
<PAGE>   1
                   U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-QSB


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


                For the quarterly period ended September 30, 1997

                                       OR

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

                 For the transition period from ______ to ____

                           Commission File No. 0-15445


                             THE BOX WORLDWIDE, INC
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


           FLORIDA                                       59-2605267
--------------------------------------------------------------------------------
(State or other jurisdiction of               (IRS Employer Identification 
 incorporation or organization)                           Number)


     1221 Collins Avenue, Miami Beach, Florida                   33139
--------------------------------------------------------------------------------
                    (Address of principal executive offices)


                                 (305) 674-5000
--------------------------------------------------------------------------------
                           (Issuer's telephone number)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
                                    ---   ---


State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:

        Class                                 Number of Shares Outstanding
                                                  on November 12, 1997
Common Stock, par value $.001 Per Share                 24,892,623
Transitional Small Business Disclosure Format         Yes     No X
                                                          ---   ----

<PAGE>   2



                             THE BOX WORLDWIDE, INC.

<TABLE>
<CAPTION>
                                      INDEX

                                                                           PAGE
<S>                 <C>                                                    <C>
PART I              FINANCIAL INFORMATION                                    

         Item 1     Financial Statements


                    Consolidated Balance Sheet at September 30,
                    1997 (Unaudited)                                          3


                    Consolidated Statements of Operations for the
                    Three Months and Nine Months ended September 30,
                    1997 and 1996 (Unaudited)                                 4


                    Consolidated Statements of Cash Flows for the
                    Nine Months ended September 30, 1997 and 1996
                    (Unaudited)                                               5


                    Notes to Financial Statements                             6


         Item 2     Management's Discussion and Analysis or
                    Plan of Operation                                        10


PART II             OTHER INFORMATION

         Item 5     Other Information                                        29

         Item 6     Exhibits                                                 30


SIGNATURES                                                                   31


</TABLE>



                                       -2-
<PAGE>   3
                            THE BOX WORLDWIDE, INC.
                           CONSOLIDATED BALANCE SHEET
                                  (UNAUDITED)
===============================================================================

<TABLE>
<CAPTION>
                                                               SEPTEMBER 30,
                                                                    1997
                                                               -------------    
<S>                                                            <C>      
ASSETS

CURRENT ASSETS                      
  Cash and cash equivalents                                    $  1,118,437
  Accounts receivable, less allowances for
    doubtful accounts of $319,000                                 3,509,928
  Receivable from officer                                            13,500
  Prepaid expenses and other current assets                         612,424
                                                               ------------
         TOTAL CURRENT ASSETS                                     5,254,289
                                                               ------------
RECEIVABLE FROM OFFICER - LONG TERM                                 106,161

PROPERTY AND EQUIPMENT, NET                                       8,817,501

DEFERRED COSTS AND OTHER ASSETS, NET                              2,160,032

INVESTMENT IN AND ADVANCES TO 
  UNCONSOLIDATED COMPANY                                            333,276
                                                               ------------
         TOTAL ASSETS                                          $ 16,671,259
                                                               ============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
  Accounts payable                                             $  1,447,782
  Accrued expenses                                                3,611,720
                                                               ------------
         TOTAL CURRENT LIABILITIES                                5,059,502
                                                               ------------
COMMITMENTS AND CONTINGENCIES                                  

6% CONVERTIBLE REDEEMABLE PREFERRED STOCK
   $0.15 par value, $1.50 stated value, 1,800,000 shares
   authorized, 1,666,667 issued and outstanding
   including $120,822 of cumulative dividend payable              2,410,950 
                                                               ------------
STOCKHOLDERS' EQUITY
   8% Cumulative convertible preferred      
    stock, $1.00 par value, 200,000 shares
    authorized, none issued                                              --
   Common stock, $.001 par value
     40,000,000 shares authorized, 24,772,623
     shares issued and outstanding at September 30, 1997             24,773

   Additional paid in capital - Common Stock                     31,008,832

   Accumulated deficit                                          (21,796,014)  
   Cumulative foreign currency translation                          (36,784)
                                                               ------------
         TOTAL STOCKHOLDERS' EQUITY                               9,200,807
                                                               ------------
         TOTAL LIABILITIES AND
         STOCKHOLDERS' EQUITY                                  $ 16,671,259
                                                               ============
</TABLE>

See Notes to Financial Statements

                                      -3-
<PAGE>   4


                             THE BOX WORLDWIDE, INC.
                      CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
==============================================================================
<TABLE>
<CAPTION>
                                                             FOR THE THREE MONTHS ENDED              FOR THE NINE MONTHS ENDED
                                                          SEPTEMBER 30,       SEPTEMBER 30,        SEPTEMBER 30,     SEPTEMBER 30,
                                                              1997                 1996               1997                1996
                                                          -------------------------------------------------------------------------
<S>                                                       <C>                 <C>                 <C>               <C>         


REVENUES
    Advertising revenues                                   $  3,204,157        $  2,543,302        $  8,173,092      $  7,394,121
    Net viewer revenues                                       2,472,252           2,332,352           6,840,460         7,788,713
    Other revenues                                              138,090              69,310             420,022           213,897
                                                           ------------        ------------        ------------      ------------

                                                              5,814,499           4,944,964          15,433,574        15,396,731
    Interest income                                              51,262              58,095             288,890           252,252
                                                           ------------        ------------        ------------      ------------

                                                              5,865,761           5,003,059          15,722,464        15,648,983
                                                           ------------        ------------        ------------      ------------


COSTS AND EXPENSES
    Affiliate fees, site costs and
      telephone service                                       1,689,011           1,721,268           4,548,616         4,754,438
    Distribution, general and
      administrative                                          4,580,565           3,827,125          12,656,503        12,012,866
    Satellite transponder and rent
      paid to related parties                                   118,020             125,190             354,060           620,570
    Depreciation and amortization                               623,317             379,913           1,726,135           944,282
                                                           ------------        ------------        ------------      ------------

                                                              7,010,913           6,053,496          19,285,314        18,332,156
                                                           ------------        ------------        ------------      ------------

INCOME BEFORE INCOME TAXES AND INTEREST
     IN LOSSES OF UNCONSOLIDATED COMPANIES                   (1,145,152)         (1,050,437)         (3,562,850)       (2,683,173)

INCOME TAXES                                                    (17,904)            (15,424)            (17,904)          (15,424)
                                                           ------------        ------------        ------------      ------------

INCOME BEFORE INTEREST IN LOSSES OF
    UNCONSOLIDATED COMPANIES                                 (1,127,248)         (1,035,013)         (3,544,946)       (2,667,749)

INTEREST IN LOSSES OF UNCONSOLIDATED
     COMPANIES                                                 (140,742)            (41,033)           (457,479)         (495,368)
                                                           ------------        ------------        ------------      ------------


NET LOSS                                                     (1,267,990)         (1,076,046)         (4,002,425)       (3,163,117)

Deduct required dividend on 6% convertible
   redeemable preferred stock                                   (37,192)                  0            (112,192)                0
                                                           ------------        ------------        ------------      ------------

Net loss attributable to common stock                      $ (1,305,182)       $ (1,076,046)       $ (4,114,617)     $ (3,163,117)
                                                           ============        ============        ============      ============


Net loss per common share after deduction for
  required dividend on 6% convertible redeemable
  preferred stock                                          $      (0.05)       $      (0.04)       $      (0.17)     $      (0.13)
                                                           ============        ============        ============      ============

Weighted average number of common shares
  outstanding                                                24,060,432          24,001,129          24,021,546        23,967,566
                                                           ============        ============        ============      ============
</TABLE>

  See Notes to Financial Statements
 




                                      -4-


<PAGE>   5
                             THE BOX WORLDWIDE, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
===============================================================================
<TABLE>
<CAPTION>

                                                                                  FOR THE NINE MONTHS ENDED
                                                                                SEPTEMBER 30,     SEPTEMBER 30,
                                                                                     1997              1996
                                                                               --------------------------------
<S>                                                                            <C>                <C>         
CASH FLOWS FROM OPERATING ACTIVITIES:
  Net Loss                                                                     $(4,002,425)        $(3,163,117)
  Adjustments to reconcile net loss to net
    cash used in operating activities:
     Depreciation and amortization                                               1,726,135             944,282
     Interest in losses of unconsolidated companies                                457,479             495,368
     Provision for bad debts and estimated chargebacks                                   0              45,037
     Change in assets and liabilities:
       (Increase) decrease in accounts receivable                               (1,013,384)          1,085,842
       Increase in prepaid expenses and other current assets                      (297,965)           (615,693)
       Increase in accounts payable and accrued expenses                           455,414             448,708
                                                                               -----------         -----------

  NET CASH USED IN OPERATING ACTIVITIES                                         (2,674,746)           (759,573)
                                                                               -----------         -----------

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures                                                          (3,812,814)         (3,654,392)
  Increase in deferred costs                                                      (401,757)                  0
  Disposal of equipment                                                             83,798              99,177
  Increase in investment in and advances to unconsolidated companies              (492,897)           (479,937)
                                                                               -----------         -----------

  NET CASH USED IN INVESTING ACTIVITIES                                         (4,623,670)         (4,035,152)
                                                                               -----------         -----------

CASH FLOWS FROM FINANCING ACTIVITIES:
  Proceeds from issuance of common stock, net                                            0               7,500
                                                                               -----------         -----------

  NET CASH PROVIDED BY FINANCING ACTIVITIES                                              0               7,500
                                                                               -----------         -----------

  EFFECT OF EXCHANGE RATE CHANGES ON CASH                                          (34,551)            (36,607)
                                                                               -----------         -----------


NET DECREASE IN CASH AND CASH EQUIVALENTS                                       (7,332,967)         (4,823,832)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR                                   8,451,404           6,712,402
                                                                               -----------         -----------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                                     $ 1,118,437         $ 1,888,570
                                                                               ===========         ===========


SCHEDULE OF NON-CASH FINANCING ACTIVITIES:
  Stock issued for affiliate launch incentive fees                             $   770,842         $         0
                                                                               ===========         ===========
               </TABLE>

See Notes to Financial Statements



                                      - 5 -


<PAGE>   6



                             THE BOX WORLDWIDE, INC.

