<PAGE>

                                   FORM 10-K

                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

         (MARK ONE)
           [X]  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                    SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]

         For the fiscal year ended December 31, 1997

                                      OR

           [ ]  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                    SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]

         For the transition period from ..........to..............

         Commission file number 0-15392

                                 FAIRCOM INC.
            (Exact name of registrant as specified in its charter)

          Delaware                                   87-0394057
(State or other jurisdiction of                  (I.R.S. Employer
incorporation or organization)                   Identification No.)

333 Glen Head Road, Old Brookville, N.Y.               11545
(Address of principal executive offices)             (Zip Code)

       Registrant's telephone number, including area code (516) 676-2644

          Securities registered pursuant to Section 12(b) of the Act:

                                         Name of each exchange on
  Title of each class                        which registered
  -------------------                    ------------------------

Common Stock, $.01 Par Value              Not Applicable

          Securities registered pursuant to Section 12(g) of the Act:

                                     NONE
                                --------------

         Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
         Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
         As of March 20, 1998, the aggregate market value of the registrant's
voting stock held by non-affiliates was approximately $5,294,000.
         The number of outstanding shares of Common Stock as of March 20, 1998
was 7,378,199.

<PAGE>



                                    PART I

ITEM 1.           BUSINESS

The Company

                  Faircom Inc., a Delaware corporation ("Faircom" or the
"Company"), owns and operates six radio stations, WFNT(AM) and WCRZ(FM) in
Flint, Michigan; WWBN(FM) in Tuscola, Michigan, a community north of Flint;
WMAN(AM) and WYHT(FM) in Mansfield, Ohio, and WSWR(FM) in Shelby, Ohio
adjoining Mansfield.

                  Faircom was founded by Joel M. Fairman in April 1984 and
began operations with the objective of acquiring broadcasting properties at
prices considered attractive by Faircom, financing them on terms satisfactory
to Faircom, managing them in accordance with Faircom's operating strategy and
building a broadcasting group. Faircom has sought to acquire radio properties
which have a history of growing revenues and broadcast cash flow, have capable
operating management and are in communities with good growth prospects or
which have attractive competitive environments. Faircom focuses its
acquisition efforts on medium and smaller radio markets, particularly where
there may be an opportunity to achieve a significant cluster of stations in
the market or to add additional stations in surrounding communities. Faircom
has not purchased, and does not foresee purchasing in the near future,
properties with negative cash flows, or so-called "under-performing" or
"turnaround" properties, unless they complement or can be combined with the
operations of positive cash flow properties in a market or regional cluster.
Faircom's strategy is to have at least $1,000,000 in broadcast cash flow and
be among the top three operators in each of its markets.

                  In June 1997, Faircom, through its wholly-owned subsidiary,
Faircom Mansfield Inc. ("Faircom Mansfield"), purchased substantially all of
the assets of WMAN(AM) and WYHT(FM) for total cash consideration of
$7,650,000. Faircom also negotiated the refinancing of all its existing
indebtedness, increased such indebtedness and obtained additional equity
capital in connection with the acquisition.

                  In January 1998, Faircom purchased substantially all of the
assets and operations of radio station WSWR(FM) in Shelby, Ohio for $1,125,000
in cash. The acquisition was financed with internal funds and a loan to
Faircom of $1,100,000 from Blue Chip Capital Fund II Limited. This loan is
expected to be refinanced from term loans to Regent Communications Inc.
("Regent") at the closing of the pending merger of Faircom and Regent
discussed below. The loan is in the form of a subordinated note, matures on
the first to occur of April 1, 1999 or the closing of the merger and bears
accrued interest at 14% per annum, payable at maturity.

                  Faircom continuously reviews radio properties for possible
acquisition, and several acquisitions are currently being actively pursued. No
assurance can be given that Faircom will successfully consummate any of such
acquisitions.

<PAGE>

                  Faircom's executive offices are located at 333 Glen Head
Road, Suite 220, Old Brookville, New York 11545 and its telephone number is
(516) 676-2644. All of Faircom's properties are owned and operated through
subsidiary corporations and references to the term "Faircom" or the "Company"
herein include such subsidiaries unless the context requires otherwise.

Pending Merger

                  On December 5, 1997, Faircom signed an agreement to merge
with Regent Communications, Inc. ("Regent"), another group radio broadcaster.
Under the terms of the agreement, Faircom will merge with and into a
subsidiary of Regent. The shareholders of Faircom will receive shares of
Regent Series C Convertible Preferred Stock, par value $.01 per share ("Series
C Preferred Stock").

                  The Series C Preferred Stock has full voting rights,
provides for annual cumulative dividends of 7%, and is convertible on a
one-for-one basis (subject to adjustment in certain events) into the common
stock, $.01 par value per share, of Regent. The Series C Preferred Stock is
subject to mandatory conversion under certain circumstances. In the event of a
liquidation of Regent, the Series C Preferred Stock has a preference in the
amount of its stated value of $5.00 per share, together with accrued and
unpaid dividends.

                  In the merger, the outstanding shares of Faircom Common
Stock will be exchanged for fully paid and nonassessable shares of Series C
Preferred Stock, and each outstanding Faircom option will be converted into a
Regent option entitling the holder to acquire, on equivalent terms, the same
number of shares of Series C Preferred Stock as the holder would have been
entitled to receive in the merger if such Faircom option had been exercised in
full prior to the date of the merger. The number of shares of Series C
Preferred Stock to be issued in the merger and issuable pursuant to Regent
options to be received in exchange for Faircom options in the merger will be
based upon an aggregate liquidation preference amount of $33,162,000, adjusted
by the amount of Faircom's net working capital and decreased by its senior
debt and by one-half of the prepayment premium on such senior debt to be paid
at the closing of the merger, all as computed as of the last day of the month
immediately preceding the closing date of the merger.

                  Faircom anticipates a closing of the merger in the second
quarter of 1998. The closing of the merger is subject to the effectiveness of
a registration statement and delivery of a related proxy statement to
Faircom's stockholders, satisfaction of the conditions of the merger agreement
and the approval of Faircom's stockholders.

Operating Strategy

                  Faircom's strategy has been to purchase radio properties
that exhibit growing revenues and broadcast cash flow, and have experienced,
in-place operating personnel. After acquiring a radio station, Faircom reviews
the station's operations and


                                       2

<PAGE>

attempts to realize economies associated with ownership of multiple stations
by centralizing such functions as accounting and other administrative
activities. A minimal staff is maintained at the corporate level reflecting
Faircom's strategy of minimizing corporate expenses while giving considerable
autonomy to its station managers.

                  Faircom relies on experienced station managers who are given
the authority for decision making at the station level, subject to guidance by
Faircom's management. Faircom's station managers are partially compensated on
the basis of their ability to meet or exceed budgeted operating results.
Consequently, operating personnel can benefit by meeting the revenue and
expense objectives of Faircom.

                  Each station targets specific demographic groups based upon
advertiser demand, the format of the station and the competition in the
market. Through program selection, promotion, advertising and the use of
selected on-air personnel, each station attempts to attract a target audience
that it believes is attractive to advertisers. Faircom retains consultants to
assist its programming personnel by evaluating and suggesting improvements for
programming. Faircom also conducts research through outside consultants to
evaluate and improve its programming and also uses its own personnel for such
research.

The Radio Broadcasting Industry

                  At December 31, 1997, there were 4,762 commercial AM and
5,542 commercial FM stations authorized and operating in the United States. An
increasing number of persons listen to FM radio because of clearer sound
characteristics and stereo transmission. In the spring of 1997, FM
listenership was about 78% of total radio audience.

                  Operations

                  Radio station revenue is derived predominantly from local
and regional advertising and to a lesser extent from national advertising.
Network compensation also provides some revenue. For example, in 1997,
approximately 77% of Faircom's consolidated station advertising revenues were
from local and regional sales, 22% from national sales and about 1% from
network or syndication compensation. Local and regional sales generally are
made by a station's sales staff. National sales generally are made by
"national rep" firms, specializing in radio advertising sales on the national
level. These firms are compensated on a commission-only basis. Local and
regional sales are made primarily to businesses in the market covered by a
station's broadcast signal and to some extent to businesses in contiguous or
nearby markets. Such businesses include auto dealers, soft drink, beer and
wine distributors, fast food outlets and financial institutions. National
sales are made to larger, nationwide advertisers, such as soft drink
producers, automobile manufacturers and airlines. Most advertising contracts
are short-term, generally running only for a few weeks. Advertising rates
charged by a radio station are based primarily on the station's ability to
attract


                                       3
<PAGE>



audiences in the demographic groups which advertisers wish to reach and on the
number of stations competing in the market area. Rating service surveys
quantify the number of listeners tuned to the station at various times. Rates
are generally highest during morning and evening drive-time hours. Faircom's
stations' advertising sales are made by their sales staffs under the direction
of a general manager or sales managers. Television, billboard, newspaper and
direct mail advertising, as well as special events and promotions, can be used
to supplement direct contact by the sales staff in developing advertising
clients.

                  The primary costs incurred in operating a radio station are
salaries, programming, promotion and advertising expenditures, occupancy costs
of premises for studios and offices, transmitting and other equipment expenses
and music license royalty fees.

                  Radio broadcasting revenues are spread over the calendar
year. The first quarter generally reflects the lowest and the third and fourth
quarters the highest revenues for the year, due in part to increases in retail
advertising in the summer and in the fall in preparation for the holiday
season and, in election years, to political advertising.

                  The radio industry is continually faced with technological
changes and innovations, the possible rise in popularity of competing
entertainment and communications media, changes in labor conditions,
governmental restrictions and actions of federal regulatory bodies, including
the FCC, any of which could have a material effect on Faircom's business.
However, broadcasting stations have generally enjoyed growth in listeners and
value within the past several decades. Population increases and greater
availability of radios, particularly car and portable radios, have contributed
to this growth.

                  Competition

                  The radio broadcasting industry is a highly competitive
business. Faircom's radio broadcasting stations compete for audience share and
revenue directly with the other AM and FM radio stations in their respective
market areas, as well as with other advertising media such as newspapers,
television, magazines, outdoor advertising, transit advertising and mail
marketing. Competition within the radio broadcasting industry occurs primarily
in the individual market areas so that a station in one market does not
generally compete with stations in other market areas. In addition to
management experience, factors which are material to competitive position
include the station's ratings in its market, rates charged for advertising
time, broadcast signal coverage, assigned frequency, audience characteristics,
the ability to create and execute promotional campaigns for clients and for
the station, local program acceptance and the number and characteristics of
other stations in the market area. Faircom attempts to improve its competitive
position by reviewing programming and the programming of competitors,
upgrading technical facilities where appropriate, attempting to expand sales
to existing advertising clients and developing new client


                                       4
<PAGE>



relationships, and by promotional campaigns aimed at the demographic groups
targeted by its stations.

                  In order to provide additional opportunity for persons
interested in obtaining radio broadcasting licenses, including minorities, the
FCC in 1984 proposed new licenses for new full service FM broadcast stations
in 684 communities. This FCC program is referred to as the "Docket 80-90"
proceeding. Where these stations have commenced commercial broadcasting, they
have increased competition in these markets. Also, it has been customary in
the industry for experienced operators to buy stations in markets they
consider attractive and attempt to improve the performance of these stations
by additional investment and better management, thus increasing competition in
these markets.

                  The FCC recently has allocated spectrum to a new technology,
digital audio broadcasting ("DAB"), to deliver satellite-based audio
programming to a national or regional audience and has adopted regulations for
a DAB service. DAB may provide a medium for the delivery by satellite or
terrestrial means of multiple new audio programming formats with compact disc
quality sound to local and national audiences. Another form of DAB, known as
In-Band On Channel ("IBOC"), could provide DAB in the present FM radio band.
It is not known at this time whether this technology also may be used in the
future by existing radio broadcast stations either on existing or alternate
broadcasting frequencies. In addition, three applications have been granted by
the FCC for authority to offer multiple channels of digital,
satellite-delivered S-Band aural services that could compete with conventional
terrestrial radio broadcasting. These satellite radio services use technology
that may permit higher sound quality than is possible with conventional AM and
FM terrestrial radio broadcasting. Implementation of DAB or IBOC would provide
an additional audio programming service that could compete with Faircom's
radio stations for listeners, but the effect upon Faircom cannot be predicted.
Implementation of DAB or IBOC would provide an additional audio programming
service that could compete with the Company's radio stations for listeners,
but the effect upon the Company cannot be predicted.

                  FCC Regulation

                  The FCC regulates radio stations under the Communications
Act of 1934, as amended (the "Communications Act") which, together with FCC
rules and policies promulgated thereunder, governs the issuance, renewal and
assignment of licenses, technical operations, employment practices and, to a
limited extent, business and program practices of radio stations and other
communications entities.

                  The rules also generally prohibit the acquisition of
ownership in, or control of, a television station and either an AM or a FM
radio station serving the same market. Such so-called "cross-ownership"
prohibition is subject to waiver for stations in the 25 largest television
markets under certain conditions. There are also prohibitions relating to
ownership in or control of a daily newspaper and a broadcast


                                       5
<PAGE>



station in the same market and limitations on the extent to which aliens may
own an interest in broadcast stations.

                  Over the past five years, broadcasters such as Faircom have
entered into what have commonly been referred to as "Local Market Agreements,"
or "LMAs." While these agreements may take varying forms, under a typical LMA,
separately owned and licensed radio stations agree to enter into cooperative
arrangements of varying sorts, subject to compliance with the requirements of
antitrust laws and with the FCC's rules and policies. Under these types of
arrangements, separately owned stations could agree to function cooperatively
in terms of programming, advertising sales, etc., subject to the licensee of
each station maintaining independent control over the programming and station
operations of its own station. One typical type of LMA is a programming
agreement among two separately owned radio stations serving a common service
area, whereby the licensee of one station programs substantial portions of the
broadcast day on the other licensee's station, subject to ultimate editorial
and other controls being exercised by the latter licensee, and sells
advertising time during such program segments. Such arrangements are an
extension of the concept of "time brokerage" agreements, under which a
licensee of a station sells blocks of time on its station to an entity or
entities which program the blocks of time and which sell their own commercial
advertising announcements during the time periods in question.

                  In the past, the FCC has determined that issues of joint
advertising sales should be left to antitrust enforcement and has specifically
revised its so-called "cross- interest" policy to make that policy
inapplicable to time brokerage arrangements. Under the cross-interest policy,
the FCC may prohibit one party from acquiring certain economic interests in
two broadcast stations in the same market. Furthermore, the staff of the FCC's
Mass Media Bureau has, over the past five years, held that LMAs are not
contrary to the Communications Act provided that the licensee of the station
which is being substantially programmed by another entity maintains complete
responsibility for and control over operations of its broadcast station and
assures compliance with applicable FCC rules and policies. However, LMAs in
which one station programs more than 15% of the weekly broadcast time of
another local radio station are prohibited under FCC rules if the programming
station could not own the programmed station under the FCC's so-called
"multiple ownership" rules.

