<PAGE>
 
            _______________________________________________________

               UNITED STATES 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 September 30, 1997

                                      OR

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

For the transition period from ____________ to _____________

Commission File Number  0-19728

                       GRANITE BROADCASTING CORPORATION
            (exact name of registrant as specified in its charter)

                 DELAWARE                                       13-3458782
(State or other jurisdiction of incorporation                (I.R.S. Employer
             or organization)                               Identification No.)

                               767 Third Avenue
                                  34th Floor
                           New York, New York 10017

                       Telephone number: (212) 826-2530

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

                    (APPLICABLE ONLY TO CORPORATE ISSUERS:)

     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. 
     Class A Voting Common Stock, par value $.01 per share - 178,500 shares
outstanding at September 30, 1997; Common Stock (Nonvoting), par value $.01 per
share - 8,588,841 shares outstanding at September 30, 1997.
<PAGE>
 
                          PART I. FINANCIAL INFORMATION
                        GRANITE BROADCASTING CORPORATION
                           CONSOLIDATED BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                     September 30,          December 31,
                  ASSETS                                                                 1997                   1996
                  ------                                                           ----------------         -------------
                                                                                      (Unaudited)
<S>                                                                                <C>                      <C> 
Current assets:
    Cash and cash equivalents                                                      $      3,431,630         $     555,753
    Accounts receivable, net                                                             30,257,416            27,057,451
    Film contract rights                                                                 11,409,422             6,276,660
    Other assets                                                                          5,797,224             9,784,966
                                                                                   ----------------      ----------------
              Total current assets                                                       50,895,692            43,674,830

Property and equipment, net                                                              35,429,774            33,562,019
Film contract rights and other noncurrent assets                                          5,091,536             4,284,578
Deferred financing fees, net                                                             10,709,214            14,181,662
Intangible assets, net                                                                  524,492,805           356,860,115
                                                                                   ----------------      ----------------
                                                                                   $    626,619,021         $ 452,563,204
                                                                                   ================      ================
                LIABILITIES AND STOCKHOLDERS' DEFICIT
                -------------------------------------

Current liabilities:
    Accounts payable                                                               $      2,350,787         $   4,016,964
    Accrued interest                                                                     10,489,077             6,071,378
    Other accrued liabilities                                                             6,617,698             4,497,534
    Film contract rights and other current liabilities                                   13,319,750             9,578,365
                                                                                   ----------------      ----------------
                Total current liabilities                                                32,777,312            24,164,241

Long-term debt                                                                          382,768,015           351,560,900

Film contract rights payable                                                              6,716,185             3,383,428

Deferred tax and other noncurrent liabilities                                            30,632,317            31,102,272

Commitments
Redeemable preferred stock                                                              202,678,828            45,487,500

Stockholders' deficit:
    Common Stock: 41,000,000 shares authorized consisting of 1,000,000 shares of
      Voting Common Stock, $.01 par value, and 40,000,000 shares of Common Stock
      (Nonvoting), $.01 par value; 178,500 shares of Voting Common Stock and
      8,588,841 shares of Common Stock (Nonvoting) (8,499,716
      shares at December 31, 1996) issued and outstanding                                    87,673                86,782
    Additional paid-in capital                                                           30,591,779            45,547,145
    Accumulated deficit                                                                 (55,887,051)          (45,375,910)
    Less: Unearned compensation                                                          (2,812,162)           (2,506,279)
          Note receivable from officer                                                     (886,875)             (886,875)
          Treasury stock                                                                    (47,000)                  ---
                                                                                   -----------------     ----------------
                Total stockholders' deficit                                             (28,953,636)           (3,135,137)
                                                                                   -----------------     -----------------
                                                                                   $    626,619,021         $ 452,563,204
                                                                                   ================      ================

</TABLE> 

                            See accompanying notes.

