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 June 30, 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
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(State or other jurisdiction of                          (I.R.S. Employer
incorporation or organization)                           Identification No.)

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

                                 (212) 941-1434
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                  (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 July 31, 1997:
11,316,948.



<PAGE>
                                                   
                                       PART I
ITEM 1: FINANCIAL STATEMENTS
SPICE ENTERTAINMENT COMPANIES, INC. and SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>

                                                                                                     June 30,        December 31,
                                                                                                       1997              1996
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                   (Unaudited)
<S>                                                                                                       <C>              <C>   
Assets
Current assets:
     Cash and cash equivalents ...........................................................        $  1,965,000         $  2,663,000
     Accounts receivable, less allowance for doubtful accounts ...........................           4,889,000            4,801,000
     Income tax refund receivable ........................................................              28,000               28,000
     Prepaid expenses and other current assets ...........................................           1,514,000            1,325,000
     Deferred subscription costs .........................................................             151,000              132,000
     Due from related parties and officers ...............................................             377,000               23,000
     Net assets of discontinued operations ...............................................                --              2,550,000
                                                                                                  ------------         ------------
                    Total current assets .................................................           8,924,000           11,522,000

Property and equipment, net of accumulated depreciation ..................................           7,776,000           61,948,000
Due from related parties .................................................................                --                294,000
Library of movies ........................................................................           4,045,000            3,797,000
Cost in excess of net assets acquired, net of accumulated  amortization ..................          11,075,000           11,399,000
Deferred refinancing costs ...............................................................             510,000                 --
Other assets .............................................................................             701,000              352,000
                                                                                                  ------------         ------------
                    Total assets .........................................................        $ 33,031,000         $ 89,312,000
                                                                                                  ============         ============

Liabilities and Stockholders' Equity
Current liabilities:
    Current portion of obligations under capital leases ..................................        $    794,000         $  4,926,000
    Current portion of long-term debt ....................................................           2,159,000              817,000
    Royalties payable ....................................................................             637,000            2,322,000
    Accounts payable .....................................................................           3,765,000            2,319,000
    Accrued interest expenses payable ....................................................             537,000            1,118,000
    Accrued cost of discontinued operations ..............................................                --              1,800,000
    Accrued expenses payable .............................................................           2,863,000            2,395,000
    Current portion of accrued restructuring costs .......................................             750,000              820,000
    Current portion of deferred income ...................................................             326,000                 --
    Deferred subscription revenue ........................................................             802,000            1,121,000
                                                                                                  ------------         ------------
                    Total current liabilities ............................................          12,633,000           17,638,000

Obligations under capital leases .........................................................           1,224,000           53,759,000
Long-term debt ...........................................................................          10,904,000           14,652,000
Accrued restructuring costs ..............................................................             350,000              700,000
Deferred compensation ....................................................................             281,000              269,000
                                                                                                  ------------         ------------
                    Total liabilities ....................................................          25,392,000           87,018,000
                                                                                                  ------------         ------------
Commitments and contingencies

Stockholders' equity
Preferred stock, $.01 par value; authorized 10,000,000 shares;
  24,250 issued and outstanding at June 30, 1997 .........................................                --                   --
Common stock, $.01 par value; authorized 25,000,000 shares;
  11,339,948 and 11,357,928 shares issued and outstanding at
  June 30, 1997 and December 31, 1996 ....................................................             113,000              113,000
    Additional paid-in capital ...........................................................          26,127,000           22,645,000
    Unearned compensation ................................................................            (505,000)            (765,000)
    Accumulated deficit ..................................................................         (18,759,000)         (21,338,000)
    Cumulative translation adjustment ....................................................           1,801,000            1,639,000
                                                                                                  ------------         ------------
                                                                                                     8,777,000            2,294,000
Less cost of common stock held in treasury, 700,000 shares at June 30, 1997 ..............          (1,138,000)                --
                                                                                                  ------------         ------------
                    Total stockholders' equity ...........................................           7,639,000            2,294,000
                                                                                                  ------------         ------------
                    Total liabilities and stockholders' equity ...........................        $ 33,031,000         $ 89,312,000
                                                                                                  ============         ============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
SPICE ENTERTAINMENT COMPANIES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENTS of OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>