                  On February 8, 1996, the President signed into law the
Telecommunications Act of 1996. This legislation (a) permits foreign nationals
to serve as officers and directors of broadcast licensees and their parent
companies, (b) directs the FCC to eliminate its national ownership limits on
radio station ownership, (c) requires the FCC to relax its numerical
restrictions on local radio ownership, (d) extends the FCC's radio and
television cross ownership waiver policy to the top 50 markets, (e) extends
the license renewal period for radio and television stations to eight years
and (f) affords renewal applicants significant new projections from competing
applications for their broadcast licenses.



                                       6
<PAGE>



                  The Telecommunications Act's provisions regarding local
radio ownership limits create a sliding scale of permissible ownership,
depending on market size. In radio markets with 45 or more commercial radio
stations, a license may own up to eight stations, no more than five of which
can be in a single radio service (i.e. no more than five AM or five FM). In
radio markets with 30 to 44 commercial radio stations, a license may own up to
seven stations, no more than four of which are in a single radio service. In
radio markets having 15 to 29 commercial radio stations, a licensee may own up
to six radio stations, no more than four of which are in a single radio
service. Finally, with respect to radio markets having 14 or fewer commercial
radio stations, a licensee may own up to five radio stations, no more than
three of which are in the same service; provided that the licensee may not own
more than one half of the radio stations in the market.

                  The Telecommunications Act affords renewal applicants
additional protection from renewal challenges by (a) changing the standard for
grant of license renewal and (b) precluding the FCC from considering the
relative merits of a competing applicant in connection with making its
determination on a licensee's renewal application. The new standard for
license renewal is that a station's license will be renewed if (x) the station
has served the public interest, convenience and necessity, (y) there have been
no serious violations of the Communications Act or FCC rules by the licensee
and (z) there have been no other violations of the Communications Act or FCC
rules which, taken together, would establish a pattern of abuse by the
licensee.

                  The Communications Act limits the ownership of broadcast
licenses by "aliens." Faircom's voting securities contain a legend which
states that the securities are subject to certain restrictions on transfer to
"aliens" (as defined in the Communications Act) as set forth in the By-laws of
Faircom. Faircom's By-laws provide that shares of voting securities held by
aliens which cause Faircom to be in violation of any provisions of the
Communications Act shall not be entitled to vote, to receive dividends or have
any other rights, and the holders of such securities will be required to
transfer them to Faircom or another person whose ownership of such shares
would not be in violation of the Communications Act.

                  The foregoing does not purport to be a complete summary of
all of the provisions of the Communications Act, the Telecommunications Act or
the regulations or policies of the FCC thereunder. Reference is made to such
Acts, regulations, and policies for further information.

Licenses

                  Faircom's license for its Tuscola station, WWBN(FM), was to
expire October 1, 1996, and was renewed for a term through October 1, 2003.
Pursuant to regulations adopted by the FCC in January 1997, as provided by the
Telecom Act, the license renewal term was extended to October 1, 2004, a
period of eight years. Faircom's licenses for its Flint stations, WCRZ(FM) and
WFNT(AM), also were to expire on October 1, 1996. Timely license renewal
applications for the stations were


                                       7
<PAGE>



filed, and, as part of the FCC's review process, the Equal Employment
Opportunity ("EEO") Branch of the FCC's Mass Media Bureau requested additional
written information regarding Faircom's EEO recruitment efforts at these
stations. Such additional information was furnished, and on September 30,
1997, the FCC released a Memorandum Opinion and Order and Notice of Apparent
Liability. The Opinion found that there was no evidence that the licensee
engaged in employment discrimination, but that the overall EEO recruitment
effort was deficient because the licensee failed to recruit actively for some
of its vacancies and to engage in meaningful self-assessment of its EEO
program. The Order granted renewal of the stations' licenses for a term
expiring October 1, 2004, subject to an admonishment and reporting
requirements with respect to EEO recruitment performance for the 12 month
periods ending June 1, 1998, 1999 and 2000. A Notice of Apparent Liability was
issued in the amount of $11,000. The management of Faircom and its FCC counsel
believe that the factual assumptions on which the FCC Opinion, Order and
Notice are based are incorrect, and incomplete. On October 30, 1997, Faircom
filed with the FCC a Petition for Reconsideration in this matter, Faircom and
its FCC counsel are unable to predict the ultimate outcome of this matter,
but, in the opinion of both, a rejection a Faircom's Petition would not have a
material adverse effect on Faircom. The licenses of WMAN(AM) and WYHT(FM) in
Mansfield, Ohio, and WSWR(FM), in Shelby, Ohio, were renewed October 1, 1996
and expire October 1, 2004.

Employees

                  At the corporate level, Faircom employs its President and
Treasurer, Joel M. Fairman, and John E. Risher, its Senior Vice President, who
also utilize the services of consultants, a bookkeeping service and Faircom's
attorneys. Faircom's President and Senior Vice President assist the general
managers of Faircom's stations in developing strategies to increase the
profitability of Faircom's broadcasting properties and in the operation of the
stations. Faircom plans to continue its present policy of utilizing only a
small number of persons at the corporate level. Each market in which Faircom
owns and operates radio stations has its own complement of employees,
including a general manager, a sales manager, a business manager, advertising
sales staff, on-air personalities and engineering and operating personnel. In
the aggregate, Faircom's subsidiaries employ 64 people on a full-time basis
and 32 people on a part-time basis.

                  Faircom has never experienced a strike or work stoppage and
believes that its relations with its employees are good.


ITEM 2.  PROPERTIES

                  Faircom leases approximately 780 square feet of office space
for its corporate offices in Old Brookville, New York. The lease expires
February 28, 2001. Annual rent is currently $22,200.



                                       8
<PAGE>

                  The Flint stations occupy studio and office space in a
building of approximately 6,000 square feet located on 10 acres in
southeastern Flint, Michigan. The AM towers and antennas are also located on
this land. An FM tower, antenna and transmitter building and equipment are
located on 19 acres of land located nearby. The land, buildings, towers,
antennas and equipment are owned by a subsidiary of Faircom.

                  The Tuscola station occupies studio and office space in
leased premises in Frankenmuth, Michigan, at an annual rental of $1,800 under
a lease that expires in September 1998. The station's tower, antenna and
transmitter building and equipment are owned by a subsidiary of Faircom. Those
facilities are located on leased land in Millington, Michigan. The lease
expires in June 2002 and has renewal options through June 2042. Current rental
is $2,112 annually.

                  The Mansfield stations occupy studio and office space in a
building of approximately 6,600 square feet located on six acres in Mansfield,
Ohio. An auxiliary AM tower is located at this site. An adjoining property of
approximately 10 acres is the site of a building of approximately 6,000 square
feet that contains AM and FM transmitters and equipment and storage space. The
AM and FM towers and antenna are located on this property. The land,
buildings, towers, antennas and equipment are owned by a subsidiary of
Faircom.

                  All operations of WSWR(FM) in Shelby have been moved to the
Mansfield studio and office space. The tower, antenna and transmitter building
and equipment of WSWR(FM) are located on approximately one-half acre in
Plymouth Township, Ohio, northeast of Shelby. The tower site is leased through
September 2002 at a current rental of $1,200 annually, with four five-year
term renewal options, each at a 10% increase in annual rent over the prior
term. WSWR(FM) also leases approximately 1,000 square feet for office, sales,
and broadcast use in Willard, Ohio. The lease is at a current annual rental of
$3,600 and expires in August 2002. The lease contains an option to renew for
an additional five-year term at an annual rental of $4,200.

                  Faircom owns substantially all of its studio and general
office equipment. Faircom believes that its properties are in good condition
and are adequate for its operations, although opportunities to upgrade
facilities are constantly reviewed.

                  All the tangible and intangible property of the Company's
subsidiaries is pledged as security for senior debt of the subsidiaries. See
Notes 3 and 5 to the Company's 1997 Consolidated Financial Statements for a
description of encumbrances against the Company's properties and the Company's
rental obligations.


ITEM 3.           LEGAL PROCEEDINGS

                  The Company is not a party to any lawsuit or legal
proceeding that, in the opinion of the Company, is likely to have a material
adverse effect on the Company.



                                       9
<PAGE>




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

                  Not applicable.

































                                      10
<PAGE>



                                    PART II


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

Market For Common Stock

                  The Company's common stock is quoted on the OTC Bulletin
Board under the symbol "FXCM" and is traded on the over-the-counter market.

                  The following table reflects the reported high and low bid
quotations for Faircom Common Stock on the OTC Bulletin Board for each quarter
during 1996 and 1997. Such quotations reflect interdealer prices, without
retail mark-up, markdown or commission and may not necessarily represent
actual transactions.

         Fiscal Year                                           High      Low

         1996
                  First Quarter.......................         $.25      $.13
                  Second Quarter......................         $.25      $.13
                  Third Quarter.......................         $.25      $.13
                  Fourth Quarter......................         $.19      $.13

         1997
                  First Quarter.......................         $.22      $.13
                  Second Quarter......................         $.28      $.22
                  Third Quarter.......................         $.63      $.28
                  Fourth Quarter......................         $.94      $.56

                  On March 20, 1998, the bid and asked prices of the Company's
Common Stock on the OTC Bulletin Board were $.81 and $.94, respectively. There
were 329 holders of record of the Company's Common Stock on March 20, 1998.


Dividend Policy

                  The Company has never paid dividends on its Common Stock. It
is the Company's current policy to retain future earnings for the capital
requirements of its business. The Company and its subsidiaries are subject to
certain restrictions under existing agreements with their lenders which limit
dividends on their Common Stock. See Note 3 to the Company's 1997 Consolidated
Financial Statements.


                                      11
<PAGE>



ITEM 6.           SELECTED CONSOLIDATED FINANCIAL DATA

                            Year Ended December 31,

<TABLE>
<CAPTION>
                                                   1997              1996              1995              1994                1993
                                                   ----              ----              ----              ----                ----

<S>                                           <C>                <C>               <C>               <C>               <C>
OPERATING RESULTS:

Net Broadcasting Revenues                     $  5,993,291       $ 4,873,954       $ 5,113,582       $ 4,983,513       $  5,015,265

Income from Operations                           1,015,144         1,222,829         1,511,481         1,470,355            854,514

Income (Loss)
   Before Extraordinary
   Items                                          (362,537)          278,840           244,816           992,079           (796,843)

Extraordinary Items                             (4,333,310)                                              787,201          3,216,605

Net Income (Loss)                               (4,695,847)          278,840           244,816         1,779,280          2,419,762

Basic Income (Loss)
   Per Common Share:

  Income (Loss)
   Before Extraordinary
   Items                                              (.05)              .04               .03               .13               (.11)

  Extraordinary Items                                 (.59)                                                  .11                .44

  Basic Net Income (Loss)
   Per Common Share                                   (.64)              .04               .03               .24                .33

Diluted Income (Loss)
   Per Common Share:

  Income (Loss)
   Before Extraordinary
   Items                                              (.05)              .02               .02               .06               (.11)

  Extraordinary Items                                 (.59)                                                  .05                .44

  Diluted Net Income (Loss)
   Per Common share                                   (.64)              .02               .02               .11                .33

BALANCE SHEET DATA
AT YEAR END:

Total Current Assets                             1,919,232         1,305,585         1,311,916         1,246,104          1,771,069

Total Current Liabilities                          859,631         1,068,021         1,037,239         1,150,537          2,771,126

Total Assets                                    13,010,554         4,326,453         4,546,508         4,488,913          4,515,236

Long-Term Debt and
   Obligations Under
   Capital Leases                               21,911,661         7,276,884         7,828,883         8,367,345          6,010,018

Redeemable Preferred Stock
   of Subsidiaries at
   Liquidation Value                                                                                                      1,968,544

Total Capital Deficit                          (10,181,788)       (5,485,941)       (5,764,781)       (6,009,597)       (11,624,571)

</TABLE>

 The Company has not declared or paid Common Stock cash dividends since
inception.


                                      12
<PAGE>

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

Results of Operations

                  Year ended December 31, 1997 compared to year ended December
31, 1996

                  The results of the Company's operations for the year ended
December 31, 1997 compared to the year ended December 31, 1996 are not
comparable or necessarily indicative of results in the future due to the
significance of acquisitions.

                  As of June 30, 1997, the Company, through a wholly-owned
subsidiary, Faircom Mansfield Inc. ("Faircom Mansfield"), acquired the assets
and operations of two radio stations, WMAN-AM and WYHT-FM, both located in
Mansfield, Ohio (the "Mansfield Stations") for aggregate cash consideration of
$7,650,000. The acquisition has been accounted for as a purchase, and
accordingly the operating results of the Mansfield Stations have been included
in the Consolidated Statements of Operations from the acquisition date.

                  The increase in the Company's net broadcasting revenues in
1997 as compared with 1996 resulted principally from the ownership and
operation of the Mansfield Stations during 1997. Net broadcasting revenues
increased to $5,993,000 from $4,874,000, or 23.0%, in 1997 as compared with
1996.

                  Programming and technical expenses and selling, general and
administrative expenses increased in 1997 as compared with 1996, principally
as a result of the acquisition of the Mansfield Stations. Such increases were
to $1,591,000 from $1,218,000, or 30.6%, and to $2,270,000 from $1,775,000, or
27.9%, respectively.

                  Operating expenses before depreciation, amortization and
corporate expenses also increased in 1997 as compared with 1996, primarily as
a result of the acquisition of the Mansfield Stations. Such increase was to
$3,860,000 from $2,993,000, or 29.0%, in 1997 as compared with 1996.

                  Net broadcasting revenues in excess of operating expenses
before depreciation, amortization and corporate expenses ("broadcast cash
flow") increased 13.4% to $2,133,000 in 1997 from $1,881,000 in 1996. This
increase resulted from the acquisition of the Mansfield Stations as described
above, offset in part by lower broadcast cash flow from the Company's radio
stations in Flint, Michigan.

                  Depreciation and amortization and interest expense increased
in 1997 as compared with 1996 as a result of the addition of assets and debt
incurred in connection with the acquisition of the Mansfield Stations.

                  Taxes on income for both 1997 and 1996 related principally
to state income taxes. There were no current federal income taxes in 1997, as
a result of a taxable loss. Current federal income taxes in 1996 were offset
in full by the utilization


                                      13
<PAGE>

of net operating loss carryforwards. The Company has provided valuation
allowances equal to its deferred tax assets because of uncertainty as to their
future utilization. The deferred tax assets relate principally to net
operating loss carryforwards. Although the Company was marginally profitable
in 1994 through 1996, the loss in 1997 along with substantial historical
losses caused management to conclude that it was still premature to reduce the
valuation allowance.

                  As a result principally of an extraordinary loss from debt
extinguishment of $4,703,000, offset in part by an extraordinary gain from
debt extinguishment of $370,000, net loss was $4,696,000 for 1997 compared to
net income of $279,000 in 1996.

                  Year ended December 31, 1996 compared to year ended December
                  31, 1995

                  The Company's net broadcasting revenues decreased 4.7% in
1996 compared to 1995 (to $4,874,000 from $5,114,000), primarily due to lower
regional and national advertising activity in the Flint, Michigan radio market
and resulting lower regional and national advertising revenues in the
Company's Flint radio stations.

                  Programming and technical expenses decreased by 0.9% in 1996
compared to 1995 (to $1,218,000 from $1,229,000) and selling, general and
administrative expenses increased by 3.4% (to $1,775,000 from $1,717,000).

