  nor does it
eliminate regulation of rates for Basic Service Tiers (except that cable systems
which  had,  as of  December  31,  1994,  only one  tier of  service  are  fully
deregulated).

     Cable Uniform Rate  Requirements.  The 1996 Act amends the requirement that
cable rates be uniform  throughout a franchise area to exempt  situations  where
the  cable  operator  faces  "effective  competition,"  and by  permitting  bulk
discounts  to  multiple   dwelling  units.  The  FCC  retains   jurisdiction  to
investigate complaints of "predatory pricing".

                                  Page 12 of 33

<PAGE>


     Cable  Equipment  Compatibility,  Scrambling  Requirements.  The  1996  Act
directs an FCC equipment  compatibility  rulemaking looking toward (1) some form
of  common  design  among  televisions,   VCRs,  and  cable  systems,  (2)  open
competition for all converter features unrelated to security  descrambling,  and
(3) minimal  impact on unrelated  telephone  and computer  features.  The FCC is
directed to adopt  regulations  which  assure the  competitive  availability  of
converters  ("navigation devices") from vendors other than cable operators.  Any
FCC rules in this area cannot impinge upon signal security  concerns or theft of
service protections for cable operators.

     Ownership  Restrictions  and Market  Entry.  The 1996 Act allows  telephone
companies to compete  directly  with cable  operators by repealing  the historic
telephone company/cable cross-ownership ban. This allows Local Exchange Carriers
("LEC") including the Regional Bell Operating  Companies,  to compete with cable
operators  both inside and outside their  telephone  service  areas.  Because of
their  resources,  LECs could be formidable  competitors  to  traditional  cable
operators, and certain LECs have begun offering cable service.

     The 1996 Act also provides that registered  utility  holding  companies and
subsidiaries   may  provide   telecommunications   services   (including   cable
television)  notwithstanding  the Public Utility Holding Company Act of 1935, as
amended.  Because of their resources,  utilities could be formidable competitors
to traditional cable systems. (See discussion under "Competition.")

     The  1996  Act  eliminates   statutory   restrictions  on   broadcast/cable
cross-ownership (including broadcast network/cable restrictions),  but leaves in
place  existing  FCC  regulations   prohibiting  local  cross-ownership  between
television  stations and cable systems.  The 1996 Act also  eliminates the three
year holding period previously  required under a statutory  provision  regarding
"anti-trafficking."  The  present  federal  regulatory  scheme  leaves  in place
existing  restrictions on cable  cross-ownership with SMATV and MMDS facilities,
but lifts those  restrictions  where the cable  operator is subject to effective
competition.  However,  the FCC  has  adopted  regulations  which  permit  cable
operators to own and operate SMATV systems within their franchise area, provided
that such operation is consistent with local cable franchise requirements.

     Pole  Attachments  The FCC  currently  regulates  the rates and  conditions
imposed by most  public  utilities  for use of their  poles,  unless,  under the
Federal Pole  Attachment  Act,  state  public  service  commissions  are able to
demonstrate that they regulate the cable television pole attachment rates (as is
true in certain  states in which the Company does  business).  In the absence of
state regulation,  the FCC administers pole attachment rates though the use of a
formula which it has devised.

     The 1996 Act  introduces  several  changes to the  regulation of cable pole
attachments  that  could  affect  the  Company.  Pursuant  to that law,  the FCC
recently  established  a new  formula  for poles used by cable  operators  which
eventually  will result in higher pole rental  rates.  This new FCC formula does
not apply in states which certify they regulate pole rents.

                                  Page 13 of 33

<PAGE>


Copyright

     Cable  television  systems  are  subject  to Federal  copyright  licensing,
covering carriage of television  broadcast signals. In exchange for contributing
a  percentage  of their  revenues to a Federal  copyright  royalty  pool,  cable
television  operators  obtain a  compulsory  license to  retransmit  copyrighted
materials from broadcast signals.  Existing Copyright Office regulations require
that compulsory copyright payments be calculated on the basis of revenue derived
from any service tier containing broadcast retransmissions. Although the FCC has
no formal  jurisdiction  over this area, it has recommended to Congress that the
compulsory  copyright  scheme  be  eliminated.  The U.S.  Copyright  Office  has
similarly  recommended  such a repeal.  Without the  compulsory  license,  cable
television  operators would need to negotiate  rights from the copyright  owners
for each program carried on each broadcast  station in the channel lineup.  Such
negotiated  agreements could increase the cost to cable television  operators of
carrying broadcast  signals.  Thus, given the uncertain but possible adoption of
this type of copyright legislation, the nature or amount of the Company's future
payments for broadcast signal carriage cannot be predicted at this time.

State and Local Regulations

     Cable  television  systems are generally  operated  pursuant to franchises,
permits or  licenses,  issued by a  municipality  or other  local  and/or  state
government  entity.  Franchises  are  usually  issued  for fixed  terms and must
periodically be renewed.  Most of the franchises for the Systems were granted on
a  nonexclusive  basis.  The 1992 Cable Act  prohibits  local  authorities  from
granting  exclusive  franchises  or  unreasonably  refusing  to award  competing
franchises.  Each franchise agreement  generally contains  provisions  governing
subscriber charges for basic cable television  services,  fees to be paid to the
franchising  authority,  length  of the  franchise  term,  renewal  and  sale or
transfer of the  franchise,  territory of the  franchise,  design and  technical
performance  of the system,  use and  occupancy of public  streets and number of
types of cable television services provided.  Though the 1984 Cable Act provides
for certain procedural protections, there can be no assurance that renewals will
be granted or that renewals will be made on similar  terms and  conditions.  See
"1984 Cable Act".

     Various  proposals have been  introduced at the state and local levels with
regard to the  regulation of cable  television  systems,  and a number of states
have adopted legislation subjecting cable television systems to the jurisdiction
of state  governmental  agencies.  States  where the Company  operates  Systems,
including  Vermont and West Virginia,  have enacted  legislation with respect to
the regulation of cable television systems.

ITEM 2.  PROPERTIES

     The Company's principal physical asset consist of cable television systems,
including  signal-receiving,   encoding  and  decoding  electronics,   headends,
distribution  systems, and subscriber house drop equipment for each of its cable
television  systems.  The signal receiving apparatus typically includes a tower,
antenna,  ancillary  electronic  equipment,  and earth stations for reception of
satellite  signals.  Headends,  consisting  of associated  electronic  equipment
necessary  for the  reception,  amplification  and  modulation  of signals,  are
located near the receiving devices.  The Company's  distribution systems consist
of coaxial and fiber optic cables and related electronic  equipment.  Subscriber
equipment consists of taps, house drops and

                                  Page 14 of 33

<PAGE>


converters.  The Company owns its distribution system, various office and studio
fixtures,  test equipment and service vehicles.  The physical  components of the
Systems  require   maintenance   and  periodic   upgrading  to  keep  pace  with
technological  advances.  The Company  considers all of its  properties to be in
excellent condition.

     The  Company's  cables  generally  are attached to utility poles under pole
rental  agreements  with  local  public  utilities,  although  in some areas the
distribution cable is buried in underground ducts or trenches. The FCC regulates
most pole  attachment  rates under the Federal Pole Attachment Act. The physical
components of the Systems  require  maintenance  and periodic  upgrading to keep
pace with technological advances.

     The Company owns or leases  parcels of real  property for signal  reception
sites (antenna towers and headends),  microwave facilities and business offices.
The Company  believes that its  properties,  both owned and leased,  are in good
condition  and in  areas  suitable  and  adequate  for  the  Company's  business
operations.  Management  believes that the Company's  franchises and licenses in
each of the  Township  of North  Union,  Pennsylvania;  the  City of  Uniontown,
Pennsylvania;  Terrebonne  Parish,  Louisiana;  the  communities  in Vermont and
Watauga  County  and the Town of Boone,  North  Carolina ( taken as a whole) are
material to the results of operations of the Company.  Additionally, the headend
sites  used by the  Systems  in  such  locations  are  material  to the  Company
regardless of whether such headend sites are owned or leased;  and the Company's
private  pole  agreements  in  such  locations  are  material  to  the  Company.
Substantially  all of the assets of the  Company,  including  the  Systems,  are
subject to liens of the Company's lenders.

     See "Management -- Certain  Relationships  and Related  Transactions" for a
description of office space leased from an affiliated entity.

     The Pennsylvania System serves Uniontown,  Shippenville,  Mariana and other
contiguous  areas of  western  Pennsylvania.  The West  Virginia  System  serves
subscribers  throughout  western  West  Virginia  and  communities   surrounding
Charleston, West Virginia. On January 31, 1997, the Company acquired subscribers
in the  West  Virginia  counties  of Wirt  and  Wood,  for a  purchase  price of
$1,053,457. The Vermont/New Hampshire System serves Barre, St. Johnsbury and the
Upper Valley areas of eastern Vermont and Piermont, New Hampshire.  In 1994, the
Company  was  awarded  the  East  Mountpelier  franchise  in  Vermont  which  is
contiguous to Barre.  On January 31, 1995, the Company  acquired  subscribers in
Bradford, Chelsea, and South Royalton, Vermont which are contiguous to Barre and
Upper Valley,  Vermont, for a purchase price of $350,000. The Company applied to
the Vermont  Public  Service Bureau and has obtained a franchise for the Town of
Tunbridge  which is  contiguous  to South  Royalton and Chelsea.  The  Louisiana
System serves  Terrebonne,  Lafourche and St. Mary's Parish (Amelia)  Louisiana.
The North  Carolina  System  serves the City of Roxboro,  Person  County and the
eastern part of Caswell County in northeastern North Carolina. On June 26, 1997,
the Company  acquired  subscribers in the North Carolina  communities of Watauga
County, Blowing Rock, Beech Mountain and the Town of Boone, for a purchase price
of $19,947,430.

ITEM 3.  LEGAL PROCEEDINGS

     The Company is a party to ordinary and routine litigation  proceedings that
are incidental to the Company's  business.  Management believes that the outcome
of all pending legal  proceedings  will not, in the  aggregate,  have a material
adverse effect on the financial condition of the Company.

                                  Page 15 of 33

<PAGE>


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

The information called for by this Item is not applicable.

PART II

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

The information called for by this Item is not applicable.

ITEM 6.  SELECTED FINANCIAL DATA

The  financial  data set  forth  below  has  been  derived  from  the  Financial
Statements  of the  Company.  The data  below  ($ in  000's)  should  be read in
conjunction with the Company's  Consolidated  Financial Statements and the Notes
thereto and with  "Management's  Discussion and Analysis of Financial  Condition
and Results of Operations" appearing elsewhere in this report.

<TABLE>
<CAPTION>
                                                      1993(a)        1994        1995         1996        1997
                                                      -------      -------     -------      -------     -------
Income Statement Data: ($ in 000's)
<S>                                                   <C>          <C>         <C>          <C>         <C>
  Revenues                                            $29,448      $31,664     $35,225      $38,060     $42,946
  Depreciation and amortization                        10,314        9,453       9,561       10,127      11,204
  Operating income (loss)                              (1,381)       5,828       7,580        8,144       9,041
  Interest expense                                      9,498       12,477      12,992       13,497      14,520
  Net loss                                            (18,361)      (7,343)     (5,196)      (5,142)     (5,357)

<CAPTION>
Balance Sheet Data: ($ in 000's)
                                                      =========================================================
                                                        1993         1994        1995         1996        1997
                                                      -------      -------     -------      -------     -------
<S>                                                   <C>          <C>         <C>          <C>         <C>
  Total assets                                        $69,942      $63,207     $60,938      $58,146     $72,607
  Total debt                                          117,170      119,104     122,675      124,382     143,341
  Shareholders' and partners' deficit                 (54,915)     (62,258)    (67,453)     (72,596)    (77,953)
</TABLE>

(a)  1993 net loss includes an extraordinary item-loss on extinguishment of debt
     of $3.7 million.

