METROMEDIA INTERNATIONAL GROUP INC, 10-Q, 1998-05-15

METROMEDIA INTERNATIONAL GROUP INC
10-Q, 1998-05-15
MOTION PICTURE & VIDEO TAPE PRODUCTION

Previous: CULLEN FROST BANKERS INC, 10-Q, 1998-05-15

Next: G&K SERVICES INC, 8-K, 1998-05-15

<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM 10-Q
(MARK ONE)

/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE PERIOD ENDED MARCH 31, 1998

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

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NUMBER 1-5706

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

METROMEDIA INTERNATIONAL GROUP, INC.
(Exact name of registrant as specified in its charter)

<TABLE>
<CAPTION>
DELAWARE 58-0971455
<S> <C>
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
</TABLE>

ONE MEADOWLANDS PLAZA, EAST RUTHERFORD, NJ 07073-2137
(Address and zip code of principal executive offices)
(201) 531-8000
(Registrant's telephone number, including area code)

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

INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES /X/ NO / /

THE NUMBER OF SHARES OF COMMON STOCK OUTSTANDING AS OF MAY 8, 1998 WAS
69,067,676.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART I--FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Condensed Statements of Operations............................................................ 2

Consolidated Condensed Balance Sheets...................................................................... 3

Consolidated Condensed Statements of Cash Flows............................................................ 4

Consolidated Condensed Statement of Stockholders' Equity................................................... 5

Notes to Consolidated Condensed Financial Statements....................................................... 6

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 22

Item 3. Quantitative and Qualitative Disclosures About Market Risk......................................... 38

PART II--OTHER INFORMATION

Item 1. Legal Proceedings.................................................................................. 39

Item 6. Exhibits and Reports on Form 8-K................................................................... 41

Signatures................................................................................................. 42
</TABLE>

1
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1998 1997
---------- ----------
<S> <C> <C>
Revenues.................................................................................. $ 60,219 $ 58,975
Cost and expenses:
Cost of sales and operating expenses.................................................... 37,317 37,995
Selling, general and administrative..................................................... 34,633 27,285
Depreciation and amortization........................................................... 5,315 3,859
---------- ----------
Operating loss............................................................................ (17,046) (10,164)
Interest expense.......................................................................... 5,003 5,592
Interest income........................................................................... 5,047 2,707
---------- ----------
Interest income (expense), net.......................................................... 44 (2,885)
Loss before income tax expense, equity in losses of Joint Ventures, minority interest and
discontinued operations................................................................. (17,002) (13,049)
Income tax expense........................................................................ (487) (98)
Equity in losses of Joint Ventures........................................................ (7,513) (1,598)
Minority interest......................................................................... 2,039 1,240
---------- ----------
Loss from continuing operations........................................................... (22,963) (13,505)
Discontinued operations:
Loss from discontinued operations......................................................... -- (8,753)
---------- ----------
Net loss.................................................................................. (22,963) (22,258)
Cumulative convertible preferred stock dividend requirement............................... (3,752) --
---------- ----------
Net loss attributable to common stockholders.............................................. $ (26,715) $ (22,258)
---------- ----------
---------- ----------
Weighted average number of common shares--Basic........................................... 68,572 66,155
---------- ----------
---------- ----------
Loss per common share--Basic:
Continuing operations..................................................................... $ (0.39) $ (0.21)
Discontinued operations................................................................... $ -- $ (0.13)
Net loss.................................................................................. $ (0.39) $ (0.34)
---------- ----------
---------- ----------
</TABLE>

See accompanying notes to consolidated condensed financial statements.

2
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
(UNAUDITED)
ASSETS:
Current assets:
Cash and cash equivalents........................................................... $ 86,078 $ 129,661
Short-term investments.............................................................. 100,953 100,000
Accounts receivable:
Snapper, net...................................................................... 33,014 26,494
Other, net........................................................................ 7,175 5,190
Inventories......................................................................... 90,177 96,436
Other assets........................................................................ 4,127 4,021
----------- ------------
Total current assets............................................................ 321,524 361,802
Investments in and advances to Joint Ventures:
Eastern Europe and the Republics of the Former Soviet Union......................... 84,385 86,442
China............................................................................... 53,237 45,851
Net assets of discontinued operation:
Landmark Theatre Group, Inc......................................................... 48,531 48,531
Property, plant and equipment, net of accumulated depreciation........................ 45,596 44,010
Intangible assets, less accumulated amortization...................................... 201,206 200,120
Other assets.......................................................................... 3,238 2,516
----------- ------------
Total assets.................................................................... $ 757,717 $ 789,272
----------- ------------
----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable.................................................................... $ 26,562 $ 30,036
Accrued expenses.................................................................... 71,099 73,349
Current portion of long-term debt................................................... 19,668 21,478
----------- ------------
Total current liabilities......................................................... 117,329 124,863
Long-term debt........................................................................ 57,750 57,938
Other long-term liabilities........................................................... 7,432 8,225
----------- ------------
Total liabilities............................................................... 182,511 191,026
----------- ------------
Minority interest..................................................................... 36,319 37,564
Commitments and contingencies
Stockholders' equity:
7 1/4% Cumulative Convertible Preferred Stock 207,000 207,000
Common Stock, $1.00 par value, 68,984,128 and 68,390,800 issued and outstanding at
March 31, 1998 and December 31, 1997 respectively................................. 68,984 68,391
Paid-in surplus..................................................................... 1,011,794 1,007,272
Accumulated deficit................................................................. (745,330) (718,615)
Accumulated other comprehensive loss................................................ (3,561) (3,366)
----------- ------------
Total stockholders' equity...................................................... 538,887 560,682
----------- ------------
Total liabilities and stockholders' equity...................................... $ 757,717 $ 789,272
----------- ------------
----------- ------------
</TABLE>

See accompanying notes to consolidated condensed financial statements.

3
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1998 1997
---------- ----------
<S> <C> <C>
Operating activities:
Net loss................................................................................ $ (22,963) $ (22,258)
Adjustments to reconcile net loss to net cash used in operating activities:
Loss from discontinued operations..................................................... -- 8,753
Equity in losses of Joint Ventures.................................................... 7,513 1,598
Depreciation and amortization......................................................... 5,315 3,859
Minority interest..................................................................... (2,039) (1,240)
Other................................................................................. 553 1,375
Changes in operating assets and liabilities, net of effect of acquisitions:
Increase in accounts receivable....................................................... (8,091) (15,525)
(Increase) decrease in inventories.................................................... 6,272 (5,053)
Increase in other assets.............................................................. (1,217) (1,134)
Increase (decrease) in accounts payable and accrued expenses.......................... (6,571) 7,238
Other operating activities, net....................................................... 19 211
---------- ----------
Cash used in operations............................................................. (21,209) (22,176)
---------- ----------
Investing activities:
Investments in and advances to Joint Ventures......................................... (15,104) (15,343)
Distributions from Joint Ventures..................................................... 1,400 1,848
Purchase of short-term investments.................................................... (953) --
Purchase of additional equity in subsidiaries......................................... (3,926) (2,445)
Purchase of AAT....................................................................... -- (4,750)
Cash acquired in acquisitions......................................................... 184 --
Additions to property, plant and equipment............................................ (2,794) (2,422)
Other investing activities, net....................................................... 4 --
---------- ----------
Cash used in investing activities................................................... (21,189) (23,112)
---------- ----------
Financing activities:
Proceeds from issuance of long-term debt.............................................. -- 6,008
Proceeds from issuance of stock related to incentive plans............................ 4,565 48
Payments on notes and subordinated debt............................................... (1,998) (16,465)
Preferred stock dividends paid........................................................ (3,752) --
Due from discontinued operations...................................................... -- (1,181)
---------- ----------
Cash used in financing activities................................................... (1,185) (11,590)
---------- ----------
Net decrease in cash and cash equivalents................................................. (43,583) (56,878)
Cash and cash equivalents at beginning of period.......................................... 129,661 89,400
---------- ----------
Cash and cash equivalents at end of period................................................ $ 86,078 $ 32,522
---------- ----------
---------- ----------
</TABLE>

See accompanying notes to consolidated condensed financial statements.

4
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
CONSOLIDATED CONDENSED STATEMENT OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)

<TABLE>
<CAPTION>
7 1/4% CUMULATIVE
CONVERTIBLE
PREFERRED STOCK COMMON STOCK ACCUMULATED
------------------- --------------------- OTHER
NUMBER NUMBER PAID-IN ACCUMULATED COMPREHENSIVE
OF SHARES AMOUNT OF SHARES AMOUNT SURPLUS DEFICIT INCOME (LOSS) TOTAL
--------- -------- ----------- -------- ----------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balances, December 31, 1997.... 4,140,000 $207,000 68,390,800 $68,391 $ 1,007,272 $(718,615) $(3,366) $560,682
Issuance of stock and stock
options related to incentive
plans........................ -- -- 593,328 593 4,522 -- -- 5,115
Dividends on 7 1/4% cumulative
convertible preferred
stock........................ -- -- -- -- -- (3,752) -- (3,752)
Other comprehensive loss....... -- -- -- -- -- -- (195) (195)
Net loss....................... -- -- -- -- -- (22,963) -- (22,963)
--------- -------- ----------- -------- ----------- ----------- ------------- --------
Balances, March 31, 1998....... 4,140,000 $207,000 68,984,128 $68,984 $ 1,011,794 $(745,330) $(3,561) $538,887
--------- -------- ----------- -------- ----------- ----------- ------------- --------
--------- -------- ----------- -------- ----------- ----------- ------------- --------
</TABLE>

See accompanying notes to consolidated condensed financial statements.

5
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND LIQUIDITY

BASIS OF PRESENTATION

The accompanying interim consolidated condensed financial statements include the
accounts of Metromedia International Group, Inc. ("MMG" or the "Company") and
its wholly-owned subsidiaries, Metromedia International Telecommunications, Inc.
("MITI" or the "Communications Group") and Snapper Inc. ("Snapper"). All
significant intercompany transactions and accounts have been eliminated.

The Company completed the sale of Landmark Theatre Group ("Landmark") in April
1998 (see note 4). Accordingly, Landmark has been recorded as a discontinuance
of a business segment, and the consolidated condensed balance sheets at March
31, 1998 and December 31, 1997 reflect the net assets of the discontinued
segment. In addition, the consolidated condensed statements of operations
reflect Landmark's results of operations for the three months ended March 31,
1997 as a discontinued operation.

In addition, on July 10, 1997, the Company completed the sale of substantially
all of its entertainment assets (the "Entertainment Group Sale") (see note 4).
The transaction was recorded as a discontinuance of a business segment, and
accordingly the consolidated condensed statements of operations for the three
months ended March 31, 1997 reflect the results of operations as a discontinued
segment.

Investments in other companies, including those of the Communications Group's
Joint Ventures ("Joint Ventures") that are not majority owned, or in which the
Company does not have control but exercises significant influence, are accounted
for using the equity method. The Company reflects its net investments in Joint
Ventures under the caption "Investments in and advances to Joint Ventures." The
Company accounts for its equity in earnings (losses) of the Joint Ventures on a
three month lag.

The accompanying interim consolidated condensed financial statements have been
prepared without audit pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules and
regulations although the Company believes that the disclosures made are adequate
to make the information presented not misleading. These financial statements
should be read in conjunction with the consolidated financial statements and
related footnotes included in the Company's Annual Report on Form 10-K for the
year ended December 31, 1997 (the "1997 Form 10-K"). In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary to present fairly the financial position of the Company as of March
31, 1998, the results of its operations and its cash flows for the three-month
periods ended March 31, 1998 and 1997, have been included. The results of
operations for the interim period are not necessarily indicative of the results
which may be realized for the full year.

LIQUIDITY

MMG is a holding company, and accordingly, does not itself generate cash flows.
The Communications Group is dependent on MMG for significant capital infusions
to fund its operations, its commitments to make capital contributions and loans
to its Joint Ventures and any acquisitions. Such funding requirements are based
on the anticipated funding needs of its Joint Ventures and certain acquisitions
committed to by the Company. Future capital requirements of the Communications
Group, including future acquisitions, will depend on available funding from the
Company or alternative sources of financing and on the ability of the
Communications Group's Joint Ventures to generate positive cash flows. In
addition, Snapper is restricted under covenants contained in its credit
agreement from making dividend payments or advances to MMG.

6
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

1. BASIS OF PRESENTATION AND LIQUIDITY (continued)
In the near-term, the Company intends to satisfy its working capital and capital
commitments with available cash on hand and the proceeds from the sale of
Landmark (see note 4). However, the Communications Group's businesses in the
aggregate are capital intensive and require the investment of significant
amounts of capital in order to construct and develop operational systems and
market its services. As a result, the Company will require additional financing
in order to satisfy its on-going working capital, acquisition and expansion
requirements and to achieve its long-term business strategies. Such additional
capital may be provided through the public or private sale of equity or debt
securities of the Company or by separate equity or debt financings by the
Communications Group or certain companies of the Communications Group. No
assurance can be given that additional financing will be available to the
Company on acceptable terms, if at all. If adequate additional funds are not
available, the Company may be required to curtail significantly its long-term
business objectives and the Company's results from operations may be materially
and adversely affected.

Management believes that its long term liquidity needs will be satisfied through
a combination of the Company's successful implementation and execution of its
growth strategy to become a global communications and media company, through the
Communications Group's Joint Ventures achieving positive operating results and
cash flows through revenue and subscriber growth and through control of
operating expenses.

2. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--EASTERN EUROPE AND THE
REPUBLICS OF THE FORMER SOVIET UNION

The Communications Group records its investments in other companies and Joint
Ventures which are less than majority-owned, or which the Company does not
control but in which it exercises significant influence, at cost, net of its
equity in earnings or losses. Advances to the Joint Ventures under the line of
credit agreements between the Company or one of its subsidiaries and the Joint
Ventures are reflected based on amounts recoverable under the credit agreement,
plus accrued interest.

