SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

                QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
                     of the Securities Exchange Act of 1934

                                                               Commission
For the Quarterly Period Ended September 30, 1997              File No. 33-76716

                               General Media, Inc.
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in its Charter)

          Delaware                          13-3750988
--------------------------------            ----------------------
(State or other jurisdiction                (IRS Employer
of incorporation or organization)           Identification Number)

277 Park Avenue, New York, NY               10172
-------------------------------             --------
(Address of Principal Executive             Zip Code
Offices)

                                 (212) 702-6000
              ----------------------------------------------------
              (Registrant's telephone number, including area code)

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the Registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

                                   Yes |X|  No |_|

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

            Class                            Outstanding at November 13, 1997
            -----                            --------------------------------
Common stock, $.01 par value                             475,000
<PAGE>

                      GENERAL MEDIA, INC. AND SUBSIDIARIES

                                TABLE OF CONTENTS

                                                                           PAGE
                                                                           ----
PART I- FINANCIAL INFORMATION

         Item 1.  Financial Statements                                        3

         Item 2.  Management's Discussion and Analysis
                  of Financial Condition and Results of
                  Operations                                                  8


PART II- OTHER INFORMATION

         Item 1.  Legal Proceedings                                          19

         Item 2.  Changes in Securities                                     N/A

         Item 3.  Defaults Upon Senior Securities                           N/A

         Item 4.  Submission of Matters to a Vote
                  of Security Holders                                       N/A

         Item 5.  Other Information                                         N/A

         Item 6.  Exhibits and Reports on Form 8-K                           19

         Signature                                                           20

         Exhibit Index                                                       21


                                        2
<PAGE>

Item 1. Financial Statements

                      General Media, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Operations
                             and Accumulated Deficit
                                   (unaudited)

                             (amounts in thousands)

<TABLE>
<CAPTION>
                                                          Nine months ended    Three months ended          
                                                            September 30,        September 30,            
                                                            -------------        -------------            
                                                          1996       1997       1996       1997 
                                                        --------   --------   --------   --------
<S>                                                     <C>        <C>        <C>        <C>     
Net revenues
     Publishing
        Newsstand                                       $ 40,814   $ 34,272   $ 13,319   $ 11,048
        Advertising                                       20,887     19,490      6,693      6,542
        Subscription                                       8,786      8,079      2,844      2,571
        Other                                              3,562      2,963      1,203        961
     Entertainment                                        11,708     11,034      3,771      4,309
                                                        --------   --------   --------   --------

                                                          85,757     75,838     27,830     25,431
                                                        --------   --------   --------   --------
Operating costs and expenses
     Publishing-production, distribution and editorial    39,569     34,135     12,473     10,917
     Entertainment- direct costs                           5,999      4,979      2,009      1,687
     Selling, general and administrative                  33,060     31,404     10,542     10,661
     Rent expense from affiliated companies                  558        409        136        162
     Depreciation and amortization                         1,404      1,401        467        467
                                                        --------   --------   --------   --------

               Total operating costs and expenses         80,590     72,328     25,627     23,894
                                                        --------   --------   --------   --------

               Income from operations                      5,167      3,510      2,203      1,537
                                                        --------   --------   --------   --------

Other income (expense)
     Interest expense                                     (7,431)    (7,430)    (2,478)    (2,476)
     Interest income                                         188        465         53        155
                                                        --------   --------   --------   --------

NET LOSS                                                  (2,076)    (3,455)      (222)      (784)

Accumulated deficit-beginning of period                  (73,483)   (74,012)   (75,337)   (76,683)
                                                        --------   --------   --------   --------

Accumulated deficit-end of period                       ($75,559)  ($77,467)  ($75,559)  ($77,467)
                                                        ========   ========   ========   ========
</TABLE>

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


                                        3
<PAGE>

                      General Media, Inc. and Subsidiaries
                      Condensed Consolidated Balance Sheets
                                   (unaudited)

                             (amounts in thousands)

                                                     December 31,  September 30,
                                                         1996          1997
                                                       --------      --------
                              ASSETS                                 
CURRENT ASSETS                                                       
     Cash and cash equivalents                         $  7,164      $  9,841
     Accounts receivable, net of allowance                           
        for doubtful accounts                            11,751        11,366
     Inventories                                          5,250         4,284
     Prepaid expenses and other current assets            2,692         3,296
     Due from affiliated companies                          624         1,139
     Loan to affiliate                                                    445
                                                       --------      --------
                                                                     
                     Total current assets                27,481        30,371
                                                                     
PROPERTY AND EQUIPMENT - AT COST;                                    
   net of accumulated depreciation                        4,716         4,025
                                                                     
OTHER ASSETS                                                         
     Intangible assets, net                               3,810         3,348
     Deferred subscription aquisition costs               2,162         2,670
     Deferred debt issuance costs, net                    3,977         3,235
     Loan to affiliated company                           1,086         1,086
     Other                                                1,654         1,590
                                                       --------      --------
                                                                     
                                                         12,689        11,929
                                                       --------      --------
                                                                     
                                                       $ 44,886      $ 46,325
                                                       ========      ========
                                                                     
                    LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES                                                  
     Accounts payable                                  $ 13,918      $ 16,826
     Deferred subscription revenue                       10,914        11,203
     Other liabilities and accrued expenses               5,402         7,971
                                                       --------      --------
                                                                     
                     Total current liabilities           30,234        36,000
                                                                     
SENIOR SECURED NOTES                                     79,290        79,423
                                                                     
UNEARNED REVENUE                                          6,160         5,155
                                                                     
COMMITMENTS AND CONTINGENCIES                                        
                                                                     
REDEEMABLE WARRANTS                                       1,791         1,791
                                                                     
                                                                     
STOCKHOLDERS' DEFICIENCY                                             
     Common stock, $.01 par value; 1,000,000                         
        shares; issued and outstanding, 475,000 shares        5             5
     Capital in excess of par value                       1,418         1,418
     Accumulated deficit                                (74,012)      (77,467)
                                                       --------      --------
                                                                     
                                                        (72,589)      (76,044)
                                                       --------      --------
                                                                     
                                                       $ 44,886      $ 46,325
                                                       ========      ========
                                                                   
              The accompanying notes are an integral part of these
                       consolidated financial statements.


