SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q

[X]      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
         OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly period ended March 31, 1997

OR

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR
         15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from

Commission file number                 0-21150

                                    Spice Entertainment Companies, Inc.
             (Exact name of registrant as specified in its charter)

Delaware                                                    11-2917462
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                              Identification No.)

                           536 Broadway, New York, NY  10012
                           (Address of principal executive offices)

                                            (212) 941-1434
                  (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
filing requirements for the past 90 days.


Yes           X            No

Number of shares outstanding of Registrant's Common Stock as of
March 31, 1997:   11,339,948.



<PAGE>
<TABLE>
<CAPTION>
                      PART I

ITEM 1:  FINANCIAL STATEMENTS
SPICE ENTERTAINMENT COMPANIES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

                                                                            March 31,    December 31,
                                                                             1997            1996
-------------------------------------------------------------------------------------------------------
                                                                          (Unaudited)

Assets
Current assets:
<S>                                                                       <C>             <C>         
     Cash and cash equivalents ........................................   $  1,830,000    $  2,663,000
     Accounts receivable, less allowance for doubtful accounts ........      4,818,000       4,801,000
     Income tax refunds receivable ....................................         28,000          28,000
     Prepaid expenses and other current assets ........................      1,987,000       1,325,000
     Deferred subscription costs ......................................        183,000         132,000
     Due from related parties and officers ............................        364,000          23,000
     Net assets of discontinued operations ............................           --         2,550,000
                                                                          ------------    ------------
                    Total current assets ..............................      9,210,000      11,522,000

Property and equipment, net of accumulated depreciation ...............      8,331,000      61,948,000
Due from related parties ..............................................           --           294,000
Library of movies .....................................................      3,750,000       3,797,000
Cost in excess of net assets acquired, net of accumulated  amortization     11,237,000      11,399,000
Deferred refinancing costs ............................................        572,000            --
Other assets ..........................................................        715,000         352,000
                                                                          ------------    ------------
                                                                          ============    ============
                    Total assets ......................................   $ 33,815,000    $ 89,312,000
                                                                          ============    ============
Liabilities and Stockholders' Equity
Current liabilities:
    Current portion of obligations under capital leases ...............   $    777,000    $  4,926,000
    Current portion of long-term debt .................................      2,307,000         817,000
    Royalties payable .................................................      1,956,000       2,322,000
    Accounts payable ..................................................      3,240,000       2,319,000
    Accrued interest expenses payable .................................        340,000       1,118,000
    Accrued cost of discontinued operations ...........................           --         1,800,000
    Accrued expenses payable ..........................................      3,479,000       2,395,000
    Current portion of accrued restructuring costs ....................        746,000         820,000
    Deferred subscription revenue .....................................      1,074,000       1,121,000
                                                                          ------------    ------------
                    Total current liabilities .........................     13,919,000      17,638,000

Obligations under capital leases ......................................      1,564,000      53,759,000
Long-term debt ........................................................     10,918,000      14,652,000
Accrued restructuring costs ...........................................        525,000         700,000
Deferred compensation .................................................        275,000         269,000
                                                                          ------------    ------------
                    Total liabilities .................................     27,201,000      87,018,000
                                                                          ------------    ------------
Commitments and contingencies

Stockholders' equity
Preferred stock, $.01 par value; authorized 10,000,000 shares:
  24,250 issued and outstanding at March 31, 1997 .....................           --              --
Common stock, $.01 par value; authorized 25,000,000 shares;
  11,339,948 and 11,357,928 shares issued and outstanding at
  March 31, 1997 and December 31, 1996 ................................        113,000         113,000
    Additional paid-in capital ........................................     26,378,000      22,645,000
    Unearned compensation .............................................       (708,000)       (765,000)
    Accumulated deficit ...............................................    (19,527,000)    (21,338,000)
    Cumulative translation adjustment .................................      1,496,000       1,639,000
                                                                          ------------    ------------
                                                                             7,752,000       2,294,000
Less cost of common stock held in treasury, 700,000 shares
  at March 31, 1997 ...................................................     (1,138,000)           --
                                                                          ------------    ------------
                    Total stockholders' equity ........................      6,614,000       2,294,000
                                                                          ------------    ------------
                                                                          ============    ============
                    Total liabilities and stockholders' equity ........   $ 33,815,000    $ 89,312,000
                                                                          ============    ============
</TABLE>
      The accompanying  notes are an integral part of these consolidated
                             financial statements.
<PAGE>
                     
