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

                                   FORM 10-QSB

(MARK ONE)

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

Date of Report (For the quarterly period ended August 1, 1998)

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

For the transition period from __________ to __________


                              2CONNECT EXPRESS, INC
             (exact name of registrant as specified in its charter)


         FLORIDA                                               65-0674664
-------------------------------                           ------------------
(State or other jurisdiction of                             (I.R.S. Employer
incorporation or organization)                             Identification No.)


3500 GATEWAY DRIVE, SUITE 101, POMPANO BEACH, FL                 33069
------------------------------------------------                 -----
(Address of principal executive offices)                       (Zip Code)


Registrant's telephone number, including area code          (954) 797-7960
                                                            --------------

                                 NOT APPLICABLE
              (Former name, former address and former fiscal year,
                          if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the proceeding 12 months (or for 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  [ ]   No  [X]

Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.

Common Stock, par value $.01 per share, 3,752,500 shares outstanding as of
September 14, 1998.


<PAGE>   2


                             2CONNECT EXPRESS, INC.
                                      INDEX

<TABLE>
<CAPTION>
                                                                                      PAGE
                                                                                      ----
<S>                                                                                   <C>

PART I   FINANCIAL INFORMATION

Item 1.  Financial Statements

         Condensed balance sheets--
         August 1, 1998 and January 31, 1998                                             1

         Condensed statements of operations--
         three months and six months ended August 1, 1998 and July 31, 1997              2

         Condensed statements of cash flows--
         three months and six months ended August 1, 1998 and July 31, 1997              3

         Notes to condensed financial statements                                     4 - 6

Item 2.  Management's Discussion and Analysis of Financial
         Condition and Results of Operations                                         7 - 9


PART II  OTHER INFORMATION

 Item 6. Exhibits and Reports on Form 8-K                                               10

         Signatures                                                                     10





</TABLE>




<PAGE>   3


                    PART 1 - FINANCIAL INFORMATION

Item 1.  Financial Statements

                        2Connect Express, Inc.
                       Condensed Balance Sheets
                    August 1, and January 31, 1998
                             (Unaudited)



<TABLE>
<CAPTION>

                                                                                     August 1,           January 31,
                                                                                       1998                 1998
                                                                                    ---------           -----------
<S>                                                                               <C>                   <C>        

                                     ASSETS
Current Assets
  Cash                                                                            $   735,749           $   218,068
  Accounts Receivable, net of reserves                                                195,928               350,296
  Inventory, net of reserves                                                            7,049             1,277,913
  Prepaid Expenses & Other Current Assets                                              27,890               118,086
                                                                                  -----------           -----------
    Total Current Assets                                                              966,616             1,964,363

Property & Equipment, Net                                                               7,500               394,000
Other Assets                                                                            2,090                86,806
                                                                                  -----------           -----------
Total Assets                                                                      $   976,206           $ 2,445,169
                                                                                  ===========           ===========


                 LIABILITIES AND SHAREHOLDERS' EQUITY

Current Liabilities
  Accounts Payable - Prepetition                                                  $   900,894           $ 1,001,158
  Accounts Payable - Postpetition  (See Note Below)                                   185,941                44,557
  Notes Payable                                                                             -               275,000
  Accrued Expenses & Other Current Liabilities                                        132,372               134,300
  Accrued Landlord Claims                                                             691,228               781,826
  Accrued Employee Contract Claims                                                    553,447               540,815
  Accrued Other Bankruptcy Claims                                                      76,850               149,546
  Current Maturities of long-term Debt                                                  2,967                22,209
                                                                                  -----------           -----------
    Total Current Liabilities                                                       2,543,699             2,949,411

Other Liabilities
  Long-term Debt & Capital Leases                                                       7,871                 8,803
                                                                                  -----------           -----------
    Total Liabilities                                                               2,551,570             2,958,214
                                                                                  -----------           -----------