Advances are made to Joint Ventures in the form of cash, for working capital
purposes and for payment of expenses or capital expenditures, or in the form of
equipment purchased on behalf of the Joint Ventures. Interest rates charged to
the Joint Ventures range from the prime rate to the prime rate plus 6%. The
credit agreements generally provide for the payment of principal and interest
from 90% of the Joint Ventures' available cash flow, as defined, prior to any
substantial distributions of dividends to the Joint Venture partners. The
Communications Group has entered into charter fund and credit agreements with
its Joint Ventures to provide up to $106.4 million in funding of which $16.1
million remains available at March 31, 1998. The Communications Group's funding
commitments are contingent on its approval of the Joint Ventures' business
plans.

7
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

2. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--EASTERN EUROPE AND THE
REPUBLICS OF THE FORMER SOVIET UNION (continued)
At March 31, 1998 and December 31, 1997, the Communications Group's
unconsolidated investments in Joint Ventures in Eastern Europe and the republics
of the former Soviet Union, at cost, net of adjustments for its equity in
earnings or losses, were as follows (in thousands):

<TABLE>
<CAPTION>
YEAR YEAR
OWNERSHIP VENTURE OPERATIONS
1998 1997 % FORMED COMMENCED
--------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Name
CABLE TELEVISION
Kosmos TV, Moscow, Russia (1)............................ $ (282) $ (123) 50% 1991 1992
Baltcom TV, Riga Latvia.................................. 5,009 6,093 50% 1991 1992
Ayety TV, Tbilisi, Georgia............................... 3,341 3,732 49% 1991 1993
Kamalak TV, Tashkent, Uzbekistan......................... 2,562 2,824 50% 1992 1993
Sun TV, Chisinau, Moldova................................ 4,742 4,671 50% 1993 1994
Cosmos TV, Minsk, Belarus................................ 2,388 2,135 50% 1993 1996
Alma TV, Almaty, Kazakstan............................... 3,098 2,597 50% 1994 1995
Teleplus, St. Petersburg, Russia (2)..................... 1,207 1,093 45% 1996 1998
TV-21, Riga, Latvia...................................... 462 458 48% 1996 1997
--------- ---------
22,527 23,480
--------- ---------
PAGING
Baltcom Plus, Riga, Latvia............................... 936 1,232 50% 1994 1995
Paging One, Tbilisi, Georgia............................. 1,070 1,037 45% 1993 1994
Raduga Poisk, Nizhny Novgorod, Russia.................... 571 549 45% 1993 1994
PT Page, St. Petersburg, Russia.......................... 930 1,006 40% 1994 1995
Paging Ajara, Batumi, Georgia............................ 298 277 35% 1996 1997
Kazpage, Kazakstan (3)................................... 884 864 26-41% 1996 1997
Kamalak Paging, Tashkent, Uzbekistan..................... 2,432 2,243 50% 1992 1993
Alma Page, Almaty, Kazakstan............................. 1,204 1,936 50% 1994 1995
--------- ---------
8,325 9,144
--------- ---------
RADIO BROADCASTING
Eldoradio (formerly Radio Katusha),
St. Petersburg, Russia (4)............................. -- 971 75% 1993 1995
Radio Nika, Socci, Russia................................ 333 337 51% 1995 1995
AS Trio LSL, Tallinn, Estonia............................ 1,543 1,593 49% 1997 1997
--------- ---------
1,876 2,901
--------- ---------
INTERNATIONAL TOLL CALLING
Telecom Georgia, Tbilisi, Georgia........................ 6,007 6,080 30% 1994 1994
--------- ---------
CELLULAR TELECOMMUNICATIONS
Baltcom GSM, Latvia...................................... 11,505 11,996 21% 1996 1997
Magticom, Tbilisi, Georgia............................... 6,803 6,951 34% 1996 1997
--------- ---------
18,308 18,947
--------- ---------
</TABLE>

8
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

2. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--EASTERN EUROPE AND THE
REPUBLICS OF THE FORMER SOVIET UNION (continued)
<TABLE>
<CAPTION>
YEAR YEAR
OWNERSHIP VENTURE OPERATIONS
1998 1997 % FORMED COMMENCED
--------- --------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
TRUNKED MOBILE RADIO
Trunked mobile radio ventures............................ 4,061 5,390
--------- ---------
PRE-OPERATIONAL (5)
Telephony related ventures and equipment................. 9,003 9,003
Other.................................................... 14,278 11,497
--------- ---------
23,281 20,500
--------- ---------
TOTAL.................................................... $ 84,385 $ 86,442
--------- ---------
--------- ---------
</TABLE>

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

(1) The Communications Group has a continuing obligation to fund Kosmos TV under
the credit agreement.

(2) Included in Pre-operational at December 31, 1997.

(3) Kazpage is comprised of a service entity and 10 paging Joint Ventures. The
Company's interest in the paging Joint Ventures ranges from 26% to 41% and
its interest in the service entity is 51%.

(4) In November 1997, the Communications Group purchased an additional interest
in Eldoradio, increasing its ownership to 75%.

(5) At March 31, 1998 and December 31, 1997 amounts for entities whose venture
agreements are not yet finalized and amounts expended for equipment for
future wireless local loop projects are included in pre-operational Joint
Ventures.

Summarized combined financial information of Joint Ventures accounted for on a
three-month lag under the equity method that have commenced operations as of the
dates indicated are as follows (in thousands):

9
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

2. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--EASTERN EUROPE AND THE
REPUBLICS OF THE FORMER SOVIET UNION (continued)
COMBINED INFORMATION OF UNCONSOLIDATED JOINT VENTURES

COMBINED BALANCE SHEETS

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
---------- ------------
<S> <C> <C>
Assets:
Current assets....................................................................... $ 29,544 $ 30,563
Investments in wireless systems and equipment........................................ 99,532 84,875
Other assets......................................................................... 9,831 9,758
---------- ------------
Total assets....................................................................... $ 138,907 $ 125,196
---------- ------------
---------- ------------
Liabilities and Joint Ventures' Equity (Deficit):
Current liabilities.................................................................. $ 35,445 $ 28,280
Amount payable under MITI credit facility............................................ 52,623 50,692
Other long-term liabilities.......................................................... 58,956 49,232
---------- ------------
147,024 128,204
Joint Ventures' equity (deficit)..................................................... (8,117) (3,008)
---------- ------------
Total liabilities and Joint Ventures' equity (deficit)............................. $ 138,907 $ 125,196
---------- ------------
---------- ------------
</TABLE>

COMBINED STATEMENTS OF OPERATIONS

<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
--------------------
<S> <C> <C>
1998 1997
--------- ---------
Revenue.................................................................................. $ 23,143 $ 14,310
Expenses:
Cost of service........................................................................ 7,815 1,317
Selling, general and administrative.................................................... 13,427 6,953
Depreciation and amortization.......................................................... 6,371 2,653
Other.................................................................................. 30 --
--------- ---------
Total expenses....................................................................... 27,643 10,923
--------- ---------
Operating income (loss).................................................................. (4,500) 3,387
Interest expense......................................................................... (2,579) (1,135)
Other loss............................................................................... (898) (979)
Foreign currency transactions............................................................ (862) 346
--------- ---------
Net loss................................................................................. $ (8,839) $ 1,619
--------- ---------
--------- ---------
</TABLE>

Financial information for Joint Ventures which are not yet operational is not
included in the above summary.

10
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

2. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--EASTERN EUROPE AND THE
REPUBLICS OF THE FORMER SOVIET UNION (continued)
The following tables represent summary financial information for all operating
entities being grouped as indicated as of and for the three months ended March
31, 1998 and 1997 (in thousands, except subscribers):

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1998
--------------------------------------------------------------------------------------------------
TRUNKED
CABLE RADIO CELLULAR INTERNATIONAL MOBILE
TELEVISION PAGING BROADCASTING TELECOMMUNICATIONS TOLL CALLING RADIO TOTAL
----------- --------- ------------- ------------------- ------------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED
Revenues.................... $ 7,250 $ 4,729 $ 6,148 $ 4,017 $ 7,049 $ 2,825 $ 32,018
Depreciation and
amortization.............. 3,082 1,013 335 2,302 538 529 7,799
Operating income (loss)
before taxes.............. (2,952) (3,232) 1,149 (2,940) 2,016 (1,102) (7,061)
Interest income............. 11 12 40 -- -- 14 77
Interest expense............ 1,316 471 124 1,088 167 103 3,269
Net income (loss)........... (5,025) (4,067) 266 (4,222) 1,369 (1,225) (12,904)

Assets...................... 37,259 19,468 19,113 60,663 29,164 16,960 182,627
Capital expenditures........ 2,560 320 213 18,568 652 1,437 23,750
Contributions to Joint
Ventures (2).............. 4,255 4,431 2,137 1,202 -- 2,281 14,306
Subscribers................. 255,116 64,975 n/a 28,510 n/a 15,561 364,162

CONSOLIDATED SUBSIDIARIES
AND JOINT VENTURES
Revenues.................... $ 709 $ 887 $ 5,528 $ -- $ -- $ 1,751 $ 8,875(1)
Depreciation and
amortization.............. 327 559 291 -- -- 251 1,428
Operating income (loss)
before taxes.............. (779) (2,857) 1,203 -- -- (128) (2,561)(1)
Interest income............. 10 10 40 -- -- 14 74
Interest expense............ 237 300 119 -- -- 34 690
Net income (loss)........... (1,010) (3,187) 332 -- -- (200) (4,065)(1)

Assets...................... 8,401 7,627 18,116 -- -- 9,576 43,720
Capital expenditures........ 478 315 179 -- -- -- 972

UNCONSOLIDATED JOINT
VENTURES
Revenues.................... $ 6,541 $ 3,842 $ 620 $ 4,017 $ 7,049 $ 1,074 $ 23,143
Depreciation and
amortization.............. 2,755 454 44 2,302 538 278 6,371
Operating income (loss)
before taxes.............. (2,173) (375) (54) (2,940) 2,016 (974) (4,500)
Interest income............. 1 2 -- -- -- -- 3
Interest expense............ 1,079 171 5 1,088 167 69 2,579
Net income (loss)........... (4,015) (880) (66) (4,222) 1,369 (1,025) (8,839)

Assets...................... 28,858 11,841 997 60,663 29,164 7,384 138,907
Capital expenditures........ 2,082 5 34 18,568 652 1,437 22,778
Net investment in Joint
Ventures.................. 22,527 8,325 1,876 18,308 6,007 4,061 61,104
Equity in income (losses) of
unconsolidated
investees................. (3,781) (1,014) (33) (1,840) 411 (423) (6,680)
</TABLE>

11
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

2. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--EASTERN EUROPE AND THE
REPUBLICS OF THE FORMER SOVIET UNION (continued)

<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1997
-------------------------------------------------------------------------------------------
TRUNKED
CABLE RADIO CELLULAR INTERNATIONAL MOBILE
TELEVISION PAGING BROADCASTING TELECOMMUNICATIONS TOLL CALLING RADIO TOTAL
---------- ------ ------------ ------------------ ------------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
COMBINED
Revenues...................... $ 4,857 $3,458 $3,675 -$- $6,103 $ 841 $ 18,934
Depreciation and
amortization................ 2,165 299 124 -- 245 136 2,969
Operating income (loss) before
taxes....................... (1,609) 188 1,218 -- 5,395 (929) 4,263
Interest income............... 2 20 13 -- -- -- 35
Interest expense.............. 700 258 199 95 51 164 1,467
Net income (loss)............. (1,841) (564) 770 (408) 5,105 (1,111) 1,951

Assets........................ 31,422 14,073 4,558 9,923 16,289 9,706 85,971
Capital expenditures.......... 2,804 400 89 -- 1,704 -- 4,997
Contributions to Joint
Ventures (2)................ 8,060 1,590 389 3,187 -- 1,599 14,825
Subscribers................... 101,016 51,942 n/a -- n/a 8,711 161,669

CONSOLIDATED SUBSIDIARIES AND
JOINT VENTURES
Revenues...................... $ 493 $ 857 $3,274 -$- $-- $ -- $ 4,624(1)
Depreciation and
amortization................ 103 105 108 -- -- -- 316
Operating income (loss) before
taxes....................... (271) (5) 1,152 -- -- -- 876(1)
Interest income............... 1 18 13 -- -- -- 32
Interest expense.............. 65 94 173 -- -- -- 332
Net income (loss)............. (156) (207) 695 -- -- -- 332(1)
Assets........................ 3,125 3,010 3,801 -- -- -- 9,936
Capital expenditures.......... 860 103 87 -- -- -- 1,050

UNCONSOLIDATED JOINT VENTURES
Revenues...................... $ 4,364 $2,601 $ 401 -$- $6,103 $ 841 $ 14,310
Depreciation and
amortization................ 2,062 194 16 -- 245 136 2,653
Operating income (loss) before
taxes....................... (1,338) 193 66 -- 5,395 (929) 3,387
Interest income............... 1 2 -- -- -- -- 3
Interest expense.............. 635 164 26 95 51 164 1,135
Net income (loss)............. (1,685) (357) 75 (408) 5,105 (1,111) 1,619
Assets........................ 28,297 11,063 757 9,923 16,289 9,706 76,035
Capital expenditures.......... 1,944 297 2 -- 1,704 -- 3,947
Net investment in Joint
Ventures.................... 26,570 10,612 828 10,979 4,020 2,399 55,408
Equity in income (losses) of
unconsolidated investees.... (2,415) (294) 93 (105) 1,531 (408) (1,598)
</TABLE>

- ------------------------
(1) Does not reflect the Communications Group's and Protocall's headquarter's
revenue and selling, general and administrative expenses for the three
months ended March 31, 1998 and 1997, respectively.

(2) For the three months ended March 31, 1998 and 1997, the Communications Group
made investments of $708,000 and $1,584,000 in Fixed Telephony,
respectively.

In January 1998, the Communications Group signed a definitive agreement to
purchase 50% of a paging company in the Russian Federation.