                                        4
<PAGE>

                      General Media, Inc. and Subsidiaries
                 Condensed Consolidated Statements of Cash Flows
                                   (unaudited)

                             (amounts in thousands)

                                                             Nine months ended
                                                               September 30,
                                                             -----------------
                                                              1996       1997
                                                             -------    -------
Cash flows from operating activities
Net loss                                                     ($2,076)   ($3,455)
Adjustments to reconcile net loss to
     cash provided by operating activities

     Depreciation and amortization                             1,404      1,401
     Amortization of debt issuance costs and discounts           875        875
     Net change in operating assets and liabilities            4,572      5,064
                                                             -------    -------

          Net cash provided by operating activities            4,775      3,885
                                                             -------    -------

Cash flows from investing activities

     Capital expenditures                                       (310)      (248)
                                                             -------    -------

          Net cash used in investing activities                 (310)      (248)
                                                             -------    -------

Cash flows from financing activities

     Advances to affiliated companies                           (639)      (515)
     Loan to affiliate                                          (995)      (445)
                                                             -------    -------

          Net cash used in financing activities               (1,634)      (960)
                                                             -------    -------

          Net increase in cash and cash equivalents            2,831      2,677

Cash and cash equivalents at beginning of period               4,380      7,164
                                                             -------    -------

Cash and cash equivalents at end of period                   $ 7,211    $ 9,841
                                                             =======    =======


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


                                        5
<PAGE>

                      General Media, Inc. and Subsidiaries
                         Notes to Condensed Consolidated
                        Financial Statements (Unaudited)
                             (amounts in thousands)

1.    Basis of Preparation

General Media, Inc. (the "Company") is a wholly-owned subsidiary of General
Media International, Inc. ("GMI"). The accompanying unaudited consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles for interim financial information and with the
instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments, consisting only of normal, recurring adjustments
considered necessary for a fair presentation, have been included. The balance
sheet information for December 31, 1996 has been derived from the audited
financial statements at that date.

2.    Inventories

Inventories consist of the following:

                                                   December 31,   September 30,
                                                      1996           1997
                                                   ------------   -------------
Paper and printing                                   $2,581         $2,024
Editorials and pictorial                              2,288          2,270
Film and programming costs                            1,094            923
                                                     ------         ------
                                                      5,963          5,217
                                                                  
Less- LIFO allowance-paper and printing                 713            933
                                                     ------         ------
                                                                  
                                                     $5,250         $4,284
                                                     ======         ======

Paper and printing costs are valued at the lower of cost (last-in, first-out
method) or market. Editorials and pictorials are valued at actual cost, which is
not greater than market. Film and programming costs are valued at the direct
cost of production, less amounts amortized over the expected period of revenue,
generally twelve months from the film release date.


                                        6
<PAGE>

                      General Media, Inc. and Subsidiaries
                         Notes to Condensed Consolidated
                        Financial Statements (Unaudited)
                             (amounts in thousands)

3.    Management Charge

The Company incurs shared common indirect expenses for the benefit of GMI and
affiliated companies, including accounting, personnel, data processing, employee
relations and other administrative services. In addition, the Company is charged
by GMI and its subsidiaries for the benefit of other corporate overhead costs,
executive compensation and other costs which principally relate to office space.
These allocations are based on factors determined by management of the Company
to be appropriate for the particular item, including estimated relative time
commitments of managerial personnel, relative number of employees and relative
square footage of all space occupied. Management believes that the allocation
method and amounts are reasonable.

4.    Senior Secured Notes

In December 1993, the Company issued $85 million of Senior Secured Notes (the
"Notes") at an issue price equal to 99.387% of the principal amount of the
Notes. The Notes mature on December 31, 2000 and bear interest at 10-5/8% per
annum, which is payable semiannually. In July 1995, the Company repurchased $5.0
million face amount of its outstanding Notes, including 5,000 warrants, for cash
of $4.1 million.

The Notes are fully and unconditionally guaranteed, jointly and severally, by
each of the Company's direct and indirect subsidiaries (the "Subsidiary
Guarantors"). Each of the Subsidiary Guarantors is a wholly-owned subsidiary of
the Company. The Company is a holding company with no separate assets,
liabilities or operations other than its investment in its subsidiaries and the
Notes. Financial statements of the Subsidiary Guarantors have not been presented
because the aggregate assets, liabilities, operations and equity of the
Subsidiary Guarantors are substantially equivalent to the assets, liabilities,
operations and equity of the Company on a consolidated basis.

The Indenture contains covenants which, among other things, (i) restrict the
ability of the Company to dispose of assets, incur indebtedness, create liens
and make certain investments, (ii) require the Company to make an offer to
purchase outstanding notes if it fails to maintain a consolidated tangible net
worth (deficiency) of no more than ($81.6) million for two consecutive fiscal
quarters, and (iii) limits the Company's ability to pay dividends unless certain
financial performance tests are met. The Subsidiary Guarantors are permitted to
pay intercompany dividends on their shares of common stock. The ability of the
Company and its subsidiaries to incur additional debt is severely limited by
such covenants. As of September 30, 1997, the Company was in compliance with all
such covenants.

Should the Company continue to incur losses, such that the Company's net worth
(deficiency) declines below ($81.6) million for two consecutive quarters, the
Company would be required to purchase on the last day of the next following
fiscal quarter, ten percent of the principal amount of the Notes then
outstanding at a price of 101% of the principal amount thereof.