                          NOTES TO FINANCIAL STATEMENTS

1.       The financial information included herein is submitted pursuant to the
         requirements of Form 10-QSB and does not include all disclosures
         required by generally accepted accounting principles. It is suggested
         that these unaudited financial statements be read in conjunction with
         the financial statements and notes thereto included in the Company's
         Annual Report on Form 10-KSB for the fiscal year ended December 31,
         1996. The accompanying interim financial statements reflect all normal
         recurring adjustments which are, in the opinion of management,
         necessary for a fair statement of the results for the interim periods
         presented. The results of operations for interim periods are not
         necessarily indicative of the results to be obtained for the entire
         year.

2.       Net loss per share computations are based on the weighted average
         shares of common stock outstanding during the quarter. Common stock
         equivalents were not considered in the computation of net loss per
         share as their effect would be to decrease net loss per share.

3.       The consolidated financial statements include the balance sheet and
         operating results of the Company's wholly-owned subsidiaries, VJN LPTV
         Corp. (incorporated in February, 1994), The Box Worldwide Europe, B.V.,
         (incorporated in August, 1995), Video Jukebox Network Europe,
         Ltd.(incorporated in January, 1996), The Box Worldwide-Latin America,
         Inc. (incorporated in January, 1996), The Box Argentina (incorporated
         in December 1996), and The Box Italy, srl (incorporated in January
         1997); and include on the equity method the operating results of Video
         Jukebox Network International, Limited ("VJNIL") for the first nine
         months of 1996. The Company also accounts for its 50% owned subsidiary,
         The Box Holland (incorporated in October, 1995), on the equity method
         of accounting. All significant consolidating and eliminating entries
         have been included.

         Unconsolidated Subsidiaries:

         The Box Holland --- The following is a summary of the balance sheet as
         of September 30, 1997 and operating results for the three months and
         nine months ended September 30, 1997 and 1996, respectively, of The Box
         Holland:

<TABLE>
<CAPTION>
                                                       Three Months Ended                      Nine Months Ended
                                                 Sept 30, 1997   Sept. 30, 1996        Sept. 30, 1997 Sept 30,1996
                                                 -------------   --------------       --------------- ------------
                <S>                             <C>              <C>                  <C>             <C>

                Current assets                                                         $    328,090     $   179,405
                Non-current assets                                                          819,595         775,448
                                                                                       ------------     -----------
                                                                                       $  1,147,685     $   954,853
                                                                                       ============     ===========

                Current liabilities                                                    $    398,253     $   135,330
                Equity, advances and notes
                  payable to shareholders                                                   749,432         819,523
                                                                                       ------------     -----------
                                                                                       $  1,147,685     $   954,853
                                                                                       ============     ===========

                Net revenues                    $    157,220     $    87,298           $    369,505     $   178,722
                                                ============     ===========           ============     ===========

                Net operating loss              $   (281,481)    $  (112,307)          $   (914,953)    $  (480,505)
                                                ============     ===========           ============     ===========
</TABLE>

                                       -6-

<PAGE>   7



NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3.       (CONTINUED)

         The Company recorded interest income of approximately $30,000 and
         $142,000 during the quarter and nine months ended September 30, 1997,
         related to a $1,076,000 loan outstanding with The Box Holland, Inc.
         during these periods. Interest from inception of the loan in 1995 to
         the end of 1996 had not been previously recognized, and was included in
         the first quarter of 1997.

         VJNIL --- In September 1991, VJNIL, which began operations in 1992, was
         organized in the United Kingdom to develop and launch a United Kingdom
         version of the Company's music video television programming. The
         Company had beneficially owned 91% of the outstanding common stock of
         VJNIL from inception. On June 30, 1995, the Company purchased the
         remaining nine percent of VJNIL from its minority shareholder in
         exchange for 225,000 shares of the Company's common stock, which were
         valued at $267,187 on that day. Also on June 30, 1995, the Company
         completed the sale of a 50 percent equity interest in VJNIL to a
         wholly-owned subsidiary of Ticketmaster Corporation ("Ticketmaster")
         for $2,225,000 in cash. The Company's remaining investment in VJNIL had
         been accounted for on the equity method of accounting effective June
         30, 1995. Prior to June 30, 1995, the subsidiary's assets, liabilities
         and operations had been consolidated with the Company.

         On October 30, 1996, the Company completed the sale of its remaining
         50% equity interest in VJNIL to EMAP plc, a United Kingdom media and
         entertainment company. EMAP paid VJN $4,550,000 in cash for VJN's 50%
         remaining investment, plus reimbursed VJN $1,500,000 for the Company's
         outstanding loan to VJNIL plus approximately $200,000 in accrued
         interest related to the loan. The Company also received a one-time
         $100,000 licensing payment for trademark and other intellectual
         property rights in the United Kingdom and Ireland. The Company paid
         approximately $400,000 in investment fees and legal fees related to
         this transaction.

         The following is a summary of VJNIL's balance sheet as of September 30,
         1996 and operating results for the quarter and nine months ended
         September 30, 1996, respectively, during which period the Company's
         share of these results were accounted for on the equity method by the
         Company:







                                     -7-

<PAGE>   8



NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3.       (CONTINUED)

<TABLE>
<CAPTION>

                                                   Three Months Ended    Nine Months Ended
                                                      Sept. 30,1996       Sept. 30, 1996
                                                   ------------------    ------------------
           <S>                                     <C>                    <S>
           Current assets                                                     $2,024,435
           Noncurrent assets                                                     972,072
                                                                              ----------
                                                                              $2,996,507
                                                                              ==========

           Current liabilities                                                $1,055,940
           Non-current liabilities                                                     0
           Equity, advances and notes
                 payable to shareholders                                       1,940,567
                                                                              ----------
                                                                              $2,996,507
                                                                              ==========
           Net revenues                                $  842,287             $1,910,200
                                                       ==========             ==========

           Net operating loss                          $  (70,759)            $ (565,216)
                                                       ==========             ==========

</TABLE>

         The difference between the Company's recorded net investment in and
         advances to VJNIL at September 30, 1996 and the underlying equity in
         VJNIL's net assets relates primarily to previously recognized net
         losses prior to the sale of 50% of its interest in VJNIL. The Company
         recorded interest income of approximately $38,000 and $113,000 during
         the three and nine months ended September 30, 1996, respectively,
         related to a $1,500,000 loan outstanding with VJNIL during the period.

4.       Subsequent Events:

         As of August 12, 1997, the Company entered into an Agreement and Plan
         of Merger (the "Merger Agreement") with TCI Music, Inc. ("TCI Music")
         and TCI Music Acquisition Sub, Inc. ("Acquisition Sub"), a wholly-owned
         subsidiary of TCI Music, pursuant to which Acquisition Sub will be
         merged (the "Merger") with and into the Company, with the Company as
         the surviving corporation. The completion of the Merger is subject to
         the satisfaction of certain conditions, including the approval of the
         Merger Agreement and the transactions contemplated by the Merger
         Agreement by the shareholders of the Company. A special meeting of the
         shareholders of the Company for such purpose is scheduled to be held on
         December 16, 1997.

         On November 13, 1997, the Company mailed to the shareholders of record
         on November 10, 1997 a proxy statement/prospectus (the "Proxy
         Statement") containing, among other things, a description of the terms
         of the Merger Agreement. A summary of the terms of the Merger
         Agreement is set forth in the Proxy Statement on pages 40 through 47
         under the section entitled "The Merger Agreement," which section is
         incorporated herein by reference.


                                       -8-

<PAGE>   9



NOTES TO FINANCIAL STATEMENTS (CONTINUED)

5.       On August 7, 1997, the Federal Communications Commission (the "FCC")
         adopted order FCC 97-279 (the "Order"). The Order establishes rules to
         implement the closed captioning requirements of the Telecommunications
         Act of 1996 (the "1996 Act"). The 1996 Act required the FCC to adopt,
         by August 8, 1997, rules and implementation schedules for the
         captioning of video programming ensuring access to video programming by
         persons with hearing disabilities. The Company estimates that it may
         cost approximately $110,000 to retrofit boxes that are currently in
         operation, in order to comply with the Order.