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

General

     The Company  incurred a net loss for the fiscal  years ended  December  31,
1995,  1996 and 1997,  respectively.  The principal  items  contributing  to the
Company's  net losses are the high level of expenses  relating to  depreciation,
amortization and interest. These expenses are the result of capital expenditures
related to continued  expansion  and  rebuilding  of the Systems,  the Company's
acquisitions and its financing  activities.  The Company believes that recurring
net losses are common for cable  television  companies and expects that such net
losses will continue.  The Company believes that working capital  generated from
the issuance of the Senior Secured Notes and cash flow generated from operations
will be  sufficient  to meet its  operating  needs and future  commitments.  See
"Liquidity and Capital Resources" below.

                                 Page 16 of 33


<PAGE>







Results of Operations

Twelve Months Ended December 31, 1997 Compared to Twelve Months Ended
December, 1996.

     Revenues.   Revenues   increased   $4,885,993  or  12.8%  to   $42,945,730.
Approximately  45% of the  increase in revenues was  attributed  to the June 26,
1997 acquisition of a cable television system in North Carolina.  The balance of
the increase was primarily  due to higher basic service and new program  service
rates and strong  growth in  advertising  revenue.  Excluding the effects of the
North  Carolina  acquisition,  the  average  monthly  cable  revenue  per  basic
subscriber  increased  from $36.07 in 1996 to $38.72 in 1997. The $2.65 increase
reflected  primarily i) an increase of $1.59 in basic revenues;  ii) an increase
of  $.58  due to the  new  program  services;  iii)  an  increase  of  $0.37  in
advertising revenue; iv) a increase of $.10 in premium subscription revenue; and
v) an increase of $.01 in other services.

     Operating,  Marketing,  General  and  Administrative  Expenses.  Operating,
marketing,  general and administrative expenses increased $2,620,146 or 14.9% to
$20,160,815. Approximately 45% of the increase in expenses was attributed to the
North  Carolina  cable  television  system  acquisition  and  approximately  25%
reflected  additional expenses for new and expanded  programming  services.  The
balance of the increase in expenses was consistent  with the growth in revenues,
coupled with general cost  increases.  As a percentage  of revenues,  operating,
marketing,  general and administrative  expenses increased from 46.1% in 1996 to
46.9% in 1997.

     Depreciation  and  Amortization.  Depreciation  and  amortization  expenses
increased $1,076,763 or 10.6% to $11,203,963,  primarily as a result of $627,492
higher  depreciation  charges  relating to the North  Carolina  acquisition  and
ongoing capital  expenditures in the other cable systems;  and,  $449,271 higher
amortization expense largely attributed to the North Carolina acquisition.

     Management  Fee Charged by  Affiliate.  Management  fee expenses  increased
$244,299 or 12.8% to $2,147,286 consistent with the increase in revenues.

     Corporate  and  other  expenses.  Corporate  and other  expenses  increased
$47,215 or 13.7% to $392,512.

     Operating Income. Operating income for the twelve months ended December 31,
1997 increased  $897,570 or 11.0% to $9,041,154  from the  $8,143,584  operating
income in the comparable 1996 period.  The improvement in operating  results was
due to increased profits on higher revenues.

                                  Page 17 of 33

<PAGE>


     Interest  Expense.   Interest  expense  increased  $1,023,115  or  7.6%  to
$14,519,725. Approximately 93% of the increase in interest expense is associated
with the debt for the North  Carolina  acquisition.  The balance of the increase
was primarily due to higher cash interest  expense on the Senior  Secured Notes,
which after November 1, 1996, pay interest at the rate of 11% per annum,  offset
in part by the absence of non-cash  interest expense  attributed to the original
issue  discount on the Senior  Secured  Notes which  became  fully  amortized on
November  1, 1996  offset in part by lower  interest  expense on the 1994 Credit
Facility which was repaid on June 26, 1997.

     Interest  Income.  Interest income  decreased  $88,962 or 42.3% to $121,582
primarily due to lower average cash balances.

Twelve Months Ended December 31, 1996 Compared to Twelve Months Ended
December 31, 1995.

     Revenues.  Revenues  increased  $2,835,017  or  8.0%  to  $38,059,737.  The
increase in  revenues  was  primarily  attributed  to increase in basic  service
rates,  internal  subscriber  growth,  new program service  revenues,  non-cable
internet  service  revenues  (acquired  March  22,  1996) and  strong  growth in
advertising  revenue.  The average  monthly cable  revenue per basic  subscriber
increased from $33.89 in 1995 to $36.07 in 1996.  The $2.18  increase  reflected
primarily  i) an increase of $1.81 in basic cable  revenues;  ii) an increase of
$.06 due to the new program  services;  iii) an increase of $.36 in  advertising
revenue;  iv) a decrease  of $.09 in  premium  subscription  revenue;  and v) an
increase of $.04 in other services.

     Operating,  Marketing,  General  and  Administrative  Expenses.  Operating,
marketing,  general and administrative  expenses increased $1,579,233 or 9.9% to
$17,540,669.  Approximately half of this increase reflected  additional expenses
for new  and  expanded  programming  services  including  costs  related  to the
non-cable  internet  service.  The  balance  of the  increase  in  expenses  was
consistent  with the growth in revenues  and  subscribers,  coupled with general
cost increases. As a percentage of revenues,  operating,  marketing, general and
administrative  expenses  increased  from  45.3% in 1995 to 46.1% in 1996.  This
increase was attributed to the  introduction of the non-cable  internet  service
whose costs outpaced its revenues.

     Depreciation  and  Amortization.  Depreciation  and  amortization  expenses
increased  $566,242 or 5.9% to  $10,127,200,  primarily  as a result of $490,640
higher  depreciation  charges relating to capital  expenditures made in 1995 and
1996, and $75,602 higher  amortization  expenses reflecting the full year effect
of amortizing certain intangible costs which were incurred in 1995.

     Management  Fee Charged by  Affiliate.  Management  fee expenses  increased
$141,751 or 8.0% to $1,902,987, consistent with the increase in revenues.

     Corporate  and  Other  Expenses.  Corporate  and other  expenses  decreased
$16,036 or 4.4% to $345,297 primarily due to higher gains from asset sales.

     Operating Income. Operating income for the twelve months ended December 31,
1996  increased  $563,827 or 7.4% to $8,143,584  from the  $7,579,757  operating
income in the comparable 1995 period.  The improvement in operating  results was
due to increased profits on higher revenues.

                                  Page 18 of 33

<PAGE>


     Interest  Expense.   Interest  expense   increased   $504,656  or  3.9%  to
$13,496,610  primarily as a result of monthly interest  payments on the note due
to the Principal  Owner which resumed in November  1995, as per the terms of the
Senior Secured Notes,  higher cash interest expense on the Senior Secured Notes,
which after  November 1, 1996 pay interest at the rate of 11% per annum,  offset
in part by lower  non-cash  interest  expense  attributed to the original  issue
discount on the Senior Secured Notes which became fully amortized on November 1,
1996.

     Interest Income. Interest income decreased $5,991 or 2.8% to $210,544.

Liquidity and Capital Resources

     The  cable  television   business   requires   substantial   financing  for
construction,  expansion  and  maintenance  of the  cable  plant  as well as for
acquisitions.  The  Company has  historically  financed  its  capital  needs and
acquisitions  through  long-term  debt and,  to a lesser  extent,  through  cash
provided from operating  activities.  The general availability of bank financing
has been variable over recent years.  In 1993,  the Company  refinanced its 1992
Credit Facility by issuing  $115,000,000  aggregate principal amounts 11% Senior
Secured Notes due 2003.  In 1994,  the Company  utilized its available  cash and
also entered into a credit  facility with another bank  consisting of $2,500,000
three year term loan facility,  under which none was outstanding at December 31,
1997 and a  $2,500,000  one-year  line of credit  facility  with a bank  bearing
interest at Prime Plus 1.5%, none of which was outstanding at December 31, 1997,
secured  by all the  assets of the  Company  (the "1994  Credit  Facility").  On
February 23, 1996, the 1994 Credit Facility was amended to include an additional
loan  facility of $318,000 and extended to May 31, 1996.  On June 28, 1996,  the
term loan of the 1994 Credit  Facility was extended to May 31, 1997. On June 23,
1997,  all balances  outstanding  under the 1994 Credit  Facility were repaid in
full and the 1994 Credit Facility was terminated.  On June 26, 1997, the Company
entered into a new credit  facility (the 1997 Credit  Facility)  with a new bank
consisting  of  $20,000,000  senior  secured term loan  facility due November 1,
2000,  bearing  interest  at LIBOR  plus  2.75%,  under  which  $20,000,000  was
outstanding at December 31, 1997, secured by all the assets of the Company.  The
proceeds  of the  1997  Credit  Facility  was  used  to  acquire  certain  cable
television  assets in North Carolina.  On February 24, 1997, the Company entered
into a  $285,000  loan  agreement  with a new bank,  under  which  $276,641  was
outstanding  at December  31,  1997.  The proceeds of this new loan were used to
construct the  Company's new office  building in Vermont which secures the loan.
(See Credit Agreements of the Company, below).

     The Company operates at low and sometimes  negative working capital levels.
This  is  primarily  due  to  account  payable  balances,  which  often  include
significant amount of capital expenditures. Such payables are paid when due from
available cash balances, including cash generated from operations up to the date
of payment.

     Cash  flows  provided  by  operating  activities  amounted  to  $6,066,378,
$7,375,875 and $5,808,469 for the years ended December 31, 1995,  1996 and 1997,
respectively.  In 1996,  cash  generated  from  operations  increased  from 1995
primarily due to increased  profits on higher revenues,  higher accounts payable
balances, higher accrued interest and lower

                                  Page 19 of 33

<PAGE>


receivables from subscribers.  In 1997, cash generated from operations decreased
from 1996  primarily  due to the absence of the  amortization  of debt  discount
offset in part by financing costs incurred on the 1997 Credit Facility.

     Net cash used in investing  activities  amounted to $7,483,249,  $4,799,240
and  $25,323,444  for  the  years  ended  December  31,  1995,  1996  and  1997,
respectively and included the following:

o    In 1995, the Company incurred $6,561,044 in capital expenditures related to
     the  expansion and  rebuilding of the systems,  paid $350,000 in connection
     with the  acquisition of the property,  plant and equipment and intangibles
     of  adjacent  cable  television  systems  and  incurred  $578,655  in other
     deferred costs.

o    In 1996, the Company incurred $4,771,631 in capital expenditures related to
     the  expansion and  rebuilding  of the systems,  paid $40,000 in connection
     with the  acquisition of equipment and  intangibles of a telephone  dial-up
     internet access provider and incurred $9,556 in other deferred costs.

o    In 1997, the Company incurred $4,246,007 in capital expenditures related to
     the expansion and rebuilding of the systems, paid $21,000,887 in connection
     with the acquisition of property,  plant and equipment and intangibles of a
     cable television system and incurred $99,820 in other deferred costs.

