UNITED STATES 
                       SECURITIES AND EXCHANGE COMMISSION 
                             Washington, D.C. 20549 
                                    FORM 10-K

     (Mark One) 
     [X]  ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
          EXCHANGE ACT OF 1934 for the fiscal year ended December 31, 1998

                                       OR

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

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

                         Commission file number: 0-26420
                                              -------

                         AMBASSADORS INTERNATIONAL, INC. 
                         -------------------------------
             (Exact Name of Registrant As Specified In Its Charter)


                  Delaware                       91-1688605
      --------------------------------    ------------------------
       (State or Other Jurisdiction of        (I.R.S. Employer
       Incorporation or Organization)       Identification  No.)

        Dwight D. Eisenhower Building
            110 S. Ferrall Street
                Spokane, WA                         99202
     ---------------------------------    ------------------------
            (Address of Principal                (Zip Code)
             Executive Offices)

     Registrant's Telephone Number, Including Area Code: (509) 534-6200

     Securities registered pursuant to Section 12(b) of the Act: None

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


                              Title of Each Class 
                        --------------------------------
                          Common Stock, $.01 Par Value
     <PAGE>
     Indicate by check mark whether the registrant: (1) filed all reports
     required to be filed by Section 13 or 15(d) of the Securities Exchange
     Act of 1934 during the preceding 12 months (or for such shorter period
     that the registrant was required to file such reports) and (2) has
     been subject to such filing requirements for the past 90 days.  
     Yes  X      No
         ---        ---
     Indicate by check mark if disclosure of delinquent filers pursuant to
     Item 405 of Regulation S-K is not contained herein, and will not be
     contained, to the best of registrant's knowledge, in definitive proxy
     or information statements incorporated by reference in Part III of
     this Form 10-K or any amendment to this Form 10-K. [X]

     The aggregate market value of the voting stock of the registrant held
     by non-affiliates of the Registrant, based upon the closing sales
     price of the Common Stock on the Nasdaq Stock Market on March 19,
     1999, was $97,816,586.  The number of shares of the registrant's
     Common Stock outstanding as of March 19, 1999 was 9,824,948.

                       DOCUMENTS INCORPORATED BY REFERENCE

     Portions of the registrant's definitive Proxy Statement relating to
     the 1999 Annual Meeting of Stockholders are incorporated by reference
     into Part III.
     <PAGE>
                                TABLE OF CONTENTS


      PART I

          Item 1.   Business
          Item 2.   Properties
          Item 3.   Legal Proceedings 
          Item 4.   Submission of Matters to a Vote of Security Holders 


      PART II

          Item 5.   Market for the Registrant's Common Equity and Related
                    Stockholder Matters 
          Item 6.   Selected Financial Data 
          Item 7.   Management's Discussion and Analysis of Financial
                    Condition and Results of Operations 
          Item 7A.  Quantitative and Qualitative Disclosures About Market
                    Risk
          Item 8.   Financial Statements and Supplementary Data 
          Item 9.   Changes in and Disagreements with Accountants on
                    Accounting and Financial Disclosure 


      PART III

          Item 10.  Directors and Executive Officers of the Registrant 
          Item 11.  Executive Compensation 
          Item 12.  Security Ownership of Certain Beneficial Owners and
                    Management 
          Item 13.  Certain Relationships and Related Transactions 


      PART IV

          Item 14.  Exhibits, Financial Statement Schedules and Reports on
                    Form 8-K 

      SIGNATURES 
      <PAGE>
     PART I

     Item 1. BUSINESS

     OVERVIEW
     --------
     Ambassadors International, Inc., a Delaware corporation, is a leading
     educational travel, travel services and performance improvement
     company, which, through its wholly owned subsidiaries, is engaged
     primarily in the business of (i) organizing, marketing and operating
     international educational travel programs on a worldwide basis for
     students and adults (the "Education Group"); and (ii) developing,
     marketing and managing performance improvement programs for a
     nationwide roster of corporate clients that utilize merchandise awards
     and incentive travel, providing business meeting management services,
     and providing comprehensive housing reservation, registration and
     travel services for meetings, conventions, expositions and trade shows
     (the "Performance Group").

     The Education Group is comprised of the Company's wholly owned
     subsidiary, Ambassadors Education Group, Inc., a Delaware corporation
     ("AEG"), and AEG's wholly-owned subsidiaries, Ambassadors Programs,
     Inc., a Delaware corporation ("API"), and Ambassadors Specialty Group,
     Inc., a Delaware corporation ("ASG").  The Performance Group is
     comprised of the Company's wholly owned subsidiary, Ambassadors
     Performance Group, Inc., a Delaware corporation ("APG") and APG's
     wholly-owned subsidiary, Ambassadors Performance Housing, Inc., a
     Delaware corporation ("APH").  References to the Company herein
     include Ambassadors International, Inc. and its subsidiaries, unless
     the context otherwise requires.

     The Company was originally incorporated in the State of Washington in
     1967 under the name International Ambassador Programs, Inc. to provide
     international educational travel programs for students and adults. 
     The Company was reincorporated in the State of Delaware in 1995.  The
     Company's principal executive offices are located at Dwight D.
     Eisenhower Building, 110 S. Ferrall Street, Spokane, Washington 99202,
     and its telephone number is (509) 534-6200.

     For information reporting revenues from external customers, a measure
     of profit and loss, and total assets, see Note 13 to Consolidated
     Financial Statements, beginning on page F-1.
     <PAGE>
     EDUCATION GROUP

     The Company's Education Group has been active since the Company's
     founding in 1967.  The Education Group consists of several specialized
     private-label travel programs, including (i) the "People to People
     Student Ambassador Programs" ("Student Ambassador Programs"), which
     provide opportunities for junior high and high school students to
     visit foreign countries to learn about the politics, economy and
     culture of such countries and (ii) the "People to People Ambassador
     Programs" ("Professional Exchange Programs"), which provides foreign
     travel experiences for adults, with emphasis on meetings and seminars
     between participants and persons in similar jobs abroad.  See
     "Business--Education Group."

     Since 1983, the Company has organized programs for more than 80,000
     students and 48,000 adults in more than 35 countries on 5 continents.
     In 1998, the Company's educational travel programs featured visits to
     such countries as Australia, China, France, Germany, Great Britain,
     India, Italy and New Zealand.  In 1998, approximately 15,000
     participants traveled on the Company's educational programs.

     A majority of the Education Group's programs are organized in
     connection with People to People International ("People to People"), a
     private, non-profit organization dedicated to the promotion of world
     peace through cultural exchange.  People to People was founded by
     President Dwight D. Eisenhower in 1956 and was originally administered
     by the U.S. State Department.  Seven Presidents since President
     Eisenhower have served as Honorary Chairman of People to People,
     including President Bill Clinton, who currently holds that position.
     Subject to certain exceptions, the Company's agreements with People to
     People give the Company the exclusive right to develop and conduct
     programs for kindergarten through college age students using the
     People to People name and the non-exclusive right to develop and
     conduct programs for adults using the People to People name.  The
     Company believes that its long association with People to People has
     been a major factor in its ability to provide quality educational
     student and adult travel programs, and that this relationship provides
     the Company with greater access to foreign governmental agencies,
     officials and institutions. 

     The Company also believes that its association with the People to
     People programs and the recent efforts of management have provided the
     foundation for the Company to develop strategic alliances with
     Yosemite National Institutes and the American Youth Soccer
     Organization.  In addition, through ASG, the Education Group provides
     travel programs in such specialty markets as golf and motor racing.
     <PAGE>
     PERFORMANCE GROUP

     During 1996, the Company commenced operations of its Performance Group
     through the acquisition of two existing entities engaged in this
     business.  These operations were expanded in 1998, through the
     acquisition of Travel Incentives, Inc. ("TII") and Incentive
     Associates, Inc. ("IAI").  Through the additional acquisitions in 1998
     of Rogal America, Co. ("Rogal") and Destination, Inc. ("Destination"),
     the Company further expanded its Performance Group to include
     comprehensive housing reservation, registration and travel services
     for meetings, conventions, expositions and trade shows.  See "Business
     - Recent Acquisitions."

     The Performance Group develops, markets and manages performance
     improvement programs for a nationwide roster of clients.  The programs
     offer services in three principal areas: (i) performance improvement
     programs, (ii) business meeting management services and (iii)
     comprehensive housing reservation, registration and travel services.
     The Company's performance improvement programs utilize merchandise
     awards and travel incentives designed to help clients achieve sales
     goals, improve productivity and attract and retain qualified
     employees.  The Company's business meeting management services assist
     clients in planning, coordinating and producing business meetings and
     conferences.  The Company also provides comprehensive housing
     reservation, registration and travel services for meetings,
     conventions, expositions and trade shows.  These services include
     hotel booking, guest registration, confirmation, and on-site services.

     The Performance Group's clients include both small and large
     businesses and organizations, including several Fortune 500 companies
     and nationally recognized trade and professional associations.

     The Company intends to continue its strategy of growth by making
     selective acquisitions of travel and travel-related businesses which
     are either compatible with the Company's existing businesses or
     represent a developing specialty travel or travel-related segment not
     currently addressed by the Company's operations.

     BUSINESS
     --------
     EDUCATION GROUP

     Through its Education Group, the Company organizes, markets and
     operates educational travel programs for students and adults,
     principally using the People to People name.  The Company has the
     exclusive right to develop and conduct programs for kindergarten
     through college age students using the People to People name.  The
     Company also has the non-exclusive right to develop, market and
     operate programs for adults using the People to People name; however,
     at the present time the Company is the only entity that has been given
     <PAGE>
     this right by People to People.  These rights have been granted
     pursuant to agreements with People to People, which expire in 2005.
     The agreements will be automatically renewed for an additional ten
     years unless either party elects otherwise.  The principal offices of
     the Company's Education Group are located in Spokane, Washington.

     STUDENT AMBASSADOR PROGRAMS.  The Company's Student Ambassador
     Programs provide an opportunity for students in the sixth through
     twelfth grades to visit one or more foreign countries to learn about
     the politics, economy and culture of such countries.  The Company
     markets its Student Ambassador Programs through a combination of
     direct mail and local informational meetings.  Representatives of the
     Company review candidate applications and conduct informational
     meetings throughout the country from September through April, after
     which selected applicants register to participate in the program.