                                     -9-

<PAGE>   10



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

RESULTS OF OPERATIONS

THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 1996.

OVERVIEW:

Due to the wide brand recognition of THE BOX, the Company changed its corporate
name to The Box Worldwide, Inc. effective February 20, 1997. A corporate
restructuring has segregated domestic operations from the international
operations and from the purely corporate functions. This restructuring allows
the Company to organize its investments, operating structures and branding of
its trademarks and technology in a more efficient and economical manner.
Domestic operations are reflected through a new wholly-owned subsidiary, The Box
Worldwide - USA, Inc., formed as a Delaware corporation in March 1997.
Previously established subsidiaries, The Box Worldwide - Europe, B.V. and The
Box Worldwide - Latin America, Inc., contain the operating results and
development costs (through allocation from the parent company) for those
respective regions. Results from these two subsidiaries, along with all other
international regions and the general international development costs together
constitute "international operations and development", as referred to throughout
this document.

Costs of international development and general corporate charges, to the extent
they are not allocable to a reporting unit, are reported through the corporate
division of the Company. For the results for the quarter ended September 30,
1996, however, no such expense allocations from the parent company to domestic
and international operations were made. For comparability with the current
period's results, all direct international and corporate expenses for the prior
year period have been segregated.

For the quarter ended September 30, 1997, the Company realized a consolidated
net loss of $1,267,990 as compared to a consolidated net loss of $1,076,046 for
the quarter ended September 30, 1996. This consolidated loss is composed of the
following items:

<TABLE>
<CAPTION>
                                                                        Three Months Ended
                                                                        ------------------ 
                                                                   Sept 30, 1997    Sept 30, 1996
                                                                   -------------    --------------  
         <S>                                                       <C>             <C>                
         Income (loss) from domestic operations                     $    171,184       $  (245,006)
         Loss from international  operations
            and development                                           (1,160,670)         (490,465)
         Net corporate expenses                                         (278,504)         (340,575)
                                                                    ------------       -----------

         Consolidated net loss                                      $ (1,267,990)      $(1,076,046)
                                                                    ============       ===========
</TABLE>

As noted above, the 1997 results reflect allocations of certain corporate
charges to


                                      -10-

<PAGE>   11



RESULTS OF OPERATIONS (CONT'D)

domestic and international operations, whereas no such allocations were made in
1996. Management believes that these allocations more accurately reflect the
true cost to the domestic and international operating units for services
provided by the parent company, as these items generally represent costs which
these divisions would incur directly had such services not been provided by the
parent. Prior to giving effect to these allocations, the third quarter 1997
income from domestic operations would have been $290,983 higher, and the same
period loss from international development and operations would have been
$113,455 lower.

Please refer to the following Supplemental Schedule of Revenue and Expenses by
Segment for further detail:


                             THE BOX WORLDWIDE, INC.
            SUPPLEMENTAL SCHEDULE OF REVENUE AND EXPENSES BY SEGMENT
                 FOR QUARTERS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
                                                CONSOLIDATED                CORPORATE                    DOMESTIC         
                                         -------------------------  -------------------------    --------------------------
                                           1997           1996          1997       1996             1997         1996   
                                         -------------------------  -------------------------    --------------------------
<S>                                      <C>          <C>           <C>           <C>            <C>           <C>      
REVENUES
    Advertising revenues                 $ 3,204,157   $ 2,543,302    $       0   $         0    $3,122,839    $ 2,543,302
    Net viewer revenues                    2,472,252     2,332,352            0             0     2,077,705      2,242,103
    Other revenues                           138,090        69,310        6,668         2,496        19,004         53,614
                                         -----------   -----------    ---------   -----------    ----------    -----------

                                           5,814,499     4,944,964        6,668         2,496     5,219,548      4,839,019
    Interest income                           51,262        58,095       51,262        58,095             0              0
                                         -----------   -----------    ---------   -----------    ----------    -----------

                                           5,865,761     5,003,059       57,930        60,591     5,219,548      4,839,019
                                         -----------   -----------    ---------   -----------    ----------    -----------
COSTS AND EXPENSES
    Affiliate fees, site costs and
      telephone service                    1,689,011     1,721,268            0             0     1,426,937      1,638,177
    Distribution, general and
      administrative                       4,580,565     3,827,125      291,474       416,590     3,028,202      2,968,870
    Satellite transponder and rent
      paid to related parties                118,020       125,190            0             0       118,020        125,190
    Depreciation and amortization            623,317       379,913       62,864             0       475,205        351,788
                                         -----------   -----------    ---------   -----------    ----------    -----------

                                           7,010,913     6,053,496      354,338       416,590     5,048,364      5,084,025
                                         -----------   -----------    ---------   -----------    ----------    -----------
INCOME (LOSS) BEFORE INCOME TAXES
 AND INTEREST IN LOSSES OF
 UNCONSOLIDATED COMPANIES                 (1,145,152)   (1,050,437)    (296,408)     (355,999)      171,184       (245,006)

INCOME TAXES                                 (17,904)      (15,424)     (17,904)      (15,424)            0              0
                                         -----------   -----------    ---------   -----------    ----------    -----------

INCOME (LOSS) BEFORE INTEREST IN
 LOSS OF UNCONSOLIDATED COMPANIES         (1,127,248)   (1,035,013)    (278,504)     (340,575)      171,184       (245,006)
                                         -----------   -----------    ---------   -----------    ----------    -----------

INTEREST IN LOSS OF UNCONSOLIDATED
 COMPANIES                                  (140,742)      (41,033)           0             0             0              0
                                         -----------   -----------    ---------   -----------    ----------    -----------

NET INCOME (LOSS)                        $(1,267,990)  $(1,076,046)   $(278,504)  $  (340,575)   $  171,184    $  (245,006)
                                         ===========   ===========    =========   ===========    ==========    ===========



<CAPTION>
                                    
                                                INTERNATIONAL
                                                 DEVELOPMENT &
                                                 OPERATIONS
                                         ----------------------------
                                             1997          1998
                                         ----------------------------
<S>                                      <C>            <C>         
REVENUES
    Advertising revenues                 $    81,318    $       0   
    Net viewer revenues                      394,547       90,249   
    Other revenues                           112,418       13,200   
                                         -----------    ---------   
                                                                    
                                             588,283      103,449   
    Interest income                                0            0   
                                         -----------    ---------   
                                                                    
                                             588,283      103,449   
                                         -----------    ---------   
COSTS AND EXPENSES                                                  
    Affiliate fees, site costs and                                  
      telephone service                      262,074       83,091   
    Distribution, general and                                       
      administrative                       1,260,889      441,665   
    Satellite transponder and rent                                  
      paid to related parties                      0            0   
    Depreciation and amortization             85,248       28,125   
                                         -----------    ---------   
                                                                    
                                           1,608,211      552,881   
                                         -----------    ---------   
INCOME (LOSS) BEFORE INCOME TAXES                                  
 AND INTEREST IN LOSSES OF                                          
 UNCONSOLIDATED COMPANIES                 (1,019,928)    (449,432)  
                                                                    
INCOME TAXES                                       0            0   
                                         -----------    ---------   
                                                                    
INCOME (LOSS) BEFORE INTEREST IN                                   
 LOSS OF UNCONSOLIDATED COMPANIES         (1,019,928)    (449,432)  
                                         -----------    ---------   
                                                                    
INTEREST IN LOSS OF UNCONSOLIDATED                                  
 COMPANIES                                  (140,742)     (41,033)  
                                         -----------    ---------   
                                                                    
NET INCOME (LOSS)                        $(1,160,670)   $(490,465)  
                                         ===========    =========   
                                         
</TABLE>



                                      -11-

<PAGE>   12



RESULTS OF OPERATIONS (CONT'D)

REVENUES:

Advertising Revenues:

Consolidated advertising revenue increased by approximately $661,000 for the
quarter ended September 30, 1997 as compared with the same 1996 period. Domestic
advertising revenues increased by approximately $580,000 for the quarter ended
September 30, 1997 as compared with the same 1996 period. National advertising
increased 28.2%, or approximately $535,000, for the quarter ended September 30,
1997 from the comparable period in 1996. Proctor and Gamble, Coca Cola, MCI,
Nike, Nordic Trak, Reebok, Jordache, Gatorade, Nutrament and various other
national consumer goods and services all advertised on THE BOX during the third
quarter of 1997.

Record advertising increased approximately $45,000 in the third quarter of 1997
as compared to the same quarter of 1996. International advertising revenue was
$81,000 for the third quarter of 1997, with no comparable amount in the third
quarter of 1996.