Shareholders' Equity
  Common Stock ($.01 par value.  Authorized 25,000,000 Shares;                         37,525                37,525
   Issued & Outstanding 3,752,500 shares)
  Paid-In-Capital                                                                   8,667,451             8,667,451
  Retained Deficit - Prior Year                                                    (9,218,021)           (9,218,021)
  Net Loss - Current Year                                                          (1,062,319)                    -
                                                                                  -----------           -----------
    Total Shareholders' Equity                                                     (1,575,364)             (513,045)
                                                                                  -----------           -----------

Total Liabilities & Shareholders' Equity                                          $   976,206           $ 2,445,169
                                                                                  ===========           ===========


</TABLE>

See accompanying notes to condensed financial statements.





                                       1


<PAGE>   4


                             2Connect Express, Inc.
                       Condensed Statements of Operations
   For the Three Months and Six Months Ended August 1, 1998 and July 31, 1997
                                   (Unaudited)



<TABLE>
<CAPTION>

                                                 For the Three Months Ended           For the Six Months Ended
                                               -------------------------------    -------------------------------- 
                                               August 1, 1998    July 31, 1997    August 1, 1998    July 31, 1997
                                               --------------    -------------    --------------    -------------- 
<S>                                             <C>               <C>               <C>               <C>        
Net sales                                       $   112,061       $   844,730       $   872,215       $ 1,248,103
Cost of sales                                        24,500           681,975           790,516           974,929
                                                -----------       -----------       -----------       ----------- 
  Gross profit                                       87,561           162,755            81,699           273,174

General and administrative expenses:
  Selling, general and administrative
    expenses (excluding depreciation)               203,797         1,114,343           937,062         1,631,077
  Depreciation and amortization                          --            16,805            56,444            16,805
  Preopening cost amortization                           --            52,084            38,932            74,181
                                                -----------       -----------       -----------       ----------- 
    Operating loss                                 (116,236)       (1,020,477)         (950,739)       (1,448,889)

Other income (expense):
  Interest income                                     5,448            40,865             9,688            64,769
  Interest expense                                     (108)             (381)           (6,856)             (759)
  Restructuring charges and reserves               (111,520)               --          (265,752)               --
  Other, net                                        150,867                --           151,340                --
                                                -----------       -----------       -----------       ----------- 
    Net loss                                    $   (71,549)      $  (979,993)      $(1,062,319)      $(1,384,879)
                                                ===========       ===========       ===========       =========== 


Net loss per share                              $     (0.02)      $     (0.26)      $     (0.28)      $     (0.37)
                                                ===========       ===========       ===========       =========== 

Number of shares used in calculating
  loss per share                                  3,752,500         3,752,500         3,752,500         3,752,500
                                                ===========       ===========       ===========       =========== 



</TABLE>


See accompanying notes to condensed financial statements.




                                        2


<PAGE>   5


                            2Connect Express, Inc.
                       Condensed Statement of Cash Flows
          For the Six Months Ended August 1, 1998 and July 31, 1997
                                 (Unaudited)


<TABLE>
<CAPTION>
                                                                                             For the Six Months Ended
                                                                                    ---------------------------------------
                                                                                    August 1, 1998            July 31, 1997
                                                                                    --------------            -------------
<S>                                                                                 <C>                       <C>          
Cash flows from operating activities:

Net loss                                                                            $ (1,062,319)             $ (1,384,879) 
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
  Depreciation and amortization                                                           56,444                    74,181
  Preopening cost amortization                                                            38,932                    16,805
  Changes in assets & liabilities:
     Accounts receivable                                                                 154,368                  (133,557)
     Inventory                                                                         1,270,864                  (835,674)
     Prepaid expenses & other assets                                                     135,980                   (83,502)
     Accounts payable - prepetition                                                     (100,264)                  307,115
     Accounts payable - postpetition                                                     141,384                         -
     Accrued expenses                                                                     (1,928)                  102,637
     Accrued landlord claims                                                             (90,598)                        -
     Accrued employee contract claims                                                     12,632                         -
     Accrued other bankruptcy claims                                                     (72,696)                        -
                                                                                    ------------              ------------ 
       Net cash provided by (used in) operating activities                               482,799                (1,936,874)
                                                                                    ------------              ------------ 