                                       -1-
<PAGE>
 
                       GRANITE BROADCASTING CORPORATION
                     CONSOLIDATED STATEMENT OF OPERATIONS

<TABLE> 
<CAPTION> 
                                                 Three Months Ended September 30,            Nine Months Ended September 30,
                                             ----------------------------------------     ------------------------------------

                                                    1997                     1996               1997                 1996
                                                    ----                     ----               ----                 ----
                                                            (Unaudited)                               (Unaudited)
<S>                                          <C>                  <C>                     <C>                <C> 
Net revenue                                  $    37,159,092           $   29,467,805     $   110,789,033      $    92,058,635
Station operating expenses                        20,967,636               17,440,319          61,516,945           51,967,854
Time brokerage agreement fees                        150,000                      ---             450,000                  ---
Depreciation expense                               1,418,000                1,571,252           4,175,671            4,573,801
Amortization expense                               3,556,073                2,442,170          10,268,134            7,298,148
Corporate expense                                  1,665,539                1,235,343           4,951,609            3,247,239
Non-cash compensation expense                        296,627                  126,402             675,146              356,258
                                             ---------------           --------------     ---------------      ---------------   

    Operating income                               9,105,217                6,652,319          28,751,528           24,615,335

Other expenses:                                                                              
    Equity in net loss of investee                   400,000                      ---           1,200,000                  ---
    Interest expense, net                          9,697,306                9,172,025          29,485,907           27,220,056
    Non-cash interest expense                        543,298                  542,906           1,685,786            1,521,541
    Other                                            439,717                  366,433             738,757              711,291
                                             ---------------           --------------     ---------------      ---------------  
Loss before income taxes                                                                     
    and extraordinary item                        (1,975,104)              (3,429,045)         (4,358,922)          (4,837,553)
Provision for income taxes                           205,700                   77,007             583,100              312,696
                                             ---------------           --------------     ---------------      --------------- 

Loss before extraordinary item                    (2,180,804)              (3,506,052)         (4,942,022)          (5,150,249)
Extraordinary loss                                (5,248,315)                     ---          (5,569,119)          (2,891,250)
                                             ---------------           --------------     ----------------     ---------------

Net loss                                     $    (7,429,119)          $   (3,506,052)    $   (10,511,141)     $    (8,041,499)
                                             ================          ===============    ================     ================
                                          
Net loss attributable to                  
    common stockholders                      $   (13,317,709)          $   (4,387,372)    $   (26,480,832)     $   (10,685,456)
                                           ==================          ===============    ================     ================

Per common share:
    Loss before extraordinary item           $         (0.92)          $        (0.51)    $         (2.39)     $         (0.91)
    Extraordinary loss                                ( 0.60)                     ---               (0.64)               (0.34)
                                              
                                              ---------------           -------------      ---------------      ---------------
    Net loss                                 $         (1.52)          $        (0.51)    $         (3.03)     $         (1.25)
                                             ================          ==============    =================     ================

Weighted average common
    shares outstanding                             8,767,216                8,667,841           8,755,984            8,589,403

</TABLE> 

                            See accompanying notes.

                                      -2-
<PAGE>

                       GRANITE BROADCASTING CORPORATION 
                CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT

                     Nine Months Ended September 30, 1997
                                  (Unaudited)


<TABLE> 
<CAPTION> 
                                    Class A          Common            Additional                                              
                                     Common          Stock              Paid-in            Accumulated         Unearned      
                                     Stock        (Nonvoting)           Capital               Deficit         Compensation    
                                 --------------- ---------------    ---------------        ---------------  ----------------
<S>                                  <C>         <C>                <C>                     <C>                <C> 
Balance at December 31, 1996         $1,785         $84,997          $45,547,145            $(45,375,910)      $(2,506,279)
Dividends on redeemable                                                                                                     
  preferred stock                                                    (15,652,892)                                       
Accretion of offering costs                                                                                                 
  related to Cumulative                                                                                                     
  Exchangeable Preferred Stock                                          (316,799)                                       
Exercise of stock options                                18                9,170                                        
Conversion of redeemable                                                                                                    
  preferred stock into Common                                                                                               
  Stock (Nonvoting)                                      50               24,950                                        
Issuance of Common Stock                                                                                                    
  (Nonvoting)                                           823                 (823)                                       
Repurchase of redeemable                                                                                                    
  preferred stock                                                                                                           
Grant of Stock Award Under                                                                                                  
  Management Stock Plan                                                  981,028                                  (981,028)
Stock expense related to                                                                                                    
  Management Stock Plan                                                                                            675,146 
Net loss                                                                                     (10,511,141)                   
                                 --------------- --------------- -----------------  ---------------------- --------------------
                                                                                                                            
Balance at September 30, 1997        $1,785         $85,888          $30,591,779            $(55,887,051)      $(2,812,162)
                                 =============== =============== ================== ======================= ==================