                                                                          THREE MONTHS ENDED                SIX MONTHS ENDED
                                                                               JUNE 30,                         JUNE 30,
-----------------------------------------------------------------------------------------------------------------------------------
                                                                         1997            1996            1997            1996
                                                                     ------------    ------------    ------------    ------------
<S>                                                                  <C>             <C>             <C>             <C>         
Revenues: ........................................................   $  8,814,000    $  8,400,000    $ 17,575,000    $ 17,156,000
                                                                     ------------    ------------    ------------    ------------

Operating expenses:
    Salaries, wages and benefits .................................      2,008,000       1,900,000       3,951,000       3,997,000
    Producer royalties and library amortization ..................        428,000       1,460,000       1,549,000       2,837,000
    Satellite costs ..............................................      1,897,000         320,000       2,371,000         879,000
    Selling, general and administrative expenses .................      2,537,000       2,916,000       5,496,000       5,630,000
    Depreciation of fixed assets and amortization of goodwill ....        634,000       1,844,000       2,284,000       3,679,000
                                                                     ------------    ------------    ------------    ------------
Total operating expenses .........................................      7,504,000       8,440,000      15,651,000      17,022,000
                                                                     ------------    ------------    ------------    ------------

                    Total income (loss) from operations ..........      1,310,000         (40,000)      1,924,000         134,000

Interest expense .................................................        640,000       1,608,000       2,156,000       3,271,000
Minority interest ................................................       (242,000)       (298,000)       (680,000)       (463,000)
Gain from transponder lease amendment ............................           --              --        (2,348,000)            --
Gain on disposition of AGN .......................................           --          (875,000)           --          (875,000)
                                                                     ------------    ------------    ------------    ------------

Income (loss) from continuing operations before
  provision for income taxes .....................................        912,000        (475,000)      2,796,000      (1,799,000)

Provision for income taxes .......................................         85,000           9,000         252,000          51,000
                                                                     ------------    ------------    ------------    ------------

                    Net income (loss) from continuing operations .        827,000        (484,000)      2,544,000      (1,850,000)

Income from discontinued operations of SEG,
  net of income taxes ............................................           --           267,000            --            22,000

Extraordinary gain on debt restructuring .........................           --              --           143,000            --
                                                                     ------------    ------------    ------------    ------------
Net income (loss) ................................................        827,000        (217,000)      2,687,000      (1,828,000)

Dividends on preferred stock .....................................         59,000            --           108,000            --
                                                                     ------------    ------------    ------------    ------------
Net income (loss) attributable to common stock ...................   $    768,000    ($   217,000)   $  2,579,000    ($ 1,828,000)
                                                                     ============    ============    ============    ============

Earnings per common share                                        
  Primary
      From continuing operations ................................   $       0.07    ($      0.04)   $       0.21    ($      0.16)
      Extraordinary item ........................................           --              --              0.01            --
      Discontinued operations ...................................           --              0.02            --              --
                                                                    ------------    ------------    ------------    ------------
Earnings (loss) per common share ................................   $       0.07    ($      0.02)   $       0.22    ($      0.16)
                                                                    ============    ============    ============    ============
                                                                 
  Fully Diluted
      From continuing operations ................................   $       0.06    ($      0.04)   $       0.20    ($      0.16)
      Extraordinary item ........................................           --              --              0.01            --
      Discontinued operations ...................................           --              0.02            --              --
                                                                    ------------    ------------    ------------    ------------
Earnings (loss) per common share ................................   $       0.06    ($      0.02)   $       0.21    ($      0.16)
                                                                    ============    ============    ============    ============

Weighted average number of shares outstanding:
  Primary .......................................................     11,703,000      11,366,000      11,525,000      11,362,000
                                                                    ============    ============    ============    ============

  Fully Diluted .................................................     12,837,000      11,366,000      12,841,000      11,362,000
                                                                    ============    ============    ============    ============