5.    Statement of Cash Flows

Cash payments made for interest during the nine months ended September 30, 1997
and 1996 were $4.4 million in each such period.


                                        7
<PAGE>

Item 2.

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

Several of the Company's businesses can experience fluctuations in quarterly
performance. For example, newsstand revenues vary from issue to issue with
higher revenues for special and higher priced issues and any issue including
editorial or pictorial features that generate unusual public interest. In
addition, revenues from the licensing of the Company's trademarks, products and
videos vary with the timing of new agreements. As a result, the Company's
performance in any quarterly period is not necessarily reflective of full-year
results.

The Company is currently engaged in activities in two industry segments:
publishing and entertainment. The publishing segment of the Company is engaged
in the publication of Penthouse magazine and six affiliate magazines (the
"Affiliate Publications" and, together with Penthouse magazine, the "Mens
Magazines"), the licensing of the Penthouse brand name to publishers in foreign
countries and the publication of four specialty automotive magazines; Four
Wheeler, Stock Car Racing, Open Wheel and Drag Racing Monthly (the "Automotive
Magazines"). The entertainment segment of the Company produces a number of
adult-oriented entertainment products, including pay-per-call telephone lines,
videocassettes, pay-per-view programming, interactive products and internet
services.

Results of Operations (Three  Months Ended September 30, 1997  vs. 1996)

The Company's revenues were $25.4 million for the three months ended September
30, 1997, compared to revenues of $27.8 million for the three months ended
September 30, 1996, a decrease of $2.4 million. Newsstand revenues were $11.1
million and $13.3 million for the three months ended September 30, 1997 and
1996, respectively, a decrease of $2.2 million. Newsstand revenues for Mens
Magazines were $9.9 and $12.3 million for the three months ended September 30,
1997 and 1996, respectively, a decrease of $2.4 million. Newsstand revenues from
the Automotive Magazines were $1.1 million for the three months ended September
30, 1997 and 1996. Advertising revenues were $6.5 million and $6.7 million for
the three months ended September 30, 1997 and 1996, respectively, a decrease of
$0.2 million. The decrease in advertising revenues is attributable to a $0.4
million decrease in Mens Magazines, partially offset by a $0.2 million increase
in Automotive Magazines. Subscription revenues were $2.6 million and $2.8
million for the three months ended September 30, 1997 and 1996, respectively, a
decrease of $0.2 million. The decrease in subscription revenues is attributable
to a $0.2 million decrease in subscription revenues from Mens Magazines.
Revenues for the Entertainment segment were $4.3 million and $3.8 million for
the three months ended September 30, 1997 and 1996, respectively, an increase of
$0.5 million. Revenues from the Company's video business were $0.8 million for
the three months ended September 30, 1997 and 1996. Revenues from the Company's
pay-per-call business were $2.3 million and $2.9 for the three months ended
September 30, 1997 and 1996, respectively, a decrease of $0.6 million. Revenues
from the Company's internet business were $1.3 million and $0.2 million for the
three months ended September 30, 1997 and 1996, respectively, an increase of
$1.1 million.

Income from operations was $1.5 million for the three months ended September 30,
1997, compared to $2.2 million for the three months ended September 30, 1996.
Income from operations was negatively impacted by decreased revenues, as
discussed above, which was partially offset by a decrease in production,
distribution and editorial costs resulting from a reduction in the number of
magazine copies printed and lower paper costs, as well as lower selling, general
and administrative expenses associated with lower sales and lower advertising
and


                                        8
<PAGE>

Item 2. (Continued)

promotional expenses.

Net non-operating expenses were $2.3 million and $2.4 million for the three
months ended September 30, 1997 and 1996, respectively. Included in interest
expense is the amortization of debt issuance costs and discounts of $0.3 million
for the three months ended September 30, 1997 and 1996.

Net loss for the three months ended September 30, 1997 was ($0.8 ) million,
compared to ($0.2) million for the three months ended September 30, 1996, as a
result of the above discussed factors.

The net revenues and income from operations of the Company were as follows:

                                                                   Income
                                       Net Revenue            from operations
                                       -----------            ---------------
                                         Three                     Three
                                      Months Ended              Months Ended
                                      September 30,             September 30,
                                      -------------             -------------
                                    1996         1997         1996         1997
                                    ----         ----         ----         ----

Publishing Segment                $  24.0      $  21.1      $   1.2      $   0.2
Entertainment Segment                 3.8          4.3          1.0          1.3
                                  -------      -------      -------      -------
                                  $  27.8      $  25.4      $   2.2      $   1.5
                                  =======      =======      =======      =======

Publishing Segment

The net revenues and income (loss) from operations of the Publishing Segment
were as follows :

                                                                   Income
                                       Net Revenue            from operations
                                       -----------            ---------------
                                         Three                     Three
                                      Months Ended              Months Ended
                                      September 30,             September 30,
                                      -------------             -------------
                                    1996         1997         1996         1997
                                    ----         ----         ----         ----
Penthouse Magazine and
   the Affiliate Publications      $ 18.5       $15.4        $ (0.1)     $ (0.5)
Foreign edition licensing             0.7        0. 6           0.6         0.3
Automotive Magazines                  4.8         5.1           0.7         0.5
                                   ------      ------        ------      ------
                                   $ 24.0      $ 21.1        $  1.2      $  0.2
                                   ======      ======        ======      ======
                                                                       
Penthouse Magazine and the Affiliate Publications

Revenues for Penthouse magazine and the Affiliate Publications were $15.4
million and $18.5 million for the three months ended September 30, 1997 and
1996, respectively, a decrease of $3.1 million. Newsstand revenue for the three
months ended September 30, 1997 was $9.9 million, compared to $12.2 million for
the three months ended September 30, 1996, a decrease of $2.3 million. The
decrease in newsstand revenue is primarily attributable to a 21% decrease in the
number of newsstand copies sold of Penthouse magazine, as well as a decrease of
15% in the number of newsstand copies sold of the Affiliate Publications. The
decrease in newsstand