     Net  cash  provided  by  financing  activities  amounted  to  $996,290  and
$18,457,411 for the years ended December 31, 1995 and 1997, respectively,  while
net cash used in  financing  activities  amount to  $810,262  for the year ended
December 31, 1996, which included the following:

o    In 1995,  the  Company had  $2,850,000  in  borrowings  and  $1,100,000  in
     principal  repayments  under the 1994 Credit Facility with Fleet Bank, made
     $402,729 in  principal  repayments  under the  Company's  equipment  credit
     facilities (See Credit Agreements of the Company, below).

o    In 1996,  the Company had $400,000 in borrowings  and $952,777 in principal
     repayments under the 1994 Credit Facility with Fleet Bank, made $446,808 in
     principal  repayments under the Company's  equipment credit facilities (see
     Credit Agreements of the Company, below).

o    In 1997, the Company redeemed  $1,000,000 of certificates of deposits,  had
     $20,285,000 in borrowings,  made  $1,505,581 in principal  re-payments  and
     $768,526 in other principal repayments under the Company's equipment credit
     facilities. (see Credit Agreements of the Company, below)

o    Advances to other  affiliates and  repayments of such advances  result from
     management fees and other reimbursable expenses.

                                  Page 20 of 33

<PAGE>


     Credit  Agreements  of the Company.  On December 31, 1997,  the Company had
cash and cash equivalents of $3,693,625 and the following  credit  arrangements:
(i)  $115,000,000  aggregate  principal  amount of 11% Senior  Secured Notes due
2003;  (ii)  the new 1997  Credit  Facility  with a bank  which  consisted  of a
$20,000,000  senior secured term loan facility due November 1, 2000 all of which
was outstanding,  bearing interest at LIBOR plus 2.75% secured by all the assets
of the Company (iii) the 10% Note due August 20, 2000 to Simmons  Communications
Company,  L.P. in the amount of $2,036,765 (the original  principal  amount plus
accrued interest thereon through September 30, 1997); (iv) $5,000,000  principal
amount in favor of Mr. Baum pursuant to a Prime Plus 2% Subordinated  Note which
has no due  date and may only be  repaid,  subject  to the  passage  of  certain
limiting tests prior to repayment of the Notes;  (v) $1,028,089 of certain other
equipment credit facilities with various due dates not exceeding five years. The
principal cash payments  required under the Company's  outstanding  indebtedness
for the fiscal years ended December 31, 1998,  1999, 2000 and 2001 are estimated
to aggregate $388,321, $318,133,  $20,233,957,  $27,124,042,  respectively.  The
Company  intends  to use  available  cash  and  cash  generated  from  operating
activities  to make such debt service  payments.  The  principal  cash  payments
required under the Company's outstanding  indebtedness for the fiscal year ended
December 31, 2002 are estimated to aggregate $25,000,400. The Company intends to
use available cash and cash  generated  from  operating  activities to make such
debt service payments or refinance its indebtedness to satisfy such obligations.

     In the past, the Company has committed  substantial  capital  resources for
(i) construction and expansion of existing Systems,  (ii) routine replacement of
cable television plant, (iii) increase in the channel capacity of certain of its
Systems, (iv) acquisition of certain Systems, and (v) increase in the percentage
of its Systems which are equipped with addressable technology. In 1995, 1996 and
1997  capital   expenditures,   excluding   acquisitions,   totaled  $6,561,044,
$4,771,631 and $4,246,007, respectively.

     The Company has budgeted approximately  $6,200,000 for capital expenditures
for the Systems during 1998, which includes  $1,200,000 for rebuilding  portions
of the Pennsylvania, North Carolina, Louisiana and Vermont Systems, $700,000 for
extensions  on the Systems,  $500,000 for Private  Networks and  $3,800,000  for
converters,  customer installation material, and other capital expenditures. The
Company  believes  it  will  have  sufficient  cash  to fund  all  such  capital
expenditures.

     The  Company  believes  that  available  working  capital  and  cash  flows
generated  from  operations  will be  sufficient to allow it to meet its planned
capital  expenditures,  meet its debt  obligations and cover its other short and
long term liquidity needs.  Also, while the Company  presently sees no reason to
do so, it could adjust scheduled capital expenditures if the Company's liquidity
position so warrants.

Inflation

     Certain of the  Company's  expenses,  such as those for wages and benefits,
for equipment  repair and replacement,  and for billing and marketing,  increase
with general inflation. However, the Company does not believe that its financial
results have been, or will be, adversely affected by inflation, provided that it
is able to increase its service rates periodically.

                                  Page 21 of 33

<PAGE>


Year 2000 Compliance

     The Company is aware of the issues  associated with the programming code in
existing  computer systems as the millennium (year 2000)  approaches.  The "year
2000" problem is pervasive  and complex as virtually  every  computer  operation
will be affected in some way by the  rollover of the two digit year value to 00.
The issue is whether  computer  systems will properly  recognize  date sensitive
information  when  the  year  changes  to  2000.  Systems  that do not  properly
recognize such  information  could generate  erroneous data or cause a system to
fail.

     Management has initiated a partnership-wide program to prepare the computer
systems and  applications  for the year 2000. The Company  continues to evaluate
appropriate  courses of  corrective  action,  including  replacement  of certain
systems  whose  associated  costs  would be  recorded  as assets and  amortized.
Accordingly,  the Company  does not expect the  amounts  required to be expensed
over the next three years to have a material effect on its financial position or
result of operations. The amount expensed in 1997 was immaterial.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The response to this item is submitted in a separate section of this report
on Page F-1.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

     None.

                                    PART III

ITEM 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The  directors,  executive  and key  officers  of  Helicon  Corp.  and Baum
Investments, Inc., the general partner of the Company, are set forth below.

Name                  Age   Position with Baum Investments and Helicon Corp.
----                  ---   ------------------------------------------------
Theodore B. Baum      63    Chairman of the Board of Directors; Chief Executive
                            Officer; and President
Gregory A. Kriser     47    Chief Operating Officer; Executive Vice President
Herbert J. Roberts    43    Chief Financial Officer; Treasurer; Senior
                            Vice President
David M. Baum         36    Senior Vice President of Operations
Thomas Gimbel         55    Senior Vice President of Engineering
Ruth Baum             59    Vice President;  Director
George S. Psyllos     43    Vice President and Corporate Controller
Richard Hainbach      45    Secretary

     Mr. Baum has been Chief  Executive  Officer and  President of Helicon Corp.
since 1974. Mr. Baum is a 33-year veteran of the cable television  industry.  He
is a former owner and Chief Operating  Officer of Cable Information  Systems,  a
company engaged in the ownership and operation of cable television  systems.  In
June 1977,  Mr.  Baum  founded the Company  under the name  Fayette  Cablevision
Company.

                                  Page 22 of 33

<PAGE>


     Mr. Kriser has been Executive Vice President and Chief Operating Officer of
Helicon  Corp.  since  1985.  Mr.  Kriser  currently  is a director of the Cable
Telecommunications  Association  and Cable in the  Classroom and a member of the
National Academy of Cable Programming. Prior to joining Helicon Corp. in January
1985,  Mr. Kriser had nine years  management  experience in the cable  industry,
including  positions  with UA  Columbia  Cablevision  (1976-1977),  Teleprompter
Corporation (1977), Showtime Entertainment,  Inc. (1977-1979),  Satellite Vision
Systems Partners (1983-1984) and United Satellite  Communications,  Inc. (1984).
In addition, Mr. Kriser founded his own firm, GK Communications  Corporation,  a
consulting firm to cable firms requiring financial,  marketing,  franchising and
operations  planning  in  major  markets,  which he  served  as  President  from
1979-1983.

     Mr. Roberts joined Helicon Corp. as Senior Vice President,  Chief Financial
Officer and  Treasurer  in January  1990.  Previously  he was Vice  President of
Prudential-Bache  Capital Funding.  Prior to joining  Prudential-Bache  in early
1988,  he  worked  for  the  CBS   Television   Network  where  he  had  overall
responsibility  for the  financial  management  of CBS's efforts in New Ventures
such   as   CBS/Blackhawk    Cable   Systems,    SportsChannel/American    Movie
Classics/Bravo,  CBS  CableConnects  and  CBS  Broadcast  International.  Before
joining CBS in 1981, he spent five years in public  accounting  with Touche Ross
and Arthur Young.

     Mr. David Baum became Senior Vice  President of Operations in January 1996.
Previously,  Mr. Baum was the Vice President of Marketing/Programming at Helicon
Corp.  since  October 1989 when he rejoined the Company.  In 1988,  Mr. Baum was
self employed as a real estate developer.  Mr. Baum assisted in the construction
of THGLP's cable television system in southwestern Pennsylvania between 1978 and
1981. In 1981 and 1982, he managed his own cable television  marketing  company.
Mr. David Baum is the son of Mr. and Mrs. Baum.

     Mr. Gimbel became the Senior Vice President of Engineering of Helicon Corp.
as of  January 1, 1998.  Mr.  Gimbel  formerly  was Chief  Operating  Officer of
Fidelity Systems,  Inc., a cable and telephone  construction  company. His prior
affiliations   also  include  Vice   President  of  Engineering  at  Cablevision
Industries,  Inc. and Vice President,  Systems Manager of Comcast Cablevision of
Philadelphia.  He has been active in the Society of Cable  Television  Engineers
and the National Cable Television Association engineering committee.  Mr. Gimbel
is a licensed professional quality engineer.

     Mrs.  Ruth Baum became a director and a Vice  President of Helicon Corp. in
July  1991.  For more  than two years  prior  thereto,  Mrs.  Baum was a passive
investor in various cable television properties.  She has acted as an advisor to
Mr. Baum in connection with his varied cable interests. Mrs. Baum is the wife of
Mr. Baum and the mother of David Baum.

     Mr.  George  Psyllos is the Vice  President  and  Corporate  Controller  of
Helicon Corp.  Mr.  Psyllos  joined  Helicon Corp.  in December  1990.  Prior to
joining Helicon Corp., Mr. Psyllos held various financial  management  positions
in Sea-Land Service Inc. (1988-1990),  Purolator Courier Corp. (1980-1988),  and
Price Waterhouse & Co., LLC (1977-1980). Mr. Psyllos has been a Certified Public
Account (CPA) since 1980 and is a member of the American  Institute of CPA's and
the New Jersey Society of CPA's.

                                  Page 23 of 33

<PAGE>


     Mr. Richard  Hainbach  became the Secretary and General  Counsel of Helicon
Corp. in January 1996.  Previously he was Vice President and General  Counsel of
Multi-Vision  Cable TV Corp.  Mr.  Hainbach  has more than  nine  years of legal
experience  in the  cable  industry.  Prior to  that,  he was in  private  legal
practice in New York City.

ITEM 11.  EXECUTIVE COMPENSATION

     Compensation to the principal  executive  officers is paid by Helicon Corp.
from management fees paid to Helicon Corp., pursuant to the management agreement
between the Company and Helicon Corp.  The  executive  officers of Helicon Corp.
are also executive officers of Baum Investments, Inc.

Summary Compensation Table

     The following table summarizes the compensation  paid during 1995, 1996 and
1997 estimated to the five highest paid executive officers of Helicon Corp.