     Student Ambassador Program delegations depart during the summer and
     generally travel for approximately 21 days, during which time each
     delegation visits one or more foreign countries.  Each delegation
     generally consists of approximately 35 students and several teachers,
     who act as the delegation's leaders.  Teachers and students comprising
     a delegation generally come from the same locale.  Local guides assist
     the delegation in their travels.

     Programs are designed by the Company's staff of international planners
     and researchers to provide an educational and entertaining travel
     experience by exposing students to the history, government, economy
     and culture of the country or countries visited.  In each country the
     Company contracts with overseas program coordinators to provide day-
     to-day oversight of the programs.  Additionally, a guide trained by
     the Company accompanies the group throughout the duration of its
     program.  In most instances, the Company also arranges to provide
     students the opportunity for a "homestay" (a brief stay with a host
     family) which gives students a glimpse of daily life in the visited
     country.

     Students who complete certain written assignments and other projects
     can receive high school and university credit for their participation
     in the program.  Universities which recognize academic credit include
     Stanford University, University of California at Los Angeles, and
     Georgetown University.

     PROFESSIONAL EXCHANGE PROGRAMS.  The Company's Professional Exchange
     Programs provide adults with common interests the opportunity to
     travel abroad to meet and exchange ideas with foreign citizens who
     have similar backgrounds, interests or professions.  The Company
     markets its Professional Exchange Programs through a direct mail
     marketing effort throughout the year.  Programs originate from the
     Company's internal marketing and research staff who identify potential
     <PAGE>
     delegation topics and leaders.  Adult programs have been conducted in
     such areas as agriculture, economics, education, medicine and science.

     The Company believes that its Professional Exchange Programs provide
     participants with enriching experiences and deeper understandings of
     foreign cultures and peoples than visits arranged independently or
     through travel agencies.  The Professional Exchange Programs operate
     year-round and are generally designed to provide a more specialized
     adult educational experience.  Professional Exchange Programs
     generally last from ten days to two weeks and are designed to provide
     adults with similar backgrounds or common interests the opportunity to
     exchange information and ideas with their counterparts in other
     countries.  Unlike travel programs provided by travel agencies, these
     professional exchanges are intended largely as working trips, with a
     significant amount of the participant's time involved in organized
     meetings, seminars and round-table discussions with their foreign
     counterparts, inspection visits to major foreign facilities and
     institutions and informal gatherings with foreign counterparts.  Each
     program is led by a delegation leader chosen by the Company based upon
     his or her recognition in the field and expertise regarding the
     special focus of the particular program.

     The Company acquired additional People to People adult business
     through an acquisition in February 1996, which included, among other
     things, the right to operate adult educational and exchange travel
     programs under the tradenames "American People Ambassador Programs"
     and "Missions in Understanding" and rights under an agreement with
     People to People to operate additional travel programs.

     SPECIALTY TRAVEL.  The Company also operates certain specialty travel
     programs for niche markets.  The Company has entered into an alliance
     with Yosemite National Institutes, a non-profit organization with
     operations in Yosemite National Park, Olympic National Park and Golden
     Gate National Recreation Area.  The agreement with Yosemite National
     Institutes is exclusive, except that Yosemite National Institutes may
     conduct its own programs.  The Company also has an agreement with the
     American Youth Soccer Organization to provide international travel for
     its players.  In 1998, these programs included travel to France, the
     United Kingdom, Ireland and the Netherlands to play soccer matches
     against local teams.

     Through I.G.S. Travel, Inc. ("IGS"), the Education Group has expanded
     its business by organizing and operating high-end golf and golf-
     related tours, trips and programs, both within the United States and
     internationally.  These programs are offered both as land programs at
     private country clubs and as part of certain cruise line itineraries. 
     See "Business - Recent Acquisitions".  Grand Prix Tours ("GPT"), in
     which the Company has a minority investment, organizes and operates
     over 40 programs annually to motor racing events in the United States
     and internationally.  GPT is the largest such travel company in the
     United States.
     <PAGE>
     PERFORMANCE GROUP

     The Performance Group develops, markets and manages performance
     improvement programs for a nationwide roster of clients.  The programs
     offer services in three principal areas: (i) performance improvement
     programs, (ii) business meeting management services, and (iii)
     comprehensive housing reservation, registration and travel services.
     The Performance Group commenced operations through a series of
     acquisitions commencing in 1996.  The principal offices of the
     Performance Group are located in Newport Beach, California.

     In offering performance improvement programs and business meeting
     management services, the Performance Group follows a strategy aimed at
     developing and implementing programs tailored to each client's
     objectives.  The Company's employees first meet with existing or
     potential clients to determine their business objectives and their
     performance enhancement opportunities.  Once a client agrees to pursue
     a program, the Company works with the client to determine the scope of
     the program by identifying concepts and parameters in terms of
     purpose, costs, time and employee participation.  Subsequently, the
     Company's employees develop and provide customized services that fall
     within the identified parameters.

     Performance Group employees participate in various aspects of a
     client's program development.  The staff of creative writers and
     graphic designers often delivers promotional campaigns and materials
     that are complete from concept through production, including design,
     printing, collating, labeling and mailing.  The Company has developed
     computerized monitoring systems and provides each client with lists
     generated by internally-designed software programs which track the
     program participants and enable the client to know the status of each
     participant at any time.  Additionally, the Company provides a program
     coordinator to formulate, maintain and finalize each aspect of the
     client's event.

     For its services, the Company is usually paid a percentage markup of
     the program components including air and ground transportation,
     promotional gifts, meals and hotel accommodations.  In addition, the
     Company is reimbursed for expenses incurred in organizing the program.

     Through APH, the Company also provides comprehensive housing
     reservation, registration and travel services for meetings,
     conventions, expositions and trade shows.  The contracts for these
     services generally cover an annual meeting or event and may be for a
     term of one to several years.  Pursuant to these agreements, the
     Company provides a wide range of services associated with booking
     hotel space and guest registration, including securing sufficient and
     appropriate hotel room inventories, coordinating blocking and booking
     of all hotel rooms, monitoring the status and volume of reservations,
     accepting individual and group reservations, mailing reservation
     <PAGE>
     confirmations and providing an on-site housing services desk at a
     meeting site to coordinate attendees' housing needs.  For providing
     these and other services, the Company generally receives a fixed
     commission, which is paid directly by the hotels.

     RECENT ACQUISITIONS

     On February 5, 1998, APG acquired certain of the assets (the "Rogal
     Assets") of Rogal.  Rogal provides comprehensive housing reservation,
     registration and travel services for meetings, conventions,
     expositions and trade shows.  The Rogal Assets include two office
     leases for premises in Massachusetts and Virginia, computer equipment
     and Rogal's existing client service contracts.  The Company has
     continued to service the existing client contracts of Rogal and
     intends to expand further this area of its business.

     On February 20, 1998, the Company further expanded the operations of
     its Performance Group through the merger of TII into APG.  TII was
     engaged in the performance incentives and meeting management
     businesses.

     On May 1, 1998, ASG acquired the assets of IGS, which organizes and
     operates golf and golf-related tours, trips and programs.

     On May 22, 1998, IAI was merged into APG.  IAI provides travel
     incentive, business meeting and conference planning services.  

     On July 17, 1998, APG acquired the assets of Destination, which is
     engaged in the business of organizing and operating comprehensive
     integrated housing, registration and travel services for meetings,
     conventions, expositions and trade shows for business clients.  With
     the completion of this acquisition, the Company believes that it is
     now one of the leading housing registration services in the United
     States. 

     On January 25, 1999, subsequent to the end of the 1998 fiscal year,
     the Company purchased a minority interest in connection with the
     acquisition by a group of investors of all of the capital stock of
     Scheduled Airlines Traffic Offices, Inc. ("SatoTravel").  SatoTravel
     is a travel management firm that handles travel management services
     primarily to the U.S. military and U.S. Government, with the remainder
     to major U.S. corporations.  SatoTravel was owned by eleven domestic
     airlines prior to this transaction.  The Company also entered into a
     Management Agreement (the "Management Agreement") with SatoTravel
     Holding Co., Inc., the newly-formed parent corporation of SatoTravel,
     in which the Company is a minority shareholder, to provide general
     financial and management consulting services to SatoTravel.  In
     consideration for providing these services, the Company will be paid a
     management fee and will be reimbursed for reasonable expenses incurred
     in connection with the rendering of services under the Management
     Agreement.  The term of the Management Agreement is five years,
     subject to earlier termination under certain circumstances.
     <PAGE>
     BUSINESS STRATEGY

     The Company believes that high quality programs and exceptional
     customer service are and will remain key elements of the Company's
     success.  The Company's strategy is to maintain its quality standards
     while increasing its volume of business.  To increase its business,
     the Company intends to (i) expand the marketing and tour volume of its
     existing student travel programs, (ii) introduce new student travel
     programs and strategic alliances, (iii) broaden its adult travel
     programs, (iv) expand the scope of services and increase the market
     penetration of the Performance Group, and (v) pursue selective
     acquisitions of travel and performance improvement businesses.

     COMPETITION

     The travel industry in general, and the educational segment of the
     travel industry in particular, is highly competitive.  The Company's
     student programs compete with similar educational travel programs
     operated by other individuals and organizations, as well as
     independent programs organized and sponsored by local teachers with
     the assistance of local travel agents.  The Company's adult programs
     also compete with independent professional associations that sponsor
     and organize their own travel programs through the assistance of local
     travel agents, and other organizations that design travel programs for
     adults.

     The Company believes that the barriers to entry for any future
     competitors are relatively low.  Certain organizations engaged in the
     travel business have substantially greater financial, marketing and
     sales resources than the Company.  There can be no assurance that the
     Company's present competitors or competitors that choose to enter the
     marketplace in the future will not exert significant competitive
     pressures on the Company.