12
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA

At March 31, 1998 and December 31, 1997 the Company's investments in the Joint
Ventures in China, at cost, net of adjustments for its equity in earnings or
losses, were as follows (in thousands):

<TABLE>
<CAPTION>
YEAR YEAR
OWNERSHIP VENTURE OPERATIONS
NAME 1998 1997 % FORMED COMMENCED
- -------------------------------------------------- --------- --------- ------------- ----------- -----------------
<S> <C> <C> <C> <C> <C>
Sichuan Tai Li Feng
Telecommunications
Co., Ltd. ("Sichuan JV")........................ $ 10,797 $ 10,946 92% 1996 Pre-operational

Chongqing Tai Le Feng
Telecommunications Co.,
Ltd. ("Chongqing JV")........................... 13,353 7,425 92% 1997 Pre-operational

Ningbo Ya Mei
Telecommunications Co.,
Ltd. ("Ningbo JV").............................. 29,087 27,480 70% 1996 1997
--------- ---------

$ 53,237 $ 45,851
--------- ---------
--------- ---------
</TABLE>

The Joint Ventures participate in project cooperation contracts with China
United Telecommunications Incorporated ("China Unicom") that entitle the Joint
Ventures to certain percentages of the projects' distributable cash flows. The
Joint Ventures amortize the contributions to these cooperation contracts over
the cooperation periods of benefit (15 to 25 years).

(A) SICHUAN JV

On May 21, 1996, Asian American Telecommunications, Inc. ("AAT"), a majority
owned subsidiary of the Company, entered into a Joint Venture Agreement with
China Huaneng Technology Development Corp. ("CHTD") for the purpose of
establishing Sichuan Tai Li Feng Telecommunications Co., Ltd. ("Sichuan JV").
Also on May 21, 1996, Sichuan JV entered into a Network Systems Cooperation
Contract (the "STLF Contract") with China Unicom. The STLF Contract provides for
the establishment of a network of 50,000 local telephone lines in the Sichuan
Province (the "Sichuan Network"), approximately 540 kilometers of secondary
class fiber optical toll lines between Chengdu and Chongqing cities. This
initial phase has a contractual term of twenty-five years. Subsequent phases are
projected to expand the Sichuan Network to more than 1,000,000 lines of local
telephone network and expand the intra-provincial long distance toll lines.

Under the STLF Contract, China Unicom will be responsible for the construction
and operation of the Sichuan Network, while Sichuan JV will provide financing
and consulting services for the project. Distributable Cash Flows, as defined in
the STLF Contract, are to be distributed 22% to China Unicom and 78% to Sichuan
JV for a twenty-five year period for each phase. Sichuan JV holds title to all
assets constructed, except for gateway switches and long distance transmission
facilities. On the tenth anniversary of the completion of the Sichuan Network's
initial phase, the assets will transfer from Sichuan JV to China Unicom. The
Joint Venture considers the cost of these fixed assets to be part of its
contribution to the STLF Contract.

The total amount to be invested in Sichuan JV is $29.5 million with equity
contributions from its shareholders amounting to $12.0 million. AAT is required
to make capital contributions to Sichuan JV of

13
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA (continued)
$11.4 million, representing 95% of the Sichuan JV's equity. CHTD is required to
contribute $600,000, representing 5% of the Sichuan JV's equity. The remaining
investment will be in the form of $17.5 million of loan from AAT and Northern
Telecom Communications ("Nortel"), the manufacturer of the equipment for
construction of the network. Ownership in the Sichuan JV is 92% by AAT and 8% by
CHTD.

AAT also has a consulting contract with CHTD for assistance with operations in
China. Under the contract, the Company is obligated to pay an annual fee of RMB
15.0 million (U.S. $1.8 million at March 31, 1998 exchange rates).

(B) CHONGQING JV

In May 1997, the PRC established the City of Chongqing as a separate municipal
government from the Province of Sichuan. On September 9, 1997, AAT entered into
a Joint Venture Agreement with CHTD for the purpose of establishing Chongqing
Tai Le Feng Telecommunication Co., Ltd. ("Chongqing JV"). Sichuan JV and
Chongqing JV entered into an agreement whereby the Chongqing JV assumed the
rights and obligations of the Sichuan JV under the STLF contract as it relates
to the financing and consulting services for the Sichuan Network that is
constructed by China Unicom within the City of Chongqing.

The total amount to be invested in Chongqing JV is $29.5 million with equity
contributions from its shareholders amounting to $14.8 million. AAT is required
to make capital contributions of $14.1 million representing 95% of the Chongqing
JV's equity. CHTD is required to contribute $740,000 representing 5% of the
Chongqing JV's equity. The remaining investment in Chongqing JV will be in the
form of $14.7 million of loans from AAT and Nortel, the manufacturer of the
equipment for construction of the network. Ownership in the Chongqing JV is 92%
by AAT and 8% by CHTD.

AAT entered into a Joint Venture Agreement with Ningbo United Telecommunications
Investment Co., Ltd. ("NUT") on September 17, 1996 for the purpose of
establishing Ningbo Ya Mei Telecommunications Co., Ltd ("Ningbo JV"). Ningbo JV
is engaged in the development of a GSM telecommunications project in the City of
Ningbo, Zhejiang Province, for China Unicom. This project entailed construction
of a mobile communications network with a capacity for 50,000 subscribers. China
Unicom is the operator of the network, and Ningbo JV provides financing and
consulting services to China Unicom.

NUT assigned Ningbo JV the rights and obligations received by NUT under a
Network System Cooperation Contract (the "NUT Contract") with China Unicom,
including the right to expand the project to a capacity of 50,000 subscribers.
NUT has also agreed to assign the rights of first refusal on additional
telecommunications projects to Ningbo JV in the event such rights are granted to
NUT by China Unicom. Distributable Cash Flows, as defined in the NUT Contract
are to be distributed 27% to China Unicom and 73% to Ningbo JV for a 15 year
period for each phase. Under the NUT Contract, Ningbo JV will own 70% of all
assets constructed. Ningbo JV's ownership of these assets will transfer to China
Unicom as Ningbo JV's project investment is returned. The Ningbo JV considers
the cost of these assets to be part of its contribution to the NUT Contract.

Under the terms of the Ningbo JV, AAT provided $8.3 million of capital
contributions, representing 70% of Ningbo JV's equity. NUT provided $3.6 million
of capital contributions to Ningbo JV, representing 30% of Ningbo JV's equity.
Ningbo JV arranged loans with AAT, manufacturers of the equipment for the
project and banks in the amount of $17.8 million.

14
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

3. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES--CHINA (continued)
As of March 31, 1998, AAT had long-term loans to Ningbo JV in the amount of
$20.1 million. A substantial portion of these loans was to refinance previous
loans from manufacturers. These loans bear interest at 10% per annum.

On March 26, 1998 Ningbo JV and China Unicom signed a co-operation agreement for
Phase 1 Re-expansion of the network. The re-expansion includes 35 new base
stations (total of 100 base stations) and 25,000 new subscribers (total capacity
of 75,000 subscribers). The feasibility study for the expansion was completed at
March 6, 1998 and forecast a total budget of approximately $17 million. The
expansion is scheduled from May 1998 through July 1998.

The following table represents summary financial information for the Joint
Ventures and their related projects in China as of and for the three months
ended March 31, 1998 (in thousands, except subscribers):

<TABLE>
<CAPTION>
NINGBO SICHUAN CHONGQING
JV JV JV TOTAL
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Revenues............................................................. $ 638 $ -- $ -- $ 638
Depreciation and amortization........................................ 560 9 -- 569
Operating income (loss).............................................. 47 (169) (232) (354)
Interest income (expense), net....................................... (715) 7 -- (708)
Net loss............................................................. (668) (162) (232) (1,062)
Assets............................................................... 35,713 11,803 14,689 62,205
Net investment in project............................................ 32,967 10,186 2,075 45,228
AAT equity in loss of Joint Ventures................................. (470) (149) (214) (833)
Subscribers.......................................................... 19,085 -- -- 19,085
</TABLE>

Ningbo JV records revenue from the Ningbo China Unicom GSM project based on
amounts of revenues and profits reported to it by China Unicom through December
31, 1997.

(D) GOLDEN CELLULAR JV

The Company is in the process of dissolving Beijing Metromedia-Jinfeng
Communications Technology Development Co. Ltd. (the "Golden Cellular JV"), a
Joint Venture created in March, 1996 with Golden Cellular Communication Co.,
Ltd. ("GCC") for the purpose of developing, manufacturing, assembling and
servicing of wireless telecommunications equipment, central telephone terminals
and subscriber telephone terminals equipment and networks using Airspan
Communications Corporation (an equipment manufacturer) technology in China.

GCC and Metromedia China Telephony Limited ("MCTL") entered into a settlement
contract on March 3, 1998 which provides the terms for dissolution of the Golden
Cellular JV. The costs associated with the dissolution of GCC were recorded in
1997.

4. DISCONTINUED OPERATIONS

SALE OF LANDMARK THEATRE GROUP

On April 16, 1998, the Company sold to Silver Cinemas, Inc. (the "Landmark
Sale") all of the assets, except cash for an aggregate cash purchase price of
approximately $62.5 million and the assumption of certain Landmark liabilities.
The Landmark Sale has been recorded as a discontinuance of a business

15
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

4. DISCONTINUED OPERATIONS (continued)
segment in the accompanying consolidated financial statements. The Company
expects to record a gain on the sale of the discontinued segment.

The net assets of Landmark at March 31, 1998, December 31, 1997 and November 12,
1997, the date the Company adopted a plan to dispose of Landmark, were as
follows (in thousands):

<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31, NOVEMBER 12,
1998 1997 1997
----------- ------------ ------------
<S> <C> <C> <C>
Current assets........................................................... $ 773 $ 793 $ 906
Non-current assets....................................................... 57,716 57,183 57,523
Current liabilities...................................................... (6,012) (6,286) (4,738)
Non-current liabilities.................................................. (4,754) (4,922) (5,160)
----------- ------------ ------------
Net assets............................................................. $ 47,723 $ 46,768 $ 48,531
----------- ------------ ------------
----------- ------------ ------------
</TABLE>

Landmark's revenues and income from operations for the three months ended March
31, 1997 were $17.0 million and $1.3 million, respectively. Income from
operations for the three months ended March 31, 1997 includes income taxes of
$408,000.

THE ENTERTAINMENT GROUP SALE

On July 10, 1997, the Company completed the sale of substantially all of its
entertainment assets (the "Entertainment Group"). The Entertainment Group's
revenues and loss from operations for the three months ended March 31, 1997 were
$27.4 million and $10.1 million, respectively. Loss from operations for the
three months ended March 31, 1997 includes income tax expense of $200,000.

5. EARNINGS PER SHARE OF COMMON STOCK

On December 31, 1997 the Company adopted Statement of Financial Accounting
Standards No. 128 ("SFAS 128"), "Earnings per Share," which specifies the
computation, presentation and disclosure requirements for earnings per share
("EPS"). All prior period EPS data has been restated to conform with SFAS 128.
SFAS 128 replaces the presentation of primary and fully diluted EPS with basic
and diluted EPS.

Basic EPS excludes all dilutive securities. It is based upon the weighted
average number of common shares outstanding during the period. Diluted EPS
reflects the potential dilution that would occur if securities to issue common
stock were exercised or converted into common stock. In calculating diluted EPS,
no potential shares of common stock are to be included in the computation when a
loss from continuing operations available to common stockholders exists. For the
three months ended March 31, 1998 and in 1997 the Company had losses from
continuing operations.

16
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

5. EARNINGS PER SHARE OF COMMON STOCK (continued)
The computation of basic EPS for the three months ended March 31, 1998 and 1997
is as follows (in thousands, except per share amounts):

<TABLE>
<CAPTION>
LOSS SHARES PER-SHARE
(NUMERATOR) (DENOMINATOR) AMOUNT
------------ ------------- -----------
<S> <C> <C> <C>
1998:
Loss from continuing operations.......................................... $ (22,963)
Less: Preferred stock dividend requirement............................... 3,752
------------
Loss from continuing operations attributable to common stockholders...... $ (26,715) 68,572 $ (0.39)
------------ ------------- -----------
------------ ------------- -----------
1997:
Loss from continuing operations.......................................... $ (13,505) 66,155 $ (0.21)
------------ ------------- -----------
------------ ------------- -----------
</TABLE>

The Company had for the three months ended March 31, 1998 and 1997, potentially
dilutive shares of common stock of 19,136,000 and 8,182,000, respectively.

6. STOCK OPTION PLANS

On March 31, 1998, the Company granted approximately 200,000 stock options at an
exercise price of $11.69 under the 1996 Metromedia International Group, Inc.
Incentive Stock Plan which resulted in a compensation expense of approximately
$550,000 which is included in selling, general and administrative expense for
the three months ended March 31, 1998.

17
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

7. BUSINESS SEGMENT DATA

The business activities of the Company constitute two business segments and are
set forth as of and for the three months ended March 31, 1998 and 1997 in the
following table (in thousands):

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
COMMUNICATIONS GROUP CONSOLIDATED:
Revenues.................................................................................. $ 8,962 $ 5,175
Depreciation and amortization............................................................. (3,500) (1,949)
Operating loss............................................................................ (16,620) (8,432)
Equity in losses of Joint Ventures........................................................ (7,513) (1,598)
Minority interest......................................................................... 2,039 1,240
Loss before income tax expense............................................................ (21,092) (7,360)
Assets at March 31, 1998 and December 31, 1997............................................ 355,250 346,437
Capital expenditures...................................................................... $ 1,862 $ 1,677
---------- ----------
---------- ----------
SNAPPER:
Revenues.................................................................................. $ 51,257 $ 53,800
Depreciation and amortization............................................................. (1,814) (1,907)
Operating income (loss)................................................................... 864 (508)
Loss before income tax expense............................................................ (3,556) (2,067)
Assets at March 31, 1998 and December 31, 1997............................................ 170,143 167,858
Capital expenditures...................................................................... $ 932 $ 745
---------- ----------
---------- ----------
OTHER:
Revenues.................................................................................. $ -- $ --
Depreciation and amortization............................................................. (1) (3)
Operating loss............................................................................ (1,290) (1,224)
Income (loss) before income tax expense................................................... 2,172 (3,980)
Assets at March 31, 1998 and December 31, 1997, including discontinued operations and
eliminations............................................................................ $ 232,324 $ 274,977
---------- ----------
---------- ----------
CONSOLIDATED:
Revenues.................................................................................. $ 60,219 $ 58,975
Depreciation and amortization............................................................. (5,315) (3,859)
Operating loss............................................................................ (17,046) (10,164)
Equity in losses of Joint Ventures........................................................ (7,513) (1,598)
Minority interest......................................................................... 2,039 1,240
Loss before income tax expense............................................................ (22,476) (13,407)

Assets at March 31, 1998 and December 31, 1997............................................ 757,717 789,272
Capital expenditures...................................................................... $ 2,794 $ 2,422
---------- ----------
---------- ----------
</TABLE>

The revenues and assets by the Communications Group's lines of business are
disclosed in notes 2 and 3.