<CAPTION>                                
                                                                           Total
                                 Note Receivable     Treasury          Stockholders'
                                  from Officer        Stock               Deficit
                                ----------------- --------------- --------------------
<S>                             <C>               <C>             <C>                                
Balance at December 31, 1996        $(886,875)                $0        $(3,135,137)
Dividends on redeemable        
  preferred stock                                                       (15,652,892)
Accretion of offering costs    
  related to Cumulative        
  Exchangeable Preferred Stock                                             (316,799)
Exercise of stock options                                                     9,188
Conversion of redeemable       
  preferred stock into Common  
  Stock (Nonvoting)                                                          25,000
Issuance of Common Stock       
  (Nonvoting)                                                                     -
Repurchase of redeemable       
  preferred stock                                        (47,000)           (47,000)
Grant of Stock Award Under     
  Management Stock Plan                                                           -
Stock expense related to       
  Management Stock Plan                                                     675,146
Net loss                                                                (10,511,141)
                                ----------------- --------------- --------------------
                               
Balance at September 30, 1997      $(886,875)           $(47,000)      $(28,953,636)
                                ================= =============== ====================

</TABLE> 

                                      -3-
<PAGE>
 
                        GRANITE BROADCASTING CORPORATION
                      CONSOLIDATED STATEMENT OF CASH FLOWS


<TABLE> 
<CAPTION> 
                                                                              Nine Months Ended September 30,
                                                                          --------------------------------------
                                                                                1997                    1996
                                                                                ----                    ----
                                                                                        (Unaudited)
<S>                                                                       <C>                 <C> 
Cash flows from operating activities:                                    
    Net loss                                                              $   (10,511,141)     $     (8,041,499)
    Adjustments to reconcile net loss to net cash                        
      provided by operating activities:                                  
        Amortization of intangible assets                                      10,268,134             7,298,148
        Depreciation                                                            4,175,671             4,573,801
        Non-cash compensation expense                                             675,146               356,258
        Non-cash interest expense                                               1,685,786             1,521,541
        Equity in net loss of investee                                          1,200,000                   ---
        Extraordinary loss                                                      5,569,119             2,891,250
                                                                         
      Change in assets and liabilities net of effects from               
         acquisitions of stations:                                       
         (Increase) decrease in accounts receivable                            (3,199,965)            3,516,245
         Increase in accounts payable and accrued liabilities                   4,740,878             2,874,451
         Increase in film contract rights and other assets                     (3,334,884)           (2,922,514)
         Increase in film contract rights payable and other liabilities         3,512,311             2,729,279
         Increase in other assets                                              (2,675,860)           (1,989,039)
                                                                          ---------------      ----------------
      Net cash provided by operating activities                                12,105,195            12,807,921
                                                                         
Cash flows from investing activities:                                    
    Payment for acquisitions of stations, net of cash acquired               (172,713,906)                  ---
    Investment in Datacast                                                     (1,000,000)                  ---
    Capital expenditures                                                       (4,115,936)           (5,062,410)
                                                                          ---------------      ----------------
      Net cash used in investing activities                                  (177,829,842)           (5,062,410)
                                                                         
Cash flows from financing activities:                                    
    Proceeds from bank loan                                                   121,500,000            16,500,000
    Repayment of bank debt                                                    (11,000,000)         (107,000,000)
    Proceeds from preferred stock offering, net                               143,889,789                   ---
    Proceeds from senior subordinated notes                                           ---           109,450,000
    Repurchase of senior subordinated notes                                   (82,897,588)          (15,500,000)
    Dividends paid                                                             (2,642,992)           (2,643,957)
    Payment of deferred financing fees                                           (210,873)           (5,391,444)
    Other financing activities                                                    (37,812)                3,938
                                                                          ---------------      ----------------
      Net cash provided by (used in) financing activities                     168,600,524            (4,581,463)
                                                                          ---------------      ----------------
Net increase in cash and cash equivalents                                       2,875,877             3,164,048
Cash and cash equivalents, beginning of period                                    555,753                95,123
                                                                          ---------------      ----------------
Cash and cash equivalents, end of period                                  $     3,431,630      $      3,259,171
                                                                          ===============      ================
Supplemental information:                                                
    Cash paid for interest                                                $    25,084,723       $    22,472,970
    Income taxes paid                                                             193,000               116,593
    Non-cash capital expenditures                                                 393,685               397,024
    Stock dividend                                                              3,240,625                   ---
    Other non-cash financing activity                                                 ---               886,875

</TABLE> 
                            See accompanying notes.