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

<PAGE>
SPICE ENTERTAINMENT COMPANIES, INC. and SUBSIDIARIES
CONSOLIDATED STATEMENT of STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1997
(Unaudited)
<TABLE>
<CAPTION>

                             

                                                    Additional                                Cumulative
                               Common    Preferred   Paid-in       Unearned     Accumulated   Translation   Treasury
                                Stock     Stock      Capital     Compensation     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 warrants in connection
  with the debt restructuring                         3,528,000                                                           3,528,000

Issuance of warrants
  in connection with a
  consulting agreement                                  205,000                                                             205,000

Issuance of common stock                                  8,000                                                               8,000

Cancellation of 
restrictive stock                                      (259,000)      146,000                                              (113,000)

Pro rata share of 
  restricted stock grant 
  to an executive officer                                             114,000                                               114,000

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

Net income attributable
  to common stock                                                                  2,687,000                              2,687,000

Dividend                                                                            (108,000)                              (108,000)

Foreign currency
  translation adjustment                                                                          162,000                   162,000

                              ---------- --------- ------------- ------------  -------------- ------------ ------------ -----------
Balance at June 30, 1997       $113,000   $   -     $26,127,000     ($505,000)  ($18,759,000)  $1,801,000  ($1,138,000)  $7,639,000
                              ========== ========= ============= ============= ============== ============ ============ ===========

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<PAGE>
SPICE ENTERTAINMENT COMPANIES, INC., and SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>

                                                                                                              SIX MONTHS ENDED
                                                                                                                   JUNE 30,
-----------------------------------------------------------------------------------------------------------------------------------
                                                                                                        1997                1996
                                                                                                    -----------         -----------
<S>                                                                                                      <C>                <C>    
Cash flows from operating activities:
     Net income (loss) .....................................................................        $ 2,687,000         ($1,828,000)
                                                                                                    -----------         -----------
Adjustments to reconcile net income (loss) to net cash provided by operating
activities:
    Income from discontinued operations ....................................................               --               (22,000)
    Depreciation and amortization of fixed assets ..........................................          1,960,000           3,357,000
    Gain on transponder lease amendment ....................................................         (2,348,000)               --
    Extraordinary gain on debt restructuring ...............................................           (143,000)               --
    Gain on disposition of AGN .............................................................               --              (875,000)
    Other, net .............................................................................               --                31,000
    Amortization of deferred refinancing costs .............................................             62,000                --
    Amortization of goodwill ...............................................................            324,000             322,000
    Amortization of films and CD-ROM cost ..................................................               --               335,000
    Amortization of library of movies ......................................................          1,139,000             629,000
    Provision for bad debts ................................................................            690,000              28,000
    Compensation satisfied through the issuance of common stock ............................              2,000                --
    Consulting expense satisfied through the issuance of warrants ..........................            205,000                --
    Deferred compensation expense ..........................................................             12,000              47,000
    Minority interest ......................................................................           (680,000)           (463,000)
    Changes in assets and liabilities:
         (Increase) decrease in accounts receivable ........................................           (778,000)            925,000
         Decrease in prepaid expenses and other current assets .............................             11,000             156,000
         (Increase) decrease in deferred subscription costs ................................            (19,000)            238,000
         Decrease (increase) in other assets ...............................................             26,000             (14,000)
         Decrease in royalties payable .....................................................         (1,685,000)           (497,000)
         Increase in accounts payable and accrued expenses .................................          1,132,000             599,000
         Decrease in accrued restructuring costs ...........................................           (420,000)         (1,334,000)
         Increase in deferred income .......................................................            326,000                --
         Decrease in deferred subscription revenue .........................................           (319,000)           (874,000)
                                                                                                    -----------         -----------
                   Total adjustments .......................................................           (503,000)          2,588,000
                                                                                                    -----------         -----------
                   Net cash provided by operating activities
                    from continuing operations .............................................          2,184,000             760,000
                   Net cash provided by operating activities
                    from discontinued operations ...........................................               --               865,000
                                                                                                    -----------         -----------
                   Net cash provided by operating activities ...............................          2,184,000           1,625,000
                                                                                                    -----------         -----------
Cash flows from investment activities:
         Purchase of property and equipment ................................................           (429,000)           (297,000)
         Purchase of rights to library of movies ...........................................         (1,387,000)           (983,000)
         Investment in TeleSelect ..........................................................               --               (67,000)
         Proceeds on sale of TeleSelect ....................................................               --             3,244,000
                                                                                                    -----------         -----------
                   Net cash (used in) provided by investing activities
                    from continuing operations .............................................         (1,816,000)          1,897,000
                   Net cash used in investing activities
                    from discontinued operations ...........................................               --              (444,000)
                                                                                                    -----------         -----------
                   Net cash (used in) provided by investing activities .....................         (1,816,000)          1,453,000
                                                                                                    -----------         -----------
Cash flows from financing activities:
         Proceeds from issuance of common stock and detachable warrants ....................              8,000              27,000
         Proceeds from capital contributed to CVSP by a third party ........................            780,000           1,000,000
         Proceeds from issuance of long-term debt ..........................................          1,015,000                --
         Increase in loans receivable from related parties .................................            (60,000)             (2,000)
         Repayment of long-term debt and  capital leases obligations .......................         (2,237,000)         (2,598,000)
         Deferred refinancing costs ........................................................           (572,000)               --
                                                                                                    -----------         -----------
                   Net cash used in financing activities
                    from continuing operations .............................................         (1,066,000)         (1,573,000)
                   Net cash used in financing activities
                    from discontinued operations ...........................................               --              (421,000)
                                                                                                    -----------         -----------
                   Net cash used in financing activities ...................................         (1,066,000)         (1,994,000)
                                                                                                    -----------         -----------
                   Net (decrease) increase in cash and cash equivalents ....................           (698,000)          1,084,000
   Cash and cash equivalents, beginning of the period ......................................          2,663,000           1,292,000
                                                                                                    -----------         -----------
                   Cash and cash equivalents, end of the period ............................        $ 1,965,000         $ 2,376,000
                                                                                                    ===========         ===========
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>