18
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

8. OTHER CONSOLIDATED CONDENSED FINANCIAL STATEMENT INFORMATION

ACCOUNTS RECEIVABLE

The total allowance for doubtful accounts at March 31, 1998 and December 31,
1997 was $2.4 million and $2.6 million, respectively.

INVENTORIES

Inventories consist of the following as of March 31, 1998 and December 31, 1997
(in thousands):

<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Lawn and garden equipment:
Raw materials............................................................................. $ 10,084 $ 11,031
Finished goods............................................................................ 80,002 84,523
--------- ---------
90,086 95,554
Less: LIFO reserve........................................................................ 1,306 1,306
--------- ---------
88,780 94,248
--------- ---------
Telecommunications:
Pagers.................................................................................... 424 1,083
Telephony................................................................................. 310 425
Cable..................................................................................... 663 680
--------- ---------
1,397 2,188
--------- ---------
$ 90,177 $ 96,436
--------- ---------
--------- ---------
</TABLE>

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Interest expense includes amortization of debt discount of $659,000 for the
three months ended March 31, 1997.

9. CONTINGENCIES

RISKS ASSOCIATED WITH THE COMMUNICATIONS GROUP'S INVESTMENTS

The ability of the Communications Group and its Joint Ventures to establish
profitable operations is subject to, among other things, significant political,
economic and social risks inherent in doing business in Eastern Europe, the
republics of the former Soviet Union, and China. These include potential risks
arising out of government policies, economic conditions, imposition of taxes or
other similar charges by governmental bodies, foreign exchange fluctuations and
controls, civil disturbances, deprivation or unenforceability of contractual
rights, and taking of property without fair compensation.

The Company may also be materially and adversely affected by laws restricting
foreign investment in the field of communications. Certain countries have
extensive restrictions on foreign investment in the communications field and the
Communications Group is attempting to structure its prospective projects in
order to comply with such laws. However, there can be no assurance that such
legal and regulatory

19
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

9. CONTINGENCIES (continued)
restrictions will not increase in the future or, as currently promulgated, will
not be interpreted in a manner giving rise to tighter restrictions, and thus may
have a material adverse effect on the Company's prospective projects in the
country. The Russian Federation has periodically proposed legislation that would
limit the ownership percentage that foreign companies can have in communications
businesses. While such proposed legislation has not been enacted, it is possible
that such legislation could be enacted in Russia and that other countries in
Eastern Europe and the republics of the former Soviet Union may enact similar
legislation which could have a material adverse effect on the business,
operations, financial condition or prospects of the Company. Such legislation
could be similar to United States federal law which limits foreign ownership in
entities owning broadcasting licenses. Similarly, PRC law and regulation
prohibit foreign companies or Joint Ventures in which they participate from
providing telephony service to customers in China and generally limit the role
that foreign companies or their Joint Ventures may play in the
telecommunications industry. As a result, the Communications Group affiliate
that has invested in China structures its transactions so that the applicable
Joint Venture is a provider of telephony equipment and technical support
services as opposed to a direct provider of such services. In addition, there is
no way of predicting whether additional foreign ownership limitations will be
enacted in any of the Communications Group's markets, or whether any such law,
if enacted, will force the Communications Group to reduce or restructure its
ownership interest in any of the ventures in which the Communications Group
currently has an ownership interest. If foreign ownership limitations are
enacted in any of the Communications Group's markets and the Communications
Group is required to reduce or restructure its ownership interests in any
ventures, it is unclear how such reduction or restructuring would be
implemented, or what impact such reduction or restructuring would have on the
Communications Group.

The Communications Group's strategy is to minimize its foreign currency risk. To
the extent possible, in countries that have experienced high rates of inflation,
the Communications Group bills and collects all revenues in U.S. dollars or an
equivalent local currency amount adjusted on a monthly basis for exchange rate
fluctuations. The Communications Group's Joint Ventures are generally permitted
to maintain U.S. dollar accounts to service their U.S. dollar denominated credit
lines, thereby reducing foreign currency risk. As the Communications Group and
its Joint Ventures expand their operations and become more dependent on local
currency based transactions, the Communications Group expects that its foreign
currency exposure will increase. The Communications Group does not hedge against
foreign exchange rate risks at the current time and therefore could be subject
in the future to any declines in exchange rates between the time a Joint Venture
receives its funds in local currencies and the time it distributed such funds in
U.S. dollars to the Communications Group.

The licenses pursuant to which the Communications Group's businesses operate are
issued for limited periods. Certain of these licenses expire over the next
several years. One of the licenses held by the Communications Group has expired,
although the Communications Group has been permitted to continue operations
while the reissuance is pending. The Communications Group has applied for a
renewal and expects a new license to be issued. Four other licenses held or used
by the Communications Group will expire during 1998, including the license for
Radio Juventus, the Company's radio operation in Hungary. The failure of such
licenses to be renewed may have a material adverse effect on the Company's
results of operations. Additionally, certain of the licenses pursuant to which
the Communications Group's businesses operate contain network build-out
milestone clauses. The failure to satisfy such milestones could result in the
loss of such licenses which may have a material adverse effect on the
Communications Group.

20
<PAGE>
METROMEDIA INTERNATIONAL GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (continued)

9. CONTINGENCIES (continued)
In the case of the licenses other than Radio Juventus, the Company's Joint
Ventures will apply for renewals of their licenses. While there can be no
assurance that these four licenses will be renewed, based on past experience,
the Communications Group expects to obtain such renewals. In the case of Radio
Juventus, the Communications Group plans to cause the venture to participate in
a competitive tender for a regional broadcasting license to cover Budapest and
certain other areas in Hungary. The Company believes that Radio Juventus'
prospects for winning such tender, which will be determined by the strength of
its bid in the tender in comparison to the bids of other participants in the
tender, are good, although there can be no assurance that Radio Juventus will
win the tender.

LITIGATION

The Company is involved in various legal and regulatory proceedings. While the
results of any legal or regulatory proceeding contain an element of uncertainty,
management believes that the outcome of any known, pending or threatened legal
proceedings will not have a material effect on the Company's consolidated
financial position and results of operations.

21
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The following discussion should be read in conjunction with the Company's
consolidated condensed financial statements and related notes thereto.

Metromedia International Group, Inc. ("MMG" or "the Company") is a global
communications and media company engaged in the development and operation of a
variety of communications businesses, including cable television, AM/FM radio
broadcasting, paging, cellular telecommunications, international toll calling,
fixed telephony and trunked mobile radio, in Eastern Europe, the republics of
the former Soviet Union ("the FSU") and the People's Republic of China ("China")
and other selected emerging markets, through its Communications Group ( the
"Communications Group").

The Communications Group's investments in communications businesses are made in
two primary geographic areas: Eastern Europe and the FSU, and China. In Eastern
Europe and the FSU, the Communications Group generally owns 50% or more of the
operating Joint Ventures ("Joint Ventures") in which it invests. Currently,
legal restrictions in China prohibit foreign participation in the operations or
ownership in the telecommunications sector. The Communications Group's existing
China Joint Ventures invest in network construction and development of telephony
networks for China United Telecommunications Incorporated ("China Unicom"). The
completed networks are operated by China Unicom. The China Joint Ventures
receive payments from China Unicom based upon distributable cash flow generated
by the networks, for a cooperation period of 15-25 years for each expansion
phase financed and developed. These payments are in return for the Joint Venture
providing financing, technical advice, consulting and other services.
Hereinafter, all references to the Communications Group's Joint Ventures relate
to the operating Joint Ventures in Eastern Europe and the FSU and Communications
Group's Joint Ventures in China. Statistical data regarding subscribers,
population, etc. for the Joint Ventures in China relate to the telephony
networks of China Unicom.

Investments in other companies, including the Communications Group's Joint
Ventures ("Joint Ventures") which are not majority owned, or in which the
Company does not have control but exercises significant influence, are accounted
for using the equity method. The Company reflects its net investments in Joint
Ventures under the caption "Investments in and advances to Joint Ventures." The
Company accounts for its equity in earnings (losses) of the Joint Ventures in
Eastern Europe and the FSU and the telephony networks of China Unicom on a three
month lag.

The Company also owns Snapper, Inc. ("Snapper"), which is a wholly-owned
subsidiary. Snapper manufacturers Snapper-Registered Trademark- brand
premium-priced power lawnmowers, lawn tractors, garden tillers, snowthrowers and
related parts and accessories. In addition, on April 16, 1998 the Company
completed the sale of Landmark Theatre Group ("Landmark") and on July 10, 1997
the Company sold substantially all of its entertainment assets (the
"Entertainment Group Sale"). Both transactions were recorded as a discontinuance
of a business segment. See note 4 to the Notes to Consolidated Condensed
Financial Statements.

The Company owns approximately 39% of the outstanding common stock of RDM Sports
Group, Inc. ("RDM"). On August 29, 1997, RDM and certain of its affiliates filed
a voluntary bankruptcy petition under chapter 11 of the Bankruptcy Code in the
United States Bankruptcy Court for the Northern District of Georgia (the
"Bankruptcy Court"). On February 18, 1998 the Office of the United States
Trustee filed a motion to appoint a chapter 11 trustee in the Bankruptcy Court.
RDM and its affiliates subsequently filed a motion to convert the chapter 11
cases to cases under chapter 7 of the Bankruptcy Code. On February 19, 1998, the
Bankruptcy Court granted the United States Trustee's motion and ordered that a
chapter 11 trustee be appointed. The Bankruptcy Court also ordered that the
chapter 11 cases not convert to cases under chapter 7 of the Bankruptcy Code. On
February 25, 1998, each of the Company's designees on RDM's Board of Directors
submitted a letter of resignation. The chapter 11 trustee is in the process of
selling all of RDM's assets to satisfy its obligations to its creditors and the
Company believes that it will not be entitled to receive any distributions in
respect of its equity interest in RDM.

22
<PAGE>
Certain statements set forth below under this caption constitute
"Forward-Looking Statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended (the "Securities Act") and Section 21E of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). See "Special Note
Regarding Forward-Looking Statements" on page 38.

COMMUNICATIONS GROUP

The Company, through the Communications Group, is the owner of various interests
in Joint Ventures that are currently in operation or planning to commence
operations in Eastern Europe, the FSU, China and other selected emerging
markets.

The Communications Group's Joint Ventures currently offer cable television,
AM/FM radio broadcasting, paging, cellular telecommunications, international
toll calling, fixed telephony and trunked mobile radio. The Communications
Group's Joint Ventures' partners are often governmental agencies or ministries.

The Communications Group's investments in communications businesses are made in
two primary geographic areas in Eastern Europe and the FSU, and in China. In
Eastern Europe and the FSU, the Communications Group generally owns 50% or more
of the operating Joint Ventures in which it invests. Currently, legal
restrictions in China prohibit foreign participation in the telecommunications
sector. The Communications Group's China Joint Ventures invest in network
construction and development of telephony networks for China United
Telecommunications Incorporated ("China Unicom"). The completed networks are
operated by China Unicom. The China Joint Ventures receive payments from China
Unicom based on revenues and profits generated by the networks in return for
their providing financing, technical advice and consulting and other services.
Statistical data regarding subscribers, population, etc. for the Joint Ventures
in China relate to the telephony networks of China Unicom.

The Company's financial statements consolidate the accounts and results of
operations of only 16 of the Communications Group's 45 operating Joint Ventures
at March 31, 1998. Investments in other companies and Joint Ventures which are
not majority owned, or which the Communications Group does not control, but over
which the Communications Group exercises significant influence, have been
accounted for using the equity method. Investments of the Communications Group
or its consolidated subsidiaries over which significant influence is not
exercised are carried under the cost method. See notes 2 and 3 to the "Notes to
Consolidated Condensed Financial Statements" of the Company, for these Joint
Ventures and their summary financial information.

23
<PAGE>
The following table summarizes the Communications Group's Joint Ventures and
subsidiaries at March 31, 1998, as well as the amounts contributed, amounts
loaned net of repayments and total amounts invested in such Joint Ventures and
subsidiaries at March 31, 1998 (in thousands).