                                      -4-
<PAGE>
 
                       GRANITE BROADCASTING CORPORATION
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                  (UNAUDITED)

Note 1 -  Basis of presentation
-------------------------------

The accompanying unaudited consolidated financial statements include the
accounts of Granite Broadcasting Corporation and its subsidiaries (the
"Company"), have been prepared in accordance with the instructions to Form 10-Q
and do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. Operating
results for the three and nine-month periods ended September 30, 1997 are not
necessarily indicative of the results that may be expected for the year ended
December 31, 1997. For further information, refer to the Company's consolidated
financial statements and notes thereto for the year ended December 31, 1996
which were included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1996. All significant intercompany accounts and transactions
have been eliminated. Certain amounts in the prior year have been reclassified
to conform to 1997 presentation. Data at and for the year ended December 31,
1996 are derived from the Company's audited consolidated financial statements.

In the opinion of management, all adjustments of a normal recurring nature which
are necessary for a fair presentation of the results for the interim periods
have been made.

Note 2 - Acquisitions
---------------------

On January 31, 1997, the Company acquired substantially all of the assets of
WDWB-TV (formerly called WXON-TV), the WB affiliate serving Detroit, Michigan,
for $175,000,000 and the assumption of certain liabilities. The Company financed
the acquisition by borrowing approximately $27,500,000 under its credit
agreement and issuing 150,000 shares of its 12-3/4% Cumulative Exchangeable
Preferred Stock, par value $0.01 per share (the "New Preferred Stock"), at
$1,000 per share. Dividends on the New Preferred Stock are payable semi-annually
on April 1 and October 1 of each year. The Company may elect to pay dividends
prior to April 1, 2002 in additional shares of New Preferred Stock. Dividends on
the New Preferred Stock are cumulative and accrue without interest, if unpaid.

On October 3, 1997, the Company entered into an agreement to acquire KOFY-TV,
the WB Network affiliated television station serving San Francisco-Oakland-San
Jose, California, the nation's fifth largest television market, for
$173,750,000. The Company presently contemplates financing the acquisition with
debt, equity or a combination thereof.

Note 3 - Long term debt
-----------------------

In March, the Company purchased $19,405,000 face amount of its 9-3/8% Senior
Subordinated Notes due December 1, 2005 (the "9-3/8% Notes") at a discount. As a
result, the Company recognized an extraordinary loss, after the write-off of a
portion of related deferred financing fees, of $320,804 in the first quarter of
1997. In September, the Company exercised its option to redeem the entire
outstanding $60,000,000 principal amount of its 12.75% Senior Subordinated
Debentures, due September 1, 2002 (the "12.75% Notes"), at a redemption price of
106.375% of the principal amount thereof. As a result, the Company recognized an
extraordinary loss, including the write-off of a portion of related deferred
financing fees, of $5,248,315 in the third quarter of 1997.

                                      -5-
<PAGE>
 
                       GRANITE BROADCASTING CORPORATION
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
                                  (UNAUDITED)

Note 4 -  Net loss per common share
-----------------------------------

Net loss per common share for the three month periods ended September 30, 1997
and 1996 and the nine month periods ended September 30, 1997 and 1996 is
calculated by dividing net loss attributable to common stockholders by the
weighted average number of shares of common stock outstanding. The inclusion of
additional shares assuming the exercise of outstanding stock options and the
conversion of certain preferred stock into Common Stock (Nonvoting) would have
been antidilutive for those periods presented.

In February 1997, the Financial Accounting Standards Board issued Statement No.
128 "Earnings Per Share" (FAS 128), which establishes new standards for
computing and presenting earnings per share. FAS 128 is effective for financial
statements issued for periods ending after December 15, 1997, including interim
periods. Management does not believe that the implementation of FAS 128 will
have a material impact on the Company's per share amounts.

Note 5 - Related party transactions
-----------------------------------

On April 16, 1997, the Company made a loan to an officer in the amount of
$441,530 to pay certain personal taxes. The loan is a term loan which provides
for an annual interest rate of 8%, payable annually on April 16 of each year,
with all principal and remaining interest due on April 16, 2001.