     The Company believes that the principal bases of competition in the
     educational segment of the market are the quality and uniqueness of
     the educational program offered, customer service, reputation and
     program cost.  The Company believes that its agreements with People to
     People, as well as its years of experience organizing student
     educational programs and established relationships with public
     officials, organizations and residents in countries in which it
     provides programs, allow the Company to provide an educational
     opportunity that is not easily duplicated by competitors' programs.

     The Performance Group also competes in segments of the travel industry
     that are highly competitive.  In the meeting management and incentives
     businesses, the Company competes with companies which are larger and
     have greater resources than the Company.  The Company believes that,
     although some potential clients will focus on price alone, other
     <PAGE>
     clients will also be interested in the quality of the programs
     developed by the Performance Group and customer service.  The Company
     believes that its programs are not easily duplicated by its
     competitors.

     SERVICEMARKS

     The Company has registered a variety of service and trademarks,
     including the names "High School Student Ambassador Program" and
     "Citizen Ambassador Program." In addition, the Company has the right,
     subject to certain exceptions, to use People to People's name,
     servicemark and logo for use in marketing student and adult programs.
     In February 1996, the Company acquired the exclusive rights to the
     names "American People Ambassador Programs" and "Missions in
     Understanding." The Company believes that the strength of its service
     and trademarks is valuable to its business and intends to continue to
     protect and promote its marks as appropriate.  However, the Company
     believes that its business is not dependent upon any trademark or
     servicemark. 

     INSURANCE

     The Company maintains insurance coverage in amounts it believes are
     adequate for its business, including a $5 million professional
     liability policy and a $5 million umbrella policy.  The Company also
     maintains a $1 million general liability and property coverage policy.
     The Company has not experienced difficulty in obtaining adequate
     insurance coverage.  There is no assurance that the insurance
     maintained by the Company will be adequate in the event of a claim, or
     that such insurance will continue to be available in the future.

     EMPLOYEES  

     At February 28, 1999, the Company had approximately 406 employees, of
     which 383 were full-time employees.  Of the Company's total employees,
     137 are located in Spokane, Washington, 66 are located in Newport
     Beach, California, 12 are located in Novato, California, 3 are located
     in Winnebago, Illinois, 35 are located in Plymouth, Minnesota, 93 are
     located in Watertown, Massachusetts, 3 are located in Alexandria,
     Virginia, 16 are located in Westlake Village, California and 41 are
     located in Atlanta, Georgia.  The Company has 76 full-time employees
     engaged in marketing and sales and 330 full-time employees in
     operations, administration and finance.  The Company also occasionally
     employs temporary labor on a seasonal basis to assist it with its
     direct marketing efforts in recognition of the fact that the Company's
     student travel programs are seasonal in nature.  None of the Company's
     employees is subject to collective bargaining agreements or is
     represented by a union.  The Company believes that its labor relations
     are good.
     <PAGE>
     Item 2. PROPERTIES

     The principal executive offices of the Company, consisting of
     approximately 41,000 square feet, are located in Spokane, Washington
     and are occupied pursuant to a lease dated January 3, 1995 that
     expires December 31, 2004.  The lease currently provides for monthly
     rental payments of $36,992.  The Company may cancel the lease without
     penalty (upon one year's prior notice) and also may extend the term of
     the lease for an additional ten year period upon providing written
     notice to the lessor of its intention to exercise such option at least
     six months prior to the end of the initial term.  If the Company
     elects to exercise the extension option, the monthly rental during the
     renewal period will be the fair market rental value of the leased
     premises as of the date the option is exercised (as determined based
     on market rentals of similar properties in the Spokane, Washington
     area).  The owner of the premises is a partnership consisting of two
     former principals of the Company, who subsequently sold their interest
     in the Company in January 1995.  

     In March 1998, the Company entered into a new lease for the
     Ambassadors Performance Group headquarters office in Newport Beach,
     California.  The lease commenced on June 15, 1998 and is for a term of
     seven years.  The initial base rental is $28,346 per month in the
     first year, increasing to $29,696 per month in the second year.  The
     premises consist of approximately 27,000 square feet.  The Company
     subleases approximately 2,000 square feet of this space to a sublessee
     for a current monthly rental of $2,900 and subleases approximately
     2,800 square feet of this space to another sublessee for a current
     monthly rental of $2,600.

     In July 1998, APG entered into a lease for office space in Novato,
     California.  The lease commenced on September 1, 1998 and is for a
     term of five years.  The premises consist of approximately 2,400
     square feet.  The base rent is $5,645 per month for the first year of
     the lease and will increase in subsequent years based on the local
     consumer price index.  

     The Company also leases approximately 900 square feet of office space
     in Winnebago, Illinois pursuant to a lease that expires in August
     2000.  In addition, the Company currently leases approximately 15,360
     square feet of office and warehouse space in Plymouth, Minnesota,
     pursuant to a lease which expired in January 1999.  That lease was
     renewed until July 31, 2000 at a monthly rental of $10,144.

     In February 1998, the Company assumed two additional leases for office
     space in connection with its acquisition of the Rogal Assets.  One
     lease is for approximately 15,900 square feet in Watertown,
     Massachusetts, with a current monthly rental of $15,640, which lease
     expires in 2003.  The second lease is for approximately 1,805 square
     feet in Alexandria, Virginia, with a current monthly rental of $2,137;
     that lease expired in November 1998 and has been extended for an
     additional three years, until November 2001.
     <PAGE>
     In February 1998, the Company assumed a month-to-month lease for
     office space in connection with its acquisition of TII.  The lease was
     for approximately 4,841 square feet with a monthly rental of $6,051. 
     Effective February 1, 1999, this lease was renewed for two years,
     expiring on January 31, 2001, for approximately 3,148 square feet, at
     a monthly rental of $4,407.

     In July 1998, the Company assumed a lease for office space in Atlanta,
     Georgia, in connection with the acquisition of Destination.  That
     lease is for approximately 9,933 square feet and the term of the lease
     expires in June 2002.  The base rent is $11,333 per month through 
     June 30, 1999 and $11,786 from July 1, 1999 through June 30, 2000.  

     The Company also leases, but no longer occupies, approximately 4,500
     square feet of office space in Newport Beach, California.  The lease
     expires in June 2000, and currently provides for monthly rental
     payments of $4,742.  The Company subleases this space to one sublessee
     for a monthly rental of $6,744 for the period July 1998 through June
     1999, increasing to $7,194 for the period July 1999 through June 2000.

     Management believes that its existing facilities are sufficient to
     meet its present needs and anticipated needs for the foreseeable
     future.  However, additional facilities may be required in connection
     with future business acquisitions.

     Item 3. LEGAL PROCEEDINGS

     On September 22, 1997, Sarah Buffington and certain other individuals,
     for themselves and on behalf of their children, six teenage students
     (the "Plaintiffs"), filed a lawsuit in the District Court of Harris
     County, Texas, against People to People and three individual tour
     leaders.  In February 1998, the lawsuit was amended to include the
     Company (the original named defendants and the Company are
     collectively referred to as the "Defendants").  The basis for the
     Plaintiffs' claim was their allegation that, while the six teenagers
     were in Europe in June 1997 as part of a tour involving 31 students,
     three of the tour leaders behaved in an inappropriate manner toward
     the six teenagers.  The Plaintiffs alleged breach of contract,
     negligence, negligent hiring and retention of the tour leaders,
     slander, intentional infliction of emotional distress, and assault and
     battery.  The Plaintiffs sought at least $15,000,000 in punitive and
     exemplary damages against the Defendants, together with unspecified
     actual damages, attorneys' fees, court costs and other incidental
     costs.

     On December 14, 1998, this lawsuit was settled for a payment to the
     Defendants in the aggregate amount of $64,000, and the suit was
     dismissed with prejudice.
     <PAGE>
     Except for the foregoing, the Company is not a party to any material
     pending legal proceedings other than ordinary routine litigation
     incidental to its business, the outcome of which the Company believes
     will not have a material adverse effect on its business, financial
     condition or results of operations.

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

     None.

     PART II

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

     STOCK MARKET AND OTHER INFORMATION

     The Company's common stock has been traded on the Nasdaq National
     Market under the symbol "AMIE" since August 3, 1995.  Prior to such
     date, there was no public trading market for the Company's equity
     securities.  As of March 19, 1999, there were approximately 42 holders
     of record of the Company's Common Stock.  This number does not include
     beneficial owners holding shares through nominee or "street" name.

     The following table sets forth the high and low sale prices of a share
     of the Company's Common Stock as reported on the Nasdaq National
     Market on a quarterly basis for the Company's fiscal years ended
     December 31, 1997 and December 31, 1998.

                                                           High     Low    
                                                           -------- -------
     1997:
         Quarter ended March 31, 1997                      $12.50   $ 9.00 
         Quarter ended June 30, 1997                       $13.75   $ 8.75 
         Quarter ended September 30, 1997                  $22.00   $12.25 
         Quarter ended December 31, 1997                   $26.75   $17.25 

     1998:
         Quarter ended March 31, 1998                      $26.75   $17.50 
         Quarter ended June 30, 1998                       $30.75   $24.50 
         Quarter ended September 30, 1998                  $31.88   $15.75 
         Quarter ended December 31, 1998                   $17.91   $13.00 

     DIVIDEND POLICY

     The Company has not paid any dividends since the consummation of its
     initial public offering of securities in 1995 and intends to continue
     to retain its earnings for use in the operation and expansion of its
     business and therefore does not anticipate declaring any cash
     dividends in the foreseeable future.  The payment of dividends in the
     <PAGE>
     future will be at the discretion of the Board of Directors and will be
     dependent upon the Company's financial condition, results of
     operations, capital requirements and such other factors as the Board
     of Directors, in its discretion, deems relevant.

     TRANSFER AGENT AND REGISTRAR

     ChaseMellon Shareholder Services of Los Angeles, California serves as
     transfer agent and registrar of the Company's Common Stock.

     CHANGES IN SECURITIES

     In February 1998, the Company issued 140,187 shares of its Common
     Stock in connection with its acquisition of the Rogal Assets, and
     52,068 shares of its Common Stock in connection with its acquisition
     of TII.  In May 1998, the Company issued 85,672 shares of its Common
     Stock in connection with its acquisition of IAI.