<PAGE>

SPICE ENTERTAINMENT COMPANIES, and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 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 June 30, 1997 and the results of operations and cash flows for
the three and six months ended June 30, 1997 and 1996.

2.   The results of operations for the three and six months ended June 30, 
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 accompanying consolidated financial statements.

5.   On January 11, 1997, as a result of AT&T losing contact with and declaring
Telstar 401 permanently out of service, AT&T pre-empted 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 597,000 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 as of June 30, 1997. The term loan and the revolving line of
credit mature in July, 1999. 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 before January 15, 1999.

<PAGE>
SPICE ENTERTAINMENT COMPANIES, and SUBSIDIARIES
NOTES to CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 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.

     On June 3, 1997, the parties executed an agreement to dissolve the
partnership. Under the terms of the dissolution agreement WCTV agreed to pay the
company $580,000, representing past and future transponder services, and
contribute an additional $1,030,000 to the partnership. The additional
contribution approximates the funding required to wind down 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. The Company's agreements with EMI have been
modified. At June 30, 1997, the Company provided transponder services on two
transponders and playback services for two of EMI's networks from the Company's
master control and digital playback facility.

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 became effective on May 18, 1997. Section 505 will
adversely effect the Company's revenues. 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, March 31, 1997 and
June 30, 1997 was approximately $1.5 million, $1.3 million and $1.1 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.  On July 31, 1997, the Company through its wholly-owned subsidiary The Home
Video Channel Limited ("HVC") sold a 51% interest in Danish Satellite TV a/s
("DSTV") which operates a European satellite delivered subscription network
based in Denmark. The new majority shareholder of DSTV is Societe E
Responsabilite Limited Parkas ("PARKAS"). The agreement requires PARKAS to
retain substantially all the profits and expenses from DSTV's operations. The
Company, through its wholly-owned subsidiary Spice Productions, Inc., also
agreed to license pictures from its adult library to PARKAS.