Cash flows from investing activities:
  Capital expenditures                                                                         -                  (770,946)
  Loss on closed store assets and reserve for asset liquidations                         330,056                         -
                                                                                    ------------              ------------ 
  Net cash provided by investing activities                                              330,056                  (770,946)
                                                                                    ------------              ------------ 

Cash flows from financing activities:
  Decrease in notes payable                                                             (275,000)                        -
  Net proceeds from issuance of common stock                                                   -                 5,354,731
  Increase (decrease) in long-term debt                                                  (20,174)                   17,643
                                                                                    ------------              ------------ 
    Net cash provided by (used in) financing activities                                 (295,174)                5,372,374
                                                                                    ------------              ------------ 

  Net increase (decrease) in cash and cash equivalents                                   517,681                 2,664,554

Cash and cash equivalents, beginning of period                                           218,068                 1,449,167
                                                                                    ------------              ------------ 

Cash and cash equivalents, end of period                                               $ 735,749               $ 4,113,721
                                                                                    ============              ============ 


</TABLE>


See accompanying notes to condensed financial statements.




                                      3


<PAGE>   6



                             2CONNECT EXPRESS, INC.
                     NOTES TO CONDENSED FINANCIAL STATEMENTS



1) BASIS OF PRESENTATION

         The unaudited condensed financial statements have been prepared in
conformity with instructions to Form 10-QSB, and therefore, do not include all
the information and footnotes required by generally accepted accounting
principals for complete financial statements. Certain items included in these
statements are based upon management estimates. In the opinion of management,
the accompanying financial statements contain all adjustments (consisting of
normal recurring accruals, reserves and restructuring reserves) necessary for
fair presentation. The results of operations for the three months and six months
ended August 1, 1998 are not necessarily indicative of the operating results
expected for the fiscal year ending January 30, 1999. These financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto for the fiscal year ended January 31, 1998. Such financial
statements for fiscal year ended January 31, 1998 have not yet been issued, as
the audit of such financial statements has not been completed due to the
Company's bankruptcy filing.

2) NET LOSS PER COMMON SHARE

         Net loss per common share has been determined by dividing net loss by
the weighted average number of shares of common stock outstanding during the
respective periods. Common stock equivalents were not included due to their
antidilutive effect.

3) STORE PROPERTY AND DEVELOPMENT COSTS

         Costs incurred prior to the opening of a store and certain costs
related to the implementation of corporate sales programs are capitalized and
amortized over a period of twelve months starting with the month of commencement
of such programs and new stores. All such previously accrued "pre-opening" costs
have been written off to restructuring expense as part of the Company's
reorganization.

4) STOCK OFFERING

         On May 2, 1997, the Company's Board of Directors declared a one-for-two
reverse split of the Company's issued and outstanding shares of common stock
effective May 6, 1997. The par value of each common share remained $.01 and a
total of $27,100 were reclassified from common stock to paid-in capital.

         On May 9, 1997, the Company completed an initial public offering (the
"IPO") of 520,000 units of its Common Stock. Each unit consists of two shares of
Common Stock, par value $.01 per share (the "Common Stock"), and one Common
Stock Purchase Warrant (a "Warrant") of the Company. Each Warrant entitled the
holder to purchase one share of common stock at a purchase price of $6.00 per
share for a period of sixty days commencing one year from the date of the final
prospectus, May 9, 1997. Neither the share of Common Stock nor the Warrant
contained in the units were detachable or separately transferable from the units
until May 9, 1998, at which time the units automatically terminated. The units
were listed for quotation on the OTC Bulletin Board under the symbol CNTCU until
the units components were detached and then the Common Stock was listed for
quotation on the OTC Bulletin Board under the symbol CNTC until recently
qualified by the NASD Regulation, Inc. and given the symbol CNTCQ. The price to
the public was $12.50 per unit and the Company received gross proceeds of
$6,500,000 before underwriting discounts and offering expenses of approximately
$530,000 and $611,000, respectively.