                                        9
<PAGE>

Item 2. (Continued)

circulation of the Affiliate Publications was partially the result of one less
issue of Penthouse Comix and Variations being published during the three months
ended September 30, 1997, as compared to the 1996 period. Advertising revenue
was $3.5 million for the three months ended September 30, 1997, compared to $3.9
million for the three months ended September 30, 1996, a decrease of $0.4
million. The decline in advertising revenue is primarily attributable to a 16%
decrease in ad pages sold in Penthouse magazine for the three months ended
September 30, 1997, as compared to the 1996 period. The Affiliate Publications
experienced a 10% decline in advertising pages sold during the three months
ended September 30, 1997, compared to the 1996 period. The decline was partially
due to one less issue of Penthouse Comix and Variations being published during
the three months ended September 30, 1997, as compared to the three months ended
September 30, 1996. Subscription revenue was $1.6 million and $1.9 million for
the three months ended September 30, 1997 and 1996, respectively, a decrease of
$0.3 million. This decrease is attributable to a decline in the net revenue per
subscription copy sold. The decreased revenue per copy was due primarily to a
change in the mix of sales between agency sales, which generate a lower per copy
remit rate, and direct to customer sales. Other revenue was $0.4 million for the
three months ended September 30, 1997 and 1996.

Publishing-production, distribution and editorial expenses were $8.3 million for
the three months ended September 30, 1997, compared to $10.0 million for the
three months ended September 30, 1996, a decrease of $1.7 million. Paper costs
were $3.3 million for the three months ended September 30, 1997, compared to
$4.4 million for the three months ended September 30, 1996, a decrease of $1.1
million. The decrease is due both to a decline in the cost of paper and the
reduced number of copies printed of certain publications, as well as one less
issue of Penthouse Comix and Variations being published during the three months
ended September 30, 1997, as compared to the three months ended September 30,
1996. Print costs were $2.9 million for the three months ended September 30,
1997, compared to $3.5 million for the three months ended September 30, 1996, a
decrease of $0.6 million. The decrease is due to the reduced number of copies
printed of certain publications, as well as one less issue of Penthouse Comix
and Variations being published during the three months ended September 30, 1997,
as compared to the three months ended September 30, 1996. Distribution costs
were $1.3 million for the three months ended September 30, 1997, compared to
$1.5 million for the three months ended September 30, 1996, a decrease of $0.2
million. The decrease is attributable to fewer overall copies being distributed
and lower costs associated with the sale of past issues of the Company's
publications sold as value-packs. Editorial costs were $0.8 million for the
three months ended September 30, 1997 and 1996. During the three months ended
September 30, 1997 the adjustment to the LIFO reserve resulted in an additional
expense of $0.3 million, as compared to the 1996 period.

Selling, general and administrative expenses were $7.3 million for the three
months ended September 30, 1997, compared to $8.1 million for the three months
ended September 30, 1996, a decrease of $0.8 million. The decrease is primarily
attributable to lower retail display allowances taken by retailers due to lower
newsstand sales ($0.3 million), lower legal expenses ($0.2 million) and lower
advertising sales commissions related to lower sales ($0.1 million).
Additionally, corporate overhead allocations to the Mens Magazine group were
lower ($0.6 million) during the three months ended September 30, 1997, compared
to the three months ended September 30, 1996. These decreases were partially
offset by increases in subscription and newsstand promotional spending ($0.2
million) and increased salaries ($0.2 million).

Rent expense from affiliated companies represents charges from affiliated
companies for the use of the Company's corporate and executive offices. The
charge is based upon the Company's proportionate share of the


                                       10
<PAGE>

Item 2. (Continued)

operating expenses of such offices. Rent expense from affiliated companies was
$0.1 million for the three months ended September 30, 1997 and 1996,
respectively.

Depreciation and amortization was $0.2 million and $0.3 million for the three
months ended September 30, 1997 and 1996, respectively.

Foreign Edition Licensing

Revenues from licensing of foreign editions were $0.6 million and $0.7 million
for the three months ended September 30, 1997 and 1996, respectively. This
decrease is due primarily to the termination of a contract with the South
African licensee of Penthouse magazine and lower revenue received from various
other licensees.

Selling, general and administrative expenses were $0.3 million and $0.1 million
for the three month period ended September 30, 1997 and 1996, respectively, an
increase of $0.2 million. The increase is attributable to an increase in
corporate overhead allocations.

Automotive Magazines

Revenues for the Automotive Magazines were $5.1 million for the three months
ended September 30, 1997, compared to revenues of $4.8 million for the three
months ended September 30, 1996, an increase of $0.3 million. Newsstand revenues
were $1.1 million for the three months ended September 30, 1997 and 1996,
respectively. Advertising revenues were $3.1 million for the three months ended
September 30, 1997, compared to $2.8 million for the three months ended
September 30, 1996, an increase of $0.3 million, resulting from an increase in
advertising page rates and in advertising pages sold. Subscription revenues were
$0.9 million for the three month period ended September 30, 1997 and 1996,
respectively.

Publishing-production, distribution and editorial expenses were $2.6 million and
$2.5 million for the three months ended September 30, 1997 and 1996,
respectively, an increase of $0.1 million. Paper costs were $1.0 million for the
three months ended September 30, 1997 and September 30, 1996. Paper costs
decreased due to a decline in the cost of paper, however, these decreases were
offset by increased costs due to an increase in magazine copies printed and
increased pages per copy. Print costs were $1.0 million and $0.9 million for the
three months ended September 30, 1997 and 1996, respectively, an increase of
$0.1 million. The increase is primarily attributable to costs associated with
increased magazine copies printed and increased pages per issue. Distribution
costs were $0.5 million for the three months ended September 30, 1997 and 1996.
Editorial costs were $0.1 million for the three months ended September 30, 1997
and 1996.