                                      -6-
<PAGE>
 
                    MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                 FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Introduction
------------

The consolidated financial statements of the Company reflect increases between
the three and nine month periods ended September 30, 1997 and 1996 in
substantially all line items. The principal reasons for such increases are the
acquisition of WDWB-TV (formerly called WXON-TV), the WB affiliate serving
Detroit, Michigan, on January 31, 1997 and the operation of WLAJ-TV, the ABC
affiliate serving Lansing, Michigan, under a time brokerage agreement which
commenced in October 1996. It is anticipated that the Company's consolidated
financial statements for the year ended December 31, 1997 will reflect
significant increases in substantially all line items compared to the prior year
primarily due to the acquisition of WDWB-TV and the operation of WLAJ-TV.

The Company's revenues are derived principally from local and national
advertising and, to a lesser extent, from network compensation for the broadcast
of programming and revenues from studio rental and commercial production
activities. The primary operating expenses involved in owning and operating
television stations are employee salaries, depreciation and amortization,
programming and advertising and promotion expenses. Numbers referred to in the
following discussion have been rounded to the nearest thousand.

The following table sets forth certain operating data for the three month and
nine month periods ended September 30, 1997 and 1996:


<TABLE> 
<CAPTION> 

                                               Three Months Ended September 30,         Nine months ended September 30,
                                           ------------------------------------      -------------------------------------
                                                  1997                 1996                      1997              1996
                                                  ----                 ----                      ----              ----
<S>                                            <C>              <C>                     <C>                <C> 
Operating income                               $   9,105,000    $      6,653,000        $     28,751,000   $    24,616,000
Add:
    Time brokerage agreement fees                    150,000                 ---                 450,000              ---
    Depreciation and amortization                  4,974,000           4,013,000              14,444,000        11,872,000
    Corporate expense                              1,665,000           1,235,000               4,952,000         3,247,000
    Non-cash compensation                            297,000             126,000                 675,000           356,000
                                           -----------------    ----------------        ----------------   ---------------

Broadcast cash flow                        $      16,191,000    $     12,027,000        $     49,272,000   $    40,091,000
                                           =================    ================        ================   ===============

</TABLE> 

"Broadcast cash flow" means operating income plus time brokerage agreement fees,
depreciation, amortization, corporate expense and non-cash compensation. The
Company has included broadcast cash flow data because such data are commonly
used as a measure of performance for broadcast companies and are also used by
investors to measure a company's ability to service debt. Broadcast cash flow is
not, and should not be used as, an indicator or alternative to operating income,
net income or cash flow as reflected in the consolidated financial statements,
is not a measure of financial performance under generally accepted accounting
principles and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles.

Three Months Ended September 30, 1997 and 1996
----------------------------------------------

Net revenue for the three months ended September 30, 1997 totaled $37,159,000,
an increase of $7,691,000 or 26 percent compared to $29,468,000 for the three
months ended September 30, 1996. Of the increase, $5,097,000 was due to the
inclusion of three months of operations of WDWB-TV and WLAJ-TV. The remaining
increase was primarily due to increased local and national advertising revenue
and incremental revenue from the Company's internet ventures, partially offset
by lower political advertising revenue in a non-election year.

Station operating expenses for the three months ended September 30, 1997 totaled
$20,968,000, an increase of $3,528,000 or 20 percent compared to $17,440,000 for
the three months ended September 30, 1996. Of the increase, $2,221,000 was due
to the inclusion of three months of operations of WDWB-TV and WLAJ-TV. The
remaining increase was primarily due to increased news, sales and administrative
expenses.

Depreciation and amortization increased by $961,000, or 24 percent during the
three months ended September 30, 1997 compared to the same period a year
earlier, primarily due to the inclusion of three months of operations of WDWB-TV
and WLAJ-TV. Corporate expense increased $430,000, or 35 percent during the
three months ended September 30, 1997 compared to the same period a year
earlier, primarily due to higher administrative costs

                                      -7-
<PAGE>
 
associated with the expansion of the Company's corporate office to manage its
expanded station group. Non-cash compensation expense increased $171,000 or 136
percent during the three months ended September 30, 1997 compared to the same
period a year earlier due to the granting of additional awards payable in Common
Stock (Nonvoting) to certain executive employees of the Company under the
Company's Management Stock Plan and to members of the Company's Board of
Directors under the Company's Director Stock Plan, which was adopted on April
29, 1997.