                                       4

<PAGE>   7

5) LEASE OBLIGATIONS
 
         (a) Operating Leases:

         The Company had entered into eleven (11) non-cancelable operating
leases for store locations, corporate office and security equipment as of
January 31, 1998. The Company filed a voluntary petition for protection under
Chapter 11 of the U.S. Bankruptcy Code on January 12, 1998, and subsequent to
the filing, closed all but one of its' retail stores, relocated its' corporate
office to smaller space on a month to month basis, terminated all leases for
security equipment except for the one store which continues to operate, and has
rejected all such leases. Only the retail store at Coral Square Mall, Coral
Springs, Florida remains open, operating under a Management Agreement with Bobby
Allison Cellular Systems of Florida, Inc. ("Bobby Allison") effective June 18,
1998, whereby Bobby Allison is responsible for the operations of this store
including all expenses related thereto, and is entitled to all resulting profits
(losses).

Minimum future rental payments for all non-cancelable operating leases consist
of the following:

Year ending
the Saturday closest
to January 31
--------------------

1999.......................................................       $ 81,370
2000 .......................................................       108,493
2001 .......................................................       112,001
2002 .......................................................        87,927
2003 .......................................................        57,882
Thereafter .................................................       242,052
                                                                  --------
                                                                  $689,725
                                                                  ========

6) RESTRUCTURING AND BANKRUPTCY FILING

         On January 12, 1998, the Company filed a voluntary petition for relief
("the Filing") under chapter 11 ("Chapter 11") of title II of the United States
Code ("the Bankruptcy Code") in the United States Bankruptcy Court for the
Southern District of Florida ("the Bankruptcy Court"). In Chapter 11, the
Company will and has continued to manage its affairs and operate its business as
a debtor-in-possession and has developed a reorganization plan that will
restructure the Company and allow its emergence from Chapter 11. As a
debtor-in-possession in Chapter 11, the Company may not engage in transactions
outside of the ordinary course of business without approval, after notice and
hearing, of the Bankruptcy Court.

         In accordance with the Bankruptcy Code, the Company can seek court
approval for the rejection of executory contracts, including real property
leases. In connection with the Company's Chapter 11 proceedings, a review was
undertaken of all the Company's obligations under its executory contracts,
including real property leases. All store leases and executory contracts have
been rejected except for the Coral Square Mall (Coral Springs, Florida) store
lease and a related lease of electronic article surveillance systems for that
store. All re-seller agreements with service providers have not been rejected,
except for an agreement with a telephone service provider, which was terminated
by mutual agreement between the parties.



                                       5

<PAGE>   8

         Subsequent to the bankruptcy filing, the Company reached an agreement
with Bay Tech Investments, Inc., to provide secured debtor-in-possession
financing in the form of a credit facility. The credit facility provides for
borrowings dependent upon the Company's level of inventory and accounts
receivable with maximum borrowings of $500,000. The agreement grants a security
interest in substantially all of the Company's assets. Advances under the
facility bear interest at 11%. The debtor-in-possession facility replaced a
Revolving Credit Facility provided by Bay Tech Investments, Inc. which had been
in existence pre-petition. At the time of the Chapter 11 petition, $275,000 was
borrowed on this facility, which balance rolled over to the debtor-in-possession
facility. The debtor-in-possession agreement was originally scheduled to
terminate on February 29, 1998. The Company requested and received a thirty-day
extension of the facility until March 28, 1998 unless further extended upon
request of the borrower and such extension to be at the option of the lender.
The interest rate on advances under the facility was changed to 12% for the
extension period only. On March 28, 1998 the Company voluntarily paid off the
balance owed on the debtor-in-possession facility plus accrued interest and did
not seek extension of the facility. The Company believed that cash raised
through liquidation of excess assets would provide sufficient liquidity through
the anticipated date that the Company expects to emerge from the proceeding.