     Each of the foregoing issuances was made directly by the officers and
     directors of the Company and no underwriting discounts or commissions
     were paid.  Each of the foregoing transactions was exempt from the
     registration provisions of the Securities Act of 1933, as amended (the
     "Securities Act"), pursuant to Section 4(2) thereof for issuances of
     securities not involving a public offering and exempt from
     registration under applicable state securities laws.

     Each of the persons with whom the Company's Common Stock was issued
     represented to the Company, substantially as follows: that he or it
     acquired the securities for his or its own account, for investment
     purposes only and not with a view to or for sale in connection with
     any distribution thereof.  Certificates evidencing the Common Stock
     issued in these transactions bear restrictive legends to such effect
     and state further that the securities have not been registered under
     the Securities Act or state securities laws and may not be sold,
     pledged or otherwise transferred without registration under the
     Securities Act or an exemption therefrom.

     <PAGE>
     Item 6. SELECTED FINANCIAL DATA

      <TABLE>
      <CAPTION>
                                          YEAR ENDED DECEMBER 31,
                                          ----------------------------------------------------
                                          1998       1997       1996       1995       1994
                                          --------   --------   --------   --------   --------
                                              (dollars in thousands, except per share data)
      <S>                                 <C>        <C>        <C>        <C>        <C>
      STATEMENT OF INCOME DATA (A):           
      Operating revenues                  $ 40,148   $ 26,541   $ 18,843   $ 17,133   $ 16,990

      Operating expenses:
         Selling and tour promotion         15,555      9,826      8,420      8,694      9,407
         General and administrative         15,577      8,210      5,770      4,676      5,380

      Operating income                       9,016      8,505      4,653      3,763      2,203

      Net income                             8,362      5,637      3,947      5,157      2,127

      Pro forma net income (B)                  --         --         --      3,179      3,152

      Net income per share - basic (B)    $   0.93   $   0.83   $   0.60   $   0.57   $   0.63

      Net income per share - diluted (B)  $   0.92   $   0.82   $   0.59   $   0.56   $   0.63

      BALANCE SHEET DATA (C):

      Cash and cash equivalents           $ 55,290   $ 22,871   $ 18,281   $ 12,974   $  6,634

      Total assets                         127,732     34,449     27,269     16,016      9,637

      Long-term debt                           145        329         --          6         17

      Total stockholders' equity           107,049     22,556     16,783     11,135      1,829

      SELECTED OPERATING DATA:

      Gross program receipts (rounded
        to nearest million)               $116,000   $ 80,000   $ 57,000   $ 47,000   $ 45,000

      </TABLE>

     (A)  Since 1995, the Company has made several acquisitions which have
          been accounted for under the purchase method of accounting.
          Therefore, the results of operations of these acquired entities
          are included in the results of operations of the Company since
          their respective dates of acquisition.  The statement of income
          data for the years ended December 31, 1995 and 1994 only reflects
          the Education Group.  During 1996, the Company commenced
          operations of its Performance Group through the acquisition of
          two existing entities engaged in this business.  Due to the
          timing of these acquisitions, the results of operations for one
          of these entities are included in the Company's results of
          operations for the year ended December 31, 1996.  The results of
          operations of the second acquisition are included in the
     <PAGE>
          financial presentation for the year ended December 31, 1997.  The
          results of operations for the year ended December 31, 1997 also
          include the acquisition in September 1997 of a third company in
          the Performance Group. The results of operations for the year
          ended December 31, 1998 include the results of operations of
          acquisitions as of February, April, May and July of 1998.

     (B)  In connection with the Company's change in ownership and
          reincorporation in 1995, certain compensation agreements between
          the Company and certain stockholders were terminated and new
          employment agreements were executed.  Also, notes receivable from
          certain stockholders were repaid.  Therefore, the pro forma net
          income for the year ended December 31, 1994 reflects adjustments
          to (i) reduce certain incentive compensation costs and (ii)
          eliminate interest income on the repayment of notes receivable.
          The pro forma net income for the years ended December 31, 1995
          and 1994 reflects an adjustment to record income taxes which
          would have been paid by the Company as a C Corporation rather
          than as an S Corporation.

     (C)  All of the Company's acquisitions have been accounted for under
          the purchase method of accounting.  Therefore, the balance sheet
          data include the accounts of the acquired entities as of their
          respective dates of acquisition.  Since one of the acquisitions
          occurred effective December 31, 1996, the balance sheet data
          includes the accounts of this entity as of December 31, 1996;
          however, the results of operations of this entity are not
          included in the statement of income data until the year ended
          December 31, 1997.  Acquisitions in 1998 include results of
          operations in the statement of income data as of the months
          described in note (A) above and also are included in balance
          sheet data at the end of 1998.

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

     The following discussion should be read in conjunction with the
     Company's consolidated financial statements and the notes thereto
     incorporated by reference in this Annual Report on Form 10-K.  Certain
     statements contained herein that are not related to historical
     results, including, without limitation, statements regarding the
     Company's business strategy and objectives, future financial position,
     expectations about pending litigation and estimated cost savings, are
     forward-looking statements within the meaning of Section 27A of the
     Securities Act and Section 21E of the Securities Exchange Act of 1934,
     as amended, and involve risks and uncertainties.  Actual results could
     differ materially from those discussed in the forward-looking
     statements.  Factors that could cause or contribute to such
     differences include, but are not limited to, those discussed below. 
     All forward-looking statements contained in this Annual Report on Form
     10-K are qualified in their entirety by this statement.
     <PAGE>
     General
     -------
     The Company is engaged primarily in (i) organizing, marketing and
     operating international educational travel programs on a worldwide
     basis for students and adults and (ii) developing, marketing and
     managing performance improvement programs that utilize merchandise
     awards and incentive travel, providing business meeting management
     services and providing comprehensive housing reservation, registration
     and travel services for meetings, conventions, expositions and trade
     shows.

     Since its initial public offering in August 1995, the Company has
     expanded its operations primarily through internal growth and a series
     of acquisitions of businesses within the travel and performance
     improvement industries.  Prior to 1996, the Company's business was
     conducted through its Education Group.

     In January 1996, the Company completed the acquisition of The Helin
     Organization and commenced operations of the Performance Group.  This
     acquisition was followed in February 1996 by the acquisition of
     certain assets of Marc L. Bright & Associates, which expanded the
     business of the Company's already existing Education Group.  In
     December 1996, the Company acquired Bitterman & Associates, Inc.; in
     September 1997, the Company acquired certain of the assets of Debol &
     Associates; in February 1998, the Company acquired certain of the
     assets of Rogal America, Co. and the stock of Travel Incentives, Inc.;
     in May 1998, the Company acquired the assets of I.G.S. Travel
     Corporation and the stock of Incentive Associates, Inc.; and in July
     1998, the Company acquired the assets of Destination, Inc.; the
     cumulative effect of which was to further expand the Company's
     Performance Group.  All of these acquisitions were accounted for under
     the purchase method of accounting.  Therefore, the results of
     operations of the acquired businesses are included in the Company's
     results of operations since their respective dates of acquisition,
     which, in the case of Incentive Associates, Inc., was effective 
     April 1, 1998.

     Gross program receipts reflect the total payments received by the
     Company from Education Group participants and Performance Group
     clients.  Gross program receipts less program pass-through expenses
     constitute the Company's revenues.  Program pass-through expenses
     include all direct costs associated with the Company's programs
     including costs related to airfare, ships, hotels, meals, ground
     transportation, guides, professional exchanges, changes in currency
     exchange rates and merchandise costs.  The Company recognizes gross
     program receipts, pass-through expenses and revenues upon the
     departure of the program participant or as the Performance Group
     service is rendered.  Operating expenses, which are expensed by the
     Company as incurred, are the costs related to the creation of
     programs, promotional materials and marketing costs, salaries, rent,
     <PAGE>
     other general and administrative expenses and all of the Company's
     ordinary expenses.  The Company's policy is to obtain payment for
     substantially all travel services prior to entering into commitments
     for incurring expenses relating to such travel.  

     The Company's businesses are seasonal.  The Company earns more than
     three-quarters of its annual revenues in the second and third
     quarters, which historically has more than offset operating losses
     incurred during the rest of the year.  The Company anticipates that
     this trend will continue for the foreseeable future. The Company's
     annual results would be adversely affected if the Company's revenues
     were to be substantially below seasonal norms during these periods. 
     The Company's operating results may fluctuate as a result of many
     factors, including the mix of Education Group and Performance Group
     programs and services, the mix of programs and program destinations
     offered by the Company and its competitors, the introduction and
     acceptance of new programs and program enhancements by the Company and
     its competitors, timing of program completions, cancellation rates,
     competitive conditions in the industry, marketing expenses, extreme
     weather conditions, international conflicts, timing of and costs
     relating to acquisitions, changes in relationships with certain travel
     providers, economic factors and other considerations affecting travel.

     The substantial majority of the Company's programs take place outside
     the United States and most foreign suppliers require payment in local
     currency rather than U.S. dollars.  Accordingly, the Company is
     exposed to foreign currency risks in certain countries as foreign
     currency exchange rates between those currencies and the U.S. dollar
     fluctuate.  To manage these risks, the Company enters into forward
     foreign exchange contracts and foreign currency option contracts.

     These foreign exchange contracts and options are entered into to
     support normal recurring purchases, and accordingly, are not entered
     into for speculative purposes.  See "Management's Discussion and
     Analysis of Financial Condition and Results of Operations - Market
     Risk". 
     <PAGE>
     Results of Operations 
     ---------------------
     The following table sets forth, for the periods indicated, the
     relative percentages that certain income and expense items bear to
     consolidated revenues.