SPICE ENTERTAINMENT COMPANIES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS of OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
                                                                      THREE MONTHS ENDED
                                                                           MARCH 31,
---------------------------------------------------------------------------------------------
                                                                          1997           1996
                                                                  ------------   ------------
<S>                                                               <C>            <C>         
Revenues: ......................................................  $  8,761,000   $  8,756,000
                                                                  ------------   ------------

Operating expenses:
    Salaries, wages and benefits ...............................     1,943,000      2,097,000
    Producer royalties and library amortization ................     1,121,000      1,377,000
    Satellite costs ............................................       474,000        559,000
    Selling, general and administrative expenses ...............     2,959,000      2,714,000
    Depreciation of fixed assets and amortization of
      goodwill .................................................     1,650,000      1,835,000
                                                                  ------------   ------------
Total operating expenses .......................................     8,147,000      8,582,000
                                                                  ------------   ------------

                    Total income from operations ...............       614,000        174,000

Interest expense ...............................................     1,516,000      1,663,000
Minority interest ..............................................      (438,000)      (165,000)
Gain from transponder lease amendment ..........................    (2,348,000)          --
                                                                  ------------   ------------

Income (loss) from continuing operations before
  provision for income taxes ...................................     1,884,000     (1,324,000)

Provision for income taxes .....................................       167,000         42,000
                                                                  ------------   ------------

                    Net income (loss) from continuing operations     1,717,000     (1,366,000)

Loss from discontinued operations of SEG,
  net of income taxes ..........................................          --         (245,000)

Extraordinary gain on debt restructuring .......................       143,000           --
                                                                  ------------   ------------
Net income (loss) ..............................................     1,860,000     (1,611,000)

Dividends on preferred stock ...................................        49,000           --
                                                                  ============   ============
Net income (loss) attributable to common stock .................  $  1,811,000   ($ 1,611,000)
                                                                  ============   ============

Earnings per common share
  Primary
      From continuing operations ...............................  $       0.15   ($      0.12)
      Extraordinary item .......................................          0.01           --
      Discontinued operations ..................................          --            (0.02)
                                                                  ============   ============
Earnings (loss) per common share ...............................  $       0.16   ($      0.14)
                                                                  ============   ============

  Fully Diluted
      From continuing operations ...............................  $       0.14   ($      0.12)
      Extraordinary item .......................................          0.01           --
      Discontinued operations ..................................          --            (0.02)
                                                                  ============   ============
Earnings (loss) per common share ...............................  $       0.15   ($      0.14)
                                                                  ============   ============

Weighted average number of shares outstanding:
  Primary ......................................................    11,418,000     11,369,000
                                                                  ============   ============

  Fully Diluted ................................................    12,355,000     11,369,000
                                                                  ============   ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial 
statements.
<PAGE>
<TABLE>
<CAPTION>
SPICE ENTERTAINMENT COMPANIES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENT of STOCKHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 1997
(Unaudited)
----------------------------------------------------------------------------------------------------------------------------------

                                                                    Additional   Unearned                 Cumulative
                                  Common    Preferred    Paid-in     Compensa-   Accumulated  Translation  Treasury
                                  Stock       Stock      Capital       tion        Deficit    Adjustment    Stock         Total
------------------------------- ----------  ---------  -----------  ----------  ------------  ----------  ----------- ------------ 
<S>                               <C>          <C>         <C>        <C>          <C>        <C>            <C>         <C>      
Balance at January 1, 1997 .... $  113,000  $   --     $22,645,000  ($765,000) ($21,338,000)  $1,639,000  $--           $2,294,000

Issuance of Preferred Stock 
 and warrantsin connection with
 the debt restructuring .......                          3,528,000                                                       3,528,000

Issuance of warrants in 
 connection with a 
   consulting agreement .......                            205,000                                                         205,000
Pro rata share of restricted 
 stock granted to an 
 executive officer ............                                       57,000                                                57,000

Treasury stock acquired in 
 connection with the sale 
 of SEG ......................                                                                            (1,138,000)  ($1,138,000)

Net income attributable to 
 common stock..................                                                   1,811,000                              1,811,000

Foreign currency 
 translation adjustment .......                                                                                           (143,000)