                  Operating expenses before depreciation, amortization and
corporate expenses increased by 1.6% in 1996 compared to 1995 (to $2,993,000
from $2,946,000).

                  Net broadcasting revenues in excess of operating expenses
before depreciation, amortization and corporate expenses ("broadcast cash
flow") decreased 13.2% (to $1,881,000 from $2,167,000) in 1996 compared to
1995, principally as a result of the lower net broadcasting revenues in Flint.

                  Corporate expenses increased by 10.5% in 1996 from 1995 (to
$337,000 from $305,000) primarily as a result of higher employee compensation,
professional fees and related expense. Such employee compensation in 1996
included incentive payments indexed to 1995 operating results.

                  Interest expense decreased by 26.9% in 1996 from 1995 (to
$914,000 from $1,249,000) due to lower principal amounts of interest bearing
debt outstanding, lower interest rates during 1996 and a lower provision for
appraisal rights.

                  Taxes on income for both 1996 and 1995 related principally
to state income taxes. Current federal income taxes in 1996 and 1995 and a
portion of state income taxes in 1995 were offset by the utilization of net
operating loss carryforwards. The Company has provided valuation allowances
equal to its deferred tax assets because of uncertainty as to their future
utilization. The deferred tax assets relate principally to net operating loss
carryforwards. Although the Company was marginally


                                      14
<PAGE>

profitable in 1994 through 1996, substantial historical losses caused
management to conclude that it was still premature to reduce the valuation
allowance.

                  As a result principally of lower provision for appraisal
rights and interest expense in 1996 compared with 1995, offset by lower income
from operations, net income increased to $279,000 in 1996 from $245,000.

Liquidity and Capital Resources

                  In 1997, net cash provided by operating activities was
$418,000 compared with $379,000 provided by operating activities in 1996. Net
increase in cash and cash equivalents was $412,000 in 1997 compared with a net
decrease of $240,000 in 1996.

                  In January 1998, Faircom Mansfield purchased substantially
all of the assets and operations of radio station WSWR-FM in Shelby, Ohio for
$1,125,000 in cash. The acquisition was financed with internal funds and a
loan to the Company of $1,100,000. The loan is in the form of a subordinated
note, matures on the first to occur of April 1, 1999 or the closing of the
merger with Regent Communications, Inc. ("Regent"), discussed below, and bears
accrued interest at 14% per annum, payable at maturity.

                  Based upon current interest rates, and assuming the merger
with Regent is not consummated, the Company believes its interest payments for
1998 will be approximately $1,213,000. Scheduled debt principal payments are
$430,000. Corporate expenses and capital expenditures for 1997 are estimated
to be approximately $410,000 and $200,000, respectively. The Company expects
to be able to meet such interest expense, debt repayment, corporate expenses
and capital expenditures, aggregating $2,253,000, from net cash provided by
operations and current cash balances. For the years 1999 through 2001,
currently scheduled debt principal payments average $685,000 yearly. Interest
payments, corporate expenses and capital expenditures are expected to be
approximately the same as projected for 1998, adjusted for inflation. The
Company expects to be able to meet such cash requirements from net cash
provided by operations and cash balances. The Company believes its $1,100,000
loan maturing April 1, 1999, and the balance of its long-term debt in the
amount of $19,858,000, maturing July 1, 2002, will be refinanced at their
respective maturity dates either from its current lenders or from other
sources, if still outstanding.

                  The terms of the Securities Purchase Agreement applicable to
the Company's Convertible Subordinated Promissory Class A and Class B Notes
(the "Notes"), as amended, provide that if the Company does not, on or before
April 1, 1999, consummate a merger of the Company with another corporation on
terms acceptable to the holders of the Notes, then upon notice from such
holders, the Company shall take all action necessary to liquidate the Company
and each of its subsidiaries on terms and conditions acceptable to such
holders, such approval not to be unreasonably withheld. As indicated below,
the Company expects to complete a merger with Regent in the second quarter of
1998. If, however, such merger should not occur, the Company


                                      15
<PAGE>

believes there are a number of alternatives available to it which would be
acceptable to the holders of the Notes.

                  On December 5, 1997, the Company announced that it had
signed an agreement to merge with Regent, another group radio broadcaster. The
Company anticipates a closing of the merger in the second quarter of 1998. The
closing of the merger is subject to the effectiveness of a registration
statement and delivery of a related proxy statement to the Company's
stockholders, satisfaction of the conditions of the merger agreement and the
approval of the Company's stockholders. The Company estimates the fees and
expenses of this transaction, for which the Company is responsible, to be
approximately $543,000. Of this amount, approximately $233,000 is payable only
if the merger is consummated. Of the balance of $310,000, the Company expects
to pay such fees and expenses from net cash provided by operations and current
cash balances, and, with respect to the amount payable on consummation of the
merger, from such balances at the time of the closing of the merger.

Inflation

                  The Company does not believe the effects of inflation have
had a significant impact on its consolidated financial statements.

Compliance with Year 2000

                  Management has initiated a Company-wide program to prepare
the Company's computer systems and applications for year 2000 compliance. The
Company expects to incur internal staff costs as well as other expenses
necessary to prepare its systems for the year 2000. The Company expects to
both replace some systems and upgrade others. Maintenance or modification
costs will be expensed as incurred. The total cost of this effort is still
being evaluated, but is not expected to be material to the Company.

Cautionary Statement Concerning Forward-Looking Statements

                  This Form 10-K, including this Management's Discussion and
Analysis, includes or may include certain forward-looking statements with
respect to Faircom that involve risks and uncertainties. This Form 10-K
contains certain forward-looking statements concerning financial position,
business strategy, budgets, projected costs, and plans and objectives of
management for future operations, as well as other statements including words
such as "anticipate," "believe," "plan," "estimate," "expect," "intend,"
"project" and other similar expressions. Although Faircom believes its
expectations reflected in such forward-looking statements are based on
reasonable assumptions, readers are cautioned that no assurance can be given
that such expectations will prove correct and that actual results and
developments may differ materially from those conveyed in such forward-looking
statements. For these statements, Faircom claims the protections of the safe
harbor for forward-looking statements contained in the Private Securities
Litigation Reform Act of 1995.



                                      16
<PAGE>



                  Important factors that could cause actual results to differ
materially from the expectations reflected in the forward-looking statements
herein include changes in general economic, business and market conditions, as
well as changes in such conditions that may affect the radio broadcast
industry or the markets in which Faircom operate, in particular, increased
competition for attractive radio properties and advertising dollars,
fluctuations in the costs of operating radio properties, and changes in the
regulatory climate affecting radio broadcast companies. Such forward-looking
statements speak only as of the date on which they are made, and Faircom
undertakes no obligation to update any forward-looking statement to reflect
events or circumstances after the date of this Form 10-K. If Faircom does
update or correct one or more forward-looking statements, readers should not
conclude that Faircom will make additional updates or corrections with respect
thereto or with respect to other forward-looking statements.

ITEM 8.           FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                  Financial statements and supplementary data required
pursuant to this Item begin on page F-1 of this report.

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

                  Not applicable.


                                      17
<PAGE>



                                   PART III


ITEM 10.          DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

                  The names of the directors and executive officers of Faircom
Inc. (the "Company") and certain information about them are set forth below:

<TABLE>
<CAPTION>
                                                              Principal Occupation
Name                                Age                       for Past Five Years
----                                ---                       --------------------
<S>                                 <C>                       <C>
Joel M. Fairman                     69                        Founder, President, Treasurer and
                                                              Chairman of the Board of the Company
                                                              since its inception in April 1984.  From
                                                              September 1965 until June 1984, Mr.
                                                              Fairman was employed in an executive
                                                              capacity by investment banking firms.

Anthony Pantaleoni                  58                        Secretary and director of the Company
                                                              since its inception in April 1984.  Mr.
                                                              Pantaleoni has been a partner in the
                                                              law firm of Fulbright & Jaworski L.L.P.
                                                              for more than five years.  Mr.
                                                              Pantaleoni also currently serves as a
                                                              director of Universal Health Services,
                                                              Inc., AAON Inc. and Westwood
                                                              Corporation.

Stephen C. Eyre                     75                        Director of the Company since May
                                                              1984.  From July 1985 to December
                                                              1997, Dr. Eyre was Executive Director
                                                              of The John A. Hartford Foundation.
                                                              From March 1983 through June 1985 he
                                                              was Distinguished Professor, Citicorp
                                                              Chair of Finance at Pace University,
                                                              New York City.  Prior to March 1983,
                                                              Dr. Eyre was a director of Citibank,
                                                              N.A. (December 1981 - March 1983),
                                                              Senior Vice-President and Secretary
                                                              (1980 - 1983) and Comptroller (1973 -
                                                              1980) of Citibank and Citicorp.  Dr.
                                                              Eyre currently serves as a director or
                                                              trustee of various Prudential Global
                                                              Equity and Money Market Funds.

John C. Jansing                     72                        Director of the Company since May
                                                              1984.  From January 1975 to February


                                      18

<PAGE>



                                                              1992, Mr. Jansing was Chairman of the
                                                              Board of Directors of The Independent
                                                              Election Corporation of America, a
                                                              proxy solicitation, tabulation and
                                                              services firm. Mr. Jansing also serves
                                                              as a director of Vestaur Securities,
                                                              Inc. and Alpine Group Corporation. In
                                                              addition, Mr. Jansing currently serves
                                                              as a director of the following
                                                              investment funds: Affiliated Fund,
                                                              Inc.; Lord Abbett Value Appreciation
                                                              Fund, Inc.; Lord Abbett Bond-Debenture
                                                              Fund, Inc.; Lord Abbett Cash Reserve
                                                              Fund, Inc.; Lord Abbett Development
                                                              Growth Fund, Inc.; Lord Abbett Income
                                                              Fund, Inc.; and the Lord Abbett Tax
                                                              Free Income Fund, Inc.

John H. Wyant                       52                        Director of the Company since
                                                              September 1997.  Mr. Wyant has served
                                                              since its formation in 1992 as President
                                                              of Blue Chip Venture Company, a
                                                              venture capital investment firm which,
                                                              together with its affiliates, manages an
                                                              aggregate of approximately $180 million
                                                              of committed capital for investment in
                                                              privately held high growth companies.
                                                              From 1991 to 1992, Mr. Wyant served
                                                              as Executive Vice President, Corporate
                                                              Finance, of Gradison & Co., a financial
                                                              services firm, where his primary activity
                                                              was the development and formation of
                                                              Blue Chip Venture Company.  Mr.
                                                              Wyant was initially trained in
                                                              marketing with The Proctor & Gamble
                                                              Company and served in marketing and
                                                              general management positions with Taft
                                                              Broadcasting Company.  Subsequently,
                                                              he was Chief Executive Officer of Home
                                                              Entertainment Network and Nutrition
                                                              Technology Corporation, both venture
                                                              capital-backed companies.  Mr. Wyant is
                                                              also a director of Zaring National
                                                              Corporation, Ciao Cucina Corporation
                                                              and a number of privately held
                                                              companies.



                                                 19
<PAGE>



John E. Risher                      58                        Senior Vice President of the Company
                                                              since January 1996 and Vice President
                                                              of the Company from July 1991 to
                                                              January 1996.  Mr. Risher is also
                                                              President and General Manager, since
                                                              January 1996, of the Company's
                                                              subsidiary, Faircom Flint Inc.  Prior to
                                                              January 1996, Mr. Risher was Vice
                                                              President and General Manager of the
                                                              subsidiary since its acquisition of the
                                                              Company's radio stations in Flint,
                                                              Michigan in December 1986.  For 20
                                                              years prior to 1986, Mr. Risher was
                                                              employed in sales, sales management
                                                              and as a general manager for radio
                                                              stations.
</TABLE>


                  Directors of the Company are elected annually and hold
office until the Annual Meeting of stockholders or until their successors have
been elected and have duly qualified.

                  Executive officers of the Company are elected annually and
hold office until the first meeting of the Board of Directors following the
Annual Meeting of stockholders or until their successors have been elected and
have duly qualified.

Compensation Pursuant to Stock Option Plan

                  On September 18, 1984 the Board of Directors of the Company
adopted a stock option plan (the "Plan"), which was subsequently approved by
the stockholders of the Company on September 12, 1985. The Plan provides for
the granting of incentive stock options as well as options not qualifying as
incentive stock options (non-statutory stock options). Under the terms of the
Plan, the Company's right to grant additional incentive stock options
terminated September 18, 1994, ten years from the date the Plan was adopted by
the Company's Board of Directors.

                  The Plan was adopted for the purpose of advancing the
interests of the Company and furthering its growth and development by
encouraging and enabling directors, officers and key employees of the Company
and its subsidiaries and other persons, who are presently making and are
expected to continue to make substantial contributions to the successful
growth of the Company, to acquire an increased and proprietary interest in its
continued success and progress. Incentive stock options granted pursuant to
the Plan provide certain restrictions concerning to whom and upon what basis
the grant and exercise of options may be made and on the disposition of stock
issued upon exercise of options as required by the tax laws.



                                       20
<PAGE>



                  An aggregate of 900,000 shares of the Common Stock, par
value $.01 per share, is available and reserved for issuance under the Plan.

Eligibility

                  Employees (either full or part-time), directors and
consultants to the Company and its subsidiaries, who are deemed to have the
potential to contribute to the future success of the Company, are eligible to
receive non-statutory stock options under the Plan. Until September 1994,
full-time and part-time employees (including employees who are also directors
of the Company or a subsidiary) and salaried directors, were eligible to
receive incentive stock options. Approximately 97 employees of the Company and
its subsidiaries are entitled to participate in the Plan.

Administration of the Plan

                  The Plan may be administered by the Board of Directors or by
a committee appointed by the Board of Directors of the Company (the
"Committee"). Currently, the Board of Directors is administering the Plan.
Subject to the provisions of the Plan, either the Board of Directors or the
Committee, whichever is then acting with respect to the Plan, possesses the
authority in its discretion (i) to determine, upon review of relevant
information, the fair market value of the Common Stock; (ii) to determine the
exercise price per share of stock options to be granted; (iii) to determine
the Eligible Participants to whom, and time or times at which, awards shall be
granted and the number of shares to be represented by each stock option; (iv)
to construe and interpret the Plan; (v) to prescribe, amend and rescind rules
and regulations relating to the Plan; (vi) to determine the terms and
provisions of each award (which need not be identical) and (vii) to make all
other determinations necessary to or advisable for the administration of the
Plan.

                  The Plan provides for the issuance of shares of Common Stock
for any nature of consideration, including a promissory note, as determined by
the Board of Directors or the Committee. The Board of Directors or the
Committee may also determine the conditions which it deems appropriate to
assure that such consideration will be received by, or accrued to, the
Company. The consideration may be different for different options.

Grants and Exercises under the Plan and Other Stock Options

                  During the fiscal year ended December 31, 1997, options to
purchase an aggregate of 69,000 shares of Common Stock at a weighted average
exercise price of $.53 per share were granted pursuant to the Plan. As of
March 20, 1998, no options granted pursuant to the Plan had been exercised. On
that date the bid and asked prices for the Common Stock as quoted on the OTC
Bulletin Board were $.81 and $.94, respectively.