Nearly $10.6 million in domestic advertising has already been booked for the
year. International advertising is anticipated to contribute positively to
consolidated operations in 1997, due to subscriber increases in existing
international operations, the March 1997 broadcast launch of The Box Italy, and
the attainment of critical mass levels of subscriber households now reached in
Holland and Argentina. However, there can be no assurance that all booked
revenue will actually be aired and earned or that the international growth will
result in increased advertising.

Net Viewer Revenues:

The increase in net viewer revenues of $140,000 results from (1) the net effect
of reduced domestic gross viewer revenues (negative effect of $325,000) offset
by the related reduction in the telephone service provider's billing and
collection charges (positive effect of $80,000) and the reduction in chargebacks
experienced when consumers failed to pay for their requested videos (positive
effect of $81,000), and (2) increased international viewer revenues (positive
effect of $304,000).

Gross domestic viewer revenues, which resulted from the interactive telephone
calls to THE BOX for video selections, decreased from $2,853,000 to $2,528,000,
a difference of approximately $325,000 or 11.4% from the third quarter of 1996
to the third quarter of 1997. The decrease resulted from a lower average
performance per box during the third quarter of 1997. This decrease in average
performance may be attributed to factors involving both the Company and the
music industry. THE BOX removed certain violent or sexually explicit videos from
its playlists, which historically

                                      
                                     -12-
                                      
<PAGE>   13



RESULTS OF OPERATIONS (CONT'D)

generated a significant number of viewer requests. The Company also has
introduced request emulation when no viewer requests were in the queue in order
to improve the on-air look of its programming. Finally, the transactional
revenue has been negatively affected by airtime required for increased
advertising and for additional programming elements such as Box Big Break
(on-air spots featuring local artists) and other elements designed to strengthen
viewing of THE BOX.

As the Company moves forward to improve its product, the interests of various
constituencies must be balanced. This involves attracting and maintaining
viewers while remaining cognizant of the concerns of cable operators and
advertisers. While many requests on THE BOX were directed towards controversial
videos, their frequent play resulted in the loss of cable distribution. To
address this issue, THE BOX has implemented a more stringent standard for video
content while at the same time maintaining its reputation for innovative
programming.

THE BOX also is taking additional steps to balance its appeal to both the
passive and the transacting audiences. Request emulation and pre-programmed
segments are increasing the attractiveness of the service to non-transacting
viewers which make up the bulk of THE BOX audience. These viewers are looking
for engaging and continuous programming, prefer less emphasis on a static
request menu and want fewer repetitive plays of the same music video selection.
The needs of advertisers and cable operators are generally more closely aligned
with these non-transacting viewers. However, some form of available video menu
with a call to action is important to prompt requests from transactional
viewers. The Company continues to make enhancements to serve both audience
groups.

In addition to taking viewer requests via 900 service, the Company introduced a
new program in 1996 to allow customers who would like to exceed the Company's
900 service credit limit to establish a prepaid account for the selection of
videos. In addition to generating additional viewer revenue, this program has
been designed to eliminate customer chargebacks and billing charges from service
providers, as well as reduce transport costs. Initiated as a test, this program
slowly expanded during 1996 so that, by the end of that year, it was available
to all customers. This new prepaid video program provided 32.1% of consolidated
gross viewer revenue in the current period, as compared with 11.6% in the third
quarter of 1996. Revenue from this program is recognized only as videos are
selected, while prepaid account balances are included in current liabilities.

With lower domestic viewer revenues, the billing and collection charges imposed
by the Company's telephone service providers were reduced proportionately.
Therefore, an offset to the decrease in domestic gross revenue is the reduction
in billing charges of approximately $80,000. Besides the lower revenue level,
the Company has been successful in renegotiating with the telco providers to
reduce billing and collection charges from 7.7% during the third quarter of 1996
to 7.0% during the third quarter of 1997. Further, revenue from the prepaid
video program is not subject to billing and collection charges, and therefore
the increase in revenue from this program as a percentage of total gross viewer
revenue has also contributed to the reduction in


                                      -13-

<PAGE>   14



RESULTS OF OPERATIONS (CONT'D)

these charges relative to gross viewer revenue.

An additional component of net viewer revenues relates to the adverse effect of
domestic customers who deny having made music video requests on THE BOX. In the
Company's current international markets, consumers are not allowed to refute
these charges, so the chargebacks are only occurring domestically. In an effort
to reduce chargebacks from telephone companies, the Company is in its third year
of call blocking for previous non-paying customers and applying credit
limitations for all its interactive viewers. After nearly three years of these
procedures, the Company has seen the chargeback rate reduced from over 16.7% in
1994, to approximately 14.9% currently. Chargebacks for the quarter ended
September 30, 1997 totaled approximately $329,000 as compared to $410,000 for
the same prior year period. Revenue from the prepaid video program is not
subject to customer chargebacks since all money is collected before the videos
air, and therefore the increase in revenue from this program as a percentage of
total gross viewer revenue has also contributed to the reduction in these
charges relative to gross viewer revenue.

Net viewer revenue from international boxes increased by a net of $304,000 due
to the late 1996 international launches in Chile and Peru, none of which were in
operation during third quarter 1996, and the 1997 launches in New Zealand and
Italy.

Other Revenue:

Miscellaneous revenues of $138,000 for the third quarter 1997 included $111,000
in domestic and international cable carriage fees, $6,000 for production
services provided to our unconsolidated Holland affiliate, $10,000 from the
music compilations marketed under the Company's BOXTunes label, and
miscellaneous other revenue of approximately $16,000, offset by $5,000 in losses
on the sale of some minor equipment. Interest income totaled approximately
$51,000 in the third quarter of 1997, which included $30,000 related to an
outstanding loan to the Company's Holland affiliate.

COSTS AND EXPENSES:

Affiliate Fees, Site Costs and Telephone Services:

Expenses for affiliate fees, site costs and telephone services were 68.3% and
73.8% of net viewer revenues for the quarters ended September 30, 1997 and 1996,
respectively. Most expenses in this category as a percentage of net viewer
revenues are up significantly for 1997 since a large portion of the affiliation
fees, site costs and telecommunications charges are fixed per location. With the
reduced level of domestic viewer transactional revenues, these expenses as a
percentage of revenues increased in the third quarter of 1997. Offsetting the
increase in these fixed expenses was a


                                      -14-

<PAGE>   15



RESULTS OF OPERATIONS (CONT'D)

decrease in low power television affiliation fees as discussed below.

Overall expenses for affiliate fees, site costs and telephone services totaled
$32,000 less for third quarter 1997 as compared with the same prior year period.
This decrease resulted from lower net expenditures for domestic operations of
$211,000 offset by increased expenditures for international operations of
$179,000.

The domestic decrease in expenses of approximately $211,000 between the quarters
ended September 30, 1997 and 1996 was due to the net effect of the following:

-        A decrease of $279,000 in domestic transport resulted from a
         combination of reduced levels of viewer transactional revenues and
         rerouting of certain viewer calls in-house that were previously handled
         by outside service bureaus. In the future, the Company expects to
         continue to realize savings from the movement of these calls to an
         in-house operation.

-        A decrease in low power television affiliation fees of approximately
         $183,000. Of this decrease, $107,000 relates to the discontinued
         affiliation with a New York City low power station broadcasting from
         Queens. This affiliation was terminated on January 31, 1997 to reduce
         affiliation fee expenditures since the other two low power affiliates
         in New York City had improved their signals and were covering a
         majority of the market at lower affiliation fees. The remainder of the
         decrease is due primarily to lower viewer revenue.

-        An increase in the cable affiliation fees of approximately $213,000
         resulted from an increase in the number of systems having guaranteed
         affiliate fees, and the amortization of incentive fees associated with
         new launches.

-        An increase in satellite transponder and uplink fees of $38,000 paid
         for satellite service of THE BOX. In prior years and through the end of
         March 1996, the fees for satellite transponder and uplink services were
         paid to a related party and were included in the related party
         expenditure category in the financial statements. Beginning in April
         1996, the Company entered into an agreement for such service with an
         unrelated third party. The rates for the transponder uplink increased
         from $42,500 per month to $55,300 per month beginning in January 1997.
         The Company is negotiating a long-term agreement with WTCI for these
         services, which are now provided on a month-to-month basis.

International expenses for affiliate fees, site costs and telephone services
increased by $179,000 due to the start-up of new international operations in the
second half of 1996 and the first quarter of 1997 that were not in existence
during the third quarter of 1996.


                                      -15-

<PAGE>   16
 


RESULTS OF OPERATIONS (CONT'D)

Distribution, General and Administrative:

Consolidated distribution, general and administrative expenses for the quarter
ended September 30, 1997 increased by approximately $753,000, from $3,827,000 in
1996 to $4,580,000 in 1997. This increase can be divided into the net effect of
the following components: an increase in domestic expenditures of approximately
$59,000; an increase of approximately $819,000 related to international
development and operating expenses; and a decrease in corporate expenses of
$125,000 (after allocation to domestic and international units).