                                ===========  ========= ===========  ========== =============  ==========  =========== ============  
Balance at March 31, 1997 ..... $  113,000   $   --    $26,378,000  ($708,000) ($19,527,000)  $1,496,000 ($1,138,000)   $6,614,000
                                ===========  ========= ===========  ========== =============  ==========  =========== ============
</TABLE>
The accompanying notes are an integral part of this consolidated financial 
statements.
<PAGE>
<TABLE>
<CAPTION>
SPICE ENTERTAINMENT COMPANIES, INC., and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                                                                                      THREE MONTHS ENDED
                                                                                          MARCH 31,
-------------------------------------------------------------------------------------------------------------------
                                                                                   1997           1996
                                                                            -----------    -----------
Cash flows from operating activities:
<S>                                                                         <C>            <C>         
     Net income (loss) ..................................................   $ 1,860,000    ($1,611,000)
                                                                            -----------    -----------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
    Loss from discontinued operations ...................................       245,000
    Depreciation and amortization of fixed assets .......................     1,488,000      1,674,000
    Gain on transponder lease amendment .................................    (2,348,000)
    Extraordinary gain on debt restructuring ............................      (143,000)
    Amortization of goodwill and other intangibles ......................       162,000        161,000
    Amortization of films and CD-ROM cost ...............................          --          186,000
    Amortization of library of movies ...................................       542,000        314,000
    Provision for bad debts .............................................       270,000         33,000
    Compensation satisfied through the issuance of common stock .........        58,000
    Consulting expense satisfied through the issuance of warrants .......       205,000
    Deferred compensation expense .......................................         6,000         24,000
    Minority interest ...................................................      (438,000)      (165,000)
    Changes in assets and liabilities:
         (Increase) decrease in accounts receivable .....................       (87,000)       541,000
         (Increase) decrease in prepaid expenses and other current assets      (474,000)       209,000
         (Increase) decrease in deferred subscription costs .............       (51,000)       119,000
         Decrease (increase) in other assets ............................        12,000        (29,000)
         Decrease in royalties payable ..................................      (366,000)      (399,000)
         Increase (decrease) in accounts payable and accrued expenses ...       953,000       (530,000)
         Decrease in accrued restructuring costs ........................      (249,000)      (646,000)
         Decrease in deferred subscription revenue ......................       (47,000)      (502,000)
                                                                            -----------    -----------
                   Total adjustments ....................................      (507,000)     1,235,000
                                                                            -----------    -----------
                   Net cash provided by (used in) operating activities
                    from continuing operations ..........................     1,353,000       (376,000)
                   Net cash provided by operating activities
                    from discontinued operations ........................          --          255,000
                                                                            -----------    -----------
                   Net cash provided by (used in) operating activities ..     1,353,000       (121,000)
                                                                            -----------    -----------
Cash flows from investment activities:
         Purchase of property and equipment .............................      (213,000)      (147,000)
         Purchase of rights to libraries of movies ......................      (495,000)      (467,000)
                                                                            -----------    -----------
                   Net cash used in investing activities
                    from continuing operations ..........................      (708,000)      (614,000)
                   Net cash used in investing activities
                    from discontinued operations ........................          --           (5,000)
                                                                            -----------    -----------
                   Net cash used in investing activities ................      (708,000)      (619,000)
                                                                            -----------    -----------
Cash flows from financing activities:
         Proceeds from issuance of common stock and detachable warrants .        27,000
         Proceeds from capital contributed to CVSP by a third party .....     1,000,000
         Proceeds from issuance of long-term debt .......................     1,015,000        120,000
         (Decrease) increase in loans receivable from related parties ...       (47,000)        31,000
         Repayment of long-term debt and  capital leases obligations ....    (1,874,000)      (128,000)
         Deferred refinancing costs .....................................      (572,000)
                                                                            -----------    -----------
                   Net cash (used in) provided by financing activities
                    from continuing operations ..........................    (1,478,000)     1,050,000
                   Net cash used in financing activities
                    from discontinued operations ........................          --         (250,000)
                                                                            -----------    -----------
                   Net cash (used in) provided by financing activities ..    (1,478,000)       800,000
                                                                            -----------    -----------
                   Net (decrease) increase in cash and cash equivalents .      (833,000)        60,000
   Cash and cash equivalents, beginning of the period ...................     2,663,000      1,292,000
                                                                            -----------    -----------
                   Cash and cash equivalents, end of the period .........   $ 1,830,000    $ 1,352,000
                                                                            ===========    ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
SPICE ENTERTAINMENT COMPANIES, and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,1997 (unaudited)
--------------------------------------------------------------------------------
1. In the opinion of Spice  Entertainment  Companies,  Inc. and its wholly-owned
subsidiaries and a majority-owned  partnership (the "Company"), the accompanying
unaudited consolidated financial statements contain all adjustments  (consisting
of only normal  recurring  accruals)  necessary to present  fairly the financial
position as of March 31, 1997 and the results of  operations  and cash flows for
the three months ended March 31, 1997 and 1996.