                                                 Year Ended December 31,   
                                                 --------------------------
                                                 1998      1997      1996
                                                 -----     -----     ------
     Revenue                                     100.0%    100.0%    100.0%
     Operating expenses:
       Selling and tour promotion                 38.7      37.0      44.7 
       General and administrative                 38.8      31.0      30.6 
                                                 -----     -----     -----
     Total operating expenses                     77.5      68.0      75.3 
                                                 -----     -----     -----
     Operating income                             22.4      32.0      24.7 
                                                 -----     -----     -----
     Other income (expense)                        8.8       1.8       7.0 
     Income before income taxes                   31.2      33.8      31.7 
     Income tax provision (benefit)               10.7      12.6      10.8 
                                                 -----     -----     -----
     Net income                                   20.8%     21.2%     20.9%
                                                 =====     =====     =====


     COMPARISON OF YEAR ENDED DECEMBER 31, 1998 TO YEAR ENDED DECEMBER 31,
     1997

     The Company is organized in two operating divisions: the Education
     Group and the Performance Group.  Both groups strengthened their
     business in 1998 by growing their sales volume.  The Education Group
     focused on internal growth and posted gains in both sales volume and
     gross margin percentage.  The Performance Group grew through both
     internal sales increases and a series of acquisitions designed to
     broaden the product appeal, geographic scope, and sales force
     capabilities of the Performance Group.

     Overall, gross program receipts grew by 44%, to $115.8 million in
     1998, from $80.5 million in 1997, an increase of $35.3 million.  Net
     revenue grew by 51% to $40.1 million in 1998, from $26.5 million in
     1997, an increase of $13.6 million.

     Gross margins (revenues as a percentage of gross program receipts)
     strengthened during 1998 to 35%, from 33% during 1997.  This increase
     was driven by improved gross margin percentages in both the Education
     and Performance Groups.  The Performance Group strengthened its gross
     margins primarily through the addition of a new product line, housing
     registration for convention services, while the Education Group
     continued to achieve strong margins.
     <PAGE>
     Selling and tour promotion expenses increased during 1998 when
     compared to 1997 by $5.7 million.  For the year ended December 31,
     1998, selling and tour promotion expenses totaled $15.5 million in
     comparison to $9.8 million for the year ended December 31, 1997. 
     Existing business contributed marginally to this increase, while the
     new customers, clients and product lines added by the four
     acquisitions in the Performance Group during 1998 accounted for the
     substantial majority of this increase.

     General and administrative expenses increased to $15.6 million in 1998
     from $8.2 million during 1997.  Existing businesses contributed
     marginally to this increase, while the new customers, clients and
     product lines added by the four acquisitions in the Performance Group
     during 1998 accounted for the substantial majority of this increase.

     The gains in both gross program receipts and net revenue enabled the
     Company to realize operating income of $9.0 million in 1998 compared
     to $8.5 million in 1997, an increase of $0.5 million.

     Other income in 1998 consisted primarily of interest income generated
     by cash and cash equivalents.  As of December 31, 1998, the Company
     had $93.0 million in cash, cash equivalents and short term
     investments, compared to $22.9 million on December 31, 1997.  This
     $70.1 million increase is primarily attributable to the Company's
     secondary offering of stock in April 1998, in which the Company
     realized net proceeds of $70.3 million.  As a result, the Company
     realized interest income of $3.6 million in 1998, compared to $1.6
     million in 1997, an increase of $2.0 million.

     Other income also included unrealized foreign currency gains or
     losses.  The Company enters into forward foreign exchange contracts
     and foreign currency option contracts to offset certain operational
     exposures from changes in foreign currency exchange rates.  These
     foreign exchange contracts and options are entered into to support
     normal recurring purchases, and accordingly are not entered into for
     speculative purposes.  Forward foreign exchange contracts are utilized
     to manage the risk associated with currency fluctuations on certain
     purchase commitments.  Beginning July 1, 1998, the Company adopted the
     provisions of Statement of Financial Accounting Standards No. 133
     (SFAS 133), "Accounting for Derivative Instruments and Hedging
     <PAGE>
     Activities."  Therefore, the effective portion of any unrealized gains
     or losses on foreign exchange contracts are no longer recorded in
     other income, but are recorded as other comprehensive income and are
     accumulated as a component of stockholders' equity.  Realized gains
     and losses on these contracts are recorded as a cost of the related
     travel program when the contracts mature and are utilized.  Prior to
     July 1, 1998, all unrealized gains and losses on foreign exchange
     contracts and options were recorded in the statement of income as
     other income or expense.  The Company reduced its unrealized foreign
     exchange losses from $1.1 million in 1997 to an insignificant amount
     in 1998.

     The Company reduced its effective tax rate to 34% in 1998, from 37% in
     1997.  This improvement in the effective tax rate was primarily due to
     the Company's cash management and investment strategies in 1998, which
     resulted in the Company's receiving a significant amount of tax-exempt
     interest income.  The Company recorded an income tax provision of $4.3
     million in 1998, compared to $3.3 million in 1997.

     COMPARISON OF YEAR ENDED DECEMBER 31, 1997 TO YEAR ENDED DECEMBER 31,
     1996

     The Company is organized in two operating divisions: the Education
     Group and the Performance Group.  For the year ended December 31,
     1997, the Education Group increased its productivity by growth within
     the core product lines while realizing efficiencies through the sales
     and marketing process.  The Performance Group contribution resulted
     from its acquisitions and additional sales of incentive travel
     programs and business meeting management services.

     Gross program receipts increased 42% in 1997 over 1996, from $56.7
     million to $80.3 million, and net revenue increased 41%, from $18.8
     million in 1996 to $26.5 million in 1997.  These increases were driven
     by an increase in the number of Education Group program participants,
     the addition of new acquisitions, and improved cross-selling in the
     Performance Group.  

     The overall gross margins (revenues as a percentage of gross program
     receipts) for the 1997 year remained consistent with the prior year at
     33%.  This reflects a strengthening of the Education Group margins,
     combined with the margins achieved by the new acquisitions in the
     Performance Group.  Gross margins of the Performance Group are
     expected to be slightly lower than those achieved in the Education
     Group.

     Selling and tour promotion expenses increased during 1997 when
     compared to 1996 by $1.4 million, or 17%.  Most of this increase
     results from an acquisition in late 1996 within the Performance Group.
     As a percentage of revenues, selling and tour expenses decreased to
     37% in 1997 from 45% in 1996, as a result of sales and marketing
     efficiencies and the benefits of a cost management program.
     <PAGE>
     General and administrative expenses increased from $5.8 million to
     $8.2 million between 1996 and 1997.  Most of this increase is due to
     the assumption of continuing expenses associated with the Performance
     Group acquisitions.

     Operating income increased 83% in the year ended December 31, 1997
     compared to the year ended December 31, 1996.

     Other income includes interest income and unrealized foreign currency
     gains or losses.  Other income decreased from $1.3 million in 1996 to
     $0.5 million in 1997.  The cash component of other income, interest
     income, increased to $1.6 million from $1.1 million, a 47% increase on
     a 25% increase in year-end cash balances.  This increase in interest
     income is the effect of improved cash management practices implemented
     in 1997.  The overall net decrease in other income can be attributed
     to the non-cash component of other income, unrealized foreign exchange
     losses.  In 1997, the Company incurred $0.7 million of net unrealized
     losses compared to an insignificant amount in 1996.  The face amount
     of forward foreign exchange contracts outstanding at December 31,
     1997, was $17.4 million.

     The Company's income before taxes in 1997 increased 50% over 1996 as a
     result of the foregoing factors.  The Company has recorded an income
     tax provision of $3.3 million for 1997 which represents an effective
     tax rate of 37%.  The tax provision has increased over the prior
     year's provision of $2.0 million due to the effect of certain
     non-deductible expenses as well as the increase in state income taxes
     with the expansion of the Company through acquisitions.

     LIQUIDITY AND CAPITAL RESOURCES

     The Company's business is not capital intensive.  However, the Company
     does retain funds for operating purposes in order to conduct sales and
     marketing efforts for future programs and to facilitate acquisitions
     of other companies.  

     Net cash provided by operations for the years ended December 31, 1998,
     1997 and 1996 was $8.8 million, $5.9 million and $6.1 million,
     respectively.  The increase in cash flow from operations in 1998
     resulted primarily from the increase in net income of $2.7 million. 

     Net cash used in investing activities for the years ended December 31,
     1998, 1997 and 1996 was $46.7 million, $1.2 million and $0.8 million,
     respectively.  The net cash used in investing activities increased in
     1998 primarily due to investing the proceeds from the Company's
     secondary offering, as well as $6.6 million spent on acquisitions. 
     The investing activities during 1997 were due primarily to leasehold
     improvements in the corporate headquarters facilities as well as the
     purchase of a company in the third quarter of the year.  The Company
     does not have any material capital expenditure commitments for 1999.
     <PAGE>
     However, the terms of the Company's acquisitions of certain businesses
     include contingent consideration.  Additionally, the Company is
     continuing to pursue further acquisitions of related travel and
     performance improvement businesses that may require the use of cash
     and cash equivalents.  No such acquisitions are currently pending and
     no assurance can be given that definitive agreements for any such
     acquisitions will be entered into, or, if they are entered into, that
     they will be on terms favorable to the Company.

     The Company had no significant long- or short-term debt as of 
     December 31, 1996; however, at December 31, 1998 and 1997, the Company
     had $0.3 million and $0.5 million in long-term debt as a result of an
     acquisition during 1997. 

     Net cash provided by financing activities in 1998 was $70.3 million as
     a result of the Company's secondary offering of the Company's Common
     Stock during April 1998.  Net cash used in 1997 and 1996 was
     insignificant.  The Company has a credit facility available with
     Seafirst Bank, with a current limit of up to $25.0 million for foreign
     currency purchases and forward contracts.  This credit facility is
     renewable annually and the Company expects it to be renewed prior to
     July 1999.

     At December 31, 1998, the Company had approximately $55.3 million of
     cash and cash equivalents, including program participant funds of
     $15.7 million.  Under the Company's cancellation policy, a program
     participant may be entitled to a refund of a portion of his or her
     deposit, less certain fees, depending on the time of cancellation. 
     Management believes that existing cash and cash equivalents and cash
     flows from operations, combined with the net proceeds of the secondary
     offering in April 1998, will be sufficient to fund the Company's
     anticipated operating needs, capital expenditures and acquisitions at
     least through 1999.