As part of the Company's corporate restructuring, corporate expenses have been
segregated from expenses relating to domestic and international development and
operations. These corporate costs primarily consist of parent company personnel,
administrative expenses, legal fees and the continuing development cost of the
digital box and related technology. All charges which relate to domestic and
international expenditures, which are essentially all charges except for the
corporate costs of a public company, have been allocated to the operating units
beginning with the first quarter of 1997. For the three month periods ended
September 30, 1997 and 1996, the net corporate charges were as follows:

<TABLE>
<CAPTION>
                                                                            Three Months Ended
                                                                      Sept 30,1997    Sept 30, 1996
                                                                      ------------    --------------
         <S>                                                          <C>             <C>       
         Total corporate charges                                       $  695,910        $  416,590
         Allocated to The Box Worldwide-USA, Inc.                        (290,983)               --
         Allocated to international development and operations           (113,455)               --
                                                                       ----------        ----------

         Net corporate charges                                         $  291,472        $  416,590
                                                                       ==========        ==========
</TABLE>

The increase in total corporate charges from $417,000 in 1996 to $696,000 for
third quarter 1997 ($279,000) consisted of the following items:

-        An increase in compensation of $81,000 relating mostly to the transfer
         of certain digital box development and engineering functions to the
         parent company in 1997.

-        An increase of $197,000 in legal and consulting expenses associated
         with the pending merger with TCI Music, Inc.

-        A decrease of $18,000 because the costs of the 1996 Annual Report were
         incurred in the third quarter of 1996, while the cost of producing the
         1997 Corporate Annual Report occurred in the second quarter of 1997.

-        A net increase in various administrative expenses of $19,000.




                                      -16-

<PAGE>   17



RESULTS OF OPERATIONS (CONT'D)

Distribution, general and administrative expenses for domestic operations
increased by $59,000 for the third quarter of 1997 as compared with the same
prior year period, as follows:

-       Increases were experienced in trade advertising, consumer marketing,
        research, industry events and travel and entertainment expenses of
        approximately $93,000 as a result of the Company beginning a new
        marketing campaign.

-       Increased national and direct response advertising sales revenues in the
        third quarter of 1997, as compared with the same period in 1996,
        resulted in higher agency commissions of approximately $69,000. Legal
        expenses increased $33,000 in the current quarter.

-       Offsetting these increases, savings were realized in various areas. The
        majority of the savings ($196,000) related to lower salaries and
        benefits realized primarily due to three factors: (i) the departure of
        the Executive Vice President, Programming in 1996 ($115,000); (ii) the
        transfer of certain staff from domestic operations to corporate and
        international operations ($20,000); and (iii) a general reduction of
        domestic staff due to the elimination of a number of positions
        ($61,000).

-       A decrease of $127,000 in production, discs and shipping costs resulted
        from more in-house production and the use of VSAT technology to update
        the Digital Box programming and advertising.

-       Cost of sales associated with merchandise sold through the Company's
        retail operation was approximately $32,000 lower for the quarter ended
        September 30, 1997, as compared with the same prior year period. The
        Company closed the store at the end of the first quarter of 1997,
        because it was unprofitable. This termination of operations is expected
        to save the Company over $100,000 in operating expenditures for 1997.

-       Operational costs decreased $51,000 as a result of the full
        implementation of the digital box rollout. The savings were related to
        lower telecommunication costs ($18,000) and repair and maintenance costs
        ($33,000).

-       The Company also expended approximately $21,000 less in office and
        administrative costs during the quarter ended September 30, 1997 than
        the same prior year period. This decrease in office and administrative
        costs occurred due to lower insurance premiums of $29,000 and a decrease
        in provision for bad debt of $45,000 as no additional provision is
        required this quarter as compared to the third quarter of 1996. These
        reductions are offset by increased use of consultants for internet
        development, marketing and public relations ($41,000), and higher costs
        of office administration ($12,000).

As discussed above, corporate overhead of approximately $291,000 was allocated
to domestic operations in the third quarter of 1997, with no comparable amount
allocated in the third quarter of 1996. These expenses included, for example,
charges for management salaries, office space, telecommunications, travel and
related expenses.


                                     -17-

<PAGE>   18




RESULTS OF OPERATIONS (CONT'D)

Distribution, general and administrative expenses for our international
development and consolidated operations increased by approximately $819,000 for
the quarter ended September 30, 1997, as compared to the same prior year period.
These expenses related to operations in Argentina, Chile, Peru and Venezuela,
which launched in 1996 and incurred minimal expenses in 1996, and start-up
operations in New Zealand and Italy in 1997. The increased expenditures involved
were: operations, office and administration ($143,000); salaries and benefits
($79,000); legal ($57,000); corporate allocations ($113,000); and marketing,
research, trade advertising, travel and events ($301,000); and production and
related costs ($126,000).

Rent Paid to a Related Party:

Related party expenditures attributable to rental expense payable to Island
Trading Company, Inc. for the Company's corporate headquarters location
decreased from $125,000 for the third quarter of 1996 to $118,000 for the same
current year period.

Depreciation and Amortization:

Depreciation and amortization expenses for the quarter ended September 30, 1997,
increased by approximately $243,000 due to capital expenditures for the
development, equipment and installation costs associated with the new digital
boxes launched in 1996 and 1997, as well as certain capital expenditures
relating to international operations.



                                      -18-

<PAGE>   19



ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

RESULTS OF OPERATIONS

NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THE NINE MONTHS ENDED SEPTEMBER
30, 1996.

OVERVIEW:

Due to the wide brand recognition of THE BOX, the Company changed its corporate
name to The Box Worldwide, Inc. effective February 20, 1997. A corporate
restructuring has segregated domestic operations from the international
operations and from the purely corporate functions.

Costs of international development and general corporate charges, to the extent
they are not allocable to a reporting unit, are reported through the corporate
division of the Company. For the results for the nine months ended September 30,
1996, however, no such expense allocations from the parent company to domestic
and international operations were made. For comparability with the current
period's results, all direct international and corporate expenses for the prior
year period have been segregated.

For the nine months ended September 30, 1997, the Company realized a
consolidated net loss of $4,002,425 as compared to a consolidated net loss of
$3,163,117 for the nine months ended September 30, 1996. This consolidated loss
is composed of the following items:

<TABLE>
<CAPTION>
                                                                                Nine Months Ended
                                                                                -----------------
                                                                      Sept 30, 1997          Sept 30, 1996
                                                                      -------------          -------------  
         <S>                                                          <C>                    <C>          
         Loss from domestic operations                                $   (189,751)          $   (261,656)
         Loss from international operations
            and development                                             (3,298,026)            (1,908,695)
         Net corporate expenses                                           (514,648)              (992,766)
                                                                       -----------           ------------

         Consolidated net loss                                         $(4,002,425)          $ (3,163,117)
                                                                       ===========           ============
</TABLE>

As noted above, the 1997 results reflect allocations of certain corporate
charges to domestic and international operations, whereas no such allocations
were made in 1996.

Management believes that these allocations more accurately reflect the true cost
to the domestic and international operating units for services provided by the
parent company, as these items generally represent costs which these divisions
would incur directly had such services not been provided by the parent. Prior to
giving effect to these allocations, the losses for the first nine months of 1997
from domestic operations and international development and operations would have
been lower by $934,935 and $340,173, respectively.


                                      -19-

<PAGE>   20

RESULTS OF OPERATIONS (CONT'D)

Please refer to the following Supplemental Schedule of Revenue and Expenses by
Segment for further detail:


                           THE BOX WORLDWIDE, INC.
           SUPPLEMENTAL SCHEDULE OF REVENUE AND EXPENSES BY SEGMENT
            FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

<TABLE>
<CAPTION>

                                                CONSOLIDATED               CORPORATE                          DOMESTIC  
                                         -----------------------------------------------------------------------------------------
                                            1997          1996           1997         1996              1997            1996      
                                         ------------------------------------------------------------------------------------------
<S>                                      <C>           <C>           <C>          <C>              <C>            <C>         
REVENUES
    Advertising revenues                 $  8,173,092  $  7,394,121  $         0  $          0     $  8,076,926   $  7,394,121
    Net viewer revenues                     6,840,460     7,788,713            0             0        6,085,674      7,672,918
    Other revenues                            420,022       213,897       33,728        31,939           78,392        154,458
                                         ------------  ------------  -----------  ------------     ------------   ------------

                                           15,433,574    15,396,731       33,728        31,939       14,240,992     15,221,497
    Interest income                           288,890       252,252      288,890       252,252                0              0
                                         ------------  ------------  -----------  ------------     ------------   ------------

                                           15,722,464    15,648,983      322,618       284,191       14,240,992     15,221,497
                                         ------------  ------------  -----------  ------------     ------------   ------------
COSTS AND EXPENSES
    Affiliate fees, site costs and
      telephone service                     4,548,616     4,754,438            0             0        3,996,396      4,643,819
    Distribution, general and
      administrative                       12,656,503    12,012,866      682,799     1,292,381        8,729,507      9,336,734
    Satellite transponder and rent
      paid to related parties                 354,060       620,570            0             0          354,060        620,570
    Depreciation and amortization           1,726,135       944,282      172,371             0        1,350,780        882,030
                                         ------------  ------------  -----------  ------------     ------------   ------------