Selling, general and administrative expenses were $1.9 million and $1.5 million
for the three months ended September 30, 1997 and 1996, respectively, an
increase of $0.4 million. The increase is primarily attributable to an increase
in corporate overhead allocations charged to the Automotive Magazines ($0.2
million) and increased subscription acquisition spending ($0.2 million) during
the three months ended September 30, 1997, as compared to the three months ended
September 30, 1996.

Depreciation and amortization was $0.2 million for the three months ended
September 30, 1997, compared to $0.1 million for the three months ended
September 30, 1996, an increase of $0.1 million.


                                       11
<PAGE>

Item 2. (Continued)

Entertainment Segment

Revenues from the Entertainment Segment were $4.3 million for the three months
ended September 30, 1997, compared to $3.8 million for the three months ended
September 30, 1996, an increase of $0.5 million. Revenues from the Company's
video and CD-ROM business were $0.8 million for the three months ended September
30, 1997 and 1996. Revenues from the Company's pay-per-call business were $2.3
million and $2.9 for the three months ended September 30, 1997 and 1996,
respectively, a decrease of $0.6 million. Revenues from the Company's internet
business were $1.3 million and $0.2 million for the three months ended September
30, 1997 and 1996, respectively, an increase of $1.1 million. The video business
experienced increased revenue as a result of increased licensing revenues and
revenue received from a pay-per-view venture, which were offset by lower
revenues as a result of the discontinued sale of its unprofitable CD-ROM
products and accordingly there were no revenues during the three months ended
September 30,1997. The decrease in pay-per-call revenues is at least partially
attributable to lower circulation of the Company's Mens Magazines. Internet
revenues increased due to revenues received from the sale of subscriptions to
the Company's "Private Collection", contained within the Company's internet site
that began operations in April, 1997. Revenues were also received from a new
arrangement, whereby the Company receives a minimum guaranteed revenue from
another internet site "linked" to the Company's internet site. Such arrangement
also began in April of 1997.

Direct costs were $1.7 million for the three months ended September 30, 1997,
compared to $2.0 million for the three months ended September 30, 1996, a
decrease of $0.3 million. The Company's video division experienced a $0.2
million decrease in direct expenses primarily associated with lower video
production costs and the discontinuation of the Company's CD-ROM business.
Pay-per-call direct costs decreased $0.2 million due to lower sales volume, as
previously discussed.

Selling, general and administrative expenses were $1.3 million and $0.8 million
for the three months ended September 30, 1997 and September 30, 1996,
respectively, an increase of $0.5 million. The Company's video division expenses
increased $0.3 million due primarily to an increase in corporate overhead
allocations, as well as an increase in commission expense related to the new
licence agreements referred to above. Computer processing and consulting fees
relating to the internet business increased $0.2 million for the period, as cost
have increased to support higher revenues.

Results of Operations (Nine  Months Ended September 30, 1997  vs. 1996)

The Company's revenues were $75.8 million for the nine months ended September
30, 1997, compared to revenues of $85.7 million for the nine months ended
September 30, 1996, a decrease of $9.9 million. Newsstand revenues were $34.3
million and $40.8 million for the nine months ended September 30, 1997 and 1996,
respectively, a decrease of $6.5 million. Newsstand revenues for Mens Magazines
were $30.8 and $37.3 million for the nine months ended September 30, 1997 and
1996, respectively, a decrease of $6.5 million. Newsstand revenues from the
Automotive Magazines were $3.5 million and $3.6 million for the nine months
ended September 30, 1997 and 1996, respectively, a decrease of $0.1 million.
Advertising revenues were $19.5 million and $20.9 million for the nine months
ended September 30, 1997 and 1996, respectively, a decrease $1.4 million. The
decrease in advertising revenues is attributable to a $2.1 million decrease in
Mens Magazines, partially offset by a $0.7 million increase in Automotive
Magazines. Subscription revenues were $8.1 million and $8.8 million for the nine
months ended September 30, 1997 and 1996, respectively, a decrease of $0.7
million. The decrease in subscription revenues is attributable to a $0.6 million
decrease in revenues from Mens


                                       12
<PAGE>

Item 2. (Continued)

Magazines and a $0.1 million decrease in revenues from Automotive Magazines.
Revenues for the Entertainment segment were $11.0 million and $11.7 million for
the nine months ended September 30, 1997 and 1996, respectively, a decrease of
$0.7 million. Revenues from the Company's video business decreased $0.1 million,
revenues from the Company's pay-per-call business decreased $1.2 million and
revenues from the Company's internet business increased $0.1 million during the
nine months ended September 30, 1997, as compared to the nine month period ended
September 30, 1996.

Income from operations was $3.5 million for the nine months ended September 30,
1997, compared to $5.2 million for the nine months ended September 30, 1996.
Income from operations was negatively impacted by decreased revenues, as
discussed above, which was partially offset by a decrease in production,
distribution and editorial costs resulting from a reduction in the number of
magazine copies printed, as well as lower selling expenses associated with lower
sales, headcount reductions due to corporate restructuring and other spending
efficiencies, which reduced selling, general and administrative costs in 1997.

Net non-operating expenses were $6.9 million and $7.2 million for the nine
months ended September 30, 1997 and 1996, respectively. Included in interest
expense is the amortization of debt issuance costs and discounts of $0.9 million
for the nine months ended September 30, 1997 and 1996.

Net loss for the nine months ended September 30, 1997 was ($3.5 ) million,
compared to ($2.1) million for the nine months ended September 30, 1996, as a
result of the above discussed factors.