     MARKET RISK

     The following table summarizes the financial instruments other than
     foreign currency forward exchange agreements held by the Company at
     December 31, 1998, which are sensitive to changes in interest rates. 
     The table presents principal cash flows for available-for-sale
     investments and a note payable outstanding at December 31, 1998 by
     contractual maturity date and the related average interest rate and
     fair value (amounts in thousands):
     <PAGE>
                                 Year Ending
                                 December 31,
                                 -------------------              Fair
                                 1999       2000       Total      Value
                                 --------   --------   --------   --------
     U.S. government and
       agency obligations        $ 37,660   $     --   $ 37,660   $ 37,660
       Interest rate                  3.7%                  3.7%
     Note payable                     186        145        331        331
       Interest rate (fixed)          6.5%       6.5%       6.5%

     The substantial majority of the Company's travel programs take place
     outside the United States and most foreign suppliers require payment
     in currency other than the U.S. dollar.  Accordingly, the Company is
     exposed to foreign currency risk relative to changes in foreign
     currency exchange rates between those currencies and the U.S. dollar.
     The Company has a program to provide a hedge against certain of these
     foreign currency risks.  The Company uses forward contracts which
     allow the Company to acquire the foreign currency at a fixed price for
     a specified period of time.  Additionally, the Company uses foreign
     currency call options which provide the Company with the option to
     acquire certain foreign currencies at a fixed exchange rate and time
     period.  Concurrent with the purchase of a foreign currency call
     option, the Company sells a foreign currency put option to minimize
     the net premium paid for the call option.  The strike prices on these
     options generally straddle the exchange rate at the time the options
     are purchased.  The Company also purchases futures contracts to
     similarly hedge its foreign currency risk.  The Company is exposed to
     credit risk under the foreign currency contracts and options to the
     extent that the counterparty is unable to perform under the agreement.
     The fair value of foreign currency exchange contracts is based on
     quoted market prices and the spot rate of the foreign currencies
     subject to contracts at year end.  The fair value of the foreign
     currency options is based on the estimated amount to terminate the put
     and call contracts with the counterparties at year end.

     The table below provides information about the Company's financial
     instruments that are sensitive to foreign currency exchange rates. 
     For foreign currency forward exchange agreements, the table presents
     the notional amounts and weighted average exchange rates.  All
     contracts mature in 1999.  These notional amounts generally are used
     to calculate the contractual payments to be exchanged under the
     contract.  None of these contracts is entered into for trading
     purposes.  At December 31, 1998, the Company had outstanding forward
     exchange contracts and call and put options to purchase and sell
     foreign currencies as follows (amounts in thousands):
     <PAGE>
                                                             U.S. Dollar
                                               U.S. Dollar   Average
                                               Contract      Contractual
                                               Amount        Exchange Rate
                                               -----------   -------------
     Forward contracts (pay $U.S./
       receive foreign currency):
         Australian dollar                       $3,450          $0.67
         New Zealand dollar                          63           0.51
         British pound                              776           1.66
                                                 ------
                                                 $4,289
                                                 ======

                                               U.S. Dollar   U.S. Dollar
                                               Contract      Average
                                               Amount        Strike Price
                                               -----------   -------------
     Call options purchased (pay $U.S./
       receive foreign currency):
         Australian dollar                       $1,750          $0.70
         New Zealand dollar                         550           0.55
         British pound                            7,380           1.64
                                                 ------
                                                 $9,680
                                                 ======

     Put options sold (pay $U.S./receive 
       foreign currency):
         Australian dollar                       $  714          $0.70
         New Zealand dollar                         227           0.63
                                                 ------
                                                 $  941
                                                 ======


     At December 31, 1998, the Company had unrealized foreign currency
     losses associated with these financial instruments of approximately
     $289,000.

     YEAR 2000 COMPLIANCE

     The Company has a comprehensive Year 2000 project designed to identify
     and assess the risks associated with its information systems,
     products, operations and infrastructure, suppliers, and customers that
     are not Year 2000 compliant, and to develop, implement, and test
     remediation and contingency plans to mitigate these risks.  The
     project comprises four phases: (1) identification of risks, (2)
     assessment of risks, (3) development of remediation and contingency
     plans, and (4) implementation and testing.  The Company's Year 2000
     <PAGE>
     project is currently in the development of remediation and remediation
     phases.  The Company has been storing years as a four-digit field in
     all mission critical databases since 1995 and believes that its
     internal master records are Year 2000 compliant.  Most of the software
     which the Company uses, including all of its finance software, has
     been certified as Year 2000 compliant.  In addition, the Company is in
     the process of obtaining Year 2000 compliance statements from the
     manufacturers of the Company's hardware and software products.  These
     compliance statements are expected to be obtained by September 1999. 
     AEG's internally generated client databases are Year 2000 compliant. 
     APG's hardware, operating systems, applications software and
     internally-generated data requires additional assessment and
     remediation for Year 2000 compliance.  The assessment phase has been
     completed.  It is expected that APG's remediation efforts will be
     greater than those required by AEG, including the replacement of
     certain APG hardware,operating system upgrades and a small amount of
     applications software upgrades.  This remediation is expected to be
     completed by June 1999.  The Company's voicemail software is not Year
     2000 complaint.  The Company intends to upgrade this software to a
     Year 2000 compliant version by the end of 1999.  The cost of this
     upgrade is not expected to be material.

     The Company believes that its greatest potential risks are associated
     with (i) its information systems and systems embedded in its
     operations and infrastructure; and (ii) its reliance on Year 2000
     compliance by the Company's vendors and suppliers.  The Company is at
     the beginning stage of assessments for its operations and
     infrastructure and cannot predict whether significant problems will be
     identified.  The Company is asking its vendors and suppliers to
     complete a Year 2000 survey by the end of May 1999, to assess the
     status of their compliance in order to assess the effect it could have
     on the Company.  The Company has not yet determined the full extent of
     contingency planning that may be required.  Based on the status of the
     assessments made and remediation plans developed to date, the Company
     is not in a position to state the total costs of remediation of all
     Year 2000 issues.  Costs identified to date have not been material. 
     The Company does not currently expect costs to be material, and it
     expects to be able to fund the total costs through operating cash
     flows.  However, the Company has not yet completed its assessments,
     developed remediation for all problems, developed any contingency
     plans, or completely implemented or tested any of its remediation
     plans.

     Based on the Company's current analysis and assessment of the state of
     its Year 2000 compliance, the Company's reasonably likely worst case
     scenario involves booking delays of AEG and APG programs that would
     take place later in 2000, and the more remote possibility of travel
     interruptions for a small number of adult program participants
     actually travelling on AEG millennium programs on and immediately
     <PAGE>
     after January 1, 2000.  Both of these types of delays and
     interruptions would arise as a result of third-party Year 2000
     noncompliance (e.g., computerized airline and hotel booking systems),
     rather than because of the Company's internal Year 2000 compliance.

     As the Year 2000 project continues, the Company may discover
     additional Year 2000 problems, may not be able to develop, implement,
     or test remediation or contingency plans, or may find that the costs
     of these activities exceed current expectations and become material. 
     In many cases, the Company is relying on assurances from suppliers
     that new and upgraded information systems and other products will be
     Year 2000 compliant.  The Company plans to test such third-party
     products by June 30, 1999, but cannot be sure that its tests will be
     adequate or that, if problems are identified, they will be addressed
     in a timely and satisfactory way.  Because the Company uses a variety
     of informational systems and has additional systems embedded in its
     operations and infrastructure, the Company cannot be sure that all of
     its systems will work together in a Year 2000 compliant fashion. 
     Furthermore, the Company cannot be sure that it will not suffer
     business interruptions, either because of its own Year 2000 problems
     or those of its customers or suppliers whose Year 2000 problems may
     make it difficult or impossible for them to fulfill their commitments
     to the Company.  If the Company fails to satisfactorily resolve the
     Year 2000 issues related to its products in a timely manner, it could
     be exposed to liability to third parties.  The Company is continuing
     to evaluate Year 2000-related risks and will take such further
     corrective actions as may be required. 

     Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     The information required by this item is incorporated herein by
     reference to the section entitled "Market Risk" in Management's
     Discussion and Analysis of Results of Operations and Financial
     Condition (Part II, Item 7).

     Item 8.   FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

     The Financial Statements of the Company are submitted as a separate
     section of this Form 10-K on pages F-1 through F-23.

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

     None.
     <PAGE>
     PART III

     Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

     The information called for by this item is hereby incorporated by
     reference from the Registrant's definitive Proxy Statement for the
     fiscal year ended December 31, 1998, which Proxy Statement is expected
     to be filed with the Securities and Exchange Commission on or about
     April 14, 1999.

     Item 11.  EXECUTIVE COMPENSATION

     The information called for by this item is hereby incorporated by
     reference from the Registrant's definitive Proxy Statement for the
     fiscal year ended December 31, 1998, which Proxy Statement is expected
     to be filed with the Securities and Exchange Commission on or about
     April 14, 1999.

     Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
               MANAGEMENT

     The information called for by this item is hereby incorporated by
     reference from the Registrant's definitive Proxy Statement for the
     fiscal year ended December 31, 1998, which Proxy Statement is expected
     to be filed with the Securities and Exchange Commission on or about
     April 14, 1999.

     Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     The information called for by this item is hereby incorporated by
     reference from the Registrant's definitive Proxy Statement for the
     fiscal year ended December 31, 1998, which Proxy Statement is expected
     to be filed with the Securities and Exchange Commission on or about
     April 14, 1999.
     <PAGE>
     PART IV

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

     (a)  List of documents filed as part of Report

          (1)  FINANCIAL STATEMENTS INCLUDED IN ITEM 8:

               Report of Independent Accountants                        F-1
               Consolidated Balance Sheets at December 31,
                 1998 and 1997                                          F-2
               Consolidated Statements of Income for the years
                 ended December 31, 1998, 1997 and 1996                 F-3
               Consolidated Statements of Comprehensive Income
                 for the years ended December 31, 1998,
                 1997 and 1996                                          F-4
               Consolidated Statements of Changes in Stockholders'
                 Equity for the years ended December 31, 1998,
                 1997 and 1996                                          F-5
               Consolidated Statements of Cash Flows for the
                 years ended December 31, 1998, 1997 and 1996           F-6
               Notes to Consolidated Financial Statements       F-7 to F-23

          (2)  FINANCIAL STATEMENT SCHEDULES INCLUDED IN ITEM 8:

               No financial statement schedules are presented as the
               required information is either not applicable or included in
               the Consolidated Financial Statements or notes thereto.