                                           19,285,314    18,332,156      855,170     1,292,381       14,430,743     15,483,153
                                         ------------  ------------  -----------  ------------     ------------   ------------
LOSS BEFORE INCOME TAXES
 AND INTEREST IN LOSSES OF
 UNCONSOLIDATED COMPANIES                  (3,562,850)   (2,683,173)    (532,552)   (1,008,190)        (189,751)      (261,656)

INCOME TAXES                                  (17,904)      (15,424)     (17,904)      (15,424)               0              0
                                         ------------  ------------  -----------  ------------     ------------   ------------

LOSS BEFORE INTEREST IN
 LOSS OF UNCONSOLIDATED COMPANIES          (3,544,946)   (2,667,749)    (514,648)     (992,766)        (189,751)      (261,656)
                                         ------------  ------------  -----------  ------------     ------------   ------------

INTEREST IN LOSS OF UNCONSOLIDATED
     COMPANIES                               (457,479)     (495,368)           0             0                0              0
                                         ------------  ------------  -----------  ------------     ------------   ------------

NET LOSS                                 $ (4,002,425) $ (3,163,117) $  (514,648) $   (992,766)    $   (189,751)  $   (261,656)
                                         ============  ============  ===========  ============     ============   ============


<CAPTION>

                                               INTERNATIONAL 
                                                DEVELOPMENT &
                                                 OPERATIONS
                                         ----------------------------
                                              1997          1998
                                         ----------------------------
<S>                                      <C>           <C>           

REVENUES 
    Advertising revenues                 $    96,166   $         0   
    Net viewer revenues                      754,786       115,795   
    Other revenues                           307,902        27,500   
                                         -----------   -----------   
                                                                     
                                           1,158,854       143,295   
    Interest income                                0             0   
                                         -----------   -----------   
                                                                     
                                           1,158,854       143,295   
                                         -----------   -----------   
COSTS AND EXPENSES                                                   
    Affiliate fees, site costs and                                   
      telephone service                      552,220       110,619   
    Distribution, general and                                        
      administrative                       3,244,197     1,383,751   
    Satellite transponder and rent                                   
      paid to related parties                      0             0   
    Depreciation and amortization            202,984        62,252   
                                         -----------   -----------   
                                                                     
                                           3,999,401     1,556,622   
                                         -----------   -----------   
LOSS BEFORE INCOME TAXES                                            
 AND INTEREST IN LOSSES OF                                           
 UNCONSOLIDATED COMPANIES                 (2,840,547)   (1,413,327)  
                                                                     
INCOME TAXES                                       0             0   
                                         -----------   -----------   
                                                                     
LOSS BEFORE INTEREST IN                                             
 LOSS OF UNCONSOLIDATED COMPANIES         (2,840,547)   (1,413,327)  
                                         -----------   -----------   
                                                                     
INTEREST IN LOSS OF UNCONSOLIDATED                                   
     COMPANIES                              (457,479)     (495,368)  
                                         -----------   -----------   
                                                                     
NET LOSS                                 $(3,298,026)  $(1,908,695)  
                                         ===========   ===========   


</TABLE>

                                      -20-
<PAGE>   21



RESULTS OF OPERATIONS (CONT'D)

REVENUES:

Advertising Revenues:

Consolidated advertising revenue increased by approximately $779,000 for the
nine months ended September 30, 1997 as compared with the same 1996 period.
Domestic advertising revenues increased by approximately $683,000 for the nine
months ended September 30, 1997 as compared with the same 1996 period. National
advertising improved 18%, or approximately $961,000, for the nine months ended
September 30, 1997 from the comparable period in 1996. Proctor and Gamble, Coca
Cola, MCI, Nintendo, Nike, Nordic Trak, AT&T, Reebok and various other national
consumer goods and services all advertised on THE BOX during the first nine
months of 1997.

Record advertising decreased approximately $278,000 in the first nine months of
1997 as compared to the same period of 1996. Part of this decrease occurred due
to the change in music mixes throughout the Company's localized interactive
boxes. In the past, the Company had relied almost exclusively on record
advertising of urban and rap artists which is no longer compatible with the
programming offered on all boxes. Minimal new music product was released during
the first half of 1997, also resulting in lower advertising levels. Management
believes that the presentations made by the Company's top management and record
label advertising sales team were well received and, while it cannot be assured,
record label advertising is expected to improve throughout the remainder of
1997. International advertising was $96,000 for the first nine months of 1997,
with no comparable amount for the same period in 1996.

Net Viewer Revenues:

The decrease in net viewer revenues of $948,000 results from (1) the net effect
of reduced domestic gross viewer revenues (negative effect of $2,240,000) offset
by the related reduction in the telephone service provider's billing and
collection charges (positive effect of $335,000) and the reduction in
chargebacks experienced when consumers failed to pay for their requested videos
(positive effect of $318,000), and (2) increased international viewer revenues
(positive effect of $639,000).

Gross domestic viewer revenues, which resulted from the interactive telephone
calls to THE BOX for video selections, decreased from $9,630,000 to $7,390,000,
a difference of approximately $2,240,000 or 23.3% from the first nine months of
1996 to the first nine months of 1997. Approximately $403,000 related to the
loss of carriage on a Detroit cable system in June 1996. The remaining decrease
resulted from a lower average performance per box during the first nine months
of 1997. This decrease in average performance may be attributed to factors
involving both the Company and the music industry. THE BOX removed certain
violent or sexually explicit videos from its playlists, which historically
generated a significant number of viewer requests. The Company also has
introduced request emulation when no viewer requests were in the queue. Finally,
the transactional revenue has been negatively affected by airtime


                                      -21-

<PAGE>   22



RESULTS OF OPERATIONS (CONT'D)

required for increased advertising and for additional programming elements such
as Box Big Break (on-air spots featuring local artists) and other elements
designed to strengthen viewing of THE BOX.

In addition to taking viewer requests via 900 service, the Company introduced a
new program in 1996 to allow customers who would like to exceed the Company's
900 service credit limit to establish a prepaid account for the selection of
videos. In addition to generating additional viewer revenue, this program has
been designed to eliminate customer chargebacks and billing charges from service
providers, as well as reduce transport costs. Initiated as a test, this program
slowly expanded during 1996 so that, by the end of that year, it was available
to all customers. This new prepaid video program provided 35.6% of consolidated
gross viewer revenue in the current period, as compared with 9.6% in the first
nine months of 1996. Revenue from this program is recognized only as videos are
selected, while prepaid account balances are included in current liabilities.

With lower domestic viewer revenues, the billing and collection charges imposed
by the Company's telephone service providers were reduced proportionately.
Therefore, an offset to the decrease in domestic gross revenue is the reduction
in billing charges of approximately $335,000. Besides the lower revenue level,
the Company has been successful in renegotiating with the telco providers to
reduce billing and collection charges from approximately eight percent during
the first nine months of 1996 to seven percent during the first nine months of
1997. Further, revenue from the prepaid video program is not subject to billing
and collection charges, and therefore the increase in revenue from this program
as a percentage of total gross viewer revenue has also contributed to the
reduction in these charges relative to gross viewer revenue.

An additional component of net viewer revenues relates to the adverse effect of
domestic customers who deny having made music video requests on THE BOX. In the
Company's current international markets, consumers are not allowed to refute
these charges, so the chargebacks are only occurring domestically. In an effort
to reduce chargebacks from telephone companies, the Company is in its third year
of call blocking for previous non-paying customers and applying credit
limitations for all its interactive viewers. After nearly three years of these
procedures, the Company has seen the chargeback rate reduced from over 16.7% in
1994, to approximately 14.9% currently. Chargebacks for the nine months ended
September 30, 1997 totaled approximately $943,000 as compared to $1,261,000 for
the same prior year period. Revenue from the prepaid video program is not
subject to customer chargebacks since all money is collected before the videos
air, and therefore the increase in revenue from this program as a percentage of
total gross viewer revenue has also contributed to the reduction in these
charges relative to gross viewer revenue.

Net viewer revenue from international boxes increased by a net of $639,000 due
to the late 1996 international launches in Chile, Peru and Venezuela, none of
which were in operation during first half of 1996, and the 1997 launches in New
Zealand and Italy.


                                      -22-

<PAGE>   23



RESULTS OF OPERATIONS (CONT'D)

Other Revenue:

Miscellaneous revenues of $420,000 for the first nine months of 1997 included
$265,000 in domestic and international cable carriage fees, $60,000 for
production services provided to the Company's unconsolidated Holland affiliate,
$23,000 in gains on the sale of some minor equipment, $23,000 for the sale of a
low power television station, revenue totaling $15,000 from the music
compilations marketed under the Company's BOXtunes label and miscellaneous other
revenue of approximately $34,000. Interest income totaled approximately $289,000
in the first nine months of 1997, which included $142,000 related to an
outstanding loan to the Company's Holland affiliate. Interest from inception of
the loan in 1995 to the end of 1996 had not been previously recognized, and
$60,000 was included in the first quarter of 1997 for interest prior to 1997.