                  At June 30, 1997, in connection with the issuance of its
Class A and Class B Convertible Subordinated Promissory Notes ("Notes"), the
Company issued options


                                       21
<PAGE>



to purchase 958,886 and 159,814 shares of its common stock at an exercise
price of $.53 per share to its President and Senior Vice President,
respectively. These options are exercisable through July 1, 2002 to the extent
the Notes are converted to common stock. If less than all of the Notes are
ultimately converted, the number of options will be reduced proportionately.


































                                       22
<PAGE>

ITEM 11.          EXECUTIVE COMPENSATION AND OTHER INFORMATION

Summary of Cash and Certain Other Compensation

                  The following table sets forth certain summary information
concerning compensation paid or accrued by the Company and its subsidiaries
to, or on behalf of, the Company's Chief Executive Officer for the fiscal
years ended December 31, 1995, 1996 and 1997.

<TABLE>
<CAPTION>
                                            SUMMARY COMPENSATION TABLE
                                            --------------------------
                                                                                               Long Term Compensation
                                                                                  ------------------------------------------------
                                          Annual Compensation                                 Awards                     Payouts
                           --------------------------------------------------     -------------------------------      -----------
                                                                      Other                            Number of        Long Term
                                                                     Annual         Restricted        Securities        Incentive
Name and                                                             Compen-           Stock          Underlying           Plan
Principal Position         Year     Salary($)       Bonus ($)      sation ($)      Award(s) ($)         Options        Payouts ($)
------------------         ----     ---------       ---------      ----------      ------------       -----------      -----------
<S>                        <C>      <C>              <C>            <C>                 <C>             <C>                <C>
Joel M. Fairman,           1997     $125,438         $28,000        $2,459(1)           ---             958,886            ---
Chairman of the
Board, President and       1996     $102,672         $28,000        $2,024(1)           ---             118,182            ---
Treasurer
                           1995     $90,000          $15,000        $1,040(1)           ---             181,818            ---
</TABLE>



                    (RESTUBBED TABLE CONTINUED FROM ABOVE)


<TABLE>
<CAPTION>
                         All Other
Name and                 Compensa-
Principal Position       tion ($)
------------------       --------
<S>                      <C>
Joel M. Fairman,         29,574(2)
Chairman of the
Board, President and     26,639(2)
Treasurer
                         28,960(2)

</TABLE>

   (1)  Represents tax "gross up" for use of motor vehicle.

   (2)  Represents tax "gross up" for premiums paid by the Company for a "key
        man" life insurance policy owned by Mr. Fairman.




                                       23
<PAGE>




                  The following table sets forth certain information
concerning stock options granted to Joel M. Fairman and John E. Risher in the
fiscal year ended December 31, 1997.

                       OPTION GRANTS IN LAST FISCAL YEAR


<TABLE>
<CAPTION>
                           Number of
                          Securities   Percent of Total
                          Underlying    Options Granted     Exercise or                   Potential Realizable Value at
Name and                    Options     to Employees in        Base        Expiration  Assumed Annual Rates of Stock Price
Principal Position          Granted       Fiscal Year     Price ($/Sh)(1)     Date       Appreciation for Option Term(2)
------------------        ----------   ----------------   ---------------  ----------  -----------------------------------
                                                                                          5% ($)               10% ($)
                                                                                          ------               -------
<S>                         <C>              <C>               <C>          <C>          <C>                   <C>
Joel M. Fairman,            958,886          83.5%             .53          7/1/2002     $139,326              $307,994
Chairman of the
Board, President
and Treasurer

John E. Risher,              30,000           2.6%             .53          7/1/2002       $4,359               $23,221
Senior Vice
President                   159,214          17.9%             .53          7/1/2002       $9,636               $51,332
</TABLE>



   (1)  The exercise price per share under each option was at least equal to
        the fair market value of the Common Stock on the date of grant.

   (2)  Amounts represent hypothetical gains that could be achieved for the
        respective options if exercised at the end of the option term. These
        gains are based on assumed rates of stock appreciation of 5% and 10%
        compounded annually from the date the respective options were granted
        to their expiration date and are not presented to forecast possible
        future appreciation, if any, in the price of the Common Stock. The
        gains shown are net of the option exercise price, but do not include
        deductions for taxes or other expenses associated with the exercise of
        the options or the sale of the underlying shares. The actual gains, if
        any, on the stock option exercises will depend on the future
        performance of the Common Stock, the optionee's continued employment
        through applicable vesting periods and the date on which the options
        are exercised.


                                       24
<PAGE>



                  The following table sets forth certain information concerning
unexercised stock options granted to Joel M. Fairman and John E. Risher:


                      AGGREGATED OPTION EXERCISES IN LAST
                      FISCAL YEAR AND FY-END OPTION VALUES



<TABLE>
<CAPTION>
                                                                                             Value of Unexercised In-
                                                              Number of Unexercised          the-Money Options
                                                              Options FY-End                 at FY-End(1)
                                                              ---------------------          ------------------------
                                            Value Realized
                              Shares     (Market Price at
                           Acquired on       Exercise Less
Name                        Exercise        Exercise Price)   Exercisable     Unexercisable  Exercisable   Unexercisable
----                        ---------    ------------------   -----------     -------------  -----------   -------------
<S>                            <C>               <C>              <C>            <C>          <C>             <C>
Joel M. Fairman                None              ---              300,000        958,886      $204,670        $304,686

John E. Risher                 None              ---              131,000        253,814       $78,645        $113,742
</TABLE>



   (1)  The "Value" set forth in this column is based on the difference between
        the fair market value at December 31, 1997 ($.84 per share as quoted on
        the OTC Bulletin Board), and the option exercise price, multiplied by
        the number of shares underlying the option.





















                                       25
<PAGE>



ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
                MANAGEMENT

                The following table sets forth, as of March 20, 1998, certain
information with respect to all stockholders known to Faircom to beneficially
own more than 5% of the Faircom Common Stock, and information with respect to
Faircom Common Stock beneficially owned by each director of Faircom, the
President of Faircom and all directors and executive officers of Faircom as a
group. Except as otherwise specified, the stockholders listed in the table
have sole voting and investment power with respect to Faircom Common Stock
owned by them.



<TABLE>
<CAPTION>
                    Name and Address of                                Number of Shares
                     Beneficial Owners                                Beneficially Owned(a)            Percent of Class
                    -------------------                               ---------------------            ----------------
<S>                                                                        <C>                                <C>
Blue Chip Capital Fund II Limited..........................                14,492,085(b)                      66.3%
  Partnership
  2000 PNC Center
  201 East Fifth Street
  Cincinnati, Ohio 45202

Miami Valley Venture Fund L.P..............................                 2,557,427(c)                      25.7%
  2000 PNC Center
  201 East Fifth Street
  Cincinnati, Ohio 45202

John H. Wyant..............................................                17,049,512(d)                      69.8%
  c/o Blue Chip Venture Company, Ltd.
  2000 PNC Center
  201 East Fifth Street
  Cincinnati, Ohio 45202

PNC Bank, National Association, Trustee....................                 1,962,488(e)                      21.0%
  201 East Fifth Street
  Cincinnati, Ohio 45202

Joel M. Fairman............................................                 2,458,886(f)                      28.5%
  333 Glen Head Road
  Old Brookville, New York 11545

Don G. Hoff and Sandra Hoff................................                    430,000                         5.8%
  1 Via Capistrano
  Tiburon, California 94920

Ido Klear..................................................                    380,000                         5.2%
  111 Great Neck Road
  Great Neck, New York 11021

Anthony Pantaleoni.........................................                   110,000(g)                       1.5%
  666 Fifth Avenue
  New York, New York 10103

Stephen C. Eyre............................................                   139,000(g)                       1.9%
  69 Dogwood Lane
  Locust Valley, New York 11560



                                       26
<PAGE>





</TABLE>
<TABLE>
<CAPTION>
                    Name and Address of                                Number of Shares
                     Beneficial Owners                                Beneficially Owned(a)            Percent of Class
                    -------------------                               ---------------------            ----------------
<S>                                                                       <C>                             <C>
John C. Jansing............................................                   153,500(g)                       2.1%
  162 South Beach Road
  Hobe Sound, Florida 33455

All officers and directors as a group (6 persons)..........                20,227,212(h)                      77.0%
</TABLE>

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

(a)   The Securities and Exchange Commission has defined "beneficial
      ownership" to include sole or shared voting or investment power with
      respect to a security or the right to acquire beneficial ownership
      within 60 days. The number of shares indicated are owned with sole
      voting and investment power unless otherwise noted and includes certain
      shares held in the name of affiliated companies as to which beneficial
      ownership may be disclaimed.

(b)   Represents: (A) 8,431,875 shares issuable upon conversion of Faircom's
      Class A Convertible Subordinated Promissory Note held by Blue Chip
      Capital Fund II Limited Partnership in the principal amount of
      $3,750,000; and (b) 6,060,210 shares issuable upon conversion of
      Faircom's Class B Convertible Subordinated Promissory Note held by Blue
      Chip Capital Fund II Limited Partnership in the aggregate principal
      amount of $3,900,000. See note (d) below.

(c)   Represents: (A) 1,487,979 shares issuable upon conversion of Faircom's
      Class A Convertible Subordinated Promissory Note held by Miami Valley
      Venture Fund L.P., in the principal amount of $661,765; and (b)
      1,069,448 shares issuable upon conversion of Faircom's Class B
      Convertible Subordinated Promissory Note held by Miami Valley Venture
      Fund L.P. in the principal amount of $688,235.  See note (d) below.

(d)   John H. Wyant, a director of Fairman, is a beneficial owner and manager
      of Blue Chip Venture Company Ltd., which is the general partner of Blue
      Chip Capital Fund II Limited Partnership, and Blue Chip Venture Company
      of Dayton, Ltd., an investment manager for Miami Valley Venture Fund
      L.P. Mr. Wyant disclaims beneficial ownership of the securities held by
      Blue Chip Capital Fund II Limited Partnership and Miami Valley Venture
      Fund L.P. See notes (b) and (c) above.

(e)   Represents 1,322,646 shares issuable upon conversion of Faircom's Class
      A Convertible Subordinated Promissory Notes held by PNC Bank, National
      Association, Trustee in the principal amount of $588,235 and 639,842
      shares issuable upon conversion of Faircom's Class B Convertible
      Subordinated Promissory Notes held by PNC Bank, National Association,
      Trustee in the principal amount of $411,765.

(f)   Includes 1,258,886 shares issuable pursuant to stock options held by Mr.
      Fairman, including options granted under Faircom's Stock Option Plan
      (the "Plan") and outside the Plan.


                                       27
<PAGE>




(g)   Includes 100,000 shares issuable pursuant to stock options held by each
      of Messrs. Pantaleoni, Eyre and Jansing under the Plan.

(h)   Includes 1,849,700 shares issuable pursuant to stock options held by
      officers and directors of Faircom, including options granted under the
      Plan and outside the Plan, and 17,049,512 shares issuable upon
      conversion of Faircom's Class A and Class B Convertible Subordinated
      Promissory Notes held by Blue Chip Capital Fund II Limited Partnership
      and Miami Valley Fund L.P. See note (d) above.


ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

                During the fiscal year ended December 31, 1997, Anthony
Pantaleoni, Secretary and a Director of the Company, was a partner in the law
firm of Fulbright & Jaworski L.L.P., which firm was retained by the Company
during such fiscal year.

                As of June 30, 1997, the Company sold $10,000,000 aggregate
principal amount of its convertible subordinated notes to Blue Chip Capital
Fund II Limited Partnership ("Blue Chip") and Miami Valley Fund L.P. ("Miami
Valley"). John H. Wyant, who was elected a director of Faircom on September
16, 1997, is a beneficial owner and manager of Blue Chip Venture Company Ltd.,
which is the general partner of Blue Chip, and Blue Chip Venture Company of
Dayton, Ltd., an investment manager for Miami Valley.



















                                       28
<PAGE>



                                    PART IV


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

(a) 1 and 2. Index to financial statements and related schedules.

                See the Index to Consolidated Financial Statements and
Consolidated Financial Statement Schedules beginning on page F-1 of this
report.

(a)   3.  Exhibits.

              * 3.1   Certificate of Incorporation, as amended.

              * 3.2   By-Laws of the Company.

              * 21    Subsidiaries of the registrant.

                27    Financial Data Schedule.

(b)       No reports on Form 8-K were filed during the period October 1, 1997
          through December 31, 1997.




















--------
*         Previously filed as an exhibit to the Company's registration of
          securities on Form 10, dated February 12, 1987, pursuant to Section
          12(g) of the Securities Exchange Act of 1934.




                                       29
<PAGE>

                                   SIGNATURES


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


                                          FAIRCOM INC.


                                          By /s/ Joel M. Fairman
                                             -------------------
                                             Joel M. Fairman
                                             President

March 30, 1998

           Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.

        Signature              Title                           Date
        ---------              -----                           ----
By /s/ Joel M. Fairman        President, Treasurer             March 30, 1998
   -----------------------    and Chairman of the Board
   Joel M. Fairman            (Chief Executive, Financial
                              and Accounting Officer)


By /s/ Anthony Pantaleoni     Secretary and Director           March 30, 1998
   -----------------------
   Anthony Pantaleoni


By  /s/ Stephen C. Eyre       Director                         March 30, 1998
    ----------------------
    Stephen C. Eyre


By  ----------------------    Director                         March   , 1998
    John C. Jansing


By  /s/ John H. Wyant         Director                         March 30, 1998
    ----------------------
    John H. Wyant




                                      30


<PAGE>
                                                        FAIRCOM INC.




                                              CONSOLIDATED FINANCIAL STATEMENTS
                                FORM 10-K - ITEM 8 AND ITEMS 14 (A) (1) AND (2)
                                                   YEAR ENDED DECEMBER 31, 1997


                                                                            F-1



<PAGE>

                                                                   FAIRCOM INC.


                                     INDEX TO CONSOLIDATED FINANCIAL STATEMENTS







REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                  F-3

CONSOLIDATED BALANCE SHEETS:
        December 31, 1997 and 1996                                  F-4

CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE
   YEARS ENDED DECEMBER 31, 1997:
        Statements of operations                                    F-5
        Statements of capital deficit                               F-6
        Statements of cash flows                                    F-7

SUMMARY OF ACCOUNTING POLICIES                               F-8 - F-11

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS                  F-12 - F-27



                                                                            F-2

<PAGE>



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS


The Board of Directors and Stockholders
Faircom Inc.

We have audited the consolidated balance sheets of Faircom Inc. as of December
31, 1997 and 1996 and the related consolidated statements of operations,
capital deficit, and cash flows for each of the three years in the period ended
December 31, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

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

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Faircom Inc. at
December 31, 1997 and 1996 and the consolidated results of its operations and
its cash flows for each of the three years in the period ended December 31,
1997 in conformity with generally accepted accounting principles.




Mitchel Field, New York                                    /s/  BDO Seidman, LLP
January 21, 1998                                           ---------------------
                                                                BDO Seidman, LLP

                                                                            F-3
<PAGE>

                                                                   FAIRCOM INC.