<TABLE>
<CAPTION>
                                                                         Other Annual            All Other
Name and Principal Position          Year      Salary          Bonus     Compensation         Compensation
---------------------------          ----      ------          -----     ------------         ------------
<S>                                  <C>       <C>          <C>            <C>                     <C>     <C>
Theodore B. Baum                     1997      65,400 (1    $250,000       $1,053,405 (2           $15,480 (5
  Chief Executive Officer;           1996      62,700 (1         -0-          994,770 (2           $15,555 (5
  President                          1995      61,200 (1         -0-          962,250 (2               -0-
                                                      (1                              (2

Gregory A. Kriser                    1997     226,000            -0-           87,750 (3               -0-
  Executive Vice President           1996     202,539        $50,000           87,750 (3               -0-
                                     1995     178,000            -0-           87,720 (3               -0-
                                                                                      (3

Herbert J. Roberts                   1997     220,500        $50,000           40,785 (3               -0-
  Senior Vice President; Chief       1996     198,211        $50,000           40,785 (3               -0-
  Financial Officer; Treasurer       1995     174,000            -0-           40,770 (3               -0-
                                                                                      (3

David M. Baum                        1997     240,000        $50,000 (4         2,720                  -0-
  Vice President                     1996     204,464        150,000 (4         1,300                  -0-
                                     1995     175,000            -0-            1,180                  -0-

Thomas Gimbel                        1997     150,000            -0- (3        24,825 (3               -0-
  Vice President                     1996     131,557        $30,000 (3        24,825 (3               -0-
                                     1995     114,000            -0- (3        24,755 (3               -0-
                                                                     (3               (3
</TABLE>

----------
1)   Includes  payments made by Helicon Corp.  pursuant to a current  employment
     agreement  with Mr.  Baum.  The  employment  agreement  provides for annual
     compensation of $65,400 with certain escalation  provisions therein.  Under
     his  employment  agreement,  Mr.  Baum is  engaged  as the Chief  Executive
     Officer of Helicon  Corp.  and its  affiliates.  Helicon  Corp.  also has a
     consulting  arrangement  with Elizabeth  Baum, the daughter of Mr. and Mrs.
     Baum, pursuant to which Ms. Baum was paid $75,000 for her legal services as
     Assistant  Secretary  of Helicon  Corp.  Ruth Baum,  Mr.  Baum's  wife,  is
     employed by Helicon  Corp.  as its Vice  President  at an annual  salary of
     $65,400.

2)   Includes $955,000, $987,500 and $1,045,000 of consulting fees paid in 1995,
     1996 and 1997  respectively,  to TR Cable  Consultants,  a company owned by
     Theodore and Ruth Baum.

3)   Includes  consulting fees which have historically been paid by the Company,
     pursuant to consulting  agreements  between the Company and the  individual
     consultants.  Such consulting  services have principally  taken the form of
     strategic oversight and business planning.

4)   Payment of the bonus was to Cable Marketing Group, a company owned by David
     M. Baum and his wife, Sande Baum.

5)   Represents  the  premium  paid by  Helicon  Corp.  pursuant  to Mr.  Baum's
     employment  agreement which requires  Helicon Corp. to provide $3.0 million
     of life  insurance  on Mr.  Baum with the  beneficiary  of the policy to be
     designated by Mr. Baum.

                                  Page 24 of 33

<PAGE>


Compensation of Directors

No Director of Baum  Investments,  Inc., (the general partner of the Company) or
Helicon Corp. is presently compensated for any services provided as a director.

Employment Contracts, Termination of Employment and Change-in-Control
Arrangements

     Each of Messrs. Kriser, Roberts and Gimbel have a consulting agreement with
the Company  which is  disclosed in the  footnotes  to the summary  compensation
table.  Additionally,  in the event of a voluntary retirement or withdrawal of a
limited  partner of Helicon  Partners I, L.P. which is controlled by a member of
the management of the Company other than Theodore Baum or his immediate  family,
the Company has the right,  and in the event of an involuntary  retirement,  the
obligation,  to purchase the partnership  interests controlled by such member of
management.  The purchase  price for such  interests is the fair market value or
the amount, if any, owed by such partners or their  controlling  shareholders to
Theodore Baum under certain  promissory  notes. The purchase price is payable by
delivery of the Company's  subordinated  note and, under certain  circumstances,
also partly in cash;  all as more fully set forth in the Company's  Agreement of
Limited Partnership.

Board Compensation Committee Report on Executive Compensation

     For the 1995,  1996 and 1997 fiscal years,  the Company had no compensation
committee.  The Company is controlled by Mr.  Theodore Baum, the Chairman of the
Board of Directors,  Chief Executive  Officer and President of Helicon Corp. and
Baum Investments;  and the compensation of the Company's  executive  officers is
determined  by Mr. Baum  subject to the  approval of the boards of  directors of
Helicon Corp. and Baum Investments.

ITEM 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table set forth the number and percentage of interests in the
Company owned by the Company's  management and certain  beneficial  owners.  HPI
owns 99% of the interest in the Company. With the exception of Baum Investments,
Inc.  which has both a direct and indirect  ownership  interests in the Company,
all beneficial  ownership  interests in the Company are owned indirectly through
HPI. Other than as set forth below, no person or entity  beneficially  owns more
than 5.0% of the limited partnership interests in the Company.

                                  Page 25 of 33

<PAGE>


 Name and Address of Beneficial Owner              Type of Interest   Ownership
 ------------------------------------              ----------------   ---------
Baum Investments, Inc. (1)                          General Partner      1.990%
  630 Palisade Avenue
  Englewood Cliffs, New Jersey 07632
Helicon Corp. (1)                                   Limited Partner       .594%
  630 Palisade Avenue
  Englewood Cliffs, New Jersey 07632
Helicon Group Ltd. (1)                              Limited Partner     61.320%
  630 Palisade Avenue
  Englewood Cliffs, New Jersey 07632
TREDD Investors (1)                                 Limited Partner     15.583%
  630 Palisade Avenue
  Englewood Cliffs, New Jersey 07632
TREDD TWO (1)                                       Limited Partner     16.721%
  630 Palisade Avenue
  Englewood Cliffs, New Jersey 07632
Theodore B. Baum (2)                                Limited Partner     95.208%
  630 Palisade Avenue
  Englewood Cliffs, New Jersey 07632
Gregory A. Kriser (3) (6)                           Limited Partner      2.307%
  630 Palisade Avenue
  Englewood Cliffs, New Jersey 07632
Herbert J. Roberts(4) (6)                           Limited Partner       .990%
  630 Palisade Avenue
  Englewood Cliffs, New Jersey 07632
Thomas Gimbel(5) (6)                                Limited Partner       .495%
  630 Palisade Avenue
  Englewood Cliffs, New Jersey 07632
Sandler Capital Management (7)                      Warrant Holder       8.368%
  767 Fifth Avenue
  New York, New York  10153
SunAmerica Investments, Inc. (7)                    Warrant Holder      13.947%
  1 SunAmerica Center
  Los Angeles, California  90067
All Directors and Officers as a Group (6 persons)                       100.00%

----------
(1)  Mr. Baum, Chief Executive Officer and President of the Company, owns all of
     the outstanding stock of Baum  Investments,  Inc., the sole general partner
     of the Company,  and together with Ruth Baum,  beneficially owns all of the
     stock of Helicon Group Ltd. and the trust  interests in TREDD Investors and
     TREDD TWO.  Baum  Investments,  Inc.  also owns a 1.0% general  partnership
     interest  in  HPI,  and  thus  owns an  additional  indirect  .99%  limited
     partnership interest in the Company.

(2)  Includes 1.00% general partnership interest held by Baum Investments, Inc.,
     61.320% limited  partnership  interest held by Helicon Group Ltd.,  15.583%
     limited  partnership  interest  held by TREDD  Investors,  16.721%  limited
     partnership  interests  held by  TREDD  Two,  a .594%  limited  partnership
     interest held by Helicon  Corp.  and an .99% limited  indirect  partnership
     interest held by Baum Investments, Inc.

(3)  Represents the 2.307% limited partnership  interest held by GAK Cable, Inc.
     All of the  outstanding  shares of GAK Cable Inc.,  are owned by Gregory A.
     Kriser.

(4)  Represents  the .990%  limited  partnership  interest held by Roberts Cable
     Corp. All of the outstanding shares of Roberts Cable Corp. are beneficially
     owned by Herbert J. Roberts.

(5)  Represents  the .495%  limited  partnership  interest  held by Gimbel Cable
     Corp.  All of the  outstanding  shares of Gimbel  Cable Corp.  are owned by
     Thomas Gimbel.

(6)  Disclaims beneficial ownership.

(7)  Indirect  limited   partnership   ownership  through  warrants  to  acquire
     interests in HPI. Disclaims beneficial ownership.

                                  Page 26 of 33

<PAGE>


ITEM 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     On April 8, 1996, the existing limited partners of The Helicon Group,  L.P.
("THGLP")  exchanged (the  "Exchange")  their limited  partnership  interests in
THGLP  for all  Class A  Common  Limited  Partnership  Interests  and  Preferred
Partnership  Interests in Helicon Partners I, L.P. ("HPI").  As a result of this
Exchange,  THGLP  became  99%  owned by HPI  (HPI  now  owns all of the  limited
partnership  interests in THGLP and Baum Investments,  Inc.  continues to be the
general  partner of THGLP and to own a 1.00%  general  partnership  interest  in
THGLP).  The previous  limited  partners of the THGLP  presently own 100% of the
limited  partnership  interests of HPI, subject to dilution upon exercise of the
warrants issued in connection with the Exchange, see Footnote 14 "Other Events".

     Helicon Corp. is responsible  for the day-to-day  management of the Systems
pursuant to the  existing  management  agreement  with the Company , and in such
capacity has executive decision making authority, subject to the control of Baum
Investments.  Helicon  Corp. is owned and  controlled by Mr. Baum,  the owner of
Baum Investments  which is the general partner of the Company . The initial term
of the  existing  management  agreement  between the  Company and Helicon  Corp.
expires in November 2003 with the provision for automatic renewal in consecutive
ten-year  periods unless otherwise  terminated.  Management fees relating to the
Systems  are  payable  monthly  in an amount  equal to 5% of  revenues  from the
operation of the Systems subject to certain limitations.

     The office building in Pennsylvania is leased by the Company from a Company
owned by Mr. and Mrs. Baum. This lease covers  approximately  10,000 square feet
of space and  continues  through May 2005 at a triple net rent of  approximately
$5,200 per month plus certain  adjustments.  The Company believes that the terms
of the lease are at least as favorable as could be obtained from third parties.

     Mr. Baum has contributed,  directly or indirectly,  unsecured, non-interest
bearing personal  promissory notes (the "Baum Notes") in the aggregate principal
amount of $30.5  million to the capital of the Company.  Although the Baum Notes
are unconditional,  they do not become payable except (i) in amounts starting at
$19.5  million   through   December  15,  1994  and  increasing   thereafter  in
installments to a maximum of $30.5 million on December 16, 1996 and (ii) at such
time after such dates as the Company's creditors shall have exhausted all claims
against the Company's  assets.  Mr. Baum  contributed the Baum Notes in order to
enhance the overall  creditworthiness of the Company. Mr. Baum is the beneficial
owner of 96.17% of the equity  interests of the Company,  the enhancement of the
Company's creditworthiness confers a benefit on him.

     Pursuant to the  management  agreement (see Item 14.3  "Exhibits")  between
Helicon  Corp.  and the  Company,  during  1995,  1996 and 1997 the  Company was
charged  management  fees of $1.8  million,  $1.9  million,  and  $2.1  million,
respectively.  Management fees are calculated based on the gross revenues of the
Systems.  Additionally,  during 1995,  1996 and 1997, the  Partnership  was also
charged $639,477, $980,000, $713,906,  respectively,  for certain costs incurred
by this related party on their behalf.

                                  Page 27 of 33

<PAGE>


     TR Cable Consultants,  a company owned by Theodore and Ruth Baum,  received
aggregate  consulting  fees of $955,000,  $987,500 and  $1,045,000  from Helicon
Corp.  in respect of consulting  services  provided by TR Cable  Consultants  to
Helicon Corp. for the year ended December 31, 1995, 1996 and 1997, respectively.
As  executive  officers  of  Helicon  Corp.,  Theodore  and Ruth  Baum were paid
salaries  by  Helicon  Corp.  with  respect  to  their  executive   officer  and
administrative  functions.  Their  compensation  for  non-executive  officer and
administrative  functions,  such  as  services  performed  with  respect  to the
investigation of potential acquisitions and expansion of existing Systems by the
Company and the development of marketing and financing  strategies,  was paid in
the form of a consulting fee to TR Cable Consultants.