COSTS AND EXPENSES:

Affiliate Fees, Site Costs and Telephone Services:

Expenses were 66.5% and 61.0% of net viewer revenues for the nine months ended
September 30, 1997 and 1996, respectively. The percentage for the first nine
months of 1997 increased to 69.7% after adjusting for a non-recurring credit of
$218,000 due to a reversal of a reserve for affiliate fees related to
discontinued systems. Recurring expenses in this category as a percentage of net
viewer revenues are up significantly for 1997 since a large portion of the
affiliation fees, site costs and telecommunications charges are fixed per
location. With the reduced level of domestic viewer transactional revenues,
these expenses as a percentage of revenues increased in the first nine months of
1997. Due mostly to this lower level of viewer revenue, expenses for affiliate
fees, site costs and telephone services totaled $206,000 less for the first nine
months 1997 as compared with the same prior year period. The total decrease
resulted from decreased expenditures for domestic operations of $647,000, offset
by increased expenditures in international operations of $441,000.

The domestic decrease in expenses of approximately $647,000 for the nine months
ended September 30, 1997 as compared to 1996 was due to the net effect of the
following:

-        A decrease of $829,000 in domestic transport resulted from a
         combination of reduced levels of viewer transactional revenues and
         rerouting of certain viewer calls in-house that were previously handled
         by outside service bureaus. In the future, the Company expects to
         continue to realize savings from the movement of these calls to an
         in-house operation.


                                      -23-

<PAGE>   24



RESULTS OF OPERATIONS (CONT'D)

-        An increase in the cable affiliation fees of approximately $98,000
         resulted from an increase in the number of systems having guaranteed
         affiliate fees and the amortization of incentive fees associated with
         new launches.

-        A decrease in low power television affiliation fees of approximately
         $303,000. Of this decrease, $250,000 relates to the discontinued
         affiliation with a New York City low power station broadcasting from
         Queens. This affiliation was terminated on January 31, 1997 to reduce
         affiliation fee expenditures since the other two low power affiliates
         in New York City had improved their signals and were covering a
         majority of the market at lower affiliation fees. The remainder of this
         decrease is due primarily to lower viewer revenue.

-        An increase in telecommunications expense of $144,000 due mainly to the
         fixed VSAT transmission charges associated with the new digital box
         operations. While these expenses will provide for higher
         telecommunications expenses in 1997, the net cost savings of updating
         each Box location by VSAT satellite as opposed to the development,
         production and distribution of 3/4-inch tapes and laser discs required
         under the old analog technology are expected to total a minimum of
         $70,000 per month.

-        An increase in satellite transponder and uplink fees of $243,000 paid
         for satellite service of THE BOX. Beginning in April 1996, the Company
         entered into an agreement for such service with an unrelated third
         party. In prior years and through the end of March 1996, the fees for
         satellite transponder and uplink services were paid to a related party
         and were included in the related party expenditure category in the
         financial statements.

International expenses for affiliate fees, site costs and telephone services
increased by $441,000 due to the start-up of new international operations in the
second half of 1996 and the first nine months of 1997 that were not in existence
during the first nine months of 1996.

Distribution, General and Administrative:

Consolidated distribution, general and administrative expenses for the nine
months ended September 30, 1997 increased by approximately $644,000, from
$12,013,000 in 1996 to $12,657,000 in 1997. This increase can be divided into
the net effect of the following components: a decrease in domestic expenditures
of approximately $607,000; an increase of approximately $1,861,000 related to
international development and operating expenses; and a decrease in corporate
expenses of $610,000 (after allocation to domestic and international units).


                                      -24-

<PAGE>   25



RESULTS OF OPERATIONS (CONT'D)

As part of the Company's corporate restructuring, corporate expenses have been
segregated from expenses relating to domestic and international development and
operations. These corporate costs primarily consist of parent company personnel,
administrative expenses, legal fees and the continuing development cost of the
digital box and related technology. All charges which relate to domestic and
international expenditures, which are essentially all charges except for the
corporate costs of a public company, have been allocated to the operating units
beginning with the first quarter of 1997. For the nine month periods ended
September 30, 1997 and 1996, the net corporate charges were as follows:

<TABLE>
<CAPTION>

                                                                                Nine Months Ended
                                                                       Sept 30,1997        Sept 30, 1996
                                                                       ------------        -------------
         <S>                                                           <C>                 <C>             
         Total corporate charges                                        $ 1,957,905         $  1,292,381
         Allocated to The Box Worldwide-USA, Inc.                          (934,935)                  --
         Allocated to international development and operations             (340,173)                  --
                                                                        -----------         ------------

         Net corporate charges                                          $   682,797         $  1,292,381
                                                                        ===========         ============

</TABLE>

The increase in total corporate charges from $1,292,000 in 1996 to $1,958,000
for first nine months 1997 ($666,000) consisted of the following items:

-        The Company decided to settle a long standing claim for the amount of
         $160,000 in cash, $5,000 in surrender of a replevin bond (previously
         written off to expense) plus related legal costs of $19,000. While the
         Company felt that the claims asserted were without merit, costs
         associated with going to trial would be greater than the agreed
         settlement amount, therefore the claim was settled.

-        An increase in compensation of $172,000 relating mostly to the transfer
         of certain digital box development and engineering functions to the
         parent company in 1997.

-        Higher legal costs of $65,000 relating to the corporate legal expense
         for regular SEC filings, a business controls study and costs associated
         with the corporate reorganization.

-        An increase of $197,000 in legal and consulting expenses related to the
         pending merger with TCI Music, Inc.

-        Increased travel and industry event participation of $36,000.

-        Increased telecommunications cost of $25,000.

-        A decrease in various administrative expenses of $8,000.

Distribution, general and administrative expenses for domestic operations
decreased by $607,000 for the first nine months of 1997 as compared with the
same prior year period, as follows:

-        The majority of the savings ($627,000) related to lower
         salaries and benefits


                                      -25-

<PAGE>   26



RESULTS OF OPERATIONS (CONT'D)

          realized primarily due to three factors: (i) the departure of the
          Executive Vice President, Programming in 1996 ($285,000); (ii) the
          transfer of certain staff from domestic operations to corporate and
          international operations ($60,000); and (iii) a general reduction of
          domestic staff due to the elimination of a number of positions
          ($282,000).

-         Further decreases were experienced in trade advertising, consumer
          marketing, research, industry events and travel and entertainment
          expenses of approximately $521,000 as a result of the Company
          deferring the development of its new marketing campaign until the
          third quarter of 1997. Participation in several industry trade events
          also were reduced in order to control costs. While trade advertising
          will increase in the last half of 1997, the costs for trade events
          should remain low and possibly even decrease given the reduction of
          cable industry state association shows.

-         A decrease of $385,000 in production, discs and shipping costs 
          resulted from more in-house production and the use of VSAT technology
          to update the Digital Box programming and advertising. Music costs
          associated with the Company's revenues decreased approximately $32,000
          for the first nine months of 1997 as compared with the first nine
          months of 1996 due to the lower overall revenue levels.

-         Cost of sales associated with merchandise sold through the Company's
          retail operation was approximately $67,000 lower for the nine months
          ended September 30, 1997, as compared with the same prior year period.
          The Company closed the store at the end of the first quarter of 1997,
          because it was unprofitable. This deletion of operations is expected
          to save the Company over $100,000 in operating expenditures for 1997.

-         Operational costs decreased $143,000 as a result of the full
          implementation of the digital box rollout. The savings were related to
          lower telecommunications costs of $61,000 and lower repair and
          maintenance costs of $82,000.

-         Offsetting these domestic decreases, increased national and direct
          response advertising sales revenues in the first nine months of 1997,
          as compared with the same period in 1996, resulted in higher agency
          commissions of approximately $131,000. Domestic legal expenses
          increased by approximately $25,000 in the first nine months of 1997 as
          compared with 1996. The Company also expended approximately $77,000
          more in office and administrative costs during the nine months ended
          September 30, 1997 than to the same prior year period. These increased
          office and administrative costs related to increased use of
          consultants for internet development, marketing and public relations
          ($138,000), and higher property taxes relating to new digital box
          equipment ($64,000) offset by lower insurance premiums ($50,000) and
          lower costs of office administration ($75,000).

As discussed above, corporate overhead of approximately $935,000 was allocated
to domestic operations in the first nine months of 1997, with no comparable
amount allocated in the first nine months of 1996. These expenses included, for
example, charges for management salaries, office space, telecommunications,
travel and related


                                      -26-

<PAGE>   27



RESULTS OF OPERATIONS (CONT'D)

expenses.

Distribution, general and administrative expenses for our international
development and consolidated operations increased by approximately $1,861,000
for the nine months ended September 30, 1997, as compared to the same prior year
period. These expenses related to operations in Argentina, Chile, Peru and
Venezuela, which launched in late 1996 and incurred minimal expenses in 1996,
and start-up operations in New Zealand and Italy in 1997. The increased
expenditures involved were: operations, office and administration ($430,000) ;
salaries and benefits ($218,000); legal ($130,000); production, discs, tapes and
shipping ($272,000); corporate allocations ($340,000); and marketing, research,
trade advertising, travel and events ($471,000).