                                                    CONSOLIDATED BALANCE SHEETS



<TABLE>
<CAPTION>

December 31,                                                                                1997              1996
---------------------------------------------------------------------------------------------------------------------
<S>                                                                                     <C>                <C>
ASSETS (NOTE 3)
CURRENT ASSETS:
   Cash and cash equivalents                                                            $   535,312        $  123,221
   Accounts receivable, less allowance of $32,000 and $20,000
      for possible losses                                                                 1,358,002         1,169,772
   Prepaid expenses                                                                          25,918            12,592
---------------------------------------------------------------------------------------------------------------------
        TOTAL CURRENT ASSETS                                                              1,919,232         1,305,585
---------------------------------------------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT, less accumulated depreciation and
   amortization (Note 1)                                                                  2,156,244         1,184,554
---------------------------------------------------------------------------------------------------------------------
INTANGIBLE ASSETS, net of accumulated amortization of $784,791
   and $515,670 (Note 2)                                                                  7,701,341         1,627,767
OTHER ASSETS:
   Deferred financing costs                                                                 837,411           167,222
   Escrow deposit for purchase of radio station (Note 13)                                   100,000                 -
   Other                                                                                    296,326            41,325
---------------------------------------------------------------------------------------------------------------------
                                                                                          8,935,078         1,836,314
---------------------------------------------------------------------------------------------------------------------
                                                                                        $13,010,554        $4,326,453
=====================================================================================================================
LIABILITIES AND CAPITAL DEFICIT
CURRENT LIABILITIES:
   Accounts payable                                                                     $    87,280        $   76,853
   Accrued expenses and liabilities                                                         163,805           199,054
   Taxes payable                                                                             70,150            10,150
   Current portion of interest payable (Note 3 (a))                                         108,391           226,417
   Current portion of long-term debt (Note 3)                                               430,005           552,000
   Current portion of obligations under capital leases                                            -             3,547
---------------------------------------------------------------------------------------------------------------------
        TOTAL CURRENT LIABILITIES                                                           859,631         1,068,021
LONG-TERM DEBT, less current portion (including $10,000,000 to
   a related party in 1997) (Note 3)                                                     21,911,661         7,276,884
INTEREST PAYABLE, less current portion (Note 3 (a))                                         353,063           350,494
DEFERRED RENTAL INCOME (Note 4)                                                              67,987           101,995
APPRAISAL RIGHT LIABILITY (Note 3 (b))                                                            -         1,015,000
---------------------------------------------------------------------------------------------------------------------
        TOTAL LIABILITIES                                                                23,192,342         9,812,394
---------------------------------------------------------------------------------------------------------------------
COMMITMENTS AND CONTINGENCIES (Notes 3 (b) and 5)
</TABLE>

                                                                            F-4
<PAGE>


<TABLE>
<CAPTION>
<S>                                                                  <C>                      <C>
CAPITAL DEFICIT (Notes 3 (b), 7 and 8):
   Common stock - $.01 par value, 35,000,000 shares
      authorized; 7,378,199 shares issued and outstanding                  73,782                  73,782
   Additional paid-in capital                                           2,605,813               2,605,813
   Deficit                                                            (12,861,383)             (8,165,536)
----------------------------------------------------------------------------------------------------------
        TOTAL CAPITAL DEFICIT                                         (10,181,788)             (5,485,941)
----------------------------------------------------------------------------------------------------------
                                                                     $ 13,010,554             $ 4,326,453
==========================================================================================================
</TABLE>

                              See accompanying summary of accounting policies
                              and notes to consolidated financial statements.


























                                                                            F-5

<PAGE>

                                                                   FAIRCOM INC.


                                          CONSOLIDATED STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>
Year ended December 31,                                                              1997            1996                 1995
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                                                             <C>               <C>                  <C>
BROADCASTING REVENUES:
   Gross broadcasting revenues                                                  $  6,696,564      $5,517,586           $5,785,963
   Less: agency commissions                                                         (703,273)       (643,632)            (672,381)
-----------------------------------------------------------------------------------------------------------------------------------
      NET BROADCASTING REVENUES                                                    5,993,291       4,873,954            5,113,582
-----------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
   Programming and technical expenses                                              1,590,531       1,218,160            1,229,333
   Selling, general and administrative expenses                                    2,269,800       1,775,059            1,716,858
   Depreciation and amortization                                                     726,564         321,263              351,257
   Corporate expenses                                                                391,252         336,643              304,653
-----------------------------------------------------------------------------------------------------------------------------------
      TOTAL OPERATING EXPENSES                                                     4,978,147       3,651,125            3,602,101
-----------------------------------------------------------------------------------------------------------------------------------
INCOME FROM OPERATIONS                                                             1,015,144       1,222,829            1,511,481
   Interest expense (including provision for appraisal rights of
      $215,000 in 1996 and $438,000 in 1995 (Note 3(b))                           (1,330,676)       (913,643)          (1,249,298)
   Other income                                                                       24,537           7,346               10,633
-----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE TAXES ON INCOME AND EXTRAORDINARY ITEMS                        (290,995)        316,532              272,816
TAXES ON INCOME (Note 9)                                                              71,542          37,692               28,000
-----------------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS                                            (362,537)        278,840              244,816
-----------------------------------------------------------------------------------------------------------------------------------
EXTRAORDINARY ITEMS:
   Gain from debt extinguishment (Note 3(a))                                         370,060               -                    -
   Loss from debt extinguishment (Note 3(b))                                      (4,703,370)              -                    -
-----------------------------------------------------------------------------------------------------------------------------------
      Extraordinary items - net                                                   (4,333,310)              -                    -
-----------------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS)                                                                $(4,695,847)     $  278,840          $   244,816
===================================================================================================================================
BASIC INCOME (LOSS) PER SHARE OF COMMON STOCK - ASSUMING NO
   DILUTION (Note 10):
      Income (loss) before extraordinary items                                         $(.05)           $.04                 $.03
      Extraordinary items                                                               (.59)              -                    -
-----------------------------------------------------------------------------------------------------------------------------------
        BASIC NET INCOME (LOSS) PER COMMON SHARE                                       $(.64)           $.04                 $.03
===================================================================================================================================
        WEIGHTED AVERAGE SHARES OUTSTANDING                                        7,378,199       7,378,199            7,378,199
===================================================================================================================================

DILUTED INCOME (LOSS) PER COMMON SHARE - ASSUMING ISSUANCE OF ALL DILUTIVE
   CONTINGENT SHARES (Note 10):
      Income (loss) before extraordinary items                                         $(.05)           $.02                 $.02
      Extraordinary items                                                               (.59)              -                    -
-----------------------------------------------------------------------------------------------------------------------------------
        DILUTED NET INCOME (LOSS) PER COMMON SHARE                                     $(.64)           $.02                 $.02
===================================================================================================================================
        WEIGHTED AVERAGE SHARES OUTSTANDING                                        7,378,199      16,459,701           16,459,701
===================================================================================================================================
</TABLE>

                            See accompanying summary of accounting policies and
                            notes to consolidated financial statements.

                                                                            F-6
<PAGE>

                                                                   FAIRCOM INC.


                                     CONSOLIDATED STATEMENTS OF CAPITAL DEFICIT
                                    FOR THE THREE YEARS ENDED DECEMBER 31, 1997




<TABLE>
<CAPTION>
                                            Common Stock
                                  ---------------------------------
                                                                          Additional
                                       Shares          Amount           paid-in capital          Deficit               Total
-----------------------------------------------------------------------------------------------------------------------------------
<S>                                 <C>               <C>                 <C>                 <C>                  <C>
Balance, December 31,
1994                                7,378,199         $73,782             $2,605,813           $(8,689,192)         $(6,009,597)
   Net income for the year
       ended December 31,
       1995                                 -               -                      -               244,816              244,816
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31,
1995                                7,378,199          73,782              2,605,813            (8,444,376)          (5,764,781)
   Net income for the year
       ended December 31,
       1996                                 -               -                      -               278,840              278,840
-----------------------------------------------------------------------------------------------------------------------------------
Balance, December 31,
1996                                7,378,199          73,782              2,605,813            (8,165,536)          (5,485,941)
   NET LOSS FOR THE
       YEAR ENDED
       DECEMBER 31,1997                     -               -                      -            (4,695,847)          (4,695,847)
-----------------------------------------------------------------------------------------------------------------------------------
BALANCE, DECEMBER 31,
1997                                7,378,199         $73,782             $2,605,813          $(12,861,383)        $(10,181,788)
===================================================================================================================================
</TABLE>


                          See accompanying summary of accounting policies and
                              notes to consolidated financial statements.


                                                                            F-7
<PAGE>

                                                                   FAIRCOM INC.

                                          CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                                      (NOTE 12)


<TABLE>
<CAPTION>
Year ended December 31,                                                                  1997          1996            1995
-------------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>           <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                             $ (4,695,847)     $278,840        $244,816
-------------------------------------------------------------------------------------------------------------------------------
   Adjustments to reconcile net income (loss) to net cash provided by operating
      activities:
        Depreciation and amortization                                                 726,564       323,474         351,257
        Amortization of deferred rental income                                        (34,008)      (34,005)        (34,000)
        Provision for doubtful accounts                                                46,308        23,449          16,428
        Provision for appraisal rights                                                      -       215,000         438,000
        Net loss from debt extinguishments                                          4,333,310             -               -
        Increase (decrease) in cash flows from changes in
           operating assets and liabilities, net of effects of
           purchase of radio stations:
           Accounts receivable                                                       (234,538)     (250,620)         (2,708)
           Prepaid expenses                                                           (13,326)       (6,809)         31,724
           Other assets                                                                     -        (1,325)              -
           Accounts payable                                                            10,427        17,907          13,907
           Accrued expenses and liabilities                                           (35,249)       (9,581)        (77,016)
           Taxes payable                                                               60,000       (10,000)       (100,918)
           Interest payable                                                           254,603      (167,714)        (61,978)
-------------------------------------------------------------------------------------------------------------------------------
                TOTAL ADJUSTMENTS                                                   5,114,091        99,776         574,696
-------------------------------------------------------------------------------------------------------------------------------
                NET CASH PROVIDED BY OPERATING ACTIVITIES                             418,244       378,616         819,512
-------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Assets related to purchase of radio stations                                    (7,650,000)            -               -
   Capital expenditures                                                              (131,701)      (63,440)       (172,805)
   Acquisition of intangible assets                                                   (81,180)            -               -
   Escrow deposit for purchase of radio station                                      (100,000)            -               -
-------------------------------------------------------------------------------------------------------------------------------
                NET CASH USED IN INVESTING ACTIVITIES                              (7,962,881)      (63,440)       (172,805)
-------------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Payment for deferred financing costs                                              (834,137)      (44,985)           (235)
   Proceeds from long-term debt                                                    23,000,000             -               -
   Principal payments on long-term debt                                            (7,805,588)     (493,249)       (515,556)
   Purchase of convertible and exchangeable debt                                   (5,385,000)            -               -
   Payment of appraisal right liability                                            (1,015,000)            -               -
   Principal payments under capital lease obligations                                  (3,547)      (17,253)        (19,660)
-------------------------------------------------------------------------------------------------------------------------------
                NET CASH PROVIDED BY (USED IN) FINANCING
                   ACTIVITIES                                                       7,956,728      (555,487)       (535,451)
-------------------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                  412,091      (240,311)        111,256
CASH AND CASH EQUIVALENTS, beginning of year                                          123,221       363,532         252,276


                                                                            F-8
<PAGE>
Year ended December 31,                                                                1997          1996            1995
-------------------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year                                               $  535,312    $123,221       $363,532
===============================================================================================================================
</TABLE>


                              See accompanying summary of accounting policies
                              and notes to consolidated financial statements.




























                                                                            F-9
<PAGE>


                                                                   FAIRCOM INC.


                                                 SUMMARY OF ACCOUNTING POLICIES




ORGANIZATION AND                 Faircom Inc. (the "Company") owns and operates
BUSINESS                         radio stations through its wholly-owned
                                 subsidiaries in Flint, Michigan and, effective
                                 June 30, 1997, in Mansfield, Ohio.



PRINCIPLES OF                    The consolidated financial statements of the
CONSOLIDATION                    Company include the accounts of Faircom Inc.
                                 and its subsidiaries, Faircom Flint Inc.
                                 ("Flint"), and Faircom Mansfield Inc.
                                 ("Mansfield"), all of whose common stock is
                                 owned by the Company.  All intercompany
                                 accounts and transactions are eliminated.
                                 Prior to January 1997, Mansfield was named
                                 Faircom Evansville Inc. and was inactive.



USE OF ESTIMATES                 In preparing financial statements in conformity
                                 with generally accepted accounting principles,
                                 management is required to make estimates and
                                 assumptions that may affect the reported
                                 amounts of assets and liabilities and
                                 the disclosure of contingent assets and
                                 liabilities at the date of the financial
                                 statements and revenues and expenses during
                                 the reporting period. Actual results could
                                 differ from those estimates.



CASH AND CASH                    For purposes of the statement of cash flows,
EQUIVALENTS                      the Company considers all highly liquid
                                 financial instruments purchased with an
                                 original maturity of three months or less to
                                 be cash equivalents. The carrying amount
                                 reported in the consolidated balance sheets
                                 for cash and cash equivalents approximates its
                                 fair value.



PROPERTY AND                     Property and equipment are stated at cost.
EQUIPMENT                        For financial reporting purposes, depreciation
                                 is determined using the straight-line method
                                 based upon the estimated useful lives of the
                                 various classes of assets, ranging from three
                                 to fifteen years. Leasehold improvements are
                                 amortized over the shorter of their useful
                                 lives or the terms of the related leases. Both
                                 straight-line and accelerated methods are used
                                 for federal and state income tax purposes.


                                                                           F-10
<PAGE>

                                                                   FAIRCOM INC.


                                                 SUMMARY OF ACCOUNTING POLICIES


INTANGIBLE ASSETS                Intangible assets consist principally of the
                                 excess of the purchase price (including
                                 related acquisition costs) over the fair value
                                 of tangible assets of acquired radio stations,
                                 a substantial portion of which represents the
                                 value of Federal Communications Commission
                                 licenses.  These assets are amortized on a
                                 straight-line basis over lives ranging from
                                 15 to 40 years.  Management evaluates the
                                 continuing realizability of the intangible
                                 assets by assessing projected future
                                 undiscounted cash flows of its radio stations.



LONG-LIVED ASSETS                The Company follows Statement of Financial
                                 Accounting Standards No. 121, "Accounting for
                                 the Impairment of Long-Lived Assets and for
                                 Long-Lived Assets to be Disposed Of" ("SFAS
                                 No. 121").  SFAS No. 121 requires, among other
                                 things, that losses resulting from impairment
                                 of assets expected to be held, and gains or
                                 losses from assets expected to be disposed of,
                                 be included as a component of income from
                                 continuing operations before taxes on income.



DEFERRED FINANCING               Deferred financing costs are amortized on a
COSTS AND OTHER                  straight-line basis over the term of the
ASSETS                           related debt. Non-compete agreements,
                                 comprising substantially all of  the category
                                 "other assets", are amortized over the terms
                                 of the related agreements.