The equity in net loss of investee of $400,000 for the three months ended
September 30, 1997 resulted from the Company recognizing its pro rata share of
the net loss of Datacast, LLC under the equity method of accounting. Net
interest expense was $9,697,000 compared to $9,172,000 a year earlier, an
increase of 6 percent, primarily due to higher levels of outstanding
indebtedness as a result of the acquisition of WDWB-TV.

On September 1, 1997, the Company exercised its option to redeem the entire
outstanding $60,000,000 principal amount of its 12.75% Notes at a redemption
price of 106.375% of the principal amount thereof. The Company financed the
redemption of the 12.75% Notes with borrowings under its bank credit agreement
(the "Credit Agreement") which bear interest at a lower rate, thereby reducing
its cost of borrowing. In conjunction with the redemption of this debt, the
Company recognized an extraordinary loss, including the write-off of a portion
of related deferred financing fees, of $5,248,000.

Nine Months Ended September 30, 1997 and 1996
---------------------------------------------

Net revenue for the nine months ended September 30, 1997 totaled $110,789,000,
an increase of $18,730,000 or 20 percent compared to $92,059,000 for the nine
months ended September 30, 1996. Of the increase, $14,237,000 resulted from the
inclusion of eight months of operations of WDWB-TV and nine months of operations
of WLAJ-TV. The remaining increase was primarily due to increased local and
national advertising revenue, and incremental revenue from the Company's
Internet ventures, partially offset by lower political advertising revenue in a
non-election year.

Station operating expenses totaled $61,517,000, an increase of $9,549,000 or 18
percent compared to $51,968,000 for the nine months ended September 30, 1996. Of
the increase, $5,713,000 was due to the inclusion of eight months of operations
of WDWB-TV and nine months of operations of WLAJ-TV. The remaining increase was
primarily due to increased news, sales and administrative expenses.

Depreciation and amortization increased by $2,572,000, or 22 percent during the
nine months ended September 30, 1997 compared to the same period a year earlier,
primarily due to the inclusion of eight months of operations of WDWB-TV and nine
months of operations of WLAJ-TV. Corporate expense increased $1,705,000, or 53
percent during the nine months ended September 30, 1997 compared to the same
period a year earlier, primarily due to higher administrative costs associated
with the expansion of the Company's corporate office to manage its expanded
station group. Non-cash compensation expense increased $319,000 or 90 percent
during the nine months ended September 30, 1997 compared to the same period a
year earlier due to the granting of additional awards payable in Common Stock
(Nonvoting) to certain executive employees of the Company under the Company's
Management Stock Plan and to members of the Company's Board of Directors under
the Company's Director Stock Plan, which was adopted on April 29, 1997.

The equity in net loss of investee of $1,200,000 for the nine months ended
September 30, 1997 resulted from the Company recognizing its pro rata share of
the net loss of Datacast, LLC under the equity method of accounting. Net
interest expense was $29,486,000 compared to $27,220,000 a year earlier, an
increase of 8 percent, primarily due to higher levels of outstanding
indebtedness as a result of the acquisition of WDWB-TV. Non-cash interest
expense totaled $1,686,000 for the nine months ended September 30, 1997, an
increase of $164,000 or 11 percent compared to the same period a year earlier,
primarily due to the amortization of additional deferred financing fees incurred
in connection with the amendment and restatement of the Company's Credit
Agreement which was amended and restated on September 4, 1996, offset in part,
by the write-off of a portion of deferred financing fees in conjunction with the
repurchase of the Company's subordinated debt in 1997.

In March 1997, the Company purchased $19,405,000 principal amount of its 9-3/8%
Notes at a discount. In connection with the repurchase of this debt, the Company
recognized an extraordinary loss, after the write-off of a portion of related
deferred financing fees, of $321,000 during the first quarter. In September
1997, the Company exercised its option to redeem the entire outstanding
$60,000,000 principal amount of its 12.75% Notes at a redemption price of
106.375% of the principal amount thereof. In connection with the redemption of
this debt, the Company recognized an extraordinary loss, including the write-off
of a portion of related deferred financing fees, of $5,248,000 during the third
quarter. As a result of these redemptions, the Company recognized extraordinary
loss on the early extinguishment of debt of $5,569,000 for the nine months ended
September 30, 1997.