         Subsequent to the bankruptcy filing, the Company announced on March 3,
1998 that it had executed a Letter of Intent whereby Bobby Allison Cellular
Systems of Florida, Inc. ("Bobby Allison") would merge with and into the
Company. The transaction was contingent upon completion of a Merger Agreement,
which would be incorporated into a Plan of Reorganization to be filed with the
Bankruptcy Court and subsequent confirmation of that Plan by the court. The
surviving entity of the merger was expected to be financed principally by Sterne
Agee & Leach, Inc., an investment banking firm that was the managing underwriter
of the Company's initial public offering in May 1997. The merger and related
financing was anticipated to take place following the Company's emergence from
the bankruptcy proceeding.

         The Company subsequently filed a Plan of Reorganization on April 14,
1998 and an accompanying Disclosure Statement. The Company also executed the
Merger Agreement with Bobby Allison on May 1, 1998. The Company executed a
Management Agreement with Bobby Allison on May 6, 1998, whereby Bobby Allison
would assume the operation of the Company's Coral Square Mall store and be
responsible for all expenses related thereto. The Court approved the Management
Agreement on June 16, 1998, which became effective June 18, 1998.

         On August 27, 1998 the Company entered into an agreement ("Agreement")
with Sterne Agee whereby Sterne Agee will, as of the Effective Date of the Plan
of Reorganization of the Company filed with the U.S. Bankruptcy Court, Southern
District of Florida, acquire out of bankruptcy 100% of the equity interests of
the Company and the Company will retain the Coral Square Mall store lease and
certain store fixtures. In consideration for such acquisition, Sterne Agee will
make a new value contribution to the bankruptcy estate for the benefit of the
Company's creditors in the amount of $175,000, which funds are currently in
escrow. To effect this transaction and in accordance with the Plan of
Reorganization, as amended on August 7, 1998, upon the Effective Date, all of
the current and existing Common Stock of the Company will be forever
extinguished and canceled and the Company will issue new shares of Common Stock
to Sterne Agee which shall constitute 100% of the issued and outstanding shares.
The existing shareholders of Common Stock will not retain any interest in the
post-bankruptcy entity or receive any distribution from the bankruptcy estate
for their extinguished and cancelled interests. The Bankruptcy Court scheduled a
hearing to confirm the Plan of Reorganization for October 14, 1998. The
Effective Date is to occur ten days after confirmation of the Plan of
Reorganization.

          Also pursuant to the terms of the Agreement and effective August 27,
1998, all of the members of the Company's Board of Directors, except for Marc D.
Fishman, resigned from the Board of Directors and Mr. Fishman, as the sole
remaining director, and in accordance with the Bylaws of the Company, appointed
James S. Holbrook, Jr., Craig R. Heyward and F. Eugene Woodham, each of whom are
employees of Sterne Agee, to fill three of the vacancies. The Board of Directors
has further resolved to 



                                       6


<PAGE>   9

appoint James S. Holbrook, Jr. as the Chairman of the Board and, in accordance
with the Bylaws of the Company, to designate that the Chairman of the Board is
the chief executive officer of the Company.