13.  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 believes that the basic EPS will be higher than primary EPS because
of the exclusion of dilutive stock options and that the diluted EPS will
approximate primary EPS because of the inclusion of the dilutive stock options.

     Statement  of  Financial  Accounting  Standards  No.  129,  "Disclosure  of
Information about Capital Structure," ("SFAS 129"), was issued in February 1997.
In addition,  Statement of Financial  Accounting  Standards No. 130,  "Reporting
Comprehensive Income" ("SFAS 130") was issued in June 1997. The Company does not
expect  SFAS  129 or  SFAS  130 to  result  in any  substantive  changes  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 six and three months ended June 30, 1997, the Company reported
net income of $2.6 and $0.8 million as compared to net losses of $1.8 and $0.2
million for the same periods in 1996. The income for the six months ended June
30, 1997 is primarily attributable to the gain on the amendment of the Company's
transponder services agreement of $2.3 million. (See Note 5) Also contributing
was income from operations of $1.9 million as well as the allocation of the
losses from CVSP of $0.7 million to the minority partner which was included in
income from operations. Offsetting these income sources was interest expense of
$2.2 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)

     Income of $0.8 million for the three months ended June 30, 1997 was
primarily attributable to income from operations of $1.3 million and the
allocation of losses from CVSP of $0.2 million to the minority partner, which
was included in income from operations. Offsetting these income sources was
interest expense of $0.6 million.

Revenues

     Total revenues for both the six and three months ended June 30, 1997
increased by approximately $0.4 million as compared to the same periods in 1996.
Revenue growth came from the Spice Networks cable and domestic direct broadcast
satellite system ("DBS") markets totaling approximately $1.1 million and $0.6
million for the six and three months ended June 30, 1997 as compared to the same
periods in 1996. The Company also generated revenue of approximately $2.2
million and $1.2 million from the sale of its excess transponder capacity for
the six and three months ended June 30, 1997. Offsetting these gains was a
decline in revenue attributable to the Company ceasing distribution of its adult
networks in the domestic direct-to-home C-band satellite dish ("DTH") market and
a decline in revenue from the European DTH markets totaling approximately $1.6
million and $0.6 million for the six and three months ended June 30, 1997. Also
offsetting the revenue sources was a decrease of approximately $0.7 million and
$0.4 million for the six and three months ended June 30, 1997, 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 $1.5 million and $1.0 million for the six and
three months ended June 30, 1997 as compared to the same periods 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
$0.7 million and $0.2 million for the six and three months ended June 30, 1997
as compared to the same periods in 1996. The decline in revenues is directly
attributable to 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 $1.1 million (14%) and $0.6 million (15%) for the six
and three months ended June 30, 1997, respectively, as compared to the same
periods in 1996. The Company increased the number of addressable households with
access to the Spice Networks at June 30, 1997 by approximately 19% as compared
to June 30, 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 the ownership 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 for the six and three months ended June
30, 1997 were comparable to the same periods in 1996. The Company reduced
corporate administrative salaries primarily through the consolidation of
employee functions. Offsetting this reduction were increases as a result of the
expansion of the Network Operations facilities as well as increases in the area
of sales and marketing.

Producer royalties and film cost amortization

     Producer royalties and film cost amortization for the six and three
months ended June 30, 1997 decreased by approximately $1.3 million and $1.0
million as compared to the same periods in 1996. The decline is primarily
attributable to the elimination of film amortization resulting from suspension
of CPV's production activities in 1996 and the decline in revenues from the
Cable Video Store Network which resulted in a corresponding reduction in
producer royalties.

Satellite, Playback and Uplink Expenses

     Satellite, playback and uplink expenses from continuing operations for
the six and three months ended June 30, 1997 increased by approximately $1.5
million and $1.6 million as compared to the corresponding periods in 1996. The
increase is primarily attributable to the amendment of the Loral lease on March
31, 1997 and the corresponding reclassification of the lease as an operating
lease from a capital lease. For both the six and three months ended June 30
,1997 the Company recognized an additional $1.5 million of satellite expenses
and reductions in interest of $0.9 million and depreciation of $1.0 million as a
result of the Loral lease amendment.