2.       The results of operations for the three months ended March 31, 1997
are not necessarily indicative of the results to be expected for the full year.

3. The accompanying  financial  statements  include the accounts of the Company,
its wholly-owned subsidiaries and a majority-owned partnership. All intercompany
transactions  and  balances  have  been  eliminated  in  consolidation.  Certain
information and footnote  disclosures  normally included in financial statements
prepared in accordance with generally accepted  accounting  principles  ("GAAP")
have been condensed or omitted.  These consolidated  financial statements should
be read in conjunction with the financial  statements and notes thereto included
in the Company's December 31, 1996 annual report on Form 10K/A-1.

4. On August 31, 1995, the Company acquired Spector  Entertainment  Group,  Inc.
("SEG")  (which  provides  satellite   simulcasting  and  television  production
services to the  pari-mutuel  industry)  in exchange  for 700,000  shares of the
Company's  Common Stock.  On February 7, 1997,  the Company split off SEG to the
former  shareholders of the wholly-owned  subsidiary in exchange for the 700,000
shares of Common  Stock of the  Company  they  received in the  original  merger
between SEG and the Company. SEG is accounted for as a discontinued operation in
the Consolidated Statements of Operations.

5. On January 11, 1997,  as a result of AT&T losing  contact with and  declaring
Telstar 401  permanently out of service,  AT&T  permanently one of the Company's
unprotected  transponders  and  transferred  it to another AT&T  customer.  This
resulted in the reduction of the Company's satellite  transponder  payments from
$635,000 to $520,000 per month.

         On March 31,  1997,  the  Company  and  Loral  (which  acquired  AT&T`s
satellite  business)  amended the Skynet  Transponder  Services  Agreement  (the
"Transponder  Agreement").  The term of the Transponder Agreement,  which was to
originally  expire at the end of the  satellite's  useful life, was shortened to
October 31, 2004. In consideration  of the amendment,  the Company granted Loral
the right to pre-empt one of the Company's transponders after September 1, 1997.
As a result of the amendment,  the Transponder  Agreement has been classified as
an operating lease commencing on March 31, 1997.

         As a result of the two events described above, the Company has realized
a  non-recurring  gain of  approximately  $2.3 million in the three months ended
March 31, 1997.

6. On January  15,  1997 the Company  negotiated  agreements  with PNC Bank N.A.
("PNC")  and  Darla  L.L.C.  ("Darla"),  as  assignee,  which  resulted  in  the
replacement  of  the  Company's  credit  facility  with  PNC.  PNC  settled  the
outstanding  balance of the credit  facility,  totaling $14.6 million,  for $9.6
million in cash, a new $400,000 term loan, and 600,000  warrants  exercisable at
$2.06 per share. The new PNC agreement canceled the 100,000 warrants  previously
issued to PNC which had an exercise price of $3.88 per share.

         The Darla  agreement  provided a term loan of $10.5  million,  of which
$9.6 million was used to satisfy the cash portion of the PNC  agreement and $0.9
million which  financed loan  acquisition  fees.  Additionally,  this  agreement
included a revolving line of credit totaling $3.5 million, of which $1.8 million
has been drawn down. The term loan and the revolving line of credit mature in 30
months.  The loan bears interest at 5% over the Citibank prime rate but not less
than 13%.  Three  percentage  points of the interest may be accrued and added to
the  principal of the loan and will be forgiven if the Darla credit  facility is
paid in full within two years.

<PAGE>


SPICE ENTERTAINMENT COMPANIES, and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31,1997 (unaudited) CONTINUED
--------------------------------------------------------------------------------

         As part of the Darla  transaction,  the Company issued 24,250 shares of
cumulative,  convertible  Series  A  Preferred  Stock,  with  a  $100  face  and
liquidation  value per share and an 8.0%  cumulative  dividend to be paid at the
Company's  discretion.  The Preferred Stock is convertible  after two years into
Common Stock of the Company at a 10% discount from the then current market price
of the Company's  Common Stock.  The loan is secured by all the Company's assets
including  the stock of its  subsidiaries.  The loan also  restricts  payment of
common stock dividends.