<TABLE>
<CAPTION>
AMOUNT AMOUNT TOTAL
CONTRIBUTED LOANED TO INVESTMENT
TO JOINT JOINT IN JOINT
COMPANY VENTURE/ VENTURE/ VENTURE/
JOINT VENTURE (1) OWNERSHIP % SUBSIDIARY SUBSIDIARY SUBSIDIARY (8)
- ---------------------------------------------------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
CABLE TELEVISION
Romsat Cable TV (Bucharest, Romania) (2)............ 100% $ 612 $ 6,447 $ 7,059
Viginta (Vilnius, Lithuania) (2).................... 55% 397 2,581 2,978
Kosmos TV (Moscow, Russia).......................... 50% 1,093 10,538 11,631
Baltcom TV (Riga, Latvia)........................... 50% 819 11,723 12,542
Ayety TV (Tbilisi, Georgia)......................... 49% 779 7,454 8,233
Kamalak TV (Tashkent, Uzbekistan)................... 50% 400 3,112 3,512
Sun TV (Chisinau, Moldova).......................... 50% 400 6,301 6,701
Alma TV (Almaty, Kazakstan)......................... 50% 222 4,425 4,647
Cosmos TV (Minsk, Belarus).......................... 50% 400 3,272 3,672
Teleplus (St. Petersburg, Russia)................... 45% 990 344 1,334
----------- ------------- --------------
6,112 56,197 62,309
----------- ------------- --------------
PAGING
Baltcom Paging (Tallinn, Estonia) (2)............... 85% 3,715 1,874 5,589
CNM (Romania) (2)................................... 54% 490 5,489 5,979
Paging One Services (Austria) (2)................... 100% 1,036 7,815 8,851
Baltcom Plus (Riga, Latvia)......................... 50% 250 2,870 3,120
Paging One (Tbilisi, Georgia)....................... 45% 250 1,407 1,657
Raduga Poisk (Nizhny Novgorod, Russia).............. 45% 330 36 366
PT Page (St. Petersburg, Russia).................... 40% 1,100 2 1,102
Kazpage (Kazakstan) (9)............................. 26-41% 520 564 1,084
Kamalak Paging (Tashkent, Samarkand, Bukhara and
Andijan, Uzbekistan).............................. 50% 435 1,976 2,411
Alma Page (Almaty and Ust-Kamenogorsk, Kazakstan)... 50% -- 1,793 1,793
Paging Ajara (Batumi, Georgia)...................... 35% 43 254 297
----------- ------------- --------------
8,169 24,080 32,249
----------- ------------- --------------
RADIO BROADCASTING
Radio Juventus (Budapest, Hungary) (2).............. 100% 8,107 6 8,113
SAC (Moscow, Russia) (2)............................ 83% 631 2,586 3,217
Radio Skonto (Riga, Latvia) (2)..................... 55% 302 259 561
Radio One (Prague, Czech Republic) (2).............. 80% 627 240 867
NewsTalk Radio (Berlin, Germany) (2)................ 70% 2,758 2,826 5,584
Radio Vladivostok, (Vladivostok, Russia) (2)........ 51% 260 40 300
Country Radio (Prague, Czech Republic) (11)......... 85% 2,040 -- 2,040
Radio Georgia (Tbilisi, Georgia) (2)................ 51% 255 156 411
Eldoradio (formerly Radio Katusha)(St. Petersburg,
Russia) (2) (5)................................... 75% 464 830 1,294
Radio Nika (Socci, Russia).......................... 51% 260 56 316
AS Trio LSL (Tallinn, Estonia) (5).................. 49% 1,536 -- 1,536
----------- ------------- --------------
17,240 6,999 24,239
----------- ------------- --------------
</TABLE>

24
<PAGE>
<TABLE>
<CAPTION>
AMOUNT AMOUNT TOTAL
CONTRIBUTED LOANED TO INVESTMENT
TO JOINT JOINT IN JOINT
COMPANY VENTURE/ VENTURE/ VENTURE/
JOINT VENTURE (1) OWNERSHIP % SUBSIDIARY SUBSIDIARY SUBSIDIARY (8)
- ---------------------------------------------------- ----------- ----------- ------------- --------------
<S> <C> <C> <C> <C>
INTERNATIONAL TOLL CALLING
Telecom Georgia (Tbilisi, Georgia).................. 30% $ 2,554 $ -- $ 2,554
----------- ------------- --------------
Trunked Mobile Radio
Protocall Ventures, Ltd. (2) (3).................... 56% 2,550 12,544 15,094
Spectrum (Kazakstan) (10)........................... 31% 36 1,187 1,223
----------- ------------- --------------
2,586 13,731 16,317
----------- ------------- --------------
CELLULAR TELECOMMUNICATIONS
Baltcom GSM (Latvia)................................ 21% 13,483 -- 13,483
Magticom (Tbilisi, Georgia)......................... 34% 9,090 -- 9,090
Ningbo Ya Mei Communications (Ningbo City, China)
(6)............................................... 41% 9,530 21,403 30,933
----------- ------------- --------------
32,103 21,403 53,506
----------- ------------- --------------
FIXED TELEPHONY
Sichuan Tai Li Feng Telecommunications, Co. (Sichuan
Province, China) (4)(7)........................... 54% 11,087 -- 11,087
Chongqing Tai Le Feng Telecommunication, Co.
(Chongqing City, China) (4) (7)..................... 54% 13,581 -- 13,581
Instaphone (Kazakstan) (4).......................... 50% 4 1,018 1,022
----------- ------------- --------------
24,672 1,018 25,690
----------- ------------- --------------
Total............................................... $ 93,436 $ 123,428 $216,864
----------- ------------- --------------
----------- ------------- --------------
</TABLE>

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

(1) Each parenthetical notes the area of operations for each operational Joint
Venture or the area for which each pre-operational Joint Venture is
licensed.

(2) Results of operations are consolidated with the Company's financial
statements.

(3) The Communications Group owns its trunked mobile radio ventures through
Protocall, in which it has a 56% ownership interest. Through Protocall, the
Communications Group owns interests in (i) Belgium Trunking (50%), which
provides services in Brussels and Flanders, Belgium, (ii) Radiomovel
Telecommunicacoes (36%), which provides services in Portugal, (iii)
Teletrunk Spain (17-48% depending on the joint venture), which provides
services through 4 Joint Ventures in Madrid, Valencia, Aragon and Catalonia,
Spain and (iv) Spectrum (31%), which operates in Almaty and Aryran,
Kazakstan. A portion of the Communications Group's interest in Spectrum is
held directly. The above amounts include $36,050 contributed to Spectrum
directly by the Company.

(4) Pre-operational systems as of March 31, 1998.

(5) Eldoradio includes two radio stations operating in St. Petersburg, Russia
and AS Trio LSL includes four radio stations operating in various cities
throughout Estonia. In November 1997, the Communications Group entered into
a definitive agreement to purchase an additional 25% of Eldoradio,
increasing its ownership percentage to 75%. In April 1998 AS Trio LSL
acquired 100% of B-3, which operates an additional radio station in Estonia,
for $315,000.

(6) Ningbo Ya Mei Communications is participating in the build-out of an
operational GSM system in Ningbo City, China, and providing financing,
technical assistance and consulting services to the systems operator.

25
<PAGE>
(7) Sichuan Tai Li Feng Telecommunications, Co. and Chongqing Tai Le Feng
Telecommunication, Co. are pre-operational Joint Ventures that are
participating in the construction and development of a local telephone
network in the Sichuan Province and the City of Chongqing, China.

(8) Total investment does not include any incurred losses.

(9) Kazpage is comprised of a service entity and 10 paging Joint Ventures that
provide services in Kazakstan. The Company's interest in the Joint Ventures
ranges from 26% to 41% and its interest in the service entity is 51%.
Amounts described as loaned in the above table represent loans to the
service entity which in turn funds the Joint Ventures.

(10) In April 1998, Spectrum and its shareholders, including the Communications
Group, completed a transaction pursuant to which the European Bank for
Reconstruction and Development ("EBRD") and the Fund New Europe ("FNE")
purchased 30% and 3%, respectively, of the shares of Spectrum in return for
making equity contributions to Spectrum of $181,800 and $18,200,
respectively. This transaction reduced the Communications Group's ownership
interest in Spectrum to 21%. In connection with such investment, the EBRD
has agreed to make a loan of up to $2.0 million to Spectrum. In addition,
the EBRD and FNE were provided the right to put their shares back to
Spectrum at a price equal to four times earnings before interest, tax and
depreciation for the year preceding the put, multiplied by a fraction, the
numerator of which is the number of shares held by either the EBRD or FNE
and the denominator of which is all issued shares. The put may be exercised
at any time starting 6 years after the date of the transaction.

(11) The Company's interest in Country Radio was registered during January 1998.
The Joint Venture's results of operations will be consolidated with the
Company's financial statements in the quarter ended June 30, 1998.

SNAPPER

Snapper manufacturers Snapper-Registered Trademark- brand premium-priced power
lawnmowers, lawn tractors, garden tillers, snowthrowers and related parts and
accessories. The lawnmowers include rear engine riding mowers, front-engine
riding mowers or lawn tractors, and self-propelled and push-type walk-behind
mowers. Snapper also manufactures a line of commercial lawn and turf equipment
under the Snapper brand. Snapper provides lawn and garden products through
distribution channels to domestic and foreign retail markets.

26
<PAGE>
The following table sets forth the operating results for the three months ended
March 31, 1998 and 1997 of the Company's Communications Group and lawn and
garden products segments.

SEGMENT INFORMATION
MANAGEMENT'S DISCUSSION & ANALYSIS TABLE
(IN THOUSANDS)

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
COMMUNICATIONS GROUP--CONSOLIDATED:
Revenues................................................................................ $ 8,962 $ 5,175
Cost of sales and operating expenses.................................................... (1,568) (549)
Selling, general and administrative..................................................... (20,514) (11,109)
Depreciation and amortization........................................................... (3,500) (1,949)
---------- ----------
Operating loss........................................................................ (16,620) (8,432)
Equity in losses of Joint Ventures...................................................... (7,513) (1,598)
Minority interest....................................................................... 2,039 1,240
---------- ----------
(22,094) (8,790)
SNAPPER:
Revenues................................................................................ 51,257 53,800
Cost of sales and operating expenses.................................................... (35,749) (37,446)
Selling, general and administrative..................................................... (12,830) (14,955)
Depreciation and amortization........................................................... (1,814) (1,907)
---------- ----------
Operating income (loss)............................................................... 864 (508)

CORPORATE HEADQUARTERS AND ELIMINATIONS:
Revenues................................................................................ -- --
Cost of sales and operating expenses.................................................... -- --
Selling, general and administrative..................................................... (1,289) (1,221)
Depreciation and amortization........................................................... (1) (3)
---------- ----------
Operating loss........................................................................ (1,290) (1,224)

CONSOLIDATED--CONTINUING OPERATIONS:
Revenues................................................................................ 60,219 58,975
Cost of sales and operating expenses.................................................... (37,317) (37,995)
Selling, general and administrative..................................................... (34,633) (27,285)
Depreciation and amortization........................................................... (5,315) (3,859)
---------- ----------
Operating loss........................................................................ (17,046) (10,164)
Interest expense.......................................................................... (5,003) (5,592)
Interest income........................................................................... 5,047 2,707
Income tax expense........................................................................ (487) (98)
Equity in losses in Joint Ventures........................................................ (7,513) (1,598)
Minority interest......................................................................... 2,039 1,240
Discontinued operations................................................................... -- (8,753)
---------- ----------
Net loss.................................................................................. $ (22,963) $ (22,258)
---------- ----------
---------- ----------
</TABLE>

27
<PAGE>
MMG CONSOLIDATED--RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997

Net loss increased to $23.0 million for the three months ended March 31, 1998
from $22.3 million for the three months ended March 31, 1997. The net loss for
the three months ended March 31, 1997 includes a loss from discontinued
operations, the Entertainment Group and Landmark, of $8.8 million.

Operating loss increased to $17.1 million for the three months ended March 31,
1998 from $10.2 million for the three months ended March 31, 1997. The increase
in operating loss reflects the inclusion of the results of Asian American
Telecommunication Corporation ("AAT") for three months in 1998 compared to one
month in 1997 and increases in operating losses in the Communications Group's
new Joint Ventures as it continues its expansion efforts partially offset by the
improvement in the operating results of Snapper.

Interest expense decreased $589,000 to $5.0 million for the three months ended
March 31, 1998. The decrease in interest was due to the repayment of debt at
corporate headquarters in March and August 1997 partially offset by an increase
in borrowings at Snapper.

Interest income increased $2.3 million to $5.0 million in 1998, principally from
the investment of funds at corporate headquarters from the preferred stock
offering in 1997 and increased interest income resulting from increased
borrowings under the Communication Group's credit facilities with its Joint
Ventures for their operating and investing cash requirements.

COMMUNICATIONS GROUP--RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997

REVENUES

Revenues increased to $9.0 million for the three months ended March 31, 1998
from $5.2 million for the three months ended March 31, 1997. The growth in
revenue of the consolidated Joint Ventures has resulted primarily from trunked
mobile radio operations in Portugal and the increase in radio operations in
Hungary and Russia. Trunked mobile radio operations were first consolidated upon
the purchase of an additional interest in operation in Portugal during the
fourth quarter 1997. The revenue from trunked mobile radio operations was $1.8
million in the first quarter of 1998. Revenue from radio broadcasting operations
increased to $5.5 million from $3.3 million for the three months ended March 31,
1998 and 1997, respectively.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses increased by $9.4 million or 85%
for the three months ended March 31, 1998 as compared to the three months ended
March 31, 1997. The increase relates to additional expenses associated with the
increase in the number of Joint Ventures and the need for the Communications
Group to support and assist in the operations of the Joint Ventures. In
addition, increased staffing has been necessary at the radio broadcasting
stations, cable television operations and paging operations.

DEPRECIATION AND AMORTIZATION EXPENSE

Depreciation and amortization expense increased to $3.5 million from $1.9
million. The increase is primarily the result of the increased number of
consolidated joint ventures with depreciable fixed assets and the three months
of goodwill amortization in 1998 related to the acquisition of AAT as compared
to only one month in 1997.

28
<PAGE>
EQUITY IN LOSSES OF JOINT VENTURES

The Communications Group accounts for the majority of its Joint Ventures under
the equity method of accounting since it generally does not exercise control.
Under the equity method of accounting, the Communications Group reflects the
cost of its investments, adjusted for its share of the income or losses of the
Joint Ventures, on its balance sheet and reflects generally only its
proportionate share of income or losses of the Joint Ventures in its statement
of operations. The losses recorded in 1998 and 1997 represent the Communications
Group's equity in the losses of the Joint Ventures in Eastern Europe and the FSU
and the telephony networks of China Unicom for the three months ended December
31, 1997 and 1996, respectively. Equity in the losses of the Joint Ventures by
the Communications Group are generally reflected according to the level of
ownership of the Joint Venture by the Communications Group until such Joint
Venture's contributed capital has been fully depleted. Subsequently, the
Communications Group recognizes the full amount of losses generated by the Joint
Venture since the Communications Group is generally the sole funding source of
the Joint Ventures.

EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET UNION

Revenues generated by unconsolidated Joint Ventures were $23.1 million in the
first quarter of 1998, compared to $14.3 million in the first quarter of 1997.
The Communications Group recognized equity in losses of its Joint Ventures of
approximately $6.7 million in the first quarter of 1998, compared to $1.6
million in the first quarter of 1997.