                                      -8-
<PAGE>
 
Liquidity and Capital Resources
-------------------------------

In October 1996, the Company entered into agreements with the owner of WLAJ-TV,
including a time brokerage agreement pursuant to which the Company operates
WLAJ-TV and an agreement to acquire substantially all the assets used in the
operation of WLAJ-TV for approximately $19,400,000 in cash and the assumption of
certain liabilities. The Company anticipates financing the acquisition of
WLAJ-TV with borrowings under the Credit Agreement's revolving working capital
facility. In connection with these agreements, the Company agreed to provide a
loan guarantee of up to $12,000,000 in favor of the owner of WLAJ-TV.

On January 31, 1997, the Company acquired substantially all of the assets of
WDWB-TV for $175,000,000 and the assumption of certain liabilities. The Company
financed the acquisition through the sale of 150,000 shares of its New Preferred
Stock at $1,000 per share and borrowings of $27,500,000 under the Credit
Agreement.

On September 1, 1997, the Company exercised its option to redeem the entire
outstanding $60,000,000 principal amount of its 12.75% Notes at a redemption
price of 106.375% of the principal amount thereof plus accrued interest, for an
aggregate consideration of $67,650,000. The Company used borrowings under the
Credit Agreement to fund this redemption.

On October 3, 1997, the Company entered into an agreement to acquire KOFY-TV,
the WB Network affiliated television station serving San Francisco-Oakland-San
Jose, California, the nation's fifth largest television market, for
$173,750,000. The Company presently contemplates financing the acquisition with
debt, equity or a combination thereof.

The Company's credit agreement allows for revolving credit borrowings of
$200,000,000 and permits borrowings of up to $300,000,000 in the aggregate. The
revolving credit facility can be used to fund future acquisitions of broadcast
stations and for general corporate purposes. As of October 31, 1997, subject to
compliance with financial covenants, the Company had $66,000,000 of the
revolving credit facility borrowings available for acquisitions and working
capital purposes.

Cash flows provided by operating activities were $12,105,000 during the nine
months ended September 30, 1997 compared to cash flows provided by operating
activities of $12,808,000 during the nine months ended September 30, 1996, a
decrease of $703,000 or 5.5 percent. Such decrease was primarily a result of an
increase in net operating assets and higher cash interest expense, offset, in
part, by higher operating cash flow.

Cash flows used in investing activities were $177,830,000 during the nine months
ended September 30, 1997, compared to $5,062,000 during the nine months ended
September 30, 1996. Cash flows used in investing activities during the nine
months ended September 30, 1997 related primarily to the acquisition of WDWB-TV
while cash flows used in investing activities during the nine months ended
September 30, 1996 were related entirely to capital expenditures.

Cash flows provided by financing activities were $168,601,000 during the nine
months ended September 30, 1997 compared to cash flows used in financing
activities of $4,581,000 during the nine months ended September 30, 1996. Such
change resulted primarily from a net increase in bank borrowings, proceeds from
the New Preferred Stock offering and a decrease in payments for deferred
financing fees, offset in part by a net increase in repurchase of subordinated
debt.

The Company believes that internally generated funds from operations, and
borrowings under its revolving working capital facility, if necessary, will be
sufficient to satisfy the Company's cash requirements for its existing
operations for the next twelve months and for the foreseeable future thereafter.

                                      -9-
<PAGE>
 
                                     PART II
                                     -------

                                OTHER INFORMATION
                                -----------------

ITEM 1. Legal Proceedings
        -----------------

        Not applicable

ITEM 2. Changes in Securities
        ---------------------

        Not applicable

ITEM 3. Defaults upon Senior Securities
        -------------------------------

        Not applicable

ITEM 4. Submission of Matters to a Vote of Security Holders
        ---------------------------------------------------

        Not applicable

ITEM 5. Other Information
        -----------------

        Not applicable

ITEM 6. Exhibits and Reports on Form 8-K

        a.  Exhibits
            --------

             11.       Statement of Computation of Per Share Earnings.

             27.       Financial Data Schedule.

                                     -10-
<PAGE>
 
                                  SIGNATURES

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

                                         GRANITE BROADCASTING CORPORATION
                                                     Registrant

Date November 10, 1997                   /s/       W. DON CORNWELL
                                         ---------------------------------
                                                   (W. Don Cornwell)
                                               Chief Executive Officer

Date November 10, 1997                   /s/       LAWRENCE I. WILLS
                                         -----------------------------------
                                                  (Lawrence I. Wills)
                                         Vice President, Finance and Controller
                                             (Principal Accounting Officer)