Satellite Transponder and Rent Paid to Related Parties:

Related party expenditures decreased from $621,000 for the first nine months of
1996 to $354,000 for the same current year period. Satellite transponder and
service fees for the Company's satellite distributed programming resulted in
related party expenditures of $245,000 for the nine months ended September 30,
1996 with no comparable expense in 1997. WTCI, a subsidiary of
Tele-Communications, Inc., is now providing the satellite transponder and uplink
services via the Hughes' satellite Galaxy 7, transponder 13. Beginning in
January 1997, the fee charged by WTCI was $55,300 per month and such expense was
included in the financial statements under "Affiliate fees, site costs and
telephone service." The Company is negotiating a long-term agreement with WTCI
for these services, which are now provided on a month-to-month basis.

In 1997 and 1996, the Company incurred rental expense of approximately $354,000
and $376,000, respectively, payable to Island Trading Company, Inc. for its
corporate headquarters location.

Depreciation and Amortization:

Depreciation and amortization expenses for the nine months ended September 30,
1997, increased by approximately $782,000 due to capital expenditures for the
development, equipment and installation costs associated with the new digital
boxes launched in 1996 and 1997, as well as certain capital expenditures
relating to international operations.

LIQUIDITY AND CAPITAL RESOURCES:

The Company's current ratio (current assets to current liabilities) was 1.04 to
1.00 at September 30, 1997 as compared to 1.10 to 1.00 at September 30, 1996. At
September 30, 1997, the Company's current assets exceeded its current
liabilities by approximately $195,000.


                                      -27-

<PAGE>   28




LIQUIDITY AND CAPITAL RESOURCES (CONT'D)

The Company has used funds received from the 1995 and 1996 sales of its former
United Kingdom subsidiary to: (i) fully implement the Digital Box, replacing all
domestic analog boxes in the field with a Digital Box or a conversion to
satellite service; (ii) expand the distribution of the Company's programming by
constructing and installing additional box units with the new digital
technology; (iii) advertise, market and promote the Company's programming
including the staffing of a larger marketing and sales effort; (iv) research,
develop, maintain and improve the Company's software and equipment including the
continued development of the Digital Box; (v) fund working capital; and (vi)
fund certain international programming ventures.

The Company utilized approximately $8.8 million in cash during 1996 and first
nine months of 1997 for digital box equipment and related support equipment,
software development, production equipment and leasehold improvements. These
expenditures related mainly to the initial wave of development and installation
of the Company's digital box technology, including base digital support
equipment and enhancement to its in-house computer system during the past
twenty-one months, plus costs associated with expanding the Company's office
space in New York and Miami Beach. The Company believes that the newly developed
technology, known as the Digital Box, is a critical element of the Company's
future. The marketing advantages provided by the Digital Box will allow enhanced
localized programming and advertising plus programming improvements through
enhanced audio and video quality, superior graphic quality, consumer friendly
responsiveness (such as nearly immediate video play), and operational
efficiencies, such as reduction of expenses associated with the manual process
of tapes, discs, weekly change outs of music product and limited availability
for advertising. The Company now has replaced all domestic analog boxes in the
field with the Digital Box except for certain low performing boxes, which were
switched to the Company's satellite box feed. There can be no assurance that
this new technology will result in additional distribution, additional
advertising sales or higher viewership. Analog box equipment taken out of
domestic service has been or will be deployed internationally, reducing the
Company's cash requirements for expansion in new and existing international
markets.

Approximately $3,162,000 was spent during first nine months 1997 in advances of
operating expenses for the Company's international operations, specifically
Holland, Argentina, Venezuela, Chile, Peru, New Zealand and Italy. Another
$649,000 was spent for corporate international development expenses. No
expansion into new international markets will be possible unless the Company is
able to obtain the necessary financing.

In February 1996, the Company entered into a five-year agreement with an
unaffiliated party to purchase satellite receiving equipment and satellite
transponder time for sending digitized video segments from the Company's
headquarters to the various box unit locations at cable head end and broadcast
station sites. The minimum cash


                                      -28-

<PAGE>   29



LIQUIDITY AND CAPITAL RESOURCES (CONT'D)

commitment of the Company under this agreement is approximately $1.9 million, of
which approximately $1,422,000 has already been paid through October 1997. The
remaining minimum commitment relates mainly to the monthly VSAT satellite
transponder and uplink fees for the current period through February, 1999.

Management has and will continue to undertake several operational measures in an
effort to continue to improve the Company's liquidity and cash flow position.
With full implementation of the Digital Box, the Company will save approximately
$70,000 in operating costs per month, or annual savings of $840,000. In 1995,
the Company completed the renegotiation of affiliation agreements with the two
largest multiple system operators. While considerable savings have resulted from
the renegotiation of these agreements and all new agreements are signed at these
similar reduced monthly guaranteed affiliation payments, it is not known if the
Company may be required to incur additional costs in order to gain distribution
in certain key markets.

On August 7, 1997, the Federal Communications Commission (the "FCC") adopted
order FCC 97-279 (the "Order"). The Order establishes rules to implement the
closed captioning requirements of the Telecommunications Act of 1996 (the "1996
Act"). The 1996 Act required the FCC to adopt, by August 8, 1997, rules and
implementation schedules for the captioning of video programming ensuring access
to video programming by persons with hearing disabilities. The Company estimates
that it may cost approximately $110,000 to retrofit boxes that are currently in
operation, in order to comply with the Order.

While domestically, the Company has been in a positive cash flow position,
additional funding will be required to expand upon domestic and international
distribution. The cost of a digital box installation totals $40,000 per box and
launch incentive payments are also often required to gain cable carriage
domestically. Internationally, the start-up costs of entering new countries is
prohibited by the Company's financial position at this time. The Company
anticipates that the closing of the merger transaction as discussed in Item 5
below, "Other Information", will provide the Company with the ability to gain
financing for distribution. There is however, no assurance that this transaction
will be completed, nor that such completion would result in the profitability of
the Company.


PART II: OTHER INFORMATION

ITEM 5.  OTHER INFORMATION:

As of August 12, 1997, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with TCI Music, Inc. ("TCI Music") and TCI Music
Acquisition Sub, Inc. ("Acquisition Sub"), a wholly-owned subsidiary of TCI
Music, pursuant to which Acquisition Sub will be merged (the "Merger") with and
into the Company, with the Company as the surviving corporation. The completion
of the Merger is subject to the satisfaction of certain conditions, including
the approval of the Merger Agreement and the transactions


                                                -29-

<PAGE>   30


ITEM 5.  OTHER INFORMATION (CONT'D)

contemplated by the Merger Agreement by the shareholders of the Company. A
special meeting of the shareholders of the Company for such purpose is scheduled
to be held on December 16, 1997.

On November 13, 1997, the Company mailed to the shareholders of record on
November 10, 1997 a proxy statement/prospectus (the "Proxy Statement")
containing, among other things, a description of the terms of the Merger
Agreement. A summary of the terms of the Merger is set forth in the Proxy
Statement on pages 40 through 47 under the section entitled "The Merger
Agreement," which section is incorporated herein by reference.


ITEM 6.  EXHIBITS

         2.1.     Agreement and Plan of Merger, dated as of August 12, 1997,
                  among TCI Music, Inc., TCI Music Acquisition Sub, Inc. and The
                  Box Worldwide, Inc. (Incorporated by reference to Exhibit 2.1
                  to The Box Worldwide, Inc. Report on Form 10-QSB for the
                  quarterly period ended June 30, 1997, filed with the
                  Securities and Exchange Commission (the "SEC") on August 14,
                  1997 (the "Form 10-QSB")).

         2.2.     Form of Certificate of Designations of TCI Music, Inc. Series
                  A Convertible Preferred Stocks (Incorporated by reference to
                  Exhibit 2.2 to the Form 10- QSB).

         10.1.    Service Affiliation Agreement, dated August 4, 1997, between
                  The Box Worldwide, Inc. and Suburban Cable TV Co., Inc. 

         27.      Financial Data Schedule (for SEC use only).

         99.1.    The section of the Proxy Statement/Prospectus of TCI Music,
                  Inc. and The Box Worldwide, Inc. entitled "The Merger
                  Agreement." Such Proxy Statement/Prospectus was filed with the
                  SEC on November 12, 1997.


                                      -30-

<PAGE>   31



                                   SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


                             THE BOX WORLDWIDE, INC.
                                  (REGISTRANT)




Date:  November 14, 1997          By: /s/Alan McGlade
                                      -----------------------------------
                                  Alan McGlade
                                  President and Chief Executive Officer





Date:  November 14, 1997          By: /s/Luann M. Hoffman
                                      ------------------------------------
                                  Luann M. Hoffman
                                  Chief Financial and
                                     Administrative Officer
















                                      -31-