The increase in equity in the losses of the Joint Ventures of $5.1 million from
the three months ended March 31, 1997 to the three months ended March 31, 1998
is primarily attributable to (i) the commencement of operations of the
Communications Group's Georgian GSM venture which increased the loss by $1.3
million, (ii) decreased equity income of the international toll calling venture
in Georgia of $1.1 million, (iii) increased equity losses of the Latvian GSM
venture of $400,000, (iv) increased equity losses of cable ventures in Latvia,
Georgia and Moldova of $700,000, $500,000 and $200,000, respectively, and (v)
increased equity losses of $400,000 of the paging venture in Kazakstan.

CHINA

Equity in losses of the Communications Group's Joint Ventures in China, amounted
to $833,000 in 1998. The loss is attributable principally to the Communications
Group's Ningbo JV, which commenced operations in May 1997.

MINORITY INTEREST

Losses allocable to minority interests increased to $2.0 million in 1998 from
$1.2 million in 1997. The increase principally represents the inclusion of
losses allocable to the minority shareholders of MCC.

ANALYSIS OF COMBINED RESULTS OF OPERATIONS

EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET UNION

The Company is providing as supplemental information the following analysis of
combined revenues and operating income (loss) for its consolidated and
unconsolidated Joint Ventures in Eastern Europe and the FSU. The Company
believes that an analysis of combined operating results provides a meaningful
presentation of the performance of its investments. Such combined operating
results are provided as a supplement, and not as a substitute, for the
consolidated financial statements set forth elsewhere herein. Note 2 to the
Consolidated Financial Condensed Statements provides a listing of the Company's
ownership percentages in each of its unconsolidated Joint Ventures.

Total revenues for the Communications Group's cable television, paging, radio
broadcasting, cellular telecommunications, international toll calling and
trunked mobile radio businesses were $32.0 million and

29
<PAGE>
$18.9 million in the first quarter of 1998 and 1997, respectively. The
percentage increase in revenues was 68%. Combined operating income (loss) for
all of the Communication Group's businesses were ($7.1) million and $4.3 million
in the first three months of 1998 and 1997, respectively.

Cable television revenues were $7.3 million and $4.9 million in the first
quarter of 1998 and 1997, respectively. This represents an increase of 49%.
Total subscribers increased from 101,016 at March 31, 1997 to 255,116 at March
31, 1998. Combined operating losses for cable television were $3.0 million and
$1.6 million in the first three months of 1998 and 1997, respectively. Included
in operating losses in the first quarter of 1998 and 1997 were depreciation and
amortization charges of $3.1 million and $2.2 million, respectively. The
increase in these charges is attributable to the amortization of goodwill in
connection with acquisitions in Moldova and Romania.

Subscriber growth and revenue increases from cable television were the result of
the expansion of the Communications Group's strategy to increase the customer
base by wiring buildings in advance and targeting for a lower priced, broader
based program package coupled with acquisitions of systems in Moldova and
Romania. The increase in operating loss in the first quarter of 1998 as compared
to the first quarter of 1997 was primarily attributable to operating losses at
Joint Ventures that recently became operational in St. Petersburg and Romania.
In addition, the Communications Group's operations in Georgia and Latvia have
experienced increased competition which has adversely impacted operating results
in the first quarter of 1998. The Communications Group is intentionally slowing
the growth in its Belarus joint venture as a result of new regulations
instituted by various governmental ministries which may adversely impact the
operations of the joint venture.

Paging revenues were $4.7 million in the first quarter of 1998 and $3.5 million
in the first quarter of 1997. This represents an increase of 34%. Total
subscribers increased from 51,942 in first quarter 1997 to 64,975 in first
quarter 1998. Combined operating income (loss) for paging were ($3.2) million
and $188,000 in first quarter 1998 and first quarter 1997, respectively.
Included in operating income (loss) in first quarter 1998 and 1997 were
depreciation and amortization charges of $1.0 million and $299,000,
respectively.

During the first quarter of 1998, revenue growth was primarily attributable to
increases of approximately $969,000 and $249,000 at paging operations in St.
Petersburg, Russia and Almaty, Kazakstan, respectively. The operating loss in
the first quarter of 1998 was primarily comprised of operating losses of $1.7
million, $618,000, and $564,000 at paging operations in Austria, Romania, and
Estonia, respectively. These losses were partially due to increased marketing,
advertising, technical and distribution expenses incurred to introduce Calling
Party Pays service. Calling Party Pays service is designed to reach a younger
demographic group providing a significantly larger potential subscriber base.
The joint venture receives a fee from the local telephone operator for each call
made to the pager.

Radio broadcasting revenues were $6.1 million in the first quarter of 1998 and
$3.7 million in the first quarter of 1997. This represents an increase of 65%.
Combined operating income from radio broadcasting were $1.1 million and $1.2
million in the first quarter of 1998 and the first quarter of 1997,
respectively. Included in operating losses in first quarter 1998 and 1997 were
depreciation and amortization charges of $335,000 and $124,000, respectively.

The revenue growth is due to increases in the number of advertising spots
purchased and increases in the price of the advertising spots. The ability to
sell additional spots at a higher rate is dependent on an increase audience
ratings. The Company has increased it audience share through the use of market
research to determine programming formats and marketing strategies including
employing US trained sales managers.

For the three months ended March 31, 1998, operating income includes a loss of
$1.2 million attributable to increased programming and other expenses associated
with the News Talk format at the radio station in Berlin, which was acquired
during the third quarter of 1997. Although the operating results for the first
quarter of 1998 were adversley affected by the operating loss of the
Communications Group's radio station

30
<PAGE>
in Berlin, the operating results of its other radio stations generally improved.
The News Talk format has more start-up costs than traditional music radio
stations, however, the Communications Group expects to achieve its targeted rate
of return through its future operation of the radio station.

Telephony revenues were $13.9 million in the first quarter of 1998 and $6.9
million in the first quarter of 1997. This represents an increase of 101%. Total
subscribers increased from 8,711 in the first quarter of 1997 to 44,071 in the
first quarter of 1998. International toll calling revenues were $7.0 million in
the first quarter of 1998 compared to $6.1 million in the first quarter of 1997.
Trunked mobile radio revenues were $2.8 million and $841,000 in the first
quarter of 1998 and the first quarter of 1997, respectively. Cellular
telecommunications revenues were $4.0 million in the first quarter of 1998.
Combined operating income (loss) for telephony was ($2.0) million and $4.5
million in the first quarter of 1998 and in the first quarter of 1997,
respectively. Included in operating income (loss) in the first quarter of 1998
and of 1997 were depreciation and amortization charges of $3.4 million and
$381,000, respectively. Operating income from international toll calling
operations was $2.0 million and $5.4 million in the first quarter of 1998 and in
the first quarter of 1997, respectively. Trunked mobile radio's operating losses
were $1.1 million and $929,000 in the first quarter of 1998 and in the first
quarter of 1997, respectively, and the operating loss for cellular
telecommunications was $2.9 million in the first quarter of 1998.

The increase in international toll calling revenue is directly attributable to
increases in both the incoming and outgoing minutes of use at the joint venture
in Tblisi, Georgia, which handles all international calls inbound to and
outbound from the Republic of Georgia. Operating income in the first quarter of
1998 decreased due to the change in the incoming and outgoing mix in telephone
traffic and the contractual reductions in termination accounting rates in its
international settlement agreements for traffic with its overseas carriers.
Operating income in the first quarter of 1997 included the impact of favorable
settlements with international carriers for costs related to 1996 call revenues.
Increased trunked mobile radio revenue was primarily due to an increase of
approximately $900,000 realized at the Portugal operations. The operating loss
for cellular telecommunications reflects the operating results of its operations
in Latvia and Georgia, which commenced operations in April 1997 and September
1997, respectively. The Communications Group expects these start-up operations
to incur losses for the near term.

FOREIGN CURRENCY

The Communications Group's strategy is to minimize its foreign currency risk. To
the extent possible, in countries that have experienced high rates of inflation,
the Communications Group bills and collects all revenues in U.S. dollars or an
equivalent local currency amount adjusted on a monthly basis for exchange rate
fluctuations. The Communications Group's Joint Ventures are generally permitted
to maintain U.S. dollar accounts to service their U.S. dollar denominated credit
lines, thereby reducing foreign currency risk. As the Communications Group and
its Joint Ventures expand their operations and become more dependent on
local-currency based transactions, the Communications Group expects that its
foreign currency exposure will increase. The Communications Group currently does
not hedge against exchange rate risk and therefore could be subject in the
future to declines in exchange rates between the time a Joint Venture receives
its funds in local currencies and the time it distributes such funds in U.S.
dollars to the Communications Group.

SNAPPER--RESULTS OF OPERATIONS

THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997

REVENUES

Snapper's 1998 first quarter revenues were $51.3 million versus $53.8 million in
1997. Sales of lawn and garden equipment contributed the majority of the
revenues during both periods. Sales were lower in 1998

31
<PAGE>
due to Snapper having had nine distributors during 1997 that were purchasing
inventory earlier in the year in order to have equipment available to sell to
the distributors' dealers when the spring selling season started.

Gross profit during 1998 was $15.5 million versus $16.4 million in 1997. The
lower gross profit in the 1998 period was caused by lower sales noted above, as
well as sales of older equipment during the first quarter of 1998 at special
pricing to help eliminate older inventory acquired in distributor inventory
repurchases during 1997.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES

Selling, general and administrative expenses were $12.8 million in 1998 versus
$15.0 million in 1997. The 1997 period expenses were higher due to a one-time
charge for severance of $800,000 in addition to $700,000 of higher freight costs
due to higher sales in the period and the implementation of cost control
procedures by management during 1998.

DEPRECIATION AND AMORTIZATION EXPENSE

Depreciation and amortization charges were $1.8 million for the 1998 period and
$1.9 million for the 1997 period. Depreciation and amortization reflected the
depreciation of Snapper's property, plant and equipment as well as the
amortization of the goodwill associated with the acquisition of Snapper.

OPERATING INCOME (LOSS)

In 1998, Snapper had operating income of $864,000 as compared to an operating
loss of $508,000 during 1997. The gain was the result of tight cost control
measures implemented at the beginning of the quarter. The 1997 loss was the
result of the one-time charge for severance during the period.

LIQUIDITY AND CAPITAL RESOURCES

THE COMPANY

MMG is a holding company and, accordingly, does not itself generate cash flows.
The Communications Group is dependent on MMG for significant capital infusions
to fund its operations and make acquisitions, as well as to fulfill its
commitments to make capital contributions and loans to its Joint Ventures. Such
funding requirements are based on the anticipated funding needs of its Joint
Ventures and certain acquisitions committed to by the Company. Future capital
requirements of the Communications Group, including future acquisitions, will
depend on available funding from the Company and on the ability of the
Communications Group's Joint Ventures to generate positive cash flows. Snapper
is restricted under covenants contained in its credit agreement from making
dividend payments or advances to MMG and the Company has periodically funded the
short-term working capital needs of Snapper. The Company, at its discretion, can
make dividend payments on its 7 1/4% Cumulative Convertible Preferred Stock
("Preferred Stock") in either cash or Common Stock. If the Company were to elect
to pay the dividend in cash, the annual cash requirement would be $15.0 million.
On March 15, 1998 the Company paid the quarterly dividend on the Preferred Stock
in cash.

Since each of the Communications Group's Joint Ventures operates businesses,
such as cable television, fixed telephony, paging and cellular
telecommunications, that are capital intensive and require significant capital
investment in order to construct and develop operational systems and market its
services, the Company will require in addition to its cash on hand and the
proceeds from the sale of Landmark, additional financing in order to satisfy its
on-going working capital requirements and to achieve its long-term business
strategies. Such additional capital may be provided through the public or
private sale of equity or debt securities of the Company or by separate equity
or debt financings by the Communications Group or certain companies of the
Communications Group. No assurance can be given that such

32
<PAGE>
additional financing will be available to the Company on acceptable terms, if at
all. If adequate additional funds are not available, the Company may be required
to curtail significantly its long-term business objectives and the Company's
results of operations may be materially and adversely affected. The Company
believes that its cash on hand, together with the net proceeds from the sale of
Landmark, will be sufficient to fund the Company's working capital requirements
for the remainder of 1998.

Management believes that its long-term liquidity needs will be satisfied through
a combination of the Company's successful implementation and execution of its
growth strategy to become a global communications and media company and the
Communications Group's Joint Ventures achieving positive operating results and
cash flows through revenue and subscriber growth and control of operating
expenses.

As the Communications Group is in the early stages of development, the Company
expects to generate significant consolidated net losses for the foreseeable
future as the Communications Group continues to build out its facilities and
market its services.

COMMUNICATIONS GROUP

The Communications Group has invested significantly (in cash or equipment
through capital contributions, loans and management assistance and training) in
its Joint Ventures. The Communications Group has also incurred significant
expenses in identifying, negotiating and pursuing new wireless
telecommunications opportunities in selected emerging markets. The
Communications Group and virtually all of its Joint Ventures are experiencing
continuing losses and negative operating cash flow since the businesses are in
the development and start-up phase of operations.

EASTERN EUROPE AND THE REPUBLICS OF THE FORMER SOVIET UNION

The cable television, paging, fixed wireless loop telephony, GSM and
international toll calling businesses in the aggregate are capital intensive.
The Communications Group generally provides the primary source of funding for
its Joint Ventures both for working capital and capital expenditures, with the
exception of its GSM Joint Ventures. The Communications Group's Joint Venture
agreements generally provide for the initial contribution of cash or assets by
the Joint Venture partners, and for the provision of a line of credit from the
Communications Group to the Joint Venture. Under a typical arrangement, the
Communications Group's Joint Venture partner contributes the necessary licenses
or permits under which the Joint Venture will conduct its business, studio or
office space, transmitting tower rights and other equipment. The Communications
Group's contribution is generally cash and equipment, but may consist of other
specific assets as required by the applicable Joint Venture agreement.