         The accompanying condensed financial statements have been prepared on a
going concern basis of accounting, after adjustments to inventory valuation and
asset values that are not anticipated to be included in the merger described
above, and also after adjustments to the assets to be included in the merger.
The assets included in the proposed merger, which is subject to confirmation of
the Plan of Reorganization by the Court, consist of one store lease, inventory
for one store and its store fixtures, certain fixtures from nine closed stores,
and a payment to be made by Bobby Allison for the business. Remaining minimal
office assets, required during the period until the merger, have been written
down to current estimated market value. The condensed financial statements do
not reflect any adjustments that might result should the Company's Plan of
Reorganization not be confirmed by the Court, the merger not be consummated or
should the Company be unable to continue as a going concern and liquidate. The
Company's losses from operations, which resulted in its bankruptcy filing and
partial liquidation, raise substantial doubt about its ability to continue as a
going concern. The appropriateness of using the limited going concern basis is
dependent upon, among other things, (i) confirmation of a Plan of Reorganization
under the Bankruptcy Code, (ii) the ability to achieve profitable operations
after such confirmation and under the proposed merger, and (iii) the ability to
generate sufficient cash from operations to meet its obligations.


ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 
         RESULTS OF OPERATIONS.


RESULTS OF OPERATIONS

Factors That May Affect Future Results

        As stated above, pursuant to the Agreement, Sterne Agee will acquire out
of bankruptcy 100% of the equity interests of the Company and all current and
existing Common Stock of the Company will be forever extinguished and cancelled.
Consequently, the existing shareholders will not participate in the Company's
future, and the Company's future results are therefore immaterial to the
shareholders. The Management Discussion and Analysis below is primarily
historical.

Comparison of Second Quarter Ended August 1, 1998 and First Six Months of 1998
with 1997

         The Company's net sales for the second quarter ended August 1, 1998
were $112,061 versus $844,730 during the comparable second quarter ended July
31, 1997. The Company operated approximately 3.0 stores during the second
quarter last year. The Company commenced operation of its first store on
December 6, 1996 and subsequently opened two stores in April 1997, three stores
in August 1997, two stores in September 1997 and two stores in November 1997.
The Company closed its five worst performing stores immediately upon its
bankruptcy filing on January 12, 1998 and operated five stores at January 31,
1998. During the second quarter ended August 1, 1998 the Company operated
approximately 0.5 stores for the full quarter including the only on-going store
in Coral Springs, Florida until June 18, 1998 when it was turned over to Bobby
Allison under a Management Agreement in which Bobby Allison is responsible for
management and all resulting profits (losses).

           The Company's net sales for the six months ended August 1, 1998 were
$872,215 versus $1,248,103 during the comparable six months ended July 31, 1997.
The Company operated 2.2 equivalent full-time stores in the first six months of
1998 versus 2.1 equivalent full-time stores during the comparable 1997 period.
In the first six months of 1998 the Company conducted inventory clearance and
liquidation sales at steep discounts and then sold remaining inventory and
defective merchandise which 


                                       7

<PAGE>   10

had been returned by customers in two public auctions conducted by Stampler
Auctions in April 1998. The first such auction consisted of first quality
merchandise and generated proceeds of $300,000 while the second auction,
consisting of customer returns, generated proceeds of $34,500.

         Gross profit for the second quarter ended August 1, 1998 was $87,561
(78.1% to sales) versus gross profit in the prior year comparable quarter ended
July 31, 1997 of $162,755 (19.3% to sales). The gross profit in second quarter
1998 was due to residual income on previous sales of primarily cellular plans
and sales of services that carried activation commissions and related to
equipment which was supplied directly to customers by the service provider. The
lower gross profit in the last year second quarter ended July 31, 1997 was due
to price driven promotional activity related to two new stores, which opened in
late April 1997.

         Gross profit for the six months ended August 1, 1998 was $81,699 (9.4%
to sales) versus $273,174 (21.9%) for the comparable last year six months ended
July 31, 1997. The lower gross profit in 1998 was due to the aforementioned
retail store clearance sales and public auctions. The auction sales returned
approximately 30% of the merchandise inventory cost value, but they enabled to
Company to immediately eliminate expenses of operating the stores where the
inventory was housed and allowed the Company to reject those store leases. The
gross margin of 21.9% for the six months ended July 31, 1997 was adversely
affected by grand opening promotions in connection with opening the Dadeland and
Westchester stores during April 1997 and heavy promotional advertising intended
to create store awareness and garner market share. In the first six months of
1997 the Company priced its products at or below competition and used customer
incentives to increase sales, which lowered average selling price per unit and
gross margin.