7. On March 6, 1996,  the Company  contributed  the Cable  Video  Store  Network
("CVS"),  a  domestic  pay-per-view  hit movie  service  which the  Company  had
operated since 1989, to a newly formed partnership,  CVS Partners ("CVSP").  The
other partner was Wiltech Cable Television Services, Inc. ("WCTV"), a subsidiary
of The Williams  Companies,  Inc. The CVS network was  available  via  satellite
until March 31, 1997, when satellite  delivery was  terminated.  The partners of
CVSP are in the process of winding down the affairs of the partnership.

8. Pursuant to two short-term  agreements effective as of September 1, 1996, the
Company provided transponder services on one of its transponders, made available
as a result of the digital  compression of the Company's domestic networks,  and
agreed to provide  certain  telecommunications  services to Emerald Media,  Inc.
("EMI"). The Company also agreed to license pictures from its adult film library
and  licensed  the  "EUROTICA"  name and related  identity to EMI.  EMI owns and
operates EUROTICA, a premium television network featuring explicit version adult
movies which is distributed to the domestic direct-to-home C-band satellite dish
("DTH") market.
EMI also granted the Company an option to acquire its stock or business.

         EMI expanded its operations  and now operates four explicit  television
networks in the DTH market. On March 1, 1997, the Company's  agreements with EMI
were  modified  and now the Company  provides  EMI  transponder  services on two
transponders  and handles  playback  for two of EMI's  networks  from its master
control and digital playback  facility.  The Company's option to acquire the EMI
business or stock was revised with a new exercise price of $755,000.

9.  The  Company  was  previously   involved  in  an  arbitration  with  Capital
Distribution,  Inc., d/b/a Cupid Network  Television  ("CNT") which has now been
dismissed.  The  Company  and CNT are  parties  to (i) an Amended  and  Restated
Distribution  Agreement under which CNT provides merchandising services promoted
on the  Spice  Networks  (the  "Distribution  Agreement")  and (ii) a  Telephone
Services  Agreement under which CNT provides  audiotext services promoted on the
Spice  Network.  The Company  alleged that CNT breached the  agreements  and the
Company  attempted to  terminate  the  agreements.  CNT had obtained a temporary
restraining  order  preventing the Company from  terminating  the agreements and
also  commenced an  arbitration.  The Company and CNT have executed a Settlement
Agreement  dated May 15, 1997 which  provides,  among other things,  for (i) the
dismissal of the arbitration, (ii) the termination of the Distribution Agreement
with the shopping  segments  airing during the month of June, 1997 and (iii) the
termination of the Telephone Agreement on May 31, 1999.

10. Section 505 of the  Telecommunications  Act of 1996 requires cable operators
to fully scramble the audio and video signal of television  channels such as the
Spice  Networks  or block the  channels  between  6:00 a.m.  and 10:00 p.m.  The
Company  challenged the  constitutionality  of Section 505 but the Supreme Court
affirmed a lower court's ruling upholding the  constitutionality of Section 505.
As a result,  Section 505 will take  effect on May 18,  1997.  When  Section 505
takes effect, the Company's revenues will be adversely  affected;  the amount of
the revenue impact depends on several factors,  most of which are outside of the
Company's control.

11. The accrued restructuring reserve at December 31, 1996 and at March 31, 1997
was approximately $1.5 million and $1.3 million,  respectively. The reduction in
the accrued  restructuring  reserve is  principally  attributable  to  severance
payments  to two former  senior  executive  officers.  The  Company's  severance
obligation to the former officers will expire at the end of 1998.

12. Statement of Financial Accounting Standards No. 128 ("SFAS 128"),  "Earnings
per Share,"  which  supersedes  APB Opinion  No. 15,  "Earnings  per Share," was
issued in  February  1997.  SFAS 128  requires  dual  presentation  of basic and
diluted earnings per share ("EPS") for complex capital structures on the face of
the Statement of Operations income statement.  Basic EPS is computed by dividing
income  by the  weighted-average  number of common  shares  outstanding  for the
period.  Diluted  EPS  reflects  the  potential  dilution  from the  exercise or
conversion of securities into common stock,  such as stock options.  SFAS 128 is
required to be adopted for year-end 1997; earlier  application is not permitted.
The  Company  does not expect the basic or diluted EPS  measured  SFAS 128 to be
materially  different than its primary or  fully-diluted  EPS measured under APB
No. 15.