In June 1997, the Communications Group's Latvian GSM Joint Venture, Baltcom GSM
entered into certain agreements with the European Bank for Reconstruction and
Development ("EBRD") pursuant to which the EBRD agreed to lend up to $23.0
million to Baltcom GSM in order to finance its system buildout and operations.
Baltcom GSM's ability to borrow under these agreements is conditioned upon
reaching certain gross revenue targets. The loan has an interest rate equal to
the 3-month LIBOR plus 4% per annum, with interest payable quarterly. The
principal amount must be repaid in installments starting in March 2002 with
final maturity in December 2006. The shareholders of Baltcom GSM were required
to provide $20.0 million to Baltcom GSM as a condition precedent to EBRD funding
the loan. In addition, the Communications Group and Western Wireless agreed to
provide or cause one of the shareholders of Baltcom GSM to provide an additional
$7.0 million in funding to Baltcom GSM if requested by EBRD.

As part of the financing, the EBRD was also provided a 5% interest in the joint
venture which it can put back to Baltcom, GSM at certain dates in the future at
a multiple of Baltcom GSM's earnings before interest, taxes, depreciation and
amortization ("EBITDA"), not to exceed $6.0 million. The Company and Western
Wireless have guaranteed the obligation of Baltcom GSM to pay such amount. All
of the shareholders of Baltcom GSM, including MITI, pledged their respective
shares to the EBRD as security

33
<PAGE>
for repayment of the loan. Under the ERBD agreements, amounts payable to the
Communications Group are subordinated to amounts payable to the ERBD.

In April 1997, the Communications Group's Georgian GSM Joint Venture, Magticom,
entered into a financing agreement with Motorola, Inc. ("Motorola") pursuant to
which Motorola agreed to finance 75% of the equipment, software and service it
provides to Magticom up to an amount equal to $15.0 million. Interest on the
financed amount accrues at 6-month LIBOR plus 5% per annum, with interest
payable semi-annually. Repayment of principal with respect to each drawdown
commences twenty-one months after such drawdown with the final payment being due
60 months after such drawdown. All drawdowns must be made within 3 years of the
initial drawdown date. Magticom is obligated to provide Motorola with a security
interest in the equipment provided by Motorola to the extent permitted by
applicable law. As additional security for the financing, the Company has
guaranteed Magticom's repayment obligation to Motorola.

The Communications Group and Western Wireless have funded the balance of the
financing to Magticom through a combination of debt and equity. Repayment of
indebtedness owned to such partners is subordinated to Motorola.

Credit agreements between the Joint Ventures and the Communications Group are
intended to provide such ventures with sufficient funds for operations and
equipment purchases. The credit agreements generally provide for interest to
accrue at rates ranging from the prime rate to the prime rate plus 6% and for
payment of principal and interest from 90% of the Joint Venture's available cash
flow, as defined, prior to any distributions of dividends to the Communications
Group or its Joint Venture partners. The credit agreements also often provide
the Communications Group the right to appoint the general director of the Joint
Venture and the right to approve the annual business plan of the Joint Venture.
Advances under the credit agreements are made to the Joint Ventures in the form
of cash for working capital purposes, as direct payment of expenses or
expenditures, or in the form of equipment, at the cost of the equipment plus
cost of shipping. As of March 31, 1998, the Communications Group was committed
to provide funding under the various charter fund agreements and credit lines in
an aggregate amount of approximately $106.4 million, of which $16.1 million
remained unfunded. The Communications Group's funding commitments under a credit
agreement are contingent upon its approval of the Joint Venture's business plan.
To the extent that the Communications Group does not approve a joint Venture's
business plan, the Communications Group is not required to provide funds to the
Joint Venture under the credit line.

The Communications Group's consolidated and unconsolidated Joint Ventures'
ability to generate positive operating results is dependent upon their ability
to attract subscribers to their systems, their ability to control operating
expenses and the sale of commercial advertising time. Management's current plans
with respect to the Joint Ventures are to increase subscriber and advertiser
bases and thereby operating revenues by developing a broader band of programming
packages for wireless cable and radio broadcasting and by offering additional
services and options for paging and telephony services. By offering the large
local populations of the countries in which the Joint Ventures operate desired
services at attractive prices, management believes that the Joint Ventures can
increase their subscriber and advertiser bases and generate positive operating
cash flow, reducing their dependence on the Communications Group for funding of
working capital. Additionally, advances in wireless subscriber equipment
technology are expected to reduce capital requirements per subscriber. Further
initiatives to develop and establish profitable operations include reducing
operating costs as a percentage of revenue and assisting Joint Ventures in
developing management information systems and automated customer care and
service systems. No assurances can be given that such initiatives will be
successful or if successful, will result in such reductions. Additionally, if
the Joint Ventures do become profitable and generate sufficient cash flows in
the future, there can be no assurance that the Joint Ventures will pay dividends
or will return capital at any time.

34
<PAGE>
CHINA

The Sichuan JV and the Chongqing JV are parties to a Network System Cooperation
Contract dated May 1996, with China Unicom (the "Sichuan Network System
Cooperation Contract"). The Sichuan Network System Cooperation Contract provides
for a 25-year period of cooperation between the Sichuan JV and the Chongqing JV
and China Unicom for the development of a local telephone network (the "PSTN
Network") in the Sichuan Province (such project is referred to herein as the
"Sichuan Project") with an initial capacity of 50,000 lines ("Phase 1") and with
China Unicom projecting growth of up to 1,000,000 lines in the Sichuan Province
within the next five years ("Phase 2"). In accordance with the terms of the
Sichuan Network System Cooperation Contract, the Sichuan JV and the Chonqing JV
are responsible for providing the initial capital to develop Phase 1 of the PSTN
Network (including payments for import equipment) while China Unicom is
responsible for the construction of Phase 1 and operation, management and
maintenance of the PSTN Network in the Sichuan Province and the City of
Chongqing. The Sichuan JV and the Chongqing JV will provide financing,
consulting and management support services to China Unicom for the construction
and operation of the PSTN Network in exchange for a service and support fee
equal to 78% of distributable cash flow from the PSTN Network for a 25-year
period for each phase of the PSTN Network developed, payable semi-annually.

In connection with MCC's investments in the Sichuan JV and the Chongqing JV, the
Joint Ventures have entered into a Phase 1 loan with Northern Telecom
Communications ("Nortel") for $20.0 million to finance the purchase of Nortel
equipment for the Sichuan Province and City of Chongqing Phase 1 project. The
Company has secured the Phase 1 loan repayment with a $20.0 million letter of
credit. Nortel has the right to draw on the $20.0 million letter of credit for
amounts due Nortel by the Sichuan JV and the Chongqing JV if a Phase 2 contract
has not been entered into with Nortel to expand the 50,000 lines in Phase 1
project to at least 150,000 lines within one year from the date of the Phase 1
contract with Nortel.

If the Phase 2 contract is entered into with Nortel, Sichuan JV and Chongqing JV
plan to enter into a long-term loan facility with Nortel for $100.0 million to
repay the Phase 1 loan and to finance Phase 2 and subsequent phases to expand
the telecommunications network in Sichuan Province and City of Chongqing. No
assurance can be given that Sichuan JV and Chongqing JV will be successful in
executing the long-term loan facility with Nortel. Accordingly, the Company
through the letter of credit may become obligated to finance up to $20.0 million
of the Phase 1 project for the Sichuan JV and Chongqing JV.

The estimated budget for the Phase 1 of the Sichuan Project is approximately RMB
242 million or $29.5 million in the Sichuan Province and approximately RMB 242
million or $29.5 million in the City of Chongqing.

Ningbo Telecommunications has assigned to the Ningbo JV its Network System
Cooperation Contract with China Unicom (the "Ningbo Network System Cooperation
Contract") which provides for the development of A GSM telecommunications
network (the "GSM Network") in the City of Ningbo with a capacity of 50,000
lines (the "Ningbo Project"). In accordance with the terms of the Ningbo Network
System Cooperation Contract, the Ningbo JV is responsible for providing the
initial capital to develop the Ningbo Project of the GSM Network while China
Unicom is responsible for the construction of the GSM Network and operation,
management and maintenance of the GSM Network in the City of Ningbo. The Ningbo
JV will provide financing, consulting and management support services to China
Unicom for the construction and operation of the GSM Network in exchange for 73%
of the distributable cash flow from the GSM Network for a 15-year period.

The total estimated budget for the Ningbo Project is approximately RMB 247
million or $29.7 million.

35
<PAGE>
completed at March 6, 1998 and forecast a total budget of approximately $17
million. The extension is scheduled May 1998 thru July 1998.

The ability of the Communications Group and its Joint Ventures to establish
profitable operations is also subject to significant political, economic and
social risks inherent in doing business in emerging markets such as Eastern
Europe and the FSU and China. These include matters arising out of government
policies, economic conditions, imposition of or changes to taxes or other
similar charges by governmental bodies, exchange rate fluctuations and controls,
civil disturbances, deprivation or unenforceablility of contractual rights, and
taking of property without fair compensation.

For the three months ended March 31, 1998, the Communications Group's primary
source of funds was from the Company in the form of non-interest bearing
intercompany loans.

Until the Communications Group's operations generate positive cash flow, the
Communications Group will require significant capital to fund its operations,
and to make capital contributions and loans to its Joint Ventures. The
Communications Group relies on the Company to provide the financing for these
activities. The Company believes that as more of the Communications Group's
Joint Ventures commence operations and reduce their dependence on the
Communications Group for funding, the Communications Group will be able to
finance its own operations and commitments from its operating cash flow and will
be able to attract its own financing from third parties. There can be no
assurance, however, that additional capital in the form of debt or equity will
be available to the Communications Group at all or on terms and conditions that
are acceptable to the Communications Group or the Company, and as a result, the
Communications Group will continue to depend upon the Company for its financing
needs.

SNAPPER

Snapper's liquidity is generated from operations and borrowings. On November 26,
1996, Snapper entered into a credit agreement (the "Snapper Credit Agreement")
with AmSouth Bank of Alabama ("AmSouth") pursuant to which AmSouth agreed to
make available to Snapper a revolving line of credit up to $55.0 million (the
"Snapper Revolver"). The Snapper Revolver was to terminate on January 1, 1999
and is guaranteed by the Company. The Snapper Revolver contains covenants
regarding minimum quarterly cash flow and equity requirements.

On November 12, 1997, Snapper amended and restated the Snapper Credit Agreement
to increase the amount of the revolving line of credit from $55.0 million to
$80.0 million. The Snapper Revolver bears interest at an applicable margin above
the prime rate (up to 1.5%) or a LIBOR rate (up to 4.0%), and matures on January
1, 2000. The Snapper Revolver continues to be guaranteed by the Company, as well
as by John W. Kluge and Stuart Subotnick up to $10.0 million. The Snapper Credit
Agreement, as amended, continues to contain certain financial covenants
regarding minimum tangible net worth and satisfying certain quarterly cash flow
requirements.

At December 31, 1997, Snapper was not in compliance with the financial
convenants under the Snapper Revolver. The Company and AmSouth amended the
Snapper Credit Agreement to provide for (i) a reduction in the amount of the
line of credit from $80.0 million to $55.0 million as of July 1, 1998 and (ii) a
reduction in the finished goods advance rate from 80% to 70% as of July 1, 1998
and 50% as of December 31, 1998. As part of the amendment to the Snapper Credit
Agreement, AmSouth waived the covenant defaults as of December 31, 1997.
Furthermore, the amendment replaced the existing 1998 financial covenants with
covenants reflecting Snapper's anticipated cash flow and equity changes based on
the seasonality of the business. At March 31, 1998 Snapper was in compliance
with all financial covenants under the Snapper Revolver.

Snapper has entered into various long-term manufacturing and purchase agreements
with certain vendors for the purchase of manufactured products and raw
materials. As of March 31, 1998, noncancelable commitments under these
agreements amounted to approximately $25.0 million.

36
<PAGE>
Snapper has an agreement with a financial institution which makes available
floor-plan financing to distributors and dealers of Snapper products. This
agreement provides financing for dealer inventories and accelerates Snapper's
cash flow. Under the terms of the agreement, a default in payment by a dealer is
nonrecourse to Snapper. However, Snapper is obligated to repurchase any new and
unused equipment recovered from the dealer. At March 31, 1998, there was
approximately $98.9 million outstanding under this floor-plan financing
arrangement. The Company has guaranteed Snapper's payment obligations under this
agreement.

Management of the Company believes that Snapper's available cash on hand, the
cash flow generated by operating activities, borrowings from the Snapper
Revolver and, on an as needed basis, short-term working capital funding from the
Company will provide sufficient funds for Snapper to meet its obligations and
capital requirements.

YEAR 2000 SYSTEM MODIFICATIONS

The Company is currently working to evaluate and resolve the potential impact of
the Year 2000 on the processing of date-sensitive information and network
systems. The Year 2000 problem is the result of computer programs being written
using two digits (rather than four) to define the Year 2000, which could result
in miscalculations or system failures. The Company evaluates the costs
associated with modifying and testing its systems for the Year 2000. The Company
expects to make some of the necessary modifications through its ongoing
investment in system upgrades. The Company is not yet able to estimate the
incremental costs of the Year 2000 conversion effort, but such costs will be
expensed as incurred. The incremental costs to date have not been material. If
the Company, its Joint Ventures and projects where it does not have a
controlling management interest, customers or vendors are unable to resolve such
processing issues in a timely manner, it could result in a material financial
risk. Accordingly, the Company plans to devote the necessary resources to
resolve all significant Year 2000 issues.

MMG CONSOLIDATED

THREE MONTHS ENDED MARCH 31, 1998 COMPARED TO THREE MONTHS ENDED MARCH 31, 1997

Cash Flows from Operating Activities

Cash used in operations for the three months ended March 31, 1998 was $21.2
million, a decrease in cash used in operations of $967,000 from the same period
in the prior year.

Losses from operations include significant non-cash items of the operating loss
from discontinued operations, depreciation, amortization, equity in losses of
joint ventures and losses allocable to minority interests. Excluding the
operating loss from discontinued operations, non-cash items increased $5.8
million from $5.5 million to $11.3 million for the three months ended March 31,
1997 and 1998, respectively. The increase related principally to the increase in
depreciation and amortization associated with acquisitions by the Communications
Group, including AAT. Changes in operating assets and liabilities, net of the
effect of acquisitions, decreased cash flows for the three months ended March
31, 1998 by $9.6 million and decreased cash flows by $14.3 million for the three
months ended March 31, 1997.