          (3)  EXHIBITS

               The exhibits listed on the accompanying Exhibit Index are
               filed as part of this Annual Report.

     (b)  Reports on Form 8-K

          No reports on Form 8-K were filed during the quarter ended
          December 31, 1998.
     <PAGE>
     SIGNATURES

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

                              AMBASSADORS INTERNATIONAL, INC.
                              (Registrant)

     Date: March 30, 1999     By: /s/ Jeffrey D. Thomas
                                  ---------------------------------------
                                  Jeffrey D. Thomas, Chief Financial
                                    Officer

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

     <TABLE>
     <CAPTION>
      Signature                           Title                                    Date
      ---------------------------------   -------------------------------------    --------------
      <S>                                 <C>                                      <C>
      By:  /s/ John A. Ueberroth          President and Chief Executive Officer    March 30, 1999 
           ----------------------------   (Principal Executive Officer)
           John A. Ueberroth


      By:  /s/ Peter V. Ueberroth         Chairman of the Board of Directors       March 30, 1999
           ----------------------------
           Peter V. Ueberroth


      By:  /s/ Jeffrey D. Thomas          Chief Financial Officer                  March 30, 1999
           ----------------------------   (Principal Financial and Accounting
           Jeffrey D. Thomas              Officer)


      By:  /s/ James L. Easton            Director                                 March 30, 1999
           ----------------------------
           James L. Easton


      By:  /s/ Rafer L. Johnson           Director                                 March 30, 1999
           ----------------------------
           Rafer L. Johnson


      By:  /s/ John C. Spence             Director                                 March 30, 1999
           ----------------------------
           John C. Spence


      By:  /s/ Richard D.C. Whilden       Director                                 March 30, 1999
           ----------------------------
           Richard D.C. Whilden

      </TABLE>
      <PAGE>
     INDEX TO EXHIBITS 

     2.1       Form of Reincorporation Agreement(l)
     2.2       Rescission Agreement(l)
     2.3       Stock Purchase Agreement(l)
     2.4       Redemption Agreement(l)
     3.1       Certificate of Incorporation of Ambassadors International,
               Inc.(1)
     3.2       By-Laws of Ambassadors International, Inc.(l)
     4.1       Specimen Stock Certificate(l)
     10.1      People to People Contract - Student Ambassador Program(l)
     10.2      People to People Contract - Citizen Ambassador Program(l)
     10.3      Form of Equity Participation Plan of Ambassadors
               International, Inc.(1)
     10.4      Form of Registration Rights Agreement among the Company,
               John and Peter Ueberroth, and certain other stockholders(l)
     10.5      Form of Indemnification Agreement for officers and
               directors(1)
     10.6      Commercial Lease dated December 21, 1992 between Portolese
               and Sample Investments and International Ambassador
               Programs, Inc.(1)
     10.7      First Amendment to Commercial Lease dated January 3, 1995
               between Portolese and Sample Investments and International
               Ambassador Programs, Inc.(l)
     10.8      Form of Employment Agreement with Executive Officers(l)
     10.9      Form of Note between the Company and the Ueberroths relating
               to the Distribution(l)
     10.10     General Contract between People to People and M.L. Bright
               Associates dated July 1, 1995 and Assignment documents to
               the Company dated February 6, 1996(2)
     10.11     Agreement and Plan of Merger, effective as of December 11,
               1996 by and among Ambassadors International, Inc., a
               Delaware corporation, Ambassadors Performance Improvement,
               Inc., a Delaware corporation and wholly owned subsidiary of
               Ambassadors, Bitterman & Associates, Inc., a Minnesota
               corporation, and Michael H. Bitterman(3) 
     10.12     Asset Purchase Agreement dated as of February 5, 1998 by and
               among the company, Ambassador Performance Group, Inc., Rogal
               America, Co. and Andrew Rogal(4) 
     10.13     Lease dated December 20, 1996 between Rogal America, Inc.
               and Ark-Les Corp.(5)
     10.14     Industrial Lease dated 19- between the Company and the
               Irvine Company(5)
     10.15     The Amended and Restated 1995 Equity Participation Plan of
               Ambassadors International, Inc.(6)
     10.16     The Atlanta Merchandise Mart Lease Agreement dated April 17,
               1998 by and between AMC, Inc. and Destination, Inc. (6)
     10.17     Agreement and Plan of Merger, dated May 22, 1998 by and
               among Ambassadors International, Inc., Ambassador
               Performance Group, Inc., Incentive Associates, Inc., Wayne
               Wright and Russ Medevic(7)
     <PAGE>
     10.18     Asset Purchase Agreement, dated July 17, 1998 by and among
               Ambassadors International, Inc., Ambassador Performance
               Group, Inc., Destination, Inc. and Gregory S. Cunningham(8)
     10.19     Lease dated July 24, 1998 by and between the Joseph Pell and
               Eda Pell Revocable Trust dated August 19, 1989 and
               Ambassador Performance Group, Inc.(9)
     21.1      Subsidiaries of Ambassadors International, Inc.(9)
     23.1      Consent of PricewaterhouseCoopers LLP(9)
     24.1      Powers of Attorney(9)
     27.1      Financial Data Schedule(9)


     (1)       Filed as an exhibit of the same number to the Company's
               Registration Statement on Form S-1 (Registration No.
               33-93586), and incorporated herein by reference.
     (2)       Filed as an exhibit of the same number to the Company's Form
               10-KSB for the year ended December 31, 1995, and
               incorporated herein by reference.
     (3)       Filed as Exhibit 2.5 to a Current Report on Form 8-K dated
               January 3, 1997, and incorporated herein by reference.
     (4)       Filed as Exhibit 2.6 to a Current Report Form 8-K dated
               February 12, 1998 (as amended on Form 8-K/A dated April 2,
               1998), and incorporated herein by reference.
     (5)       Filed as an exhibit to the Company's Annual Report on Form
               10-K for the fiscal year ended December 31, 1997, and
               incorporated herein by reference.
     (6)       Filed as an exhibit to the Company's Quarterly Report on
               Form 10-Q for the Quarter Ended June 30, 1998, and
               incorporated herein by reference.
     (7)       Filed as Exhibit 2.5 to a Current Report on Form 8-K, which
               was filed on June 5, 1998, and incorporated herein by
               reference.
     (8)       Filed as Exhibit 2.6 to a Current Report on Form 8-K, which
               was filed on August 3, 1998, and incorporated herein by
               reference.
     (9)       Filed herewith.
     <PAGE>
     REPORT OF INDEPENDENT ACCOUNTANTS


     Board of Directors and Stockholders
     Ambassadors International, Inc.
     Spokane, Washington


     In our opinion, the accompanying consolidated balance sheets and the
     related consolidated statements of income, comprehensive income,
     changes in stockholders' equity and cash flows present fairly, in all
     material respects, the financial position of Ambassadors
     International, Inc. and its subsidiaries (the Company) at December 31,
     1998 and 1997, and the results of their operations and their cash
     flows for each of the three years in the period ended December 31,
     1998, in conformity with generally accepted accounting principles.
     These financial statements are the responsibility of the Company's
     management; our responsibility is to express an opinion on these
     financial statements based on our audits.  We conducted our audits of
     these statements in accordance with generally accepted auditing
     standards which require that we plan and perform the audit to obtain
     reasonable assurance about whether the financial statements are free
     of material misstatement.  An audit includes examining, on a test
     basis, evidence supporting the amounts and disclosures in the
     financial statements, assessing the accounting principles used and
     significant estimates made by management, and evaluating the overall
     financial statement presentation.  We believe that our audits provide
     a reasonable basis for the opinion expressed above.

     As described in Note 1 to the financial statements, the Company
     changed its accounting for derivative instruments on July 1, 1998 and
     accounting for impairment of long-lived assets in 1996.


     /s/PricewaterhouseCoopers LLP

     Spokane, Washington
     February 5, 1999
     <PAGE>
     Ambassadors International, Inc.
     Consolidated Balance Sheets
     December 31, 1998 and 1997


                                               1998           1997
                                               ------------   ------------
     ASSETS:
       Current assets:
         Cash and cash equivalents             $ 55,289,580   $ 22,870,546
         Restricted cash equivalents                152,000        125,000
         Investments                             37,659,994             --
         Accounts receivable                      4,371,898      2,005,029
         Prepaid program costs and expenses       4,637,121      2,004,995
         Deferred income taxes                           --         31,229
         Other assets                               159,158        246,469
                                               ------------   ------------
           Total current assets                 102,269,751     27,283,268

       Property and equipment, net                4,199,889      2,148,305
       Other investments                            462,500        462,500
       Goodwill, net of $1,285,950 and 
         $290,711 of accumulated 
         amortization                            20,401,794      4,247,219
       Covenants-not-to-compete, net of 
         $370,047 and $179,485 of 
         accumulated amortization                   254,953        195,515
       Deferred income taxes                             --         26,608
       Other assets                                 142,897         85,573
                                               ------------   ------------
           Total assets                        $127,731,784   $ 34,448,988
                                               ============   ============
     LIABILITIES:
       Current liabilities:
         Accounts payable                      $  2,348,759   $  1,616,120
         Accrued expenses                           942,047        724,008
         Participants' deposits                  15,742,697      7,397,924
         Customer advances                          744,077        980,834
         Note payable, current portion              185,851        171,241
         Foreign currency exchange contracts        289,322        674,625
         Deferred income taxes                      284,957             --
                                               ------------   ------------
           Total current liabilities             20,537,710     11,564,752

       Note payable, due after one year             145,243        328,696
                                               ------------   ------------
           Total liabilities                     20,682,953     11,893,448
                                               ------------   ------------

     Commitments and contingencies (Notes 2, 6, 7 and 10)
     <PAGE>
     Ambassadors International, Inc.
     Consolidated Balance Sheets, Continued
     December 31, 1998 and 1997


                                               1998           1997
                                               ------------   ------------