         Selling, general and administrative expenses ("SG&A"), excluding
depreciation and amortization, for the second quarter ended August 1, 1998 was
$203,797 (181.6% to sales) versus $1,114,343 (131.9% to sales) during the
comparable quarter last year ended July 31, 1997. The decrease in SG&A expenses
was due to the reduced number of stores operated during the second quarter of
1998 and reduction of corporate expenses and personnel to skeleton levels. SG&A
expenses for the six months ended August 1, 1998, excluding depreciation and
amortization, was $937,062 (107.4% to sales) versus $1,631,077 (130.7% to sales)
for the last year comparable period ended July 31, 1997. The 1998 SG&A expenses
included store closing expenses and expenses related to the movement of
merchandise from closed stores to operating stores and movement of store
fixtures and equipment to a warehouse awaiting subsequent sale to Bobby Allison.
Subsequent to conduct of the aforementioned auctions in April 1998, the Company
has reduced personnel headcount to five persons, including management, in its
Coral Springs store, prior to the effective date of the Management Agreement,
and four in the corporate office. The 1997 SG&A expenses included all management
functions which had been anticipated for the support of rapid store count growth
and personnel used in the start-up of telemarketing and direct outside sales
functions.

         Depreciation, amortization and amortization of pre-opening costs for
the second quarter ended August 1, 1998 was -0- versus $68,889 for the prior
year comparable quarter ended July 31, 1997. The decrease was due to the sale
and write-off of fixed assets and pre-opening expenses subsequent to the
Company's bankruptcy filing. Depreciation, amortization and amortization of
pre-opening costs for the six months ended August 1, 1998 was $95,376 versus
$90,986 for the comparable last year six months ended July 31, 1998. The
equivalent full-time store count in both periods was approximately the same.

         Net interest expense for the second quarter ended August 1, 1998 was
$108 versus $381 in the comparable prior year quarter ended July 31, 1997. For
the six months ended August 1, 1998 net interest expense was $6,856 versus $759
in the comparable last year period. The increase was due to borrowings under the
Company's debtor-in-possession credit facility during first quarter 1998.

         Net interest income for the second quarter ended August 1, 1998 was
$5,448 versus $40,865 during the last year comparable quarter ended July 31,
1997. The decline in interest income was due to lower cash and short term
investments in second quarter 1998 versus second quarter 1997 which included
proceeds from the Company's initial public offering which had not yet been
invested in committed new 



                                       8

<PAGE>   11

store capital expenditures and working capital. Net interest income for the six
months ended August 1, 1998 was $9,688 versus $64,769 for the last year
comparable six months ended July 31, 1997.

         Restructuring charges and reserves in the second quarter ended 
August 1, 1998 was ($39,347) versus $0 in the last year comparable quarter ended
July 31, 1997. The net restructuring charges and reserve adjustments included
adjustments to previously established store closing accruals, reserves for the
disposition of assets and recoveries of accounts receivable. Net restructuring
charges, reserves and adjustments for the six months ended August 1, 1998 was
$114,412 versus -0- in the last year comparable period ended July 31, 1997. The
net expenses recorded included write-down to realized proceeds of assets
(merchandise inventory) sold to Bobby Allison under the aforementioned Merger
Agreement, assets (store selling fixtures) contemplated to be sold to Sterne
Agee under the Agreement formalized and dated August 27, 1998 and legal fees
related to the Company's bankruptcy proceeding in excess of retainers previously
paid to the Company's securities counsel, general and bankruptcy counsel and
professional employed by the creditor's committee in the bankruptcy case.