APPRAISAL RIGHT                  The value of the appraisal right given to
                                 Citicorp Venture Capital, Ltd. ("CVC") in
                                 connection with its subordinated exchangeable
                                 note (see Note 3 (b)) was accrued at a
                                 discounted amount, based on the interest rate
                                 of the related note and the date on which the
                                 appraisal right was to become exercisable.
                                 Adjustments were made to this accrual based on
                                 the passage of time and changes in appraisal
                                 values.  The appraisal right liability was
                                 extinguished as of June 30, 1997, the time
                                 that the related underlying debt was purchased
                                 (see Note 3(b)).



TAXES ON INCOME                  Income taxes are calculated using the
                                 liability method specified by Statement
                                 of Financial Accounting Standards (SFAS) No.
                                 109, "Accounting for Income Taxes".




                                                                           F-11

<PAGE>

                                                                   FAIRCOM INC.


                                                 SUMMARY OF ACCOUNTING POLICIES





REVENUE                          Revenue from radio advertisements, including
RECOGNITION                      barter transactions (advertising provided in
                                 exchange for goods and services), is recognized
                                 as income when the advertisements are
                                 broadcast. Revenue from barter transactions is
                                 recorded based on the estimated fair value of
                                 the goods and services received. The
                                 merchandise or services received as barter for
                                 advertising are charged to expense when used
                                 or provided. Any merchandise or services
                                 received prior to the broadcast of the related
                                 advertisements are recorded as a liability; if
                                 the advertisement is broadcast first, a
                                 receivable is recorded. Barter liabilities and
                                 receivables were not material at December 31,
                                 1997 and 1996.



STOCK-BASED                      In 1996, the Company adopted the disclosure
COMPENSATION                     provisions of Statement of Financial
                                 Accounting Standards No. 123, "Accounting for
                                 Stock-Based Compensation" ("SFAS No. 123").
                                 SFAS No. 123 establishes a fair value method
                                 of accounting for stock-based compensation,
                                 through either recognition or disclosure.

                                 The disclosure provisions require the Company
                                 to disclose pro forma information regarding
                                 net income (loss) and net income (loss) per
                                 share as if compensation cost for stock
                                 options granted by the Company had been
                                 determined in accordance with the fair value
                                 method prescribed by SFAS No. 123.



ADVERTISING COSTS                Advertising costs are charged to expense
                                 as incurred and amounted to $75,858, $68,345
                                 and $149,469 for the years ended December 31,
                                 1997, 1996 and 1995, respectively.



NET INCOME (LOSS)                In February 1997, the Financial Accounting
PER COMMON SHARE                 Standards Board ("FASB") issued Statement of
                                 Financial Accounting Standards ("SFAS") No.
                                 128, "Earnings Per Share."  SFAS No. 128
                                 establishes a different method of computing
                                 earnings per share than was previously
                                 required under the provisions of Accounting
                                 Principles Board Opinion No. 15 ("APB 15").
                                 Under SFAS No. 128, the Company is required to
                                 report both basic net income (loss) per common
                                 share and diluted net income (loss) per common
                                 share for all periods presented.  The adoption
                                 of SFAS No. 128 had no effect on the per share
                                 amounts previously reported by the Company
                                 under APB 15.

                                                                           F-12
<PAGE>

                                                                   FAIRCOM INC.

                                                 SUMMARY OF ACCOUNTING POLICIES


                                 Net income (loss) per common share is based on
                                 the weighted average number of shares of
                                 common stock outstanding during each period.
                                 The effects of the assumed conversion of
                                 convertible debt on per share data have been
                                 reflected in the diluted calculation only for
                                 1996 and 1995; such effects were not dilutive
                                 for 1997 (see Note 3 (b)). The effects of the
                                 assumed exercise of outstanding options were
                                 not dilutive and, accordingly, have been
                                 excluded from the diluted per share
                                 calculations (see Notes 7 and 8).



RECENT ACCOUNTING                In June 1997, the FASB issued SFAS No. 130,
PRONOUNCEMENTS                   "Reporting Comprehensive Income."  This
                                 Statement establishes standards for reporting
                                 and displaying comprehensive income and its
                                 components in the financial statements. It
                                 does not, however, require a specific format
                                 for the statement, but requires the Company to
                                 display an amount representing total
                                 comprehensive income for the period of the
                                 financial statement. The Company is in the
                                 process of determining its preferred format.
                                 This Statement is effective for fiscal years
                                 beginning after December 15, 1997.

                                 Also in June 1997, the FASB issued SFAS No.
                                 131, "Disclosures about Segments of an
                                 Enterprise and Related Information." The
                                 Statement establishes standards for the manner
                                 in which public business enterprises report
                                 information about operating segments in annual
                                 financial statements and requires those
                                 enterprises to report selected information
                                 about operating segments in interim financial
                                 reports issued to stockholders. This Statement
                                 is effective for financial statements for
                                 periods beginning after December 15, 1997, and
                                 the Company has not yet determined the impact,
                                 if any, of the Statement on its financial
                                 reporting.


<TABLE>
<CAPTION>
     1.   PROPERTY AND                  Property and equipment consist of the following:
          EQUIPMENT

                                                          1997                   1996
-----------------------------------------------------------------------------------------
<S>                                                  <C>                    <C>
Land                                                 $   285,000            $   116,000
Buildings and improvements                               958,583                636,581
Towers and antenna systems                             1,457,564              1,182,526
Studio, technical and transmitting
   equipment                                           3,819,910              3,467,747
Office equipment, furniture and fixtures               1,043,648                941,665



                                                                           F-13
<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

-----------------------------------------------------------------------------------------
                                                       7,564,705              6,344,519
Less: accumulated depreciation and
   amortization                                       (5,408,461)            (5,159,965)
-----------------------------------------------------------------------------------------
Net property and equipment                            $2,156,244             $1,184,554
=========================================================================================
</TABLE>



    2.    INTANGIBLE ASSETS              Intangible assets consist of the
                                         following:


<TABLE>
<CAPTION>
                                                              1997              1996
-----------------------------------------------------------------------------------------
<S>                                                        <C>               <C>
Excess of purchase price over fair value of
   tangible assets of acquired radio stations
   (substantially related to the value of
   Federal Communications Commission
   licenses)                                               $8,255,940        $1,994,425

Related acquisition costs                                     216,209           135,029

Other                                                          13,983            13,983
-----------------------------------------------------------------------------------------

                                                            8,486,132         2,143,437

Less:  accumulated amortization                              (784,791)         (515,670)
-----------------------------------------------------------------------------------------

                                                           $7,701,341        $1,627,767
=========================================================================================
</TABLE>

<TABLE>
<CAPTION>

    3.    LONG-TERM DEBT                Long-term debt consists of the following:
          AND FAIR VALUE
          DISCLOSURES
                                                          1997                1996
---------------------------------------------------------------------------------------
<S>                                                   <C>                  <C>
Senior secured term and time notes
   (see (a) below)                                    $12,341,666          $7,147,254

Convertible and exchangeable
   subordinated promissory notes (see
   (b) below)                                          10,000,000             681,630
---------------------------------------------------------------------------------------
                                                       22,341,666           7,828,884

Less:  Current portion of long-term
   debt                                                  (430,005)           (552,000)


                                                                           F-14
<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS



---------------------------------------------------------------------------------------
                                                      $21,911,661          $7,276,884
=======================================================================================
</TABLE>


                           (a)    Senior secured term and time notes

                                  In connection with the June 1997 Mansfield
                                  acquisition described in Note 12, the Company
                                  repaid its outstanding senior secured term
                                  and time notes, which had an aggregate
                                  principal balance of $7,371,000 at that time,
                                  and borrowed $12,500,000 from the same lender
                                  under an amended and restated loan agreement
                                  (the "1997 loan agreement"). The term notes
                                  under the 1997 loan agreement mature July 1,
                                  2002 with optional renewal by the Company
                                  under certain circumstances for an additional
                                  five years. The principal balance is payable
                                  in varying monthly installments, ranging from
                                  $31,667 to $72,500, from August 1, 1997
                                  through June 1, 2002, with the balance due on
                                  the maturity date. Interest on the term notes
                                  initially is at the rate of 4.50% over 30 day
                                  commercial paper rates.

                                  The borrowings are secured by all tangible
                                  and intangible property of Flint and
                                  Mansfield and all outstanding Flint and
                                  Mansfield common stock held by the Company,
                                  and are guaranteed by the Company.


                                                                           F-15

<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





                                  The 1997 loan agreement contains certain
                                  financial and restrictive covenants,
                                  including maintenance of minimum operating
                                  income levels and debt coverage ratios, and
                                  limitations on capital expenditures,
                                  corporate expenses, additional indebtedness,
                                  mergers and dividend payments.

                                  As of the date that the Company entered into
                                  the 1997 loan agreement, certain accrued
                                  interest was extinguished, resulting in an
                                  extraordinary gain of $370,060.


                           (b)    Convertible and exchangeable subordinated
                                  promissory notes

                                  As of June 30, 1997, the Company completed
                                  the sale of $10,000,000 aggregate principal
                                  amount of its convertible subordinated
                                  promissory notes due July 1, 2002 (the
                                  "Notes"). The Notes consist of Class A and
                                  Class B convertible subordinated promissory
                                  notes, each in the aggregate principal amount
                                  of $5,000,000.

                                  The Class A Notes are convertible into
                                  11,242,500 shares of the Company's common
                                  stock, and the Class B Notes into
                                  7,769,500 shares of common stock. The
                                  aggregate 19,012,000 of such shares on full
                                  conversion of the Notes would represent 67.1%
                                  of the Company's outstanding common stock on
                                  a fully diluted and adjusted basis. The Notes
                                  bear interest at 7% per annum, compounded
                                  quarterly, payable at the maturity of the
                                  Notes. The terms of the Securities Purchase
                                  Agreement applicable to the Class A and Class
                                  B Notes, as amended, provide that if the
                                  Company does not, on or before April 1, 1999,
                                  consummate a merger of the Company with
                                  another corporation on terms acceptable to
                                  the holders of the Notes, then upon notice
                                  from such holders, the Company shall take all
                                  action necessary to liquidate the Company and
                                  each of its subsidiaries on terms and
                                  conditions acceptable to such holders, such
                                  approval not to be unreasonably withheld.
                                  Subsequent to the sale of the Notes, an
                                  individual who is a beneficial owner and
                                  manager of the general partner of one of the
                                  holders of the Notes and of the investment
                                  manager of the other holder of the Notes
                                  became a director of the Company.


                                                                           F-16

<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





                                  The proceeds from the sale of the Notes were
                                  used (i) to purchase for $6,400,000 from
                                  Citicorp Venture Capital, Ltd. ("Citicorp")
                                  the Company's 8.65% Senior Convertible Note
                                  ("Convertible Note") in the principal amount
                                  of $181,630 due December 1, 2004 and the
                                  Company's 10% Senior Exchangeable Note
                                  ("Exchangeable Note") in the principal amount
                                  of $500,000 due December 1, 2004,
                                  representing all of Citicorp's interests in
                                  the Company, and (ii) to pay a portion of the
                                  purchase price for the Mansfield acquisition,
                                  described in Note 12, and the legal and other
                                  fees and expenses of such acquisition. The
                                  Convertible Note was convertible into
                                  9,081,502 shares of Common Stock, which would
                                  have represented 52.5% of the Company's fully
                                  diluted outstanding Common Stock prior to the
                                  acquisition and the financing activities
                                  described herein. The Exchangeable Note gave
                                  Citicorp the right to request, at any time
                                  after December 1, 1999, that $350,000
                                  principal amount of such Note be exchanged
                                  for a payment equal to 19.99% of the
                                  appraised value, as defined, of the Company's
                                  subsidiary which owns and operates radio
                                  stations in Flint, Michigan.

                                  In connection with the purchase for
                                  $6,400,000 of the Citicorp notes, which had a
                                  principal amount aggregating $681,630, the
                                  Company's appraisal right liability of
                                  $1,015,000 was also extinguished. This debt
                                  extinguishment resulted in an extraordinary
                                  loss of $4,703,370.

                              Minimum annual maturities of the Company's
                              long-term debt for the next five years are
                              approximately as follows: 1998 - $430,000;
                              1999 - $554,000; 2000 - $688,000; 2001 -
                              $812,000; and 2002 - $19,858,000.


                                                                           F-17

<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





                                  The Company estimates that the carrying
                                  amounts of its senior secured term and time
                                  notes, $12,341,666 and $7,147,254 at December
                                  31, 1997 and 1996, respectively, approximated
                                  their fair values at those dates, based on
                                  rates available to the Company for debt with
                                  similar terms and remaining maturities. The
                                  fair values of the convertible and
                                  exchangeable subordinated promissory notes
                                  are not readily determinable. Such debt was
                                  carried at $10,000,000 at December 31, 1997
                                  and $1,696,630 (including a related appraisal
                                  right liability of $1,015,000) at December
                                  31, 1996. The 1997 debt is convertible into
                                  common stock with a market value of
                                  approximately $16,000,000 at December 31,
                                  1997. The 1996 debt was convertible into
                                  common stock with a market value of
                                  approximately $1,540,000 at December 31,
                                  1996, and $350,000 of the debt was
                                  exchangeable into the aforementioned
                                  appraisal right. The Company believes that an
                                  undetermined discount for lack of liquidity
                                  would be appropriate due to the large amounts
                                  of stock that would be issuable upon
                                  conversion.




    4.   DEFERRED RENTAL          Effective January 1995, Flint, as lessor,
         INCOME                   entered into an operating lease agreement
                                  with a telecommunications company. The
                                  lessee agreed to arrange for the construction
                                  of a new radio tower and antenna at one
                                  of Flint's tower sites, at lessee's expense,
                                  and transfer title to those assets to
                                  Flint, in exchange for the right to use a
                                  portion of the new tower and related building
                                  facilities in its operations on a rent-free
                                  basis for five years. The lessee has three
                                  successive five-year renewal options,
                                  providing for no rent in the sixth year, a
                                  total of $18,000 rent in the seventh year,
                                  and annual increases of 4% beginning with the
                                  eighth year.

                                  Flint has recorded as an advance minimum
                                  lease payment an amount equal to the fair
                                  value of the tower and antenna constructed
                                  for its benefit, based on the lessee's
                                  construction costs, aggregating approximately
                                  $170,000. The assets received were
                                  capitalized, the advance lease payment is
                                  being amortized as rental income on a
                                  straight-line basis over the five year
                                  initial lease term, and the unamortized
                                  portion of the lease payment is recorded as
                                  deferred rental income.



                                                                           F-18

<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     5.   COMMITMENTS             The Company has entered into an operating
                                  lease agreement for office space.

                                  The following is a schedule of approximate
                                  future minimum lease payments required under
                                  this lease:


                                      1998                          $22,200
                                      1999                           22,200
                                      2000                           22,200
                                      2001                            3,700
                                  -------------------------------------------
                                                                    $70,300
                                  ===========================================



                                  Rent expense was approximately $56,000,
                                  $46,000 and $32,000 for the years ended
                                  December 31, 1997, 1996 and 1995,
                                  respectively.