     For the three months ended March 31, 1997 and prior to the Loral lease
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 six and three months
ended June 30, 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 pre-empted
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 the Loral lease amendment, the
Transponder Agreement was classified as an operating lease commencing on March
31, 1997 and the Company realized a non-recurring gain attributable to the
Transponder Agreement of approximately $2.3 million.
<PAGE>
Selling, General and Administrative Expenses

     Selling, general and administrative expenses for the six and three
months ended June 30, 1997 decreased by approximately $0.1 million and $0.4
million as compared to the same periods in 1996. The reduction in the selling,
general and administrative expenses resulted from streamlining international
operations in the first quarter of 1997 as well as the wind down and suspension
of the CVSP operations in the second quarter of 1997. Offsetting these
reductions was an increase in costs in 1997, associated with the continued
development of Spice Networks and an increase to the bad debt reserve.

Depreciation of Fixed Assets and Amortization of Goodwill

     Depreciation  of fixed  assets and  amortization  of goodwill  decreased by
approximately  $1.4  million and $1.2  million in the six and three months ended
June  30,  1997,  as  compared  to the same  periods  in 1996.  The  decline  in
depreciation  expense  was  primarily  attributable  to  the  amendment  of  the
Transponder Agreement and the corresponding  accounting treatment which resulted
in the  Transponder  Agreement  being  accounted for as a operating  lease as of
March 31, 1997.

Interest Expense

     Interest expense  decreased by approximately  $1.1 million and $1.0 million
in the six and three months ended June 30, 1997, as compared to the same periods
in 1996.  The decline in  interest  expense was  primarily  attributable  to the
amendment  of  the  Transponder  Agreement  and  the  corresponding   accounting
treatment which resulted in the Transponder  Agreement being accounted for as an
operating  lease as of March 31, 1997.  Offsetting  this reduction is additional
interest  associated with new capital lease obligations as compared to the first
six months of 1996 and 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 periods in 1996.

Liquidity and Capital Resources

     At June 30, 1997, the Company had a working capital deficit of
approximately $3.7 million as compared to a deficit of approximately $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 597,000 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 June 30, 1997
was approximately $1.8 million.

     Net cash provided by operating activities from continuing operations
was approximately $2.2 million for the six months ended June 30, 1997, as
compared to $0.8 million for the same period in 1996. The increase in cash from
operating activities from continuing operations was primarily attributable to
net income for the six months ended June 30, 1997, as compared to a loss in the
same period in 1996.

     Net cash used in investing activities from continuing operations was
approximately $1.8 million for the six months ended June 30, 1997, as compared
to net cash provided from investing activities of approximately $1.9 million for
the same period in 1996. The decrease is primarily attributable to the proceeds
from the Company's sale of its investment in TeleSelect for approximately $3.2
million in the second quarter of 1996. In addition the Company reported a use of
cash in investing activities from additional investment in its library of movies
of $1.4 million and $1.0 million for each of the six months ended June 30, 1997 
and 1996, respectively.

     Net cash used in financing activities from continuing operations was
approximately $1.1 million for the six months ended June 30, 1997, as compared
to $1.6 million for the same period in 1996. The decrease was primarily
attributable to additional proceeds from the new credit facility offset by
financing costs paid in the six months ended June 30, 1997.

     For the six months ended June 30, 1997 and 1996, the Company reported
sources of cash from continuing financing activities of $0.8 million and $1.0
million, respectively, from third party investments in CVSP. The Company also
reported uses of cash of $2.2 million and $2.6 million for the six months ended
June 30, 1997 and 1996 from the repayment of the long-term debt and capital
lease obligations for each of the respective periods.

<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 -    None


<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:  August 14, 1997
                                           
                                            By:/s/ Harlyn C. Enholm
                                            -----------------------------------
                                            Harlyn C. Enholm
                                            Executive Vice President
                                            & Chief Financial Officer

<PAGE>