     On November 3, 1993, the Company  implemented a roll-up plan to consolidate
the ownership of the Systems  previously held by the Predecessor  Companies,  to
simplify the capital  structure of such  Predecessor  Companies and increase the
operating financial flexibility of the Systems. The roll-up plan was achieved by
the transfer to the Company of substantially  all the assets of such Predecessor
Companies in exchange for equity  interests  in the Company in  connection  with
which the Company assumed  substantially all the obligations of such Predecessor
Companies.

     Certain members of the Company's management borrowed funds from Mr. Baum in
connection  with their  indirect  purchase of limited  partnership  interests in
Helicon  Partners I, L.P.  See Item 11  "Executive  Compensation  --  Employment
Contracts,  Termination of Employment and  Change-in-Control  Arrangements"  for
disclosure regarding such arrangements.

PART IV

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

(a)  Documents Filed as Part of Form 10-K

1.   Financial Statements

     The following  information  is contained in the  Financial  section of this
     Annual Report for the fiscal year ended  December 31, 1997 (see Page F-1 of
     this Report).

o    Independent Auditors' Report
     Consolidated Balance Sheets as of December 31, 1996 and 1997

o    Consolidated  Statements  of  Operations  for each of the three years ended
     December 31, 1997

o    Consolidated  Statements  of Changes in  Partners'  Deficit for each of the
     three years ended December 31, 1997.

o    Consolidated  Statements  of Cash Flows for each of the three  years  ended
     December 31, 1997.

o    Notes to the Consolidated Financial Statements

                                  Page 28 of 33

<PAGE>


2.   Financial Statement Schedules

     The  information  called  for by this  item is  either  not  applicable  or
     included in the Consolidated Financial Statements or Notes thereto.

3.   Exhibits

Exhibit No.    Description of Exhibit
-----------    ----------------------
3.1            Certificate  of Limited  Partnership  of the Company filed August
               10,  1993  (filed as Exhibit 3.1 to  Registration  Statement  No.
               33-72468 on Form S-4 effective  February 3, 1994 and incorporated
               herein by reference).

3.2            Agreement  of  Limited  Partnership  of the  Company  dated as of
               November 3, 1993 (filed as Exhibit 3.2 to Registration  Statement
               No.  33-72468  on  Form  S-4  effective   February  3,  1994  and
               incorporated herein by reference).

3.3            Articles of  Incorporation of HCC filed August 11, 1993 (filed as
               Exhibits 3.3 to  Registration  Statement No.  33-72468-01 on Form
               S-4  effective  February  3,  1994  and  incorporated  herein  by
               reference).

3.4            Bylaws of HCC (filed as Exhibit 3.4 to Registration Statement No.
               33-72468-01   on  Form  S-4   effective   February  3,  1994  and
               incorporated herein by reference).

4.1            Indenture  dated as of October 15, 1993 between the Company,  HCC
               and Shawmut Bank  Connecticut,  National  Association as Trustee,
               relating  to the 11% Series A Senior  Secured  Notes due 2003 and
               the 11% Series B Senior Secured Notes due 2003 of the Company and
               HCC (containing, as exhibits, specimens of the Series A Notes and
               the  Series  B  Notes)(filed   as  Exhibit  4.1  to  Registration
               Statement No. 33-72468 on Form S-4 effective February 3, 1994 and
               incorporated herein by reference).

4.2            Placement  Agreement dated as of October 21, 1993 relating to the
               11% Series A Senior Secured Notes due 2003 of the Company and HCC
               (filed as Exhibit 4.2 to  Registration  Statement No. 33-72468 on
               Form S-4 effective  February 3, 1994 and  incorporated  herein by
               reference).

4.3            Registration  Rights  Agreement  dated  as of  November  3,  1993
               relating to the 11% Series A Senior Secured Notes due 2003 of the
               Company and HCC (filed as Exhibit 4.3 to  Registration  Statement
               No.  33-72468  on  form  S-4  effective   February  3,  1994  and
               incorporated herein by reference).

                                  Page 29 of 33

<PAGE>


4.4            Form  of  Letter  of   Transmittal   (field  as  Exhibit  4.4  to
               Registration   Statement  No.  33-72468  on  Form  S-4  effective
               February 3, 1994 and incorporated herein by reference).

4.5            Security  Agreement  dated as of November 3, 1993 relating to the
               security interest granted in the Collateral (filed as Exhibit 4.5
               to  Registration  Statement  No.  33-72468 on Form S-4  effective
               February 3, 1994 and incorporated herein by reference).

4.6            Cash Collateral Account, Security Pledge and Assignment Agreement
               dated as of November  3, 1993  relating to the deposit of certain
               proceeds of collateral  into the Account (filed as Exhibit 4.6 to
               Registration   Statement  No.  33-72468  on  Form  S-4  effective
               February 3, 1994 and incorporated herein by reference).

10.1           Limited  Recourse  Promissory  Note in the  principal  amount  of
               $24,000,000  granted by  Theodore B. Baum in favor of the Company
               (filed as Exhibit 10.1 to Registration  Statement No. 33-72468 on
               Form S-4 effective  February 3, 1994 and  incorporated  herein by
               reference).

10.2           Limited  Recourse  Promissory  Note in the  principal  amount  of
               $6,500,000   granted  by  Theodore  B.  Baum  in  favor  of  Baum
               Investments,  Inc. and assigned to the Company  (filed as Exhibit
               10.2 to Registration Statement No. 33-72468 on Form S-4 effective
               February 3, 1994 and Incorporated herein by reference).

10.3           Amended   and   Restated   Note  in  the   principal   amount  of
               $1,390,791.52   granted  by  the  Company  in  favor  of  Simmons
               Communications   Company,   L.P.   (filed  as  Exhibit   10.3  to
               Registration   Statement  No.  33-72468  on  Form  S-4  effective
               February 3, 1994 and incorporated herein by reference).

10.4           10%  Subordinated  Note dated  August 20,  1992 in the  principal
               amount of $1,250,000 granted by Vermont  Cablevision  Associates,
               L.P.  in favor of Simmons  Communications  Company,  L.P.  marked
               "Amended,  Restated & Replaced 11/3/93" (filed as Exhibit 10.4 to
               Registration   Statement  No.  33-72468  on  Form  S-4  effective
               February 3, 1994 and incorporated herein by reference).

10.5           13%  Subordinated  Note dated  August 20,  1992 in the  principal
               amount of $2,250,000 granted by Vermont  Cablevision  Associates,
               L.P.  in favor of Simmons  Communications  Company,  L.P.  marked
               "Paid 11/3/93" (filed as Exhibit 10.5 to  Registration  Statement
               No.  33-72468  on  Form  S-4  effective   February  3,  1994  and
               incorporated herein by reference).

10.6           Assumption and Guarantee of  Non-Negotiable  Subordinated Note in
               the Original  Principal  Amount of $500,000  payable to Swapan K.
               Bose  (filed  as  Exhibit  10.5  to  Registration  Statement  No.
               33-72468 on Form S-4 effective  February 3, 1994 and incorporated
               herein by reference).

                                  Page 30 of 33

<PAGE>


10.7           Amended and Restated  Promissory Note in the principal  amount of
               $5,000,000  granted by the  Company in favor of  Theodore B. Baum
               (filed as Exhibit 10.7 to Registration  Statement No. 33-72468 on
               Form S-4 effective  February 3, 1994 and  incorporated  herein by
               reference).

10.8.          Management  Agreement  dated November 2, 1993 between the Company
               and  Helicon  Corp.   (filed  as  Exhibit  10.8  to  Registration
               Statement No. 33-72468 on Form S-4 effective February 3, 1994 and
               incorporated herein by reference).

10.9           Programming  Supply  Agreement dated November 3, 1993 between the
               Company and Helicon Corp.  (filed as Exhibit 10.9 to Registration
               Statement No. 33-72468 on Form S-4 effective February 3, 1994 and
               incorporated herein by reference).

10.10          Amended and Restated  Consulting  Agreement dated October 1, 1993
               among Helicon Corp., HGL, the Company and Thomas Gimbel (filed as
               Exhibit 10.10 to Registration  Statement No. 33-72468 on Form S-4
               effective February 3, 1994 and incorporated herein by reference).

10.11          Amended and Restated  Consulting  Agreement dated October 1, 1993
               among  Helicon  Corp.,  HGL,  the  Company  and Gregory A. Kriser
               (filed as Exhibit 10.11 to Registration Statement No. 33-72468 on
               Form S-4 effective  February 3, 1994 and  incorporated  herein by
               reference).

10.12          Amended and Restated  Consulting  Agreement dated October 1, 1993
               among Helicon Corp.,  HGL, the Company and Herbert Roberts (filed
               as Exhibit 10.12 to  Registration  Statement No. 33-72468 on Form
               S-4  effective  February  3,  1994  and  incorporated  herein  by
               reference).

10.13          Letter  Agreement  dated October 21, 1993 between the Company and
               the Bank of New York  (filed  as  Exhibit  10.13 to  Registration
               Statement No. 33-72468 on Form S-4 effective February 3, 1994 and
               incorporated herein by reference).

10.14          Loan  Agreement  dated as of  December  19, 1994 by and among the
               Company,  HCC and Fleet Bank (filed as Exhibit 10.14 to Form 10-K
               filed on April 12, 1995 and incorporated herein by reference).

10.15          Security Agreement dated as of December 19, 1994 by and among the
               Company,  HCC and Fleet Bank (filed as Exhibit 10.15 to Form 10-K
               filed on April 12, 1995 and incorporated herein by reference).

10.16          Affiliate  Subordination  Agreement dated as of December 19, 1994
               by and among HCC, the Company,  Helicon Corp.,  Baum Investments,
               Inc.,  Theodore B. Baum and Fleet Bank (filed as Exhibit 10.16 to
               Form 10-K  filed on April  12,  1995 and  incorporated  herein by
               reference).

                                  Page 31 of 33

<PAGE>


10.17.         Intercreditor  Agreement  dated as of  December  19,  1994 by and
               among the Company,  HCC, Fleet Bank and Shawmut Bank Connecticut,
               National  Association  (filed as Exhibit 10.17 to Form 10-K filed
               on April 12, 1995 and incorporated herein by reference).

10.18          Letter  Agreement  dated as of  December  19,  1994  between  the
               Company and Fleet Bank (filed as Exhibit 10.18 to Form 10-K filed
               on April 12, 1995 and incorporated herein by reference).

10.19          First  Amendment to Loan Agreement  dated as of February 23, 1996
               by and among the Company, HCC and Fleet Bank.

10.20          Second  Amendment to Loan Agreement  dated as of June 28, 1996 by
               and among the Company, HCC and Fleet Bank.

10.21          Loan Agreement dated as of June 26, 1997 by and among the Company
               and Banque Paribas,  and The Lenders Party Thereto.  (Filed as an
               exhibit to the  Company's  quarterly  report on Form 10-Q for the
               period ended September 30, 1997).

10.22          Subsidiary  Guaranty Security Agreement dated as of June 26, 1997
               by and among the  Company,  HCC and Banque  Paribas.(Filed  as an
               exhibit to the  Company's  quarterly  report on Form 10-Q for the
               period ended September 30, 1997).


10.23          Intercreditor  Agreement  dated as of June  26,1997  among Banque
               Paribas as agent under the credit agreement, Fleet National Bank,
               HCC  and the  Company.  (Filed  as an  exhibit  to the  Company's
               quarterly  report on Form 10-Q for the period ended September 30,
               1997).

12.            Statement  regarding  computation  of earnings  to fixed  charges
               ratio.

21.            List of  Subsidiaries  of  Registrants  (filed as  Exhibit  21 to
               Registration   Statement  No.  33-72468  on  Form  S-4  effective
               February 3, 1994 and incorporated herein by reference).