The net revenues and income from operations of the Company were as follows:

                                                                   Income
                                       Net Revenue            from operations
                                       -----------            ---------------
                                         Three                     Three
                                      Months Ended              Months Ended
                                      September 30,             September 30,
                                      -------------             -------------
                                    1996         1997         1996         1997
                                    ----         ----         ----         ----
Publishing Segment                 $74.0        $64.8        $ 2.5        $ 1.3
Entertainment Segment               11.7         11.0          2.7          2.2
                                   -----        -----        -----        -----
                                   $85.7        $75.8        $ 5.2        $ 3.5
                                   =====        =====        =====        =====
                                                                     

                                       13
<PAGE>

Item 2. (Continued)

Publishing Segment

The net revenues and income (loss) from operations of the Publishing Segment
were as follows :

                                                                   Income
                                       Net Revenue            from operations
                                       -----------            ---------------
                                         Three                     Three
                                      Months Ended              Months Ended
                                      September 30,             September 30,
                                      -------------             -------------
                                    1996         1997         1996         1997
                                    ----         ----         ----         ----
Penthouse Magazine and
   the Affiliate Publications       $56.9       $47.3        $(1.1)       $(1.5)
Foreign edition licensing             2.0         1.7          1.6          1.2
Automotive Magazines                 15.1        15.8          2.0          1.6
                                     ----        ----          ---          ---
                                    $74.0       $64.8         $2.5         $1.3
                                    =====      =======        ====         ====
                                                                         
                                                                     
Penthouse Magazine and the Affiliate Publications

Revenues for Penthouse magazine and the Affiliate Publications were $47.3
million and $56.9 million for the nine months ended September 30, 1997 and 1996,
respectively, a decrease of $9.6 million. Newsstand revenue for the nine months
ended September 30, 1997 was $30.7 million, compared to $37.2 million for the
nine months ended September 30, 1996, a decrease of $6.5 million. The decrease
in newsstand revenue is primarily attributable to a decrease of 19% in the
number of newsstand copies sold of Penthouse magazine, as well as a decrease of
14% in the number of newsstand copies sold of the Affiliate Publications during
the nine months ended September 30, 1997, as compared to the 1996 period.
Advertising revenue was $10.0 million for the nine months ended September 30,
1997, compared to $12.1 million for the nine months ended September 30, 1996, a
decrease of $2.1 million. The decline in advertising revenue is primarily
attributable to a 17% decrease in ad pages sold in Penthouse magazine and a 22%
decline in advertising pages sold in the Affiliate Publications during the nine
months ended September 30, 1997, compared to the 1996 period. The decline in
newsstand circulation also resulted in lower advertising rates in 1997.
Subscription revenue was $5.4 million and $6.0 million for the nine months ended
September 30, 1997 and 1996, respectively, a decrease of $0.6 million. This
decrease is primarily attributable to decreased revenue per copy due to a change
in the mix of sales between agency sales, which generate a lower revenue per
copy, and direct to customer sales. Other revenue was $1.2 million for the nine
months ended September 30, 1997, compared to $1.5 million for the nine months
ended September 30, 1996, a decrease of $0.3 million. The decrease in other
revenues is primarily attributable to a decrease in revenues received from the
sale of past issues of the Company's publications sold as value-packs and a
decrease in royalty revenue.

Publishing-production, distribution and editorial expenses were $26.5 million
for the nine months ended September 30, 1997, compared to $31.5 million for the
nine months ended September 30, 1996, a decrease of $5.0 million. Paper costs
were $9.4 million for the nine months ended September 30, 1997, compared to
$13.2 million for the nine months ended September 30, 1996, a decrease of $3.8
million. The decrease is due both to a decline in the cost of paper and the
reduced number of copies printed of certain publications during the nine


                                       14
<PAGE>

Item 2. (Continued)

months ended September 30, 1997, as compared to the nine months ended September
30, 1996. Print costs were $10.3 million for the nine months ended September 30,
1997, compared to $10.7 million for the nine months ended September 30, 1996, a
decrease of $0.4 million. The decrease is due to decreased number of copies
printed during the nine months ended September 30, 1997, as compared to the nine
months ended September 30, 1996. Distribution costs were $3.9 million for the
nine months ended September 30, 1997, compared to $4.5 million for the nine
months ended September 30, 1996, a decrease of $0.6 million. The decrease is
attributable to fewer copies being distributed and lower distribution costs
associated with lower sales of value-packs. Editorial costs were $2.6 million
for the nine months ended September 30, 1997, compared to $2.7 million for the
nine months ended September 30, 1996, a decrease of $0.1 million, due to
decreased spending levels in Penthouse Comix and Forum, partially offset by
higher writeoffs of obsolete pictorial inventory. Other production costs of $0.5
million were incurred during the nine months ended September 30, 1996 related to
an insert placed in certain publications to promote the Company's pay-per-call
services. During the nine months ended September 30, 1997 the adjustment to the
LIFO reserve increased expense by $0.4 million, as compared to the 1996 period.

Selling, general and administrative expenses were $21.4 million for the nine
months ended September 30, 1997, compared to $25.0 million for the nine months
ended September 30, 1996, a decrease of $3.6 million. The decrease is primarily
attributable to lower salaries, employee benefits, travel and entertainment, and
temporary personnel expenses in 1997 ($0.2million), lower advertising
expenditures and related costs ($0.7 million), lower advertising sales
commissions due to lower advertising sales($0.2 million) and lower retail
display allowances taken by retailers due to lower newsstand sales ($0.8
million). Additionally, corporate overhead allocations to the Mens Magazine
group were $1.6 million lower during the nine months ended September 30, 1997,
compared to the nine months ended September 30, 1996.