     Statement  of  Financial  Accounting  Standards  No.  129,  "Disclosure  of
Information  about Capital  Structure," was issued in February 1997. The Company
does not expect it to result in any substantive change in its disclosure.
<PAGE>


ITEM 2:  MANAGEMENT DISCUSSION and ANALYSIS of
FINANCIAL CONDITION and RESULTS of OPERATIONS
SPICE ENTERTAINMENT COMPANIES, INC. and SUBSIDIARIES CONTINUED
--------------------------------------------------------------------------------

Results of Operations

This report contains  forward looking  statements that involve a number of risks
and  uncertainties.  In  addition  to the factors  discussed  elsewhere  in this
report,  among the other  factors  that  could  cause  actual  results to differ
materially  are the  following:  business  conditions  and the general  economy;
governmental  regulation of the Company's  adult  programming and of the content
and distribution of television programming in general;  competitive factors such
as rival adult television  networks and alternative sources of adult programming
content;  consolidation in the ownership of the Company's  principal  customers;
the  risks  of  doing  business  in new  international  markets;  and the  risks
associated with the distribution of premium television programming.


         For the three  months ended March 31,  1997,  the Company  reported net
income of $1.9  million as compared  to a net loss of $1.6  million for the same
period in 1996. The current  period's  income was primarily  attributable to the
gain on the amendment of the Company's  transponder  services  agreement of $2.3
million.  (See  Note  5) Also  contributing  to the  increase  was  income  from
operations  of $0.6 million as well as the  allocation  of the loss from CVSP of
$0.4  million  to the  minority  partner,  which was  included  in  income  from
operations.  Offsetting  these  income  sources  was  interest  expense  of $1.5
million,  primarily  attributable  to  interest on the  capitalized  transponder
services agreement prior to its amendment and borrowings under the Company's new
credit facility. (See Note 6)

Revenues

         Total  revenues  for  the  three  months  ended  March  31,  1997  were
approximately  the same as revenues  for the three  months ended March 31, 1996.
The Company  reported  revenue growth from its Spice Networks cable and domestic
direct broadcast  satellite system ("DBS") markets totaling  approximately  $0.5
million.  The Company also generated revenue of approximately  $0.9 million from
the sale of its excess transponder capacity for the three months ended March 31,
1997.  Offsetting  theses  gains is a decline  in  revenue  attributable  to the
Company  ceasing  distribution  of its adult networks in the domestic DTH market
and a decline in revenue from the European  DTH markets  totaling  approximately
$1.0 million.  Revenues also declined by approximately  $0.4 million as a result
of the  Company's  suspension  of  production  and  licensing  activities of its
wholly-owned  subsidiary,  CPV Productions,  Inc.  Revenues from the Cable Video
Store network ("CVS"),  the domestic hit movies pay-per-view service operated by
CVSP,  decreased by approximately  $0.4 million for the three months ended March
31, 1997 as compared to same period in 1996 as a result of the  decision to wind
down the CVSP operations in the first quarter of 1997.

         The Company elected to cease  distribution of the Spice Networks in the
domestic DTH market on August 31, 1996 as a result of  competition  from several
explicit adult  services.  These explicit adult services are not  distributed by
cable  operators and  therefore,  do not have an impact on Spice Networks in the
cable  market.   The  Company   withdrew  from  the  DTH  market  and  commenced
transmission of its programming in a digitally compressed format which cannot be
received in the DTH market. As a result of the digital  compression of the Spice
Networks, the Company freed up two transponders for other uses.

         Revenues from the European  operations have decreased by  approximately
$0.4  million for the three  months ended March 31, 1997 as compared to the same
period  in 1996.  The  decline  in  revenues  is  directly  attributable  to the
continued  competition  in the  European DTH market.  The Company is  evaluating
various alternatives in an effort to reverse this trend.