27.            Financial Data Schedule.

b)   Current Reports on Form 8-K

          A report on Form 8-KA was filed on  September  10, 1997  reporting  an
          event under Item 2 on Form 8-K.


c)   Exhibits (See Item 14(a)3 above)

d)   Financial Statements

          Not applicable.

                                  Page 32 of 33

<PAGE>


                                   SIGNATURES

     Pursuant  to the  requirements  of  Section  13 or 15(d) of the  Securities
Exchange Act of 1934, the Registrants  have duly caused this Report to be signed
on their behalf by the undersigned, thereunto duly authorized.

Dated:  March 27, 1998           THE HELICON GROUP, L.P.
                                 (Registrant)

                                 By:    Baum Investments, Inc.,
                                        its general partner

                                 By:    /s/Theodore B. Baum
                                        (Theodore B. Baum)
                                        President

                                 By:    /s/ Herbert J. Roberts
                                        (Herbert J. Roberts)
                                        Senior Vice President
                                        (Principal Financial and
                                        Accounting Officer)


Dated:  March 27, 1998           HELICON CAPITAL CORP.
                                 (Registrant)

                                 By:    /s/Theodore B. Baum
                                        (Theodore B. Baum)
                                        President

                                 By:    /s/ Herbert J. Roberts
                                        (Herbert J. Roberts)
                                        Senior Vice President
                                        (Principal Financial and
                                        Accounting Officer)

     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 the date indicated.

Signature                                Title                         Date
---------                                -----                         ----
BAUM INVESTMENTS, Inc., as general
partner of
THE HELICON GROUP, L.P.
/s/  Theodore B. Baum         President (Principal Executive      March 27, 1998
     (Theodore B. Baum)       Officer); Director

/s/  David M. Baum            Senior Vice President;              March 27, 1998
     (David M. Baum)          Director

HELICON CAPITAL CORP.
/s/  Theodore B. Baum         President (Principal Executive      March 27, 1998
     (Theodore B. Baum)       Officer); Director

/s/  David M. Baum            Senior Vice President;              March 27, 1998
     (David M. Baum)          Director

                                  Page 33 of 33

<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES

       INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT
         SCHEDULES COVERED BY INDEPENDENT AUDITORS' REPORT (ITEM 14(A))

                                                                            Page

Independent Auditors' Report                                                 F-2

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

Consolidated Statements of Operations for each of the three years
ended December 31, 1997                                                      F-4

Consolidated Statements of Changes in Partners'
Deficit for each of the three-years ended December 31, 1997                  F-5

Consolidated Statements of Cash Flows for each of the three years
ended December 31, 1997                                                      F-6

Notes to Consolidated Financial Statements                                   F-7

All other schedules have been omitted because the required information
either is not  applicable  or is shown in the  consolidated  financial
statements or notes thereto.

                                       F-1

<PAGE>


                          Independent Auditor's Report


The Partners
The Helicon Group, L.P.:

We have audited the consolidated financial statements of The Helicon Group, L.P.
and wholly  owned  incorporated  entities as listed in the  accompanying  index.
These   consolidated   financial   statements  are  the  responsibility  of  the
Partnership's  management.  Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly, in all material  respects,  the financial position of The Helicon Group,
L.P. and wholly owned incorporated entities as of December 31, 1996 and 1997 and
the  results of their  operations  and their cash flows for each of the years in
the  three-year  period ended  December 31, 1997 in  conformity  with  generally
accepted accounting principles.


                                             /s/KPMG Peat Marwick LLP
                                             KPMG Peat Marwick LLP

New York, New York
March 20, 1998

                                       F-2

<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES
                           Consolidated Balance Sheets
                           December 31, 1996 and 1997

<TABLE>
<CAPTION>
                                                               December 31, 1996   December 31, 1997
                                                                 -------------       -------------
          Assets (notes 8 and 9)
<S>                                                              <C>                 <C>
Cash and cash equivalents (note 2)                               $   5,751,189       $   3,693,625
Receivables from subscribers                                           795,568             997,231
Prepaid expenses and other assets                                      959,916           1,409,724
Property, plant and equipment, net (notes 3, 4,and 10)

                                                                    28,887,133          35,080,302
Intangible assets and deferred costs, net (notes 3 and 5)

                                                                    21,751,852          30,628,407
Due from affiliates (note 6)                                           131,540             797,590
                                                                 -------------       -------------
          Total assets                                           $  58,277,198       $  72,606,879
                                                                 =============       =============

     Liabilities and Partners' Deficit
Liabilities:
  Accounts payable                                               $   2,907,235       $   3,159,022
  Accrued expenses                                                     518,625             760,609
  Subscriptions received in advance                                    371,464             697,633
  Accrued interest                                                   2,155,526           2,173,590
  Due to principal owner (note 7)                                    5,000,000           5,000,000
  Senior secured notes (note 8)                                    115,000,000         115,000,000
  Loans payable to banks (note 9)                                    1,497,223          20,276,641
  Other notes payable (note 10)                                      2,885,044           3,064,854
  Due to affiliates, net (note 6)                                      537,844             427,282
                                                                 -------------       -------------
          Total liabilities                                        130,872,961         150,559,631
                                                                 -------------       -------------

Commitments (notes 8 and 12)

Partners' deficit: (note 11)
  Accumulated partners' deficit                                    (72,594,763)        (77,951,752)
  Less capital contribution receivable                                  (1,000)             (1,000)
                                                                 -------------       -------------
          Total partners' deficit                                  (72,595,763)        (77,952,752)
                                                                 -------------       -------------
     Total liabilities and partners' deficit                     $  58,277,198       $  72,606,879
                                                                  =============       =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-3

<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES
                      Consolidated Statements of Operations
                  Years Ended December 31, 1995, 1996 and 1997

<TABLE>
<CAPTION>
                                                             1995            1996            1997
                                                         ------------    ------------    ------------

<S>                                                      <C>             <C>             <C>
Revenues                                                 $ 35,224,720    $ 38,059,737    $ 42,945,730
                                                         ------------    ------------    ------------
Operating expenses:
  Operating expenses (note 12)                              9,403,668      10,213,044      12,166,203
  General and administrative expenses (notes 6 and 12)      5,476,416       6,177,970       6,619,137
  Marketing expenses                                        1,081,352       1,149,655       1,375,475
  Depreciation and amortization                             9,560,958      10,127,200      11,203,963
  Management fee charged by affiliate (note 6)              1,761,236       1,902,987       2,147,286
  Corporate and other expenses (note 7)                       361,333         345,297         392,512
                                                         ------------    ------------    ------------
    Total operating expenses                               27,644,963      29,916,153      33,904,576
                                                         ------------    ------------    ------------
    Operating income                                        7,579,757       8,143,584       9,041,154
                                                         ------------    ------------    ------------
Interest expense  (notes 7 and 10)                        (12,991,954)    (13,496,610)    (14,519,725)
Interest income                                               216,535         210,544         121,582
                                                         ------------    ------------    ------------
                                                          (12,775,419)    (13,286,066)    (14,398,143)
                                                         ------------    ------------    ------------
    Net loss                                             ($ 5,195,662)   ($ 5,142,482)   ($ 5,356,989)
                                                         ============    ============    ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-4

<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES
             Consolidated Statements of Changes in Partners' Deficit
                  Years Ended December 31, 1995, 1996 and 1997

<TABLE>
<CAPTION>
                                       Partners' Deficit
                                   -------------------------        Capital
                                    General         Limited      Contribution
                                    Partner        Partners       Receivable         Total
                                   ---------     -----------     ------------     ------------

<S>                                <C>           <C>                <C>           <C>
Balance at December 31, 1994       ($256,037)    (62,000,582)       (1,000)       ($62,257,619)

Net loss                           ($ 51,957)     (5,143,705)         --          ($ 5,195,662)
                                   ---------     -----------        ------        ------------

Balance at December 31, 1995       ($307,994)    (67,144,287)       (1,000)       ($67,453,281)

Net loss                           ($ 51,425)     (5,091,057)         --          ($ 5,142,482)
                                   ---------     -----------        ------        ------------

Balance at December 31, 1996       ($359,419)    (72,235,344)       (1,000)       ($72,595,763)

Net Loss                           ($ 53,570)     (5,303,419)         --          ($ 5,356,989)
                                   ---------     -----------        ------        ------------
Balance at December 31, 1997       ($412,989)    (77,538,763)       (1,000)       ($77,952,752)
                                   =========     ===========        ======        ============
</TABLE>

See accompanying notes to consolidated financial statements.

                                       F-5

<PAGE>


THE HELICON GROUP, L.P. AND WHOLLY OWNED
INCORPORATED ENTITIES
Consolidated Statements of Cash Flows
Years Ended December 31, 1995, 1996 and 1997

<TABLE>
<CAPTION>
                                                                           1995            1996            1997
                                                                       ------------    ------------    ------------
<S>                                                                    <C>             <C>             <C>
Cash flows from operating activities:
  Net loss                                                             ($ 5,195,662)   ($ 5,142,482)   ($ 5,356,989)
                                                                       ------------    ------------    ------------
  Adjustments  to  reconcile  net  loss  to  net  cash  provided
    by  operating activities:
      Depreciation and amortization                                       9,560,958      10,127,200      11,203,963
      Amortization of debt discount and deferred financing costs          1,942,730       1,778,684          60,000
      (Gain) loss on sale of equipment                                       (6,450)        (20,375)         (1,069)
      Interest on other notes payable added to principal                    153,025         168,328         185,160
      Change in operating assets and liabilities:
          (Increase) decrease in receivables from subscribers               (86,988)        119,995        (201,663)
          Increase in prepaid expenses and other assets                      (8,492)       (108,888)       (449,808)
          Increase in financing costs incurred                                 --              --          (400,000)
          (Decrease) increase in accounts payable and accrued expenses     (249,726)         90,019         424,641
          (Decrease) increase in subscriptions received in advance          (46,615)        (21,560)        326,170
          Increase in accrued interest                                        3,598         384,954          18,064
                                                                       ------------    ------------    ------------
          Total adjustments                                              11,262,040      12,518,357      11,165,458
                                                                       ------------    ------------    ------------
          Net cash provided by operating activities                       6,066,378       7,375,875       5,808,469
                                                                       ------------    ------------    ------------
Cash flows from investing activities:
  Purchases of property, plant and equipment                             (6,561,044)     (4,771,631)     (4,246,007)
  Proceeds from sale of equipment                                             6,450          21,947          23,270
  Cash paid for net assets of cable television systems acquired            (350,000)           --       (21,000,887)
  Cash paid for net assets of internet business acquired                       --           (40,000)           --
  Increase in intangible assets and deferred costs                         (578,655)         (9,556)        (99,820)
                                                                       ------------    ------------    ------------
          Net cash used in investing activities                          (7,483,249)     (4,799,240)    (25,323,444)
                                                                       ------------    ------------    ------------
Cash flows from financing activities:
  Decrease in restricted cash                                                  --              --         1,000,000
  Proceeds from bank loans                                                2,850,000         400,000      20,285,000
  Repayment of bank loans                                                (1,100,000)       (952,777)     (1,505,581)
  Repayment of other notes payable                                         (402,729)       (446,808)       (768,526)
  Advances to affiliates                                                 (1,317,392)     (2,750,376)     (1,829,692)
  Repayments of advances to affiliates                                      966,411       2,939,699       1,276,210
                                                                       ------------    ------------    ------------
          Net cash provided by (used in) financing activities               996,290        (810,262)     18,457,411
                                                                       ------------    ------------    ------------
          Net (decrease) increase in cash and cash equivalents             (420,581)      1,766,373      (1,057,564)