Rent expense from affiliated companies represents charges from affiliated
companies for the use of the Company's corporate and executive offices. The
charge is based upon the Company's proportionate share of the operating expenses
of such offices. Rent expense from affiliated companies was $0.4 million for the
nine months ended September 30, 1997, compared to $0.6 million for the nine
months ended September 30, 1996, a decrease of $0.2 million, due to lower
operating costs incurred by the affiliated companies resulting in a lower rent
charge.

Depreciation and amortization was $0.6 million and $0.9 million for the nine
months ended September 30, 1997 and 1996, respectively.

Foreign Edition Licensing

Revenues from licensing of foreign editions were $1.7 million and $2.0 million
for the nine months ended September 30, 1997 and 1996, respectively. This
decrease is due primarily to the loss of the South African licensee of Penthouse
magazine and reduced revenues from several licensees.

Selling, general and administrative expenses were $0.5 million for the nine
months ended September 30, 1997 and 1996, respectively.

Automotive Magazines

Revenues for the Automotive Magazines were $15.8 million for the nine months
ended September 30, 1997,


                                       15
<PAGE>

Item 2. (Continued)

compared to revenues of $15.1 million for the nine months ended September 30,
1996, an increase of $0.7 million. Newsstand revenues were $3.5 million and $3.6
million for the nine months ended September 30, 1997 and 1996, respectively, a
decrease of $0.1 million, due primarily to an automotive special issue being
published during the nine months ended September 30, 1996. Advertising revenues
were $9.5 million for the nine months ended September 30, 1997, compared to $8.8
million for the nine months ended September 30, 1996, an increase of $0.7
million, resulting primarily from an increase in advertising page rates and an
increase in advertising pages sold. Subscription revenues were $2.7 million and
$2.8 million for the nine month period ended September 30, 1997 and 1996,
respectively, a decrease of $0.1 million due primarily to a decline in the
revenue per subscription copy sold.

Publishing-production, distribution and editorial expenses were $7.7 million and
$8.1 million for the nine months ended September 30, 1997 and 1996,
respectively, a decrease of $0.4 million. Paper costs were $2.8 million for the
nine months ended September 30, 1997, compared to $3.5 million for the nine
months ended September 30, 1996, a decrease of $0.7 million. The decrease in
paper costs is primarily attributable to a decrease in the cost of paper and an
automotive special being published during the nine months ended September 30,
1996, partially offset by costs associated with more magazine copies being
printed and more pages per issue. Print costs were $3.0 million and $2.9 million
for the nine months ended September 30, 1997 and 1996, respectively, an increase
of $0.1 million. The increase is primarily attributable to costs associated with
increased copies printed and increased pages per issue. Distribution costs were
$1.6 million and $1.5 million for the nine months ended September 30, 1997 and
1996, respectively, an increase of $0.1 million. The increase is due primarily
to more copies being distributed in 1997. Editorial costs were $0.2 million for
the nine months ended September 30, 1997 and 1996.

Selling, general and administrative expenses were $5.9 million and $4.6 million
for the nine months ended September 30, 1997 and 1996, respectively, an increase
of $1.3 million. The increase is primarily attributable to an increase in
corporate overhead allocations charged to the Automotive Magazines($0.7
million), increased employees costs ($0.2 million), increased professional
fees($0.1 million) and increased subscription spending ($0.2 million) during the
nine months ended September 30, 1997, as compared to the nine months ended
September 30, 1996.

Depreciation and amortization was $0.6 million for the nine months ended
September 30, 1997, compared to $0.4 million for the nine months ended September
30, 1996, an increase of $0.2 million.

Entertainment Segment

Revenues from the Entertainment Segment were $11.0 million for the nine months
ended September 30, 1997, compared to $11.7 million for the nine months ended
September 30, 1996, a decrease of $0.7 million. The Company's video and CD-ROM
business revenues were $2.4 million for the nine months ended September 30, 1997
and 1996 , the pay-per-call business revenues decreased $1.8 million and the
internet business revenues increased $1.1 million. The video business
experienced increased revenue as a result of increased licensing revenues and
revenue received from a pay-per-view venture, which were offset by decreased
revenues as a result of the Company's discontinuing the sale of its unprofitable
CD-ROM products. The decrease in pay-per-call revenues is primarily attributable
to a required reduction in the extension of credit to callers that did not meet
certain criteria established by the Company, the purpose of which was to reduce
the amount of customer charge backs to a level acceptable to credit card
companies. The new credit criteria took effect in mid June of 1996.


                                       16
<PAGE>

Item 2. (Continued)

Additionally, lower circulation of the Company's Mens Magazines contributed to
lower revenues. Internet revenues increased due to revenues received from the
sale of subscriptions to the Company's "Private Collection", contained within
the Company's internet site that began operations in April, 1997. Revenues were
also received from a new arrangement, whereby the Company receives a minimum
guaranteed revenue from another internet site "linked" to the Company's internet
site. Such arrangement also began in April of 1997.

Direct costs were $5.0 million for the nine months ended September 30, 1997,
compared to $6.0 million for the nine months ended September 30, 1996, a
decrease of $1.0 million. The Company's video division experienced a $0.4
million decrease in direct costs primarily associated with lower video
production costs, offset by higher fulfillment and distribution costs associated
with a higher sales volume. Pay-per-call direct costs decreased $0.5 million,
due to lower sales volume, as previously discussed.

Selling, general and administrative expenses were $3.6 million and $3.0 million
for the nine months ended September 30, 1997 and 1996, respectively, an increase
of $0.6 million. The Company's video division expenses increased $0.4 million
due primarily to an increase in corporate overhead allocations as well as an
increase in expenses related to the new license agreements referred to above.
Computer processing and consulting fees relating to the internet business
increased $0.2 million for the period, as the volume for that business has
increased.

Liquidity and Capital Resources

At September 30, 1997, the Company had $9.8 million in cash and cash
equivalents, compared to $7.2 million at December 31, 1996. The increase in cash
and cash equivalents during the nine months ended September 30, 1997 resulted
from net cash flows provided by operating activities of $3.9 million, cash flows
used in investing activities of $0.2 million, and cash flows used in financing
activities of $1.0 million.