         Revenues  from the Spice  Networks  cable and the  domestic DBS markets
increased by approximately $0.5 million, approximately 13%, for the three months
ended  March 31,  1997,  as  compared  to the same  period in 1996.  The Company
increased the number of addressable households with access to the Spice Networks
at March 31,  1997 by  approximately  18% as  compared  to March 31,  1996.  The
percentage  increase  in  addressable  households  was more than the  percentage
increase in revenues  because of a decrease in license fees.  This  reduction in
license  fees is a result  of  increased  competition  in the  Company's  market
segment and the growing concentration in theownership of cable systems by
multiple system operators  ("MSOs).  The Company's top seven MSO  customers 
and DirecTV,  the DBS provider  which carries the Spice Network, account for 
over 75% of the Company's domestic cable and DBS revenues.

Salaries, Wages and Benefits

         Salaries,  wages and benefits  decreased by  approximately  $150,000 to
approximately $1.9 million for the three months ended March 31, 1997 as compared
to the same  period in 1996.  The  decrease  is  primarily  attributable  to the
consolidation of employee function.

Producer Royalties

         Producer  royalties  and film cost  amortization  for the three  months
ended March 31, 1997 decreased by approximately $260,000 as compared to the same
period in 1996. The decline is primarily attributable to the elimination of film
amortization  resulting from suspension of CPV's production  activities in 1996.
Also  contributing  to the decline is the  decrease  in revenues  from CVS which
resulted in a corresponding reduction in producer royalties.

Satellite, Playback and Uplink Expenses

         Satellite,  playback and uplink expenses from continuing operations for
the three  months  ended  March 31, 1997 were  approximately  the same as in the
corresponding period in 1996.

         For the three  months  ended March 31, 1997 and prior to the  amendment
described below, the Company accounted for the Transponder  Agreement with Loral
(which  acquired  AT&T's  satellite  business) as a capital lease and recognized
total expenses  attributable to the Transponder  Agreement of approximately $2.0
million, comprised of depreciation expense and interest expense of approximately
$1.0 million  each.  Had the  Transponder  Agreement  been  accounted  for as an
operating  lease, the Company would have recognized  approximately  $0.4 million
less in total expenses for the three months ended March 31, 1997.

         On  January  11,  1997,  as a result of AT&T  losing  contact  with and
declaring  Telstar 401 permanently out of service,  AT&T  permanently one of the
Company's unprotected  transponders and transferred it to another AT&T customer.
This resulted in the reduction of the Company's  monthly  satellite  transponder
costs from $635,000 to $520,000 per month.  In addition,  on March 31, 1997, the
Company and Loral amended the  Transponder  Agreement to shorten the agreement's
term,  originally scheduled to expire at the end of the satellite's useful life,
to October 31, 2004. As a result of this amendment,  the  Transponder  Agreement
was classified as an operating  lease  commencing on March 31, 1997. As a result
of the pre-emption and the amendment of the Transponder  Agreement,  the Company
realized a  non-recurring  gain  attributable  to the  Transponder  Agreement of
approximately $2.3 million.

Selling, General and Administrative Expenses

         Selling, general and administrative expenses for the three months ended
March 31, 1997 increased by  approximately  $0.2 million as compared to the same
period in 1996. The rise is primarily attributable to increased costs associated
with the  continued  development  of Spice  Networks and an increase to bad debt
reserve.

Depreciation of Fixed Assets and Amortization of Goodwill

         Depreciation of fixed assets and amortization of goodwill  decreased by
approximately  $0.2 million to  approximately  $1.7 million for the three months
ended March 31,  1997 as  compared  to the same  period in 1996.  The decline in
depreciation expense was primarily attributable to the reduction in the carrying
value of the  capitalized  transponder  costs on  January  11,  1997 which was a
direct  result  of  the  pre-emption  of  one  of  the  Company's  transponders.
Offsetting  this reduction was an increase in  depreciation  expense  associated
with the Company's operations facility.

Interest Expense

     Interest expense decreased by approximately  $0.2 million to approximately 
$1.5 million for the three months ended March 31, 1997 as compared to the same 
period in 1996. The decrease is primarily attributable to the reduction in the 
carrying value of the capitalized transponder lease obligation. Offsetting this 
reduction is additional interest associated with new capital lease obligations
and, in the first  quarter of 1997,  the  increase in interest on the  
Company's new credit facility  with Darla as compared  to interest on the PNC 
credit facility in the corresponding period in 1996.

Liquidity and Capital Resources

         At March 31,  1997,  the  Company  had a  working  capital  deficit  of
approximately $4.7 million as compared to $6.1 million at December 31, 1996. The
decrease  in the  deficit is  primarily  attributable  to the  amendment  of the
Transponder  Agreement  in the  first  quarter  of  1997,  which  resulted  in a
reduction of current lease obligations.