Cash and cash equivalents at beginning of period                          3,405,397       2,984,816       4,751,189
                                                                       ------------    ------------    ------------
Cash and cash equivalents at end of period                             $  2,984,816    $  4,751,189    $  3,693,625
                                                                       ------------    ------------    ------------
Supplemental cash flow information:
  Interest paid                                                        $ 10,892,601    $ 11,164,645    $ 14,256,501
                                                                       ============    ============    ============
  Other non-cash items:
    Acquisition of property, plant and equipment through issuance of
      other notes payable                                              $    128,111    $    759,612    $    763,175
                                                                       ============    ============    ============
    Net assets of internet business transferred to affiliate through
      an intercompany loan                                                     --              --      $    223,130
                                                                       ============    ============    ============
    Investment in HPI Acquisition Co., LLC through the issuance of a
      note payable                                                             --      $      1,000            --
                                                                       ============    ============    ============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                      F - 6

<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES

                   Notes to Consolidated Financial Statements

                        December 31, 1995, 1996 and 19967


1.   Organization and Nature of Business

     The Helicon Group, L.P. (the  "Partnership" or the "Company") was organized
     as a limited  partnership on August 10, 1993 under the laws of the state of
     Delaware to  consolidate  the ownership  interests of Helicon  Group,  Ltd.
     ("Helicon"),  Terrebonne Cablevision, L.P., Roxboro Cablevision Associates,
     L.P.  and  Vermont  Cablevision   Associates,   L.P.   (collectively,   the
     "Predecessor  Companies")  in connection  with a roll-up plan  completed on
     November  3,  1993  (the  "roll-up").  As a  result  of  the  roll-up,  the
     Partnership  acquired   substantially  all  of  the  operating  assets  and
     agreements of all the cable television  systems which were previously owned
     by the Predecessor  Companies and the  stockholders and the partners of the
     Predecessor  Companies  became  limited  partners of the  Partnership.  The
     Company  operates  under the name of "Helicon  Cable  Communications".  The
     general  partner  of the  Company  is Baum  Investments,  Inc.,  a Delaware
     Corporation, which is 100% owned by Mr. Theodore B. Baum. On April 8, 1996,
     the Company became 99% owned by Helicon Partners I, L.P. (HPI) and 1% owned
     by the Baum Investments,  Inc., the general partner. The Company is managed
     by Helicon Corp., an affiliated management company.

     The Partnership  operates cable television systems located in Pennsylvania,
     West Virginia,  North Carolina,  Louisiana,  Vermont and New Hampshire. The
     Company also offers  advanced  services,  such as paging,  cable modems and
     private data network systems to its customers.

2.   Summary of Significant Accounting Policies

     a)   Principles of Consolidation

          The  accompanying   consolidated   financial  statements  include  the
          accounts of the Partnership and its wholly owned incorporated  entity,
          Helicon Capital Corp.  ("HCC").  HCC had nominal assets as of December
          31, 1996 and 1997 and had no operations from the date of incorporation
          to December 31, 1997. All  intercompany  accounts have been eliminated
          in  consolidation.  Certain  prior  intercompany  balances  have  been
          reclassified to conform with the current year presentation.

     b)   Partnership Profits, Losses and Distributions

          Under  the  terms of the  Company's  partnership  agreement,  profits,
          losses  and  distributions  of the  Partnership  will  be made to each
          partner pro-rata based on their respective partnership interest.

                                       F-7
                                                                     (Continued)

<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES

                   Notes to Consolidated Financial Statements


2.   (Continued)

     c)   Revenue Recognition

          The Partnership  recognizes  revenues as cable television services are
          provided to subscribers.  Subscription  revenues billed in advance for
          services  are  deferred  and recorded as income in the period in which
          services are rendered.

     d)   Property, Plant and Equipment

          Property,  plant and equipment are carried at cost and are depreciated
          using the straight-line  method over the estimated useful lives of the
          respective assets.

     e)   Intangible Assets and Deferred Costs

          Intangible  assets  and  deferred  costs are  carried  at cost and are
          amortized  using the  straight-line  method over the estimated  useful
          lives of the respective assets. The Partnership  periodically  reviews
          the  amortization  periods of their  intangible  assets  and  deferred
          costs.  The Partnership  evaluates  whether there has been a permanent
          impairment  in the value of these assets by  considering  such factors
          including projected undiscounted cash flows, current market conditions
          and changes in the cable  television  industry  that would  impact the
          recoverability of such assets, among other things.

     f)   Income Taxes

          No  provision  for Federal or state  income taxes has been made in the
          accompanying consolidated financial statements since any liability for
          such income taxes is that of the Partnership's partners and not of the
          Partnership.  Certain assets have a basis for income tax purposes that
          differs  from the carrying  value for  financial  reporting  purposes,
          primarily due to differences in depreciation  methods.  As a result of
          these  differences,  at December  31,  1996 and 1997 the net  carrying
          value of these assets for financial  reporting  purposes  exceeded the
          net basis for income tax  purposes by  approximately  $15,100,000  and
          $15,400,000, respectively.

     g)   Cash and Cash Equivalents

          Cash and cash  equivalents,  consisting of amounts on deposit in money
          market accounts,  checking accounts and certificates of deposit,  were
          $5,751,189 and $3,693,625 at December 31, 1996 and 1997, respectively.
          For purposes of the statements of cash flow,  certificates  of deposit
          with  maturities  of  over  90  days,  included  above,   amounted  to
          $1,000,000  at  December  31,  1996,  and  were  not  considered  cash
          equivalents.

                                       F-8
                                                                     (Continued)

<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES

                   Notes to Consolidated Financial Statements


     h)   Use of Estimates

          Management  of  the  Company  has  made  a  number  of  estimates  and
          assumptions  relating to the reporting of assets and  liabilities  and
          the disclosure of contingent  assets and  liabilities to prepare these
          financial  statements in conformity with generally accepted accounting
          principles. Actual results could differ from those estimates.

     i)   Disclosure about Fair Value of Financial Instruments

          Cash and Cash Equivalents,  Receivables,  Accounts Payable and Accrued
          Expenses.

          The carrying amounts  reported in the consolidated  balance sheets for
          cash and cash equivalents,  current receivables,  notes receivable and
          accounts  payable  approximate  fair  values.  The  carrying  value of
          receivables   with   maturities   greater  than  one  year  have  been
          discounted,  and if such  receivables were discounted based on current
          market  rates,  the  fair  value  of these  receivables  would  not be
          materially different than their carrying values.

          Senior Secured Notes and Long-term Debt

          For the Senior Secured  Notes,  fair values are based on quoted market
          prices.  The fair  market  value  at  December  31,  1996 and 1997 was
          approximately   $117,000,000  and  $123,000,000,   respectively.   For
          long-term  debt,  their values  approximate  carrying value due to the
          short term maturity of the debt and/or fluctuating interest.

3.   Acquisitions

     On January 31, 1995, the Partnership  acquired a cable  television  system,
     serving  approximately  1,100  subscribers  in the Vermont  communities  of
     Bradford,  South  Royalton and Chelsea.  The aggregate  purchase  price was
     approximately  $350,000 and was allocated to the net assets  acquired which
     included property and equipment and intangible assets.

     On March 22, 1996, the  Partnership  acquired the net assets of a telephone
     dial-up internet access provider,  serving  approximately  350 customers in
     and around the area of  Uniontown,  Pennsylvania.  The  aggregate  purchase
     price was approximately $40,000.

     On April 8, 1996,  the Company  acquired a 1%  interest in HPI  Acquisition
     Co., LLC ("HPIAC"),  a Delaware limited liability  company for $1,000.  The
     balance of HPIAC is owned by HPI. HPIAC was formed to acquire  interests in
     cable television systems and related businesses.  The Company's 1% interest
     in HPIAC's net loss to date is not material.

                                       F-9
                                                                     (Continued)

<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES

                   Notes to Consolidated Financial Statements


     On January 31, 1997, the Partnership  acquired a cable  television  system,
     serving approximately 823 subscribers in the West Virginia counties of Wirt
     and Wood. The aggregate purchase price was approximately $1,053,457 and was
     allocated to the net assets acquired which included  property and equipment
     and intangible assets.

     On June 26,  1997,  the  Partnership  acquired  the net  assets  of a cable
     television  system serving  approximately  11,000  subscribers in the North
     Carolina  communities of Watauga County,  Blowing Rock,  Beech Mountain and
     the town of Boone.  The aggregate  purchase price was  $19,947,430  and was
     allocated  to  the  net  assets  acquired  using  the  purchase  method  of
     accounting and included,  property,  equipment and intangible  assets.  The
     Company  utilized its  available  cash and the  proceeds  from a new credit
     facility it entered  into with Banque  Paribas  consisting  of  $20,000,000
     senior  secured term loan facility to complete the  acquisition  (see Loans
     Payable - Banks below).

     The aggregate  purchase price of the 1997  acquisitions was $21,000,887 and
     was  allocated to the net assets  acquired  based on their  estimated  fair
     market value as follows:

          Land                                                $29,100
          Cable television system                           7,768,400
          Vehicles                                            165,000
          Computer equipment                                  240,000
          Subscriber lists                                 12,909,429
          Organization and other costs                        131,584
          Other net operating items                         (242,626)
                                                            ---------
          Total aggregate purchase price                  $21,000,887
                                                          ===========

     The  following  unaudited  pro-forma  summary  presents  the  Partnership's
     results of operations as if the North Carolina  acquisition had occurred as
     of the  beginning  of the  fiscal  1996,  after  giving  effects to certain
     adjustments, including the depreciation and amortization of property, plant
     and equipment and intangible assets acquired and interest costs on the debt
     incurred to finance this acquisition.  This pro-forma  information has been
     prepared  for  comparative  purposes  only  and  does  not  purport  to  be
     indicative of what would have occurred had the acquisition  been made as of
     that date or of the results  which  might  occur in the  future.  Pro-forma
     results for other  acquisitions  are not included  because they do not meet
     the significance test.

                                            Year ended December 31
                                      ---------------------------------
                                          1996                 1997
                                      ------------         ------------
          Revenues                    $ 41,735,750         $ 44,854,534
                                      ============         ============
          Net Loss                    $  7,467,320         $  6,500,913
                                      ============         ============

                                      F-10
                                                                     (Continued)

<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES

                   Notes to Consolidated Financial Statements


4.   Property, Plant and Equipment

     Property, plant and equipment is summarized as follows at December 31:
<TABLE>
<CAPTION>
                                                                             Estimated useful
                                                  1996           1997           life in years
                                           -----------    -----------                --------
<S>                                        <C>            <C>                       <C>
Land                                           $96,689        $96,689                      --
Cable television system                     66,618,787     78,060,495                 5 to 20
Office furniture and fixtures                  418,047        481,062                5 and 10
Vehicles                                     2,304,077      2,945,543                 3 and 5
Building                                       272,996        510,854                5 and 10
Building and leasehold
  Improvements                                 341,736        356,964                  1 to 5
Computers                                    1,729,593      1,917,681                5 and 10
                                           -----------    -----------
                                            71,781,925     84,369,288
Less accumulated depreciation              (42,894,792)   (49,288,986)
                                           -----------    -----------
                                           $28,887,133    $35,080,302
                                           ===========    ===========
</TABLE>


5.   Intangible Assets and Deferred Costs

     Intangible assets and deferred costs are summarized as follows at
December 31:
<TABLE>
<CAPTION>
                                                                             Estimated useful
                                                  1996           1997           life in years
                                           -----------    -----------                --------
<S>                                        <C>            <C>                       <C>
Covenants not-to-compete                   $13,168,422    $13,158,422                       5
Franchise agreements                        19,650,889     19,650,889                 9 to 17
Goodwill                                     1,703,760      1,703,760               20 and 40
Subscriber lists                            16,541,413     29,525,115                 6 to 18
Financing costs                              4,455,478      4,855,478                 8 to 10
Organization and other costs                 1,835,332      1,964,904                 5 to 10
                                           -----------    -----------
                                            57,355,294     70,858,568

Less accumulated amortization              (35,603,442)   (40,230,161)
                                           -----------    -----------
                                           $21,751,852    $30,628,407
                                           ===========    ===========
</TABLE>


                                      F-11
                                                                     (Continued)


<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES

                   Notes to Consolidated Financial Statements



6.   Transactions with Affiliates

     Amounts  due  from/to  affiliates  result  from  management  fees,  expense
     allocations and temporary  non-interest  bearing loans.  The affiliates are
     related to the Company common-ownership.