Cash flows from operating activities

Net cash provided by operating activities was $3.9 million for the nine months
ended September 30, 1997, compared to net cash provided by operating activities
of $4.6 million for the nine months ended September 30, 1996. Net cash provided
by operating activities for the nine months ended September 30, 1997 was
primarily the result of lower paper inventory levels in 1997 and increased
accounts payable balances due to timing of payments to vendors. Net cash
provided by operating activities for the nine months ended September 30, 1996
was primarily the result of lower paper inventory levels and lower subscription
acquisition cost due to lower spending levels in 1996.

Cash flows from investing activities

Cash used in investing activities for capital expenditures was $0.2 million and
$0.3 million for nine months ended September 30, 1997 and 1996, respectively.

Cash flows from financing activities

Cash flows used in financing activities were $1.0 million for the nine months
ended September 30, 1997, compared to cash flows used in financing activities of
$1.6 million for the nine months ended September 30, 1996. Affiliated company
investments and advances at September 30, 1997 increased $0.5 million from the
December 31, 1996 balance, whereby the Company is owed $1.1 million by GMI as of
September 30, 1997. These balances regularly result from the impact of certain
cost sharing and expense allocation agreements with


                                       17
<PAGE>

Item 2. (Continued)

GMI and its subsidiaries, whereby certain costs, such as shared corporate
salaries and overhead, are paid by the Company and a portion charged to GMI and
its subsidiaries as incurred. These charges generally result in amounts due to
the Company, and are generally repaid sixty days after the end of each quarter
in accordance with the terms of an expense sharing agreement. The reimbursement
by GMI, in the amount of $1.1 million, has not been made as of November 13,
1997. Demand for such payment has been made in writing. Management of the
Company believes that GMI and its subsidiaries have sufficient assets to enable
the Company to recover its advance through liquidation of certain of those
assets or through the refinancing of GMI's debts. The principal shareholder of
GMI has guaranteed the entire amount due to the Company. GMI has agreed in
writing to repay the entire amount due from the proceeds of certain pending
transactions. In 1997, the Company loaned the principal shareholder of GMI $0.4
million. The loan is evidenced by a promissory note, bears interest at 12% per
annum, and is payable by December 31, 1997.

The ability of the Company to incur additional debt is severely limited by the
terms of its Notes and the Indenture. Pursuant to the Indenture, the Company may
not declare a dividend on its common stock, subject to certain exceptions,
unless it meets certain financial covenants set forth therein. The Subsidiary
Guarantors under the Indenture, however, are permitted to make intercompany
dividends on their common stock.

Future outlook

The Company's cash balance at September 30, 1997 was $9.8 million, compared to
$7.2 million at December 31, 1996. The Company is obligated to make a $4.2
million interest payment on its Notes on December 31, 1997.

The Company's results from operations continues to be negatively impacted by
decreased newsstand circulation and advertising revenues from Mens Magazines.
Newsstand circulation has continued to decline during the first nine months of
1997 resulting in continued net losses to the Company. While it is difficult to
predict future newsstand sales of the Company's magazines, it is unlikely that
the Company can achieve profitable results of operations during 1997, if such
sales continue to decline. Furthermore, under the Indenture, should the Company
incur additional losses in the future, such that the Company's tangible net
worth (deficiency) declines from the amount at September 30, 1997 of ($79.4)
million, below ($81.6) million for two consecutive quarters, the Company would
be required to purchase on the last day of the next following fiscal quarter,
ten percent of the principal amount of the Notes then outstanding at a price of
101 % of the principal amount thereof .

Forward-Looking Statements

In addition to historical information, "Management's Discussion and Analysis of
Financial Condition and Results of Operations" contains forward-looking
statements. The forward-looking statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from those
reflected in such forward looking statements. Readers are cautioned not to place
undue reliance in these forward-looking statements, which reflect management's
opinions only as of the date hereof. The Company undertakes no obligation to
revise or publicly release the results of any revision to these forward looking
statements.


                                       18
<PAGE>

                            Part II-Other Information

Item 1.           Legal Proceedings

In August 1996, an action was brought against the Company alleging various
wrongs in connection with the Company's dealings with the former editor of
Penthouse Comix and Mens Adventure Comix. The complaint alleges RICO violations,
breach of contract, trademark and copyright infringement and other charges and
demands damages in excess of $20 million. The Company believes that the claim is
without merit and has tendered defense of this action to its insurance carrier.
In the opinion of management, the outcome of this litigation is not reasonably
likely to have a material adverse effect on the Company's financial position or
results of operations.

Item 6.           Exhibits and reports on Form 8-K

         (a)      The exhibits listed in the "Exhibit Index" are filed as part
                  of this report.

         (b)      Reports on Form 8-K.

                  No reports on Form 8-K were filed during the quarter ended
                  September 30, 1997.


                                       19
<PAGE>

                                   Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                          General Media, Inc.
                                          (Registrant)


Dated: November 13, 1997                  By: /s/ Patrick J. Gavin
                                              ------------------------
                                                  Signature

                                          Patrick J. Gavin
                                          Executive Vice President
                                          Chief Financial Officer and Treasurer

                                          (Duly Authorized Officer and
                                          Principal Accounting Officer)


                                       20
<PAGE>

                                  EXHIBIT INDEX

Exhibit No.       Item
-----------       ----

*10.1             Amendment and Extension by and among R.R. Donnelly & Sons and
                  General Media International, Inc., General Media, Inc.,
                  General Media Communications, Inc. And General Media
                  Automotive Group, Inc.

27                Financial Data Schedule
----------
*     Confidential Treatment has been requested with respect to certain
      information contained in this exhibit.



                                       21