    6.   RETIREMENT PLANS         Effective January 1, 1995, the Company
                                  established a qualified salary reduction plan
                                  under Section 401(k) of the Internal Revenue
                                  Code for eligible employees. Under the plan,
                                  the Company may, but is not required to, make
                                  matching and discretionary contributions to
                                  participants' accounts. Matching
                                  contributions charged against operations
                                  amounted to $6,800 and $4,600 for the years
                                  ended December 31, 1996 and 1995,
                                  respectively. No matching contributions were
                                  made for the year ended December 31, 1997.



                                                                           F-19

<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




     7.   STOCK OPTION PLAN       The Company has a stock option plan (the
          AND OTHER STOCK         "Plan") under which 900,000 shares of common
          OPTIONS                 stock have been reserved for issuance. Under
                                  this Plan, the Company may grant options to
                                  purchase up to 900,000 shares of common stock
                                  in the form of either nonqualified stock
                                  options or incentive stock options ("ISOs").
                                  The Plan provides that the option price for
                                  the nonqualified options be determined by the
                                  Board of Directors at or prior to the time
                                  the option is granted (but in no event at a
                                  price below par value of the common stock)
                                  and for ISOs, at a price not less than 100%
                                  of the fair market value of the common stock
                                  at the date the option is granted, except for
                                  those individuals possessing more than 10% of
                                  the total combined voting power of all
                                  classes of stock of the Company or its
                                  subsidiaries, for whom the price is not less
                                  than 110% of the fair market value of the
                                  common stock.


                                  The term of each option granted shall be
                                  determined by the Board of Directors,
                                  provided that the term for each ISO granted
                                  under the Plan not be more than 10 years from
                                  the date of the grant and the term for each
                                  option granted to an individual owning more
                                  than 10% of the combined voting power, as
                                  described above, not be more than five years.

                                  Under the terms of the Plan, the Company's
                                  right to grant additional ISOs terminated
                                  September 18, 1994, 10 years from the date
                                  the Plan was adopted by the Company's Board
                                  of Directors.

                                  The Company applies APB Opinion 25,
                                  "Accounting for Stock Issued to Employees",
                                  and related Interpretations in accounting for
                                  the Plan. Under APB 25, for options granted
                                  to employees at exercise prices equal to the
                                  fair market value of the underlying common
                                  stock at the date of grant, no compensation
                                  cost is recognized.


                                                                           F-20

<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





                                  At June 30, 1997, in connection with the
                                  issuance of its Class A and Class B
                                  Convertible Subordinated Notes ("Notes"), the
                                  Company issued options to purchase 958,886
                                  and 159,814 shares of its common stock at an
                                  exercise price of $.53 per share to its
                                  President and Senior Vice President,
                                  respectively. These options are exercisable
                                  through July 1, 2002 to the extent the Notes
                                  are converted to common stock. If less than
                                  all of the Notes are ultimately converted,
                                  the number of options will be reduced
                                  proportionately. At the time when any portion
                                  of the Notes is converted and the
                                  proportionate number of options become
                                  exercisable, the Company will record a
                                  nonrecurring charge to operations based on
                                  the difference between the exercise price and
                                  the market value of the Company's common
                                  stock at that time. If all of the Notes had
                                  been converted and all of the options had
                                  been exercised at December 31, 1997, the
                                  charge to operations would have been
                                  approximately $355,000.

                                  Statement of Financial Accounting Standards
                                  No. 123, "Accounting for Stock-Based
                                  Compensation" ("SFAS No. 123") requires the
                                  Company to provide, beginning with 1995
                                  grants, pro forma information regarding net
                                  income and net income per common share as if
                                  compensation costs for the Company's stock
                                  option plans had been determined in
                                  accordance with the fair value based method
                                  prescribed in SFAS No. 123. Such pro forma
                                  information is as follows:




<TABLE>
<CAPTION>
                                         1997               1996                1995
-----------------------------------------------------------------------------------------
<S>                                 <C>                    <C>                 <C>
Pro forma net income
(loss)                              $(4,865,688)           $257,255            $220,071

Pro forma basic net
income (loss) per
common share                              $(.66)               $.03                $.03


-----------------------------------------------------------------------------------------
</TABLE>


                                                                           F-21
<PAGE>
                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

                                  The weighted-average fair value per share for
                                  options granted was $.08, $.09 and $.08 in
                                  1997, 1996 and 1995, respectively. The fair
                                  value of each option grant is estimated on
                                  the date of grant using the Black-Scholes
                                  option-pricing model with the following
                                  assumptions for 1997, 1996 and 1995 grants:



Dividends:                         None

Volatility:                        46.5%

Risk-free interest rate:           Ranging from
                                   6.28% to 6.38%

Expected term:                     5 years




Transactions involving options are summarized below:



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

                                              WEIGHTED-                 Weighted-                   Weighted-
                                              AVERAGE                    Average                     Average
                                              EXERCISE                  Exercise                    Exercise
                                   SHARES      PRICE          Shares     Price             Shares    Price
---------------------------------------------------------------------------------------------------------------
<S>                             <C>         <C>            <C>          <C>              <C>        <C>
Outstanding, January 1            825,000     $.16           800,000      $.14             533,882    $.11

Granted                         1,187,700      .53           234,182       .19             309,318     .16

Cancelled                          69,000      .13           209,182       .13              43,200     .31


                                                                           F-22
<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

---------------------------------------------------------------------------------------------------------------
Outstanding, December 31        1,943,700     $.37           825,000      $.16            800,000     $.14
===============================================================================================================

Exercisable, December 31          721,000     $.20           676,000      $.16            661,000     $.14
===============================================================================================================
</TABLE>


                                                                           F-23

<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS





                               The following table summarizes information about
                               stock options outstanding at December 31, 1997:

<TABLE>
<CAPTION>
                                       Options Outstanding                  Options Exercisable
                             ---------------------------------------       ----------------------
                                          Weighted-
                             Number         Average       Weighted-                    Weighted-
                             Outstanding  Remaining        Average          Number     Average
Exercise                        at       Contractual       Exercise       Exercisable  Exercise
Price                        12/31/97    Life (years)       Price         at 12/31/97    Price
-------------------------------------------------------------------------------------------------
<S>                          <C>            <C>             <C>            <C>          <C>
 .13                            112,500       .5             $.13           105,000      $.13

 .16                            409,318      2.1              .16           352,818       .16

 .17                            139,182      3.9              .17           139,182       .17

 .22                             95,000      3.2              .22            55,000       .22

 .53                          1,187,700      4.5              .53            69,000       .53
-------------------------------------------------------------------------------------------------
                             1,943,700      2.8             $.37           721,000      $.20
=================================================================================================
</TABLE>

                    Of the 1,943,700 options outstanding at December 31, 1997,
                    1,866,200 are nonqualified options and 77,500 are ISOs.



      8.   COMMON STOCK           At December 31, 1997, shares of the Company's
           SHARES RESERVED        authorized and unissued common stock were
                                  reserved for issuance upon conversion of
                                  convertible subordinated promissory notes and
                                  exercise of options, as follows:


Convertible subordinated promissory notes (Note 3 (b))             19,012,000

Stock options (Note 7)                                              1,943,700
-----------------------------------------------------------------------------
                                                                   20,955,700
=============================================================================


                                                                           F-24

<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS






<TABLE>
<CAPTION>
     9.   TAXES ON INCOME         The provision for federal and state income
                                  taxes consists of the following:

                                             1997               1996             1995
--------------------------------------------------------------------------------------
<S>                                        <C>               <C>              <C>
Current:
       Federal                             $     -           $152,000         $157,000
       State                                71,542             37,692           70,000
--------------------------------------------------------------------------------------
                                            71,542            189,692          227,000
Benefits of net operating loss
       carryforwards                             -            152,000          199,000
--------------------------------------------------------------------------------------
                                           $71,542           $ 37,692         $ 28,000
======================================================================================
</TABLE>



                                  The net deferred tax asset consists of the
                                  following:

<TABLE>
<CAPTION>
                                                                 1997             1996
----------------------------------------------------------------------------------------
<S>                                                        <C>              <C>
Gross deferred asset for:
   Net operating loss carryforwards                        $2,448,000       $2,311,000
   Excess gain on debt restructuring for tax
      reporting purposes                                            -          186,000
   Alternative minimum tax credit
      carryforwards                                            35,000           35,000
----------------------------------------------------------------------------------------
        Subtotal                                            2,483,000        2,532,000
   Less: valuation allowance                               (2,483,000)      (2,532,000)
----------------------------------------------------------------------------------------
        Net                                               $         -       $        -
----------------------------------------------------------------------------------------
</TABLE>



                                  The Company has provided valuation allowances
                                  equal to its deferred tax assets because of
                                  the uncertainty as to future utilization.

                                  The Company and its subsidiaries file
                                  consolidated federal and separate state
                                  income tax returns. At December 31, 1997,
                                  consolidated net operating loss carryforwards
                                  ("NOLs") for income tax purposes were
                                  approximately $6,800,000. Such NOLs may be
                                  limited as to use upon a significant change
                                  in the Company's ownership. The tax NOLs
                                  expire during the years 2002 to 2012.



                                                                           F-25

<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




The difference between the Company's effective tax rate on income before taxes
on income and the federal statutory tax rate arises from the following:



<TABLE>
<CAPTION>
                                          1997               1996                1995
-----------------------------------------------------------------------------------------
<S>                                        <C>                <C>                 <C>
Federal tax expense at
   statutory rate                          34.0%              34.0%               34.0%

Federal taxes, based on
   alternative minimum
   calculation                                -                  -                 1.8

Loss from debt
   extinguishment - non-deductible        (34.6)                 -                   -

Amortization of
   intangibles and other
   non-deductible
   expenses                                (1.0)              31.9                47.6

Benefit of net operating
   losses                                     -              (48.0)              (72.8)

Changes in valuation
   allowance                                1.1              (13.9)                  -

State taxes, net of
   federal benefit                         (1.0)               7.9                16.9

Prior year's federal tax
   overaccrual                                -                  -               (17.2)
-----------------------------------------------------------------------------------------
Effective tax rate                         (1.5)%             11.9%               10.3%
=========================================================================================
</TABLE>


There was no material income tax effect related to the extraordinary items
described in Note 3.



                                                                           F-26
<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




10.   NET INCOME (LOSS) PER
          COMMON SHARE              The following table sets forth the
              computation of basic and diluted net income (loss) per common
              share:

<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
Year ended December 31,                                                       1997              1996              1995
--------------------------------------------------------------------------------------------------------------------------
<S>                                                        <C>              <C>
NUMERATOR:
Income (loss) before extraordinary items -
    basic                                                                $(362,537)          $278,840          $244,816
Addback:
   Interest from subordinated senior
      convertible note (net of tax effect)                                       -             13,840            14,093
--------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE EXTRAORDINARY ITEMS -
   DILUTED                                                               $(362,537)          $292,680          $258,909
==========================================================================================================================
EXTRAORDINARY ITEMS - BASIC AND DILUTED                                $(4,333,310)          $      -          $      -
==========================================================================================================================
DENOMINATOR:
Weighted average shares outstanding
   Common stock - basic                                                  7,378,199          7,378,199         7,378,199
   Shares issuable upon assumed conversion of
      subordinated senior convertible note                                       -          9,081,502         9,081,502
--------------------------------------------------------------------------------------------------------------------------
   Common shares - diluted                                               7,378,199         16,459,701        16,459,701
==========================================================================================================================
BASIC INCOME (LOSS) PER SHARE OF COMMON
   STOCK - ASSUMING NO DILUTION:
   Income (loss) before extraordinary items                                  $(.05)              $.04              $.03
   Extraordinary items                                                        (.59)                 -                 -
--------------------------------------------------------------------------------------------------------------------------
      BASIC NET INCOME (LOSS) PER COMMON
        SHARE                                                                $(.64)              $.04              $.03
==========================================================================================================================
DILUTED INCOME (LOSS) PER COMMON SHARE ASSUMING ISSUANCE OF ALL DILUTIVE
CONTINGENT SHARES:
   Income (loss) before extraordinary items                                  $(.05)              $.02              $.02
   Extraordinary items                                                        (.59)                 -                 -
--------------------------------------------------------------------------------------------------------------------------
      DILUTED NET INCOME (LOSS) PER COMMON
        SHARE                                                                $(.64)              $.02              $.02
==========================================================================================================================
</TABLE>


Note:   The effects of the assumed exercise of outstanding options were not
        dilutive and, accordingly, have been
                                                                           F-27

<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

        excluded from the diluted per share calculations. The effects of the
        assumed conversion of convertible debt were not dilutive for 1997.





































                                                                           F-28
<PAGE>

<TABLE>
<CAPTION>
   11.   SUPPLEMENTAL CASH              (a)     Supplemental disclosure of cash flow information:
         FLOW INFORMATION


Year ended December 31,                 1997                1996              1995
-----------------------------------------------------------------------------------------
<S>                                  <C>                <C>                <C>
Interest paid during the year        $1,076,073         $  866,357         $  873,276
=========================================================================================
Income taxes paid during
the year                             $   71,542         $   43,592         $  133,257
=========================================================================================
</TABLE>



                                        (b)   Supplemental disclosures of
                                              non-cash investing and financing
                                              activities:

                                              In January 1995, Flint received a
                                              tower and antenna, valued at
                                              $170,000, as an advance lease
                                              payment under the terms of an
                                              operating lease agreement (see
                                              Note 4).

                                              In June 1997, certain accrued
                                              interest was extinguished,
                                              resulting in an extraordinary
                                              gain of $370,060 (see Note 3
                                              (a)).



    12.   ACQUISITION OF RADIO             As of June 30, 1997, Mansfield
          STATIONS                         acquired the assets and operations
                                           of two commercial radio stations
                                           located in Mansfield, Ohio (the
                                           "Stations"), from an unrelated
                                           company and its principals, pursuant
                                           to the terms of an Asset Purchase
                                           Agreement, made as of May 20, 1997
                                           (the "Agreement"). Under the terms
                                           of the Agreement, the selling
                                           company received aggregate
                                           consideration of $7,350,000 in cash,
                                           which included $1 in consideration
                                           of a five-year non-compete
                                           agreement. In addition, the Company
                                           paid $300,000 in cash to one of the
                                           selling company's principals in
                                           consideration of a five year
                                           non-compete agreement. A substantial
                                           portion of the purchase price for
                                           the Stations was allocated to
                                           intangible assets, representing
                                           principally the value of the Federal
                                           Communications Commission licenses
                                           acquired. The acquisition of the
                                           Stations has been accounted for by
                                           the purchase method of accounting
                                           and, accordingly, the operating
                                           results of the Stations are included
                                           in the Company's consolidated
                                           results of operations from June 30,
                                           1997, the date of acquisition.