     During 1995, 1996 and 1997 the  Partnership was charged  management fees of
     $1,761,236  $1,902,987,   $2,147,286  respectively.   Management  fees  are
     calculated based on the gross revenues of the systems. Additionally, during
     1995, 1996 and 1997, the Partnership  was also charged  $639,477,  $980,000
     and  $713,906,  respectively,  for certain  costs  incurred by this related
     party on their behalf.

7.   Due to Principal Owner

     Mr. Theodore Baum, directly or indirectly, is the principal owner of 96.17%
     of the general and limited  partnership  interests of the Partnership  (the
     "Principal  Owner").  Due to  Principal  Owner  consists of  $5,000,000  at
     December 31, 1996 and 1997.  Beginning on November 3, 1993, interest on the
     $5,000,000 due to the Principal Owner did not accrue and in accordance with
     the  provisions  of the Senior  Secured  Notes was not paid for twenty four
     months.  Interest  resumed on November 3, 1995 (see Note 8). The  principal
     may only be repaid  thereafter  subject to the passage of certain  limiting
     tests  under  the  covenants  of the  Senior  Secured  Notes.  Prior to the
     issuance of the Senior Secured Notes,  amounts due to Principal  Owner bore
     interest at varying rates per annum based on the prime rate and were due on
     demand.   These  amounts  due  to  the  Principal  Owner  are  subject  and
     subordinate to the prior payment of the amounts due to banks under the 1994
     credit agreement  described in note 9. Interest expense includes $91,076 in
     1995, $521,701 in 1996 and $530,082 in 1997, related to this debt.


                                      F-12
                                                                     (Continued)


<PAGE>



                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES

                   Notes to Consolidated Financial Statements

8.   Senior Secured Notes

     On November 3, 1993, the  Partnership  and HCC (the  "Issuers"),  through a
     private placement offering,  issued $115,000,000 aggregate principal amount
     of 11% Senior Secured Notes due 2003 (the "Senior Secured Notes"),  secured
     by  substantially  all the assets of the Company.  The Senior Secured Notes
     were  issued at a  substantial  discount  from their  principal  amount and
     generated  net  proceeds  to the  Issuers  of  approximately  $105,699,000.
     Interest is payable on a semi-annual basis in arrears on November 1 and May
     1,  beginning on May 1, 1994.  The Senior  Secured Notes bore interest at a
     rate of 9-1/2% until the Partnership's  registration  statement to register
     the Senior Secured Notes with the Securities and Exchange Commission became
     effective on February 3, 1994.  After that date and until  November 1, 1996
     the Senior  Secured Notes bear interest at the rate of 9% per annum.  After
     November 1, 1996, the Senior Secured Notes bear interest at the rate of 11%
     per annum. The discount on the Senior Secured Notes has been amortized over
     the term of the  Senior  Secured  Notes  so as to  result  in an  effective
     interest rate of 11% per annum.

     The Senior  Secured  Notes may be  redeemed at the option of the Issuers in
     whole or in part at any time on or after November 1, 1997 at the redemption
     price of 108%  reducing  ratably to 100% of the principal  amount,  in each
     case together with accrued interest to the redemption date. The Issuers are
     required to redeem $25,000,000 principal amount of the Senior Secured Notes
     on each of November 1, 2001 and November 1, 2002. The indenture under which
     the  Senior  Secured  Notes  were  issued  contains   various   restrictive
     covenants,  the more significant of which are, limitations on distributions
     to partners,  the incurrence or guarantee of  indebtedness,  the payment of
     management  fees,   other   transactions   with  officers,   directors  and
     affiliates,  and the  issuance  of  certain  types of equity  interests  or
     distributions relating thereto.

9.   Loans Payable - Bank

     On June 26, 1997,  the Company  entered into a $20,000,000  senior  secured
     credit  facility  with  Banque  Paribas  (the 1997  Credit  Facility).  The
     facility is  non-amortizing  and is due November 1, 2000.  Borrowings under
     the facility financed the acquisition of certain cable television assets in
     North Carolina (see  acquisition  note above).  Interest on the $20,000,000
     outstanding are payable at specified  margins over either LIBOR or the rate
     of interest publicly announced in New York City by The Chase Manhattan Bank
     from time to time as its prime  commercial  lending rate.  The margins vary
     based on the Company's total leverage ratio, as defined,  at the time of an
     advance. Currently interest is payable at LIBOR plus 2.75%.



                                      F-13
                                                                     (Continued)


<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES

                   Notes to Consolidated Financial Statements

     The 1997 Credit Facility is secured by a first perfected  security interest
     in all of the assets of the Company and a pledge of all equity interests of
     the Company.  The credit agreement contains various  restrictive  covenants
     that  include  the  achievement  of certain  financial  ratios  relating to
     interest,  fixed charges,  leverage,  limitations on capital  expenditures,
     incurrence  or guarantee of  indebtedness,  transactions  with  affiliates,
     distributions  to members and  management  fees which accrue at 5% of gross
     revenues.

     On June 23, 1997, the 1994 Credit  Facility was repaid in full and the 1994
     Credit Facility was terminated.
















                                      F-14
                                                                     (Continued)


<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES

                   Notes to Consolidated Financial Statements

10.  Other Notes Payable

     Other Notes payable consists of the following at December 31:

                                                 1996                 1997
                                                 ----                 ----

     Promissory  note in  consideration
       for   acquisition   of  a  cable
       television   system,    accruing
       interest  at 10%  per  annum  on
       principal  and accrued  interest
       which is added to  principal  on
       certain     specified     dates;
       interest   becomes   payable  on
       January    1,   1998   and   the
       principal  is payable in full in
       August   20,   2000                    $1,851,604           $2,036,765

     Subordinated    promissory    note
       payable in  connection  with the
       acquisition    of   a    limited
       partner's    interest    in    a
       Predecessor Company,  payable in
       20  quarterly   installments  of
       $25,000,  plus  interest  at the
       prime  lending  rate  (which was
       8.5% and 8.25% at  December  31,
       1996  and  1997,   respectively)
       through October 31, 1997

                                                  75,000                 -0-

     Installment  note,  collateralized
       by   computer    equipment   and
       payable     in    60     monthly
       installments      of     $6,184,
       including  interest  at  8%  per
       annum, through December 18, 1997

                                                  71,131                 -0-

     Installment  note,  collateralized
       by   computer    equipment   and
       payable     in    60     monthly
       installments      of     $5,300,
       including interest at Prime Plus
       1.5% per annum, through February
       28, 2001;  fully repaid June 23,
       1997

                                                 265,000                 -0-

     Installment notes,  collateralized
       by   vehicles   and  payable  in
       monthly     installments,     at
       interest  rates  between 5.5% to
       11.25%   per   annum,    through
       January, 2002

                                                 622,309            1,028,089
                                              ----------           ----------
                                              $2,885,044           $3,064,854
                                              ==========           ==========


                                      F-15
                                                                     (Continued)


<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES

                   Notes to Consolidated Financial Statements

10.  (Continued)

     Principal payments due on the above notes payable are summarized as follows
at December 31, 1997:

                 Year ending December 31                     Amount
                 -----------------------                     ------

                 1998                                       388,321
                 1999                                       318,133
                 2000                                       233,957
                 2001                                     2,124,042
                 2002                                           400
                                                         ----------
                                                         $3,064,853
                                                         ==========


11.  Partners' Deficit

     In  connection  with  the  roll-up,   the  Principal  Owner  contributed  a
     $6,500,000 unsecured,  non-interest bearing personal promissory note due on
     demand  to the  general  partner  of  the  Partnership.  Additionally,  the
     Principal Owner  contributed to the Partnership an unsecured,  non-interest
     bearing  personal  promissory  note in the  aggregate  principal  amount of
     $24,000,000 (together with the $6,500,000 note, the "Baum Notes"). The Baum
     Notes  have  been  issued  for  the  purpose  of the  Partnership's  credit
     enhancement.  Although the Baum Notes are unconditional, they do not become
     payable except (i) in increasing amounts presently up to $19,500,000 and in
     installments  thereafter to a maximum of  $30,500,000  on December 16, 1996
     and (ii) at such time after such dates as the Partnership's creditors shall
     have exhausted all claims against the Partnership's assets.







                                      F-16
                                                                     (Continued)


<PAGE>


                    THE HELICON GROUP, L.P. AND WHOLLY OWNED
                              INCORPORATED ENTITIES

                   Notes to Consolidated Financial Statements

12.  Commitments

     The Partnership  leases telephone and utility poles on an annual basis. The
     leases are self renewing.  Pole rental expense for the years ended December
     31, 1995, 1996 and 1997 was $464,875, $508,669 and $543,679, respectively.

     In connection with certain lease and franchise agreements, the Partnership,
     from time to time, issues security bonds.

     The  Partnership  utilizes  certain  office  space  under  operating  lease
     agreements  which  expire at various  dates  through  May 2005 and  contain
     renewal options.

     At  December  31, 1997 the future  minimum  rental  commitments  under such
     leases were as follows:

                 Year ending December 31                     Amount
                 -----------------------                     ------
                 1998                                      $117,540
                 1999                                        96,540
                 2000                                        81,540
                 2001                                        81,540
                 2002                                        18,000
                 Thereafter                                 161,280
                                                           --------
                                                           $556,440
                                                           ========

     Rent expense was $88,160 in 1995 and $92,512 in 1996 and $118,625 in 1997.

13.  Other Events

     On April 1, 1997, the Company  transferred  the net assets of the telephone
     dial-up internet access provider business to HPI. The transfer was recorded
     at the  carrying  value of those  assets at that date of  $223,130  and the
     Company made an inter-company loan due on demand to HPI in this amount.

     On April 8, 1996, the existing  limited  partners of the Company  exchanged
     (the "Exchange") their limited partnership interests in the Company for all
     Class A Common  Limited  Partnership  Interests and  Preferred  Partnership
     Interests  in  Helicon  Partners  I,  L.P.  ("HPI").  As a  result  of this
     Exchange,  the  Company  became  99%  owned by HPI (HPI now owns all of the
     limited  partnership  interests in the Company) and Baum Investments,  Inc.
     which continues to be the general partner of the Company and to own a 1.00%
     general partnership  interest in the Company. The previous limited partners
     of the Company  presently own 100% of the limited partner interests of HPI,
     subject to dilution  upon exercise of the warrants of HPI that it issued to
     third party investors in connection with the Exchange.

     On April 8, 1996,  the Company  acquired a 1%  interest in HPI  Acquisition
     Co., LLC ("HPIAC"),  a Delaware limited liability  company for $1,000.  The
     balance of HPIAC is owned by HPI. HPIAC was formed to acquire  interests in
     cable television systems and related businesses.  The Company's 1% interest
     in HPIAC's net loss to date is not material.


                                      F-17