        Net loss for the second quarter ended August 1, 1998 was ($71,549)
versus ($979,993) for the last year comparable quarter ended July 31, 1997. The
net loss is due to the effective shutdown of the Company's retailing operations.
Although the Company has now closed all but one store and reduced corporate
headcount to skeleton levels, the Company anticipates that it will continue to
incur costs, expenses and losses until, at the earliest, the Company emerges
from bankruptcy, merges with Bobby Allison and establishes a number of stores
generating sufficient revenue to offset its operating costs and costs of any
continuing expansion. Net loss the six months ended August 1, 1998 was
($1,062,319) versus ($1,384,879) for the last year comparable period ended July
31, 1997. The 1998 loss was primarily due to losses sustained in the liquidation
of assets in the bankruptcy proceeding. The 1997 loss was primarily due to store
operating losses, promotional expenses and corporate expenses which had been
established in anticipation of future store count growth.


FINANCIAL CONDITION

         The Company increased its cash position by $517,681 during the second
quarter ended August 1, 1998, to $735,749 from $218,068 at fiscal year ended
January 31, 1998. During that period the Company repaid its $275,000 borrowings
under its debtor-in-possession credit facility. The cash increase was primarily
due to the liquidation of excess merchandise inventory and inventory from stores
which were closed during the bankruptcy proceeding, the sale of excess corporate
office furniture and fixtures no longer required due to downsizing, and
settlement of a contractual dispute with a previous cellular service provider
whose plans were sold in the Company's retail stores.

         The Company expects to receive nominal additional funds from the
collection of receivables and $175,000 from the sale of assets to Sterne Agee
under the aforementioned Agreement. However, all of the Company's excess cash at
the Effective Date of the Plan of Reorganization is anticipated to be paid to
creditors after confirmation of the Company's Plan of Reorganization by the
court. Also at such time, all of the current and existing Common Stock of the
Company will be forever extinguished and cancelled and the Company will issue
new shares of Common Stock to Sterne Agee which shall constitute 100% of the
issued and outstanding shares. The existing shareholders of Common Stock will
not retain any interest in the post-bankruptcy entity or receive any
distribution from the bankruptcy estate for their extinguished and cancelled
interests.

          This form 10-QSB includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act and Section 21E of the Exchange
Act. All statements other than statements of historical facts included in this
Form 10-QSB and located elsewhere herein regarding the Company's financial
position and business strategy may constitute forward-looking statements.
Although the Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance that such
expectations will prove to be accurate.


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<PAGE>   12

                           PART II - OTHER INFORMATION


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

            (a)   Exhibits
                  - Exhibit Item 10 of Rule 601 - Management Agreement by and
                    between 2Connect Express, Inc. and Bobby Allison Cellular
                    Systems of Florida, Inc. effective May 31, 1998.
                  - Exhibit Item 27 of Rule 601 - Financial Data Schedule (for
                    SEC use only).
            (b)   Reports on Form 8-K. Reports on Form 8-K have been filed
                  during the quarter ended August 1, 1998, on a monthly basis
                  pursuant to the filing of U.S. Bankruptcy Court Trustee
                  Reports, and as material events occurred.
                  - Form 8-K dated May 19, 1998 re: Merger Agreement with Bobby
                    Allison and auction inventory liquidation results;
                  - Form 8-K dated June 19, 1998 re: U.S. Trustee Report (May,
                    1998 financial results);
                  - Form 8-K dated July 16, 1998 re: U.S. Trustee Report (June,
                    1998 financial results);
                  - Form 8-K dated July 28, 1998 re: motion to amend Disclosure
                    Statement to provide for the extinguishment of
                    pre-confirmation equity.



                                   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.

                                       2CONNECT EXPRESS, INC.
                                       ----------------------
                                       (Registrant)



Date: September 14, 1998               /s/ James S. Holbrook, Jr.
------------------------               ---------------------------------------
                                       James S. Holbrook, Jr., Chairman of the
                                       Board and Chief Executive Officer










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