                                                                           F-29

<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




The following are the Company's estimates of selected pro forma unaudited
consolidated results as if the Stations had been acquired as of the beginning
of 1996:

<TABLE>
<CAPTION>
                                               1997                    1996
-------------------------------------------------------------------------------------
<S>                                           <C>                     <C>
($000s except per share
amounts)

Net broadcasting revenues                     $7,154                  $7,152
=====================================================================================

Loss before extraordinary
items                                        $  (570)                $  (168)
=====================================================================================

Basic loss before
extraordinary items, per
common share                                 $  (.08)                $  (.02)
=====================================================================================
</TABLE>



   13.   SUBSEQUENT             (a) On September 25, 1997, Mansfield filed an
         ACQUISITION AND            application with the Federal Communications
         PENDING MERGER             Commission ("FCC") to acquire the  assets
                                    and operations of radio station WSWR-FM,
                                    Shelby, Ohio, for $1,125,000. The net
                                    broadcasting revenues and results of
                                    operations of the Shelby station for 1997
                                    were not material in relation to the
                                    Company's comparable amounts. Mansfield
                                    deposited $100,000 in escrow pursuant to
                                    the contract to acquire the Shelby station.
                                    The closing of this acquisition occurred in
                                    January 1998. In connection with the
                                    closing, the Company borrowed $1,100,000
                                    from a holder of the Class A and Class B
                                    convertible subordinated promissory notes
                                    described in Note 3(b). To evidence this
                                    loan, the Company issued its Class C
                                    Subordinated Promissory Note, which bears
                                    interest at a rate of 14% per annum payable
                                    at maturity, and is payable on the earlier
                                    of April 1, 1999 or the closing of the
                                    merger described in the following
                                    paragraph.


                                                                           F-30

<PAGE>

                                                                   FAIRCOM INC.


                                     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




                             (b)    On December 5,1997, the Company signed an
                                    agreement to merge with Regent
                                    Communications, Inc., another group radio
                                    broadcaster. Under the terms of the
                                    agreement, Faircom will merge with and into
                                    a subsidiary of Regent. The shareholders of
                                    Faircom will receive shares of Regent
                                    Series C Convertible Preferred Stock, par
                                    value $.01 per share ("Series C Preferred
                                    Stock"). The Series C Preferred Stock has
                                    full voting rights, provides for annual
                                    cumulative dividends of 7%, and is
                                    convertible on a one-for-one basis (subject
                                    to adjustment in certain events) into the
                                    common stock, $.01 par value per share, of
                                    Regent. The Series C Preferred Stock is
                                    subject to mandatory conversion under
                                    certain circumstances. In the event of a
                                    liquidation of Regent, the Series C
                                    Preferred Stock has a preference in the
                                    amount of its stated value of $5.00 per
                                    share, together with accrued and unpaid
                                    dividends. In the merger, the outstanding
                                    shares of Faircom Common Stock will be
                                    exchanged for fully paid and nonassessable
                                    shares of Series C Preferred Stock, and
                                    each outstanding Faircom option will be
                                    converted into a Regent option entitling
                                    the holder to acquire, on equivalent terms,
                                    the same number of shares of Series C
                                    Preferred Stock as the holder would have
                                    been entitled to receive in the merger if
                                    such Faircom option had been exercised in
                                    full prior to the date of the merger. The
                                    number of shares of Series C Preferred
                                    Stock to be issued in the merger and
                                    issuable pursuant to Regent options to be
                                    received in exchange for Faircom options in
                                    the merger will be based upon an aggregate
                                    liquidation preference amount of
                                    $33,162,000, adjusted by the amount of
                                    Faircom's net working capital and decreased
                                    by its senior debt and by one-half of the
                                    prepayment premium on such senior debt to
                                    be paid at the closing of the merger, all
                                    as computed as of the last day of the month
                                    immediately preceding the closing date of
                                    the merger.

                                    As of the date of issuance of this report,
                                    the closing of the merger is still pending,
                                    subject to shareholder approval and
                                    satisfaction of certain other conditions.



                                                                           F-31










<PAGE>
                                                     FAIRCOM INC.








                                     CONSOLIDATED FINANCIAL STATEMENT SCHEDULES
                                                        FORM 10-K - ITEM 14 (D)
                                                              DECEMBER 31, 1997




                                                                            S-1
<PAGE>
                                                                   FAIRCOM INC.


                                                INDEX TO CONSOLIDATED FINANCIAL
                                                            STATEMENT SCHEDULES







REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS                       S-3

Consolidated financial statement schedules:

      Schedule I - Condensed financial information of registrant   S-4 - S-7

      Schedule II - Valuation and qualifying accounts                    S-8


                                                                            S-2

<PAGE>



REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
   ON FINANCIAL STATEMENT SCHEDULES



The Board of Directors and Stockholders
Faircom Inc.


The audits referred to in our report dated January 21, 1998, relating to the
consolidated financial statements of Faircom Inc., which is contained in Item 8
of this Form 10-K, included the audit of the financial statement schedules
listed in the accompanying index. These financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statement schedules based upon our audits.

In our opinion such financial statement schedules present fairly, in all
material respects, the information set forth therein.


                                                            /s/BDO Seidman, LLP
                                                            --------------------
                                                               BDO Seidman, LLP




Mitchel Field, New York
January 21, 1998

                                                                            S-3

<PAGE>
                                                                   FAIRCOM INC.

                                                                     SCHEDULE I
                                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                                  BALANCE SHEETS (COMPANY ONLY)


<TABLE>
<CAPTION>
December 31,                                                                                   1997                1996
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                                   <C>                  <C>
ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                                                          $      11,478        $      7,014
   Other current assets                                                                           -               4,155
   Interest receivable from subsidiary                                                       92,944              29,004
---------------------------------------------------------------------------------------------------------------------------
        TOTAL CURRENT ASSETS                                                                104,422              40,173
OFFICE EQUIPMENT, FURNITURE AND FIXTURES - NET                                                  630                 630
NOTES RECEIVABLE FROM SUBSIDIARIES (NOTE 2)                                               3,673,000           1,243,000
OTHER ASSETS, INCLUDING DEFERRED FINANCING COSTS OF
   $629,403 AND $6,016                                                                      630,728               7,341
---------------------------------------------------------------------------------------------------------------------------
                                                                                      $   4,408,780        $  1,291,144
===========================================================================================================================
LIABILITIES AND CAPITAL DEFICIT
CURRENT LIABILITIES:
   Accrued expenses and liabilities                                                   $      30,033        $    132,747
   Taxes payable                                                                                150                 150
---------------------------------------------------------------------------------------------------------------------------
      TOTAL CURRENT LIABILITIES                                                              30,183             132,897
LONG-TERM DEBT                                                                           10,000,000             681,630
INTEREST PAYABLE                                                                            353,063                   -
APPRAISAL RIGHT LIABILITY                                                                         -           1,015,000
---------------------------------------------------------------------------------------------------------------------------
      TOTAL LIABILITIES                                                                  10,383,246           1,829,527
---------------------------------------------------------------------------------------------------------------------------
EXCESS OF LOSSES AND PREFERRED STOCK DIVIDENDS OF
   SUBSIDIARIES OVER COST (NOTE 1)                                                        4,207,322           4,947,558
---------------------------------------------------------------------------------------------------------------------------
CAPITAL DEFICIT:
   Common stock                                                                              73,782              73,782
   Additional paid-in capital                                                             2,605,813           2,605,813
   Deficit                                                                              (12,861,383)         (8,165,536)
---------------------------------------------------------------------------------------------------------------------------
           TOTAL CAPITAL DEFICIT                                                        (10,181,788)         (5,485,941)
---------------------------------------------------------------------------------------------------------------------------
                                                                                       $  4,408,780         $ 1,291,144
===========================================================================================================================
</TABLE>


                                                                            S-4

<PAGE>
                                                                   FAIRCOM INC.

                                                                     SCHEDULE I
                                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                        STATEMENTS OF OPERATIONS (COMPANY ONLY)



<TABLE>
<CAPTION>
Year ended December 31,                                                      1997                1996             1995
---------------------------------------------------------------------------------------------------------------------------
<S>                                                                  <C>                     <C>             <C>
INCOME:
   Corporate overhead from subsidiaries
      (Note 3)                                                       $     172,000           $ 226,498       $  354,328
   Interest                                                                245,653             174,024          174,024
   Other                                                                       319                   -              367
---------------------------------------------------------------------------------------------------------------------------
                                                                           417,972             400,522          528,719
---------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
   Depreciation and amortization                                            72,514               3,035            3,035
   General and administrative                                              391,252             336,643          304,653
   Interest (including provision for appraisal
      rights of $215,000 in 1996 and $438,000
      in 1995)                                                             385,919             280,711          503,873
---------------------------------------------------------------------------------------------------------------------------
                                                                           849,685             620,389          811,561
---------------------------------------------------------------------------------------------------------------------------
INCOME (LOSS) BEFORE EQUITY IN INCOME AND
   EXTRAORDINARY GAIN OF SUBSIDIARIES; TAXES ON
   INCOME; AND EXTRAORDINARY LOSS                                         (431,713)           (219,867)        (282,842)
EQUITY IN INCOME AND EXTRAORDINARY GAIN OF
   SUBSIDIARIES (NOTE 1)                                                   439,236             500,399          527,658
---------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE TAXES ON INCOME AND
   EXTRAORDINARY LOSS                                                        7,523             280,532          244,816
TAXES ON INCOME                                                                  -               1,692                -
---------------------------------------------------------------------------------------------------------------------------
INCOME BEFORE EXTRAORDINARY LOSS                                             7,523             278,840          244,816
EXTRAORDINARY LOSS FROM DEBT EXTINGUISHMENT                             (4,703,370)                  -                -
---------------------------------------------------------------------------------------------------------------------------
NET INCOME (LOSS)                                                      $(4,695,847)          $ 278,840       $  244,816
===========================================================================================================================
</TABLE>


                                                                            S-5

<PAGE>

                                                                   FAIRCOM INC.

                                                                     SCHEDULE I
                                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                                        STATEMENTS OF CASH FLOWS (COMPANY ONLY)


<TABLE>
<CAPTION>
Year ended December 31,                                                     1997           1996           1995
---------------------------------------------------------------------------------------------------------------------
<S>                                                                   <C>               <C>             <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
   Net income (loss)                                                   $(4,695,847)     $  278,840      $ 244,816
---------------------------------------------------------------------------------------------------------------------
   Adjustments to reconcile net income (loss) to
      net cash provided by (used in) operating
      activities:
        Depreciation and amortization                                       72,514           3,035          3,035
        Provision for appraisal right                                            -         215,000        438,000
        Equity in income and extraordinary gain
           of subsidiaries                                                (439,236)       (500,399)      (527,658)
        Extraordinary loss from debt
           extinguishment                                                4,703,370              -              -
        Increase (decrease) in cash flows from
           changes in operating assets and
           liabilities:
              Other current assets                                           4,155          (1,745)        (2,410)
              Other assets                                                       -          (1,325)             -
              Interest receivable from subsidiary                          (63,940)        (14,502)       (14,502)
              Accrued expenses and liabilities and
                taxes payable                                             (102,714)              -        (79,519)
              Interest payable                                             353,063               -         (1,663)
---------------------------------------------------------------------------------------------------------------------
        TOTAL ADJUSTMENTS                                                4,527,212        (299,936)      (184,717)
---------------------------------------------------------------------------------------------------------------------
        NET CASH PROVIDED BY (USED IN)
           OPERATING ACTIVITIES                                           (168,635)        (21,096)        60,099
---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
   Investment in subsidiary                                               (301,000)              -              -
   Decrease (increase) in advances and loans to
      subsidiaries                                                      (2,430,000)          8,000         (8,000)
---------------------------------------------------------------------------------------------------------------------
        NET CASH PROVIDED BY (USED IN)
           INVESTING ACTIVITIES                                         (2,731,000)          8,000         (8,000)
---------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
   Payment for deferred financing costs                                   (695,901)              -              -
   Proceeds from long-term debt                                         10,000,000               -              -
   Purchase of convertible and exchangeable
      debt                                                              (5,385,000)              -              -
   Payment of appraisal right liability                                 (1,015,000)              -              -
   Payment of loan from subsidiary                                               -               -        (85,850)
---------------------------------------------------------------------------------------------------------------------
        NET CASH PROVIDED BY (USED IN)
           FINANCING ACTIVITIES                                          2,904,099               -        (85,850)
---------------------------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH
   EQUIVALENTS                                                               4,464         (13,096)       (33,751)
CASH AND CASH EQUIVALENTS, beginning of year                                 7,014          20,110         53,861
---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS, end of year                                 $    11,478      $    7,014      $  20,110
=====================================================================================================================
</TABLE>


SUPPLEMENTAL DISCLOSURES OF CASH FLOW
   INFORMATION:
<TABLE>
<CAPTION>
                                                                         1997                1996           1995
---------------------------------------------------------------------------------------------------------------------
<S>                                                                    <C>               <C>            <C>
   Interest paid during the year                                       $    32,856       $   65,711     $  67,537
=====================================================================================================================
</TABLE>



                                                                            S-6
<PAGE>
                                                                   FAIRCOM INC.

                                                                     SCHEDULE I
                                  CONDENSED FINANCIAL INFORMATION OF REGISTRANT
                         NOTES TO CONDENSED FINANCIAL INFORMATION OF REGISTRANT


    1.   INVESTMENTS IN                   The financial statements account for
         SUBSIDIARIES                     the Company's investment in its
                                          subsidiaries by the equity method of
                                          accounting and have been prepared for
                                          the purpose of presenting the
                                          financial position and operating
                                          results of the Company as a separate
                                          entity. The Company has also prepared
                                          consolidated financial statements of
                                          the Company and its subsidiaries which
                                          represent the primary financial
                                          statements.



    2.   NOTES RECEIVABLE                  Notes receivable from subsidiaries
         FROM SUBSIDIARIES                 consist of the following:
<TABLE>
<CAPTION>

                                          December 31,                                          1997                1996
                                          --------------------------------------------------------------------------------------
                                          <S>                                                <C>                    <C>
                                          Faircom Flint Inc.                                 $1,523,000             $1,243,000

                                          Faircom Mansfield Inc.                              2,150,000                      -
                                          --------------------------------------------------------------------------------------
                                                                                             $3,673,000             $1,243,000
                                          ======================================================================================
</TABLE>



                                          Interest on the Flint notes was at
                                          the rate of 14% per annum through
                                          June 30, 1997 and prime thereafter.
                                          Interest on the Mansfield notes is at
                                          prime. The prime rate was 8.5% at
                                          December 31, 1997. All of the notes
                                          mature on July 1, 2002.



    3.   CORPORATE                        The Company received $172,000,
         OVERHEAD                         $226,498 and $354,328 from its
                                          subsidiaries for corporate overhead,
                                          representing fees and expenses in
                                          connection with management and
                                          administrative services for the years
                                          ended December 31, 1997, 1996 and
                                          1995, respectively.



                                                                            S-7
<PAGE>

                                                                   FAIRCOM INC.


                                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS



<TABLE>
<CAPTION>
                                                     Balance at              Additions                                Balance at
                                                      beginning             charged to                                  end of
                                                        of year                expense       Deductions *                year
-----------------------------------------------------------------------------------------------------------------------------------
Allowance for doubtful receivables:
   Years ended December 31,
                   <S>                                  <C>                    <C>             <C>                     <C>
                   1997                                 $20,000                $46,308         $34,308                 $32,000
===================================================================================================================================
                   1996                                 $20,000                $42,449         $42,449                 $20,000
===================================================================================================================================
                   1995                                 $20,000                $16,428         $16,428                 $20,000
===================================================================================================================================
</TABLE>


(*)     Represents accounts written off against the reserve.









                                                                            S-8