The decrease in cash flows for the three months ended March 31, 1998 resulted
from the increased losses in the Communications Group's operations due to the
start-up nature of these operations and increases in selling, general and
administrative expenses to support the increase in the number of joint ventures.

Cash Flows from Investing Activities

Cash used in investing activities decreased $1.9 million to $21.2 million for
the three months ended March 31, 1998. The principal components of investing
activities are investments in and advances to joint ventures of 15.1 million and
$15.3 million in 1998 and 1997 respectively and the Communications Group

37
<PAGE>
utilized $3.9 million and $7.2 million of funds in acquisitions for the three
months ended March 31, 1998 and 1997, respectively.

Cash Flows from Financing Activities

Cash used in financing activities was $1.2 million for the three months ended
March 31, 1998 a decrease of $10.4 million with the same period in the prior
year. For the three months ended March 31, 1998 the Company used $3.8 million to
pay its Preferred Stock dividend, $2.0 million of debt repayments partially
offset by proceeds of $4.6 million from the issuance of common stock from the
exercise of stock options. For the three months ended March 31, 1997 there were
$16.5 million of debt payments, $15.0 million was the repayment of the 97/8%
Debentures and $1.2 million of other notes. The additions to long-term debt of
$6.0 million was borrowed under the Snapper Revolver.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company will be required to provide both quantitative and qualitative
disclosures about market risk in its December 31, 1998 Annual Report on Form
10-K.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements in this Form 10-Q including, without limitation, statements
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and "Legal Proceedings" constitute "forward-looking statements"
within the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. Certain, but not
necessarily all, of such forward-looking statements can be identified by the use
of forward-looking terminology, such as "believes," "expects," "may," "will,"
"should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy that involves risks and
uncertainties. Such forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause the actual results, performance
or achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Such factors include, among others, the
following: general economic and business conditions, which will, among other
things, affect demand for the Company's products and services; industry
capacity, which tends to increase during strong years of the business cycle;
changes in public taste and industry trends; demographic changes; competition
from other communications companies, which may affect the Company's ability to
generate revenues; political, social and economic conditions and laws, rules and
regulations, particularly in Eastern Europe and the FSU, China and selected
other emerging markets, which may affect the Company's results of operations;
timely completion of construction projects for new systems for the Joint
Ventures in which the Company has invested, which may impact the costs of such
projects; developing legal structures in Eastern Europe and the FSU, China and
other selected emerging markets, which may affect the Company's results of
operations; cooperation of local partners for the Company's communications
investments in Eastern Europe and the FSU, China and other selected emerging
markets, which may affect the Company's results of operations; exchange rate
fluctuations; license renewals for the Company's communications investments in
Eastern Europe and the FSU, China and other selected emerging markets; the loss
of any significant customers; changes in business strategy or development plans;
quality of management; availability of qualified personnel; changes in or the
failure to comply with government regulations; and other factors referenced
herein. The Company does not undertake, and specifically declines, any
obligation to release publicly any revisions which may be made to any
forward-looking statements to reflect events or circumstances after the date of
such statements or to reflect the occurrence of anticipated or unanticipated
events.

38
<PAGE>
PART II--OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Updated information on litigation and environmental matters subsequent to
December 31, 1997 is as follows:

FUQUA INDUSTRIES, INC. SHAREHOLDER LITIGATION

IN RE FUQUA INDUSTRIES, INC. SHAREHOLDER LITIGATION, Del. Ch., Consolidated C.A.
No. 11974. Plaintiff Virginia Abrams filed this purported class and derivative
action in the Delaware Court of Chancery (the "Court") on February 22, 1991
against Fuqua, Intermark, Inc. ("Intermark"), the then-current directors of
Fuqua and certain past members of the board of directors. The action challenged
certain transactions which were alleged to be part of a plan to change control
of the board of Fuqua from J.B. Fuqua to Intermark and sought a judgment against
defendants in the amount of $15.7 million, other unspecified money damages, an
accounting, declaratory relief and an injunction prohibiting any business
combination between Fuqua and Intermark in the absence of approval by a majority
of Fuqua's disinterested
shareholders. Subsequently, two similar actions, styled BEHRENS V. FUQUA
INDUSTRIES, INC. ET AL. Del. Ch., C.A. No. 11988 and FREBERG V. FUQUA
INDUSTRIES, INC. ET AL., Del. Ch., C.A. No. 11989 were filed with the Court. On
May 1, 1991, the Court ordered all of the foregoing actions consolidated. On
October 7, 1991, all defendants moved to dismiss the complaint. Plaintiffs
thereafter took three depositions during the next three years.

On December 28, 1995, plaintiffs filed a consolidated second amended derivative
and class action complaint, purporting to assert additional facts in support of
their claim regarding an alleged plan, but deleting their prior request for
injunctive relief. On January 31, 1996, all defendants moved to dismiss the
second amended complaint. After the motion was briefed, oral argument was held
on November 6, 1996. On May 13, 1997, the Court issued a decision on defendants'
motion to dismiss, The Court dismissed all of plaintiffs' class claims and
dismissed all of plaintiffs' derivative claims except for the claims that Fuqua
board members (i) entered into an agreement pursuant to which Triton Group, Inc.
(which was subsequently merged into Intermark, "Triton") was exempted from 8
Del. C. 203 and (ii) undertook a program pursuant to which 4.9 million shares of
Fuqua common stock were repurchased, allegedly both in furtherance of an
entrenchment plan. On January 16, 1998, the Court entered an order implementing
the May 13, 1997 decision. The order also dismissed one of the defendants from
the case with prejudice and dismissed three other defendants without waiver of
any rights plaintiffs might have to reassert the claims if the opinion were to
be vacated or reversed on appeal.

On February 5, 1998, the plaintiffs filed a consolidated third amended
derivative complaint and named as defendants Messrs. J.B. Fuqua, Klamon,
Sanders, Scott, Warner and Zellars. The Complaint alleged that defendants (i)
entered into an agreement pursuant to which Triton was exempted from 8 Del. C.
203 and (2) undertook a program pursuant to which 4.9 million shares of Fuqua
common stock were repurchased, both allegedly in furtherance of an entrenchment
plan. For their relief, plaintiffs seek damages and an accounting of profits
improperly obtained by defendants.

On March 9, 1998, defendants Klamon, Sanders, Zellars, Scott and Warner filed
their answers denying each of the substantive allegations of wrongdoing
contained in the third amended complaint. The Company filed its answer the same
day, submitting itself to the jurisdiction of the Court for a proper resolution
of the claims purported to be set forth by the plaintiffs. On March 10, 1998,
defendant J.B. Fuqua filed his answer denying each of the substantive
allegations of wrongdoing contained in the third amended complaint.

39
<PAGE>
MICHAEL SHORES V. SAMUEL GOLDWYN COMPANY, ET AL.

On May 20, 1996, SHORES V. SAMUEL GOLDWYN COMPANY, ET AL., Case No. BC 150360,
was filed in the Superior Court of the State of California as a purported class
action lawsuit. Plaintiff Michael Shores alleged that, in connection with the
merger of the Samual Goldwyn Company ("Goldwyn"), Goldwyn's directors and
majority shareholder breached their fiduciary duties to the public shareholders
of Goldwyn. Plaintiff subsequently added, in an amended complaint, that the
Company aided and abetted the other defendants' fiduciary breaches. The Company
successfully demurred to the amended complaint on the ground that it did not
state a cause of action against the Company, and plaintiff was given an
opportunity to replead. Plaintiff filed a second amended complaint and alleged,
in addition to his other claims, that the Company negligently misrepresented
and/or omitted material facts in the Company's prospectus issued for the Goldwyn
Merger. The Company again successfully demurred to the second amended complaint,
and the court refused to allow the plaintiff another opportunity to replead the
aiding and abetting claim against the Company, but the plaintiff may replead the
negligent misrepresentation claim. The plaintiff has repleaded with a third
amended complaint alleging only the negligent misrepresentation claim. The
Company believes it has meritorious defenses and is vigorously defending such
action.

SAMUEL GOLDWYN, JR. V. METRO-GOLDWYN-MAYER INC., ET AL.

On October 29, 1997, Samuel Goldwyn, Jr., the former chairman of Goldwyn, filed
SAMUEL GOLDWYN, JR. V. METRO-GOLDWYN-MAYER INC., ET AL., Case No. BC 180290, in
Superior Court of the State of California, alleging that the Company
fraudulently induced him and the Samuel Goldwyn, Jr. Family Trust (the "Trust")
to enter into various agreements in connection with the Goldwyn Merger; breached
an agreement to guarantee the performance of Goldwyn Entertainment Company's
obligations to the Trust; and is using, without permission, the "Samuel Goldwyn"
trademark. The complaint also alleges that the Company and other defendants
breached Mr. Goldwyn's employment agreement and fiduciary duties owed to him and
the Trust, both before and after the sale of Goldwyn Entertainment Company to
Metro-Goldwyn-Mayer Inc. The Company had demurred on the plaintiff's complaint.
The Company believes it has meritorious defenses and is vigorously defending
such action.

SYDNEY H. SAPSOWITZ AND SID SAPSOWITZ & ASSOCIATES, INC. V. JOHN W. KLUGE,
STUART SUBOTNICK, METROMEDIA INTERNATIONAL GROUP, ET AL.

On June 30, 1997, the plaintiffs in SYDNEY H. SAPSOWITZ AND SID SAPSOWITZ &
ASSOCIATES, INC. V. JOHN W. KLUGE, STUART SUBOTNICK, METROMEDIA INTERNATIONAL
GROUP, INC., ORION PICTURES CORPORATION, LEONARD WHITE, ET AL. filed a lawsuit
in Superior Court of the State of California alleging $28.7 million in damages
from the breach of an agreement to pay a finder's fee in connection with the
Entertainment Group Sale. The Company believes it has meritorious defenses and
is vigorously defending such action.

ANTHONY NICHOLAS GEORGIOU, ET AL. V. MOBIL EXPLORATION AND PRODUCING SERVICES,
INC., METROMEDIA INTERNATIONAL TELECOMMUNICATIONS, INC., ET AL.

On January 14, 1998, Anthony Nicholas Georgiou, et al. v. Mobil Exploration and
Producing Services, Inc., Metromedia International Telecommunications, Inc., et
al., Civil Action No. H-98-0098, was filed in the United States District Court
for the Southern District of Texas. Plaintiffs claim that Metromedia
International Telecommunications, Inc. ("MITI") conspired against and tortiously
interfered with plaintiffs' potential contracts involving certain oil
exploration and production contracts in Siberia and telecommunications contracts
in the Russian Federation. Plaintiffs are claiming damages, for which all
defendants could be held jointly and severally liable, of an amount in excess of
$395.0 million. On or about February 27, 1998 MITI filed its answer denying each
of the substantive allegations of wrongdoing contained in the complaint. The
Company believes it has meritorious defenses and is vigorously defending this
action.

40
<PAGE>
INDEMNIFICATION AGREEMENTS

In accordance with Section 145 of the General Corporation Law of the State of
Delaware, pursuant to the Company's Restated Certificate of Incorporation, the
Company has agreed to indemnify its officers and directors against, among other
things, any and all judgments, fines, penalties, amounts paid in settlements and
expenses paid or incurred by virtue of the fact that such officer or director
was acting in such capacity to the extent not prohibited by law.

ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K

(a) Exhibits

EXHIBIT

NUMBER
- -------

11* Computation of Earnings Per Share
27* Financial Data Schedule

(b) Reports on Form 8-K

None.

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

* Filed herewith

41
<PAGE>
SIGNATURES

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

METROMEDIA INTERNAITONAL GROUP, INC.

By: /s/ SILVIA KESSEL
-----------------------------------------
Silvia Kessel
EXECUTIVE VICE PRESIDENT
CHIEF FINANCIAL OFFICER
AND TREASURER

Dated: May 13, 1998

<PAGE>

Exhibit 11

METROMEDIA INTERNATIONAL GROUP, INC.
Computation of Earnings Per Share
(in thousands, except per share amounts)

<TABLE>
<CAPTION>
1998 1997
---------- ----------
<S> <C> <C>
Loss per share - Basic (A):
Continuing operations $ (22,963) $ (13,505)
Cumulative convertible preferred stock
dividend requirement (3,752) --
---------- ----------
Continuing operations attributable to
common stock shareholders (26,715) (13,505)
Discontinued operations -- (8,753)
---------- ----------
Net loss available for common stock shareholders $ (26,715) $ (22,258)
---------- ----------
---------- ----------

Weighted average common stock shares
outstanding during the period 68,572 66,155
---------- ----------
---------- ----------

Loss per share - Basic:
Continuing operations $ (0.39) $ (0.21)
Discontinued operations -- (0.13)
---------- ----------
Net loss $ (0.39) $ (0.34)
---------- ----------
---------- ----------
</TABLE>

(A) In calculating diluted earnings per share, no potential shares of common
stock are to be included in the computation of diluted earnings per
share when a loss from continuing operations available to common
stockholders exists. For the three months ended March 31, 1998 and 1997,
the Company had a loss from continuing operations.

<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE CONSOLIDATED
FINANCIAL STATEMENTS FILED AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>

<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1998
<CASH> 86,078
<SECURITIES> 100,953
<RECEIVABLES> 42,553
<ALLOWANCES> (2,364)
<INVENTORY> 90,177
<CURRENT-ASSETS> 321,524
<PP&E> 58,468
<DEPRECIATION> (12,872)
<TOTAL-ASSETS> 757,717
<CURRENT-LIABILITIES> 117,329
<BONDS> 57,750
0
207,000
<COMMON> 68,984
<OTHER-SE> 262,903
<TOTAL-LIABILITY-AND-EQUITY> 757,717
<SALES> 60,219
<TOTAL-REVENUES> 60,219
<CGS> 37,317
<TOTAL-COSTS> 77,265
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,003
<INCOME-PRETAX> (22,476)
<INCOME-TAX> 487
<INCOME-CONTINUING> (22,963)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,963)
<EPS-PRIMARY> (0.39)
<EPS-DILUTED> (0.39)

</TABLE>