         At December 31, 1996, the Company had a credit facility with PNC with a
principal balance of $14.6 million. On January 15, 1997 the Company entered into
agreements  with PNC and Darla which  resulted in the  replacement of its credit
facility  with PNC.  PNC settled  the  outstanding  balance of the credit  line,
totaling $14.6 million,  for $9.6 million in cash, a $0.4 million new term loan,
and 600,000 warrants.

         The Darla  agreement  provided a term loan of $10.5  million,  of which
$9.6 was used to satisfy the PNC  agreement and $0.9 million was used to finance
loan  acquisition  fees.  This agreement also made available a revolving line of
credit totaling $3.5 million.  The term loan and revolving line of credit have a
term of 30 months. The outstanding  balance of the credit line at March 31, 1997
was approximately $1.7 million.

         Net cash provided by operating  activities from  continuing  operations
was  approximately  $1.4  million for the three  months  ended March 31, 1997 as
compared to a net cash used in operating  activities from continuing  operations
of approximately  $0.4 million for the same period in 1996. The increase in cash
from operating activities from continuing operations was primarily  attributable
to net income in the period  ended  March 31,  1997 as compared to a loss in the
same period in 1996.

         Net cash used in investing  activities from  continuing  operations for
the three months ended March 31, 1997 was comparable to the same period in 1996,
$0.7 and $0.6 million,  respectively.  The two major components for both periods
were  the  purchases  of  property  and  equipment  and the  licensing  of movie
libraries.

         Net cash used in financing  activities was  approximately  $1.5 million
for the three  months  ended  March 31,  1997 as  compared  to cash  provided by
financing  activities of $1.1 million for the same period in 1996.  The decrease
in net cash from financing activities is primarily attributable to the Company's
payment of four installments under its Transponder Agreement in 1997 as compared
to no payments  made in the  corresponding  quarter in 1996. As a result of cash
flow problems in 1996,  based on a agreement with AT&T (as predecessor to Loral)
, the  Company  deferred  the  first  quarter  of 1996's  Transponder  Agreement
payments until the second quarter of 1996. Also contributing to the decrease are
the payments of deferred financing costs associated with the debt restructuring.

         The  Company  also had  sources of cash from  financing  activities  of
approximately  $1.0  million in each of the  quarters  ended  March 31, 1997 and
1996.  The 1997 source is a result of borrowing  under the  Company's new credit
facility.  This  borrowing  offsets  the  decreases  in cash  used in  financing
activities described in the preceding paragraph.  The 1996 source is a result of
third party investments in CVSP.
<PAGE>



                           PART II - OTHER INFORMATION


Item 1:   Legal Proceedings

         1.  Capital Distribution, Inc. v. Spice, Inc., AAA 
             File No. 13 140 00661 96 (see Note 9).

Item 6:  Exhibits and Reports on Form 8-K


(a)  Exhibits -   Exhibit 11.01 - Computation of Earnings Per Share

                  Exhibit 27.00 - Financial Data Schedule

(b)  Reports on Form 8-K -

     1.  The Company  filed a Current  Report on Form 8-K dated January 9, 1997.
         Such report contained information under Item 4 reporting that Coopers &
         Lybrand,  L.L.P.  has  ceased  serving  as  the  Company's  independent
         auditors.

     2.  The Company filed a Current Report on Form 8-K dated January 15, 1997.
         Such report contained the following information:

                  (i)  Under Item 2, the Company reported the split-off of
                  Spector Entertainment Group, Inc. from the Company;

                  (ii)  Under Item 4, the Company reported that it had engaged 
                  Grant Thornton LLP as its independent auditors; and

                  (iii)  Under  Item  5,  the  Company   reported  that  it  had
                  refinanced  its senior credit  facility,  replacing the credit
                  facility  provided by PNC Bank,  N.A.  with a credit  facility
                  provided by Darla L.L.P., as assignee.

<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 of the
undersigned, thereunto duly authorized.

                                            SPICE ENTERTAINMENT COMPANIES, INC.


Dated:  May 15, 1997

                                            By:      /s/ Harlyn C. Enholm
                                                     Harlyn C. Enholm
                                                     Executive Vice President
                                                     & Chief Financial Officer