     Stockholders' equity:
       Preferred stock, $.01 par value; 
         2,000,000 shares authorized; 
         none issued and outstanding           $         --   $         --
       Common stock, $.01 par value; 
         authorized, 20,000,000
         shares; issued and outstanding, 
         9,915,534 and 6,768,223 shares              99,155         67,682
       Additional paid-in capital                90,043,060     13,760,963
       Retained earnings                         17,088,888      8,726,895
       Accumulated other comprehensive loss        (182,272)            --
                                               ------------   ------------
           Total stockholders' equity           107,048,831     22,555,540
                                               ------------   ------------
           Total liabilities and stockholders' 
             equity                            $127,731,784   $ 34,448,988
                                               ============   ============


     The accompanying notes are an integral part of the consolidated
       financial statements.
     <PAGE>
     Ambassadors International, Inc.
     Consolidated Statements of Income 
     for the years ended December 3, 1998, 1997 and 1996


                                    1998         1997         1996
                                    -----------  -----------  -----------
     Revenue                        $40,147,525  $26,540,897  $18,843,422
                                    -----------  -----------  -----------
     Operating expenses:
       Selling and tour promotion    15,554,540    9,825,916    8,420,151
       General and administrative    15,577,361    8,210,378    5,769,874
                                    -----------  -----------  -----------
                                     31,131,901   18,036,294   14,190,025
                                    -----------  -----------  -----------
     Operating income                 9,015,624    8,504,603    4,653,397
                                    -----------  -----------  -----------
     Other income (expense):
       Interest and dividend income   3,620,097    1,588,408    1,079,855
       Realized and unrealized gain 
         (loss) on investments          (25,787)  (1,101,526)     290,253
       Other, net                       (71,305)      (8,888)     (42,575)
                                    -----------  -----------  -----------
                                      3,523,005      477,994    1,327,533
                                    -----------  -----------  -----------
     Income before income taxes      12,538,629    8,982,597    5,980,930
     Income tax provision             4,304,346    3,345,465    2,034,395
                                    -----------  -----------  -----------
     Income before cumulative 
       effect of change in
       accounting principle           8,234,283    5,637,132    3,946,535
     Cumulative effect of change 
       in accounting principle, 
       net of income taxes of 
       $75,005                          127,710           --           --
                                    -----------  -----------  -----------
     Net income                     $ 8,361,993  $ 5,637,132  $ 3,946,535
                                    ===========  ===========  ===========
     Earnings per share - basic:
       Income before cumulative 
         effect of change in 
         accounting principle       $      0.92  $      0.83  $      0.60
       Cumulative effect of 
         accounting change                 0.01           --           --
                                    -----------  -----------  -----------
       Net income per share         $      0.93  $      0.83  $      0.60
                                    ===========  ===========  ===========
       Weighted-average common 
         shares outstanding - basic   8,938,812    6,759,541    6,618,454
                                    ===========  ===========  ===========
     <PAGE>
     Ambassadors International, Inc.
     Consolidated Statements of Income, Continued
     for the years ended December 31, 1998, 1997 and 1996


                                    1998         1997         1996
                                    -----------  -----------  -----------
     Earnings per share - diluted:
       Income before cumulative 
         effect of change in 
         accounting principle       $      0.91  $      0.82  $      0.59
       Cumulative effect of 
         accounting change                 0.01           --           --
                                    -----------  -----------  -----------
       Net income per share         $      0.92  $      0.82  $      0.59
                                    ===========  ===========  ===========
       Weighted-average common 
         shares outstanding - 
         diluted                      9,087,398    6,893,231    6,649,884
                                    ===========  ===========  ===========

     The accompanying notes are an integral part of the consolidated
       financial statements.
     <PAGE>
     Ambassadors International, Inc.
     Consolidated Statements of Comprehensive Income
     for the years ended December 31, 1998, 1997 and 1996

                                    1998         1997         1996
                                    -----------  -----------  -----------

     Net income                     $ 8,361,993  $ 5,637,132  $ 3,946,535
     Unrealized losses on 
       available-for-sale invest-
       ments, net of $107,049 
       income taxes                    (182,272)          --           --
                                    -----------  -----------  -----------
     Comprehensive income           $ 8,179,721  $ 5,637,132  $ 3,946,535
                                    ===========  ===========  ===========

     The accompanying notes are an integral part of the consolidated
       financial statements.
     <PAGE>
     Ambassadors International, Inc.
     Consolidated Statements of Changes in Stockholders' Equity
     for the years ended December 31, 1998, 1997 and 1996

     <TABLE>
     <CAPTION>

                                                                                 Retained     Accumulated
                                            Common Stock            Additional   Earnings     Other
                                            ----------------------  Paid-In      (Accumulat-  Comprehen-
                                            Shares     Amount       Capital      ed Deficit   sive Loss    Total
                                            ---------  -----------  -----------  -----------  ------------ ------------
      <S>                                   <C>        <C>          <C>          <C>          <C>          <C>
      Balances, December 31, 1995           6,535,030  $    65,350  $11,926,468  $  (856,772)$         --  $ 11,135,046
        Stock issued for acquisition 
           of subsidiaries                    218,857        2,189    1,698,811           --           --     1,701,000
        Net income                                 --           --           --    3,946,535           --     3,946,535
                                            ---------  -----------  -----------  -----------  -----------  ------------
      Balances, December 31, 1996           6,753,887       67,539   13,625,279    3,089,763           --    16,782,581
        Stock options exercised                14,336          143      135,684                        --       135,827
        Net income                                 --           --           --    5,637,132           --     5,637,132
                                            ---------  -----------  -----------  -----------  -----------  ------------
      Balances, December 31, 1997           6,768,223       67,682   13,760,963    8,726,895           --    22,555,540
        Stock options exercised                18,184          182      176,550           --           --       176,732
        Stock grants issued                    12,500          125       98,312           --           --        98,437
        Tax benefit associated with
           stock grants and exercise of
           stock options                           --           --       95,430           --           --        95,430
        Stock issued for acquisition
           of subsidiaries                    277,927        2,779    5,592,221           --           --     5,595,000
        Stock issued for cash, net of
           offering costs                   2,838,700       28,387   70,319,584           --           --    70,347,971
        Other comprehensive loss, net
           of income taxes                         --           --           --           --     (182,272)     (182,272)
        Net income                                 --           --           --    8,361,993           --     8,361,993
                                            ---------  -----------  -----------  -----------  -----------  ------------
      Balances, December 31, 1998           9,915,534  $    99,155  $90,043,060  $17,088,888  $  (182,272) $107,048,831
                                            =========  ===========  ===========  ===========  ===========  ============
      </TABLE>

      The accompanying notes are an integral part of the consolidated 
       financial statements.
     <PAGE>
     Ambassadors International, Inc.
     Consolidated Statements of Cash Flows
     for the years ended December 31, 1998, 1997 and 1996
     <TABLE>
     <CAPTION>
                                                       1998           1997           1996
                                                       ------------   ------------   ------------
      <S>                                              <C>            <C>            <C>
      Cash flows from operating activities:
        Net income                                     $  8,361,993   $  5,637,132   $  3,946,535
        Adjustments to reconcile net income to net
           cash provided by operating activities:
             Depreciation and amortization                1,943,213        894,963        392,403
             Deferred income tax provision (benefit)        449,843       (196,297)       458,235
             (Gain) loss on investments                      25,787      1,101,526       (290,253)
             Loss on sale of property and equipment              --         15,245            880
             Compensation expense for stock grants           98,437             --             --
             Purchase of trading securities              (8,073,218)    (6,699,420)    (7,765,969)
             Proceeds from sale of trading 
                securities                                7,575,521      6,225,946      8,330,781
             Change in assets and liabilities, net of
                effects of purchase of subsidiaries:
                  Restricted cash equivalents               (27,000)       (70,000)       (10,000)
                  Accounts receivable                       488,707       (535,976)       882,787
                  Prepaid program costs and expenses     (1,055,334)       179,635         62,447
                  Other assets                              256,518         86,011             --
                  Accounts payable and accrued 
                    expenses                             (1,926,870)      (246,801)      (564,821)
                  Participants' deposits                    891,215       (116,226)       684,834
                  Customer advances                        (236,757)      (354,534)            --
                                                       ------------   ------------   ------------
                       Net cash provided by operating 
                         activities                       8,772,055      5,921,204      6,127,859
                                                       ------------   ------------   ------------
      Cash flows from investing activities:
        Purchase of property and equipment               (2,147,524)    (1,032,040)      (338,072)
        Proceeds from sale of property and equipment             --             --          1,220
        Proceeds from sale of available-for-sale 
           securities                                     7,128,851        636,684             --
        Purchase of available-for-sale securities       (44,991,559)      (200,000)      (262,500)
        Cash paid for acquisition of subsidiaries, 
           net of cash received                          (6,553,679)      (199,075)      (105,340)
        Payment for covenant-not-to-compete agreement      (250,000)      (220,000)      (125,000)
        Change in other assets                              (57,324)       (48,781)        19,766
        Payments received on (issuance of) notes 
           receivable, net                                  162,354       (162,354)            --
                                                       ------------   ------------   ------------
                       Net cash used in investing 
                         activities                     (46,708,881)    (1,225,566)      (809,926)
                                                       ------------   ------------   ------------
      Cash flows from financing activities:
        Payments on long-term debt                         (168,843)      (242,352)       (10,752)
        Proceeds from exercise of stock options             176,732        135,827             --
        Net proceeds from sale of common stock           70,347,971             --             --
                                                       ------------   ------------   ------------
                       Net cash provided by (used in) 
                         financing activities            70,355,860       (106,525)       (10,752)
                                                       ------------   ------------   ------------
      </TABLE>
      <PAGE>
     Ambassadors International, Inc.
     Consolidated Statements of Cash Flows, Continued
     for the years ended December 31, 1998, 1997 and 1996

     <TABLE>
     <CAPTION>
                                                       1998           1997           1996
                                                       ------------   ------------   ------------
      <S>                                              <C>            <C>            <C>
      Net increase in cash and cash equivalents          32,419,034      4,589,113      5,307,181
      Cash and cash equivalents, beginning of year       22,870,546     18,281,433     12,974,252
                                                       ------------   ------------   ------------
      Cash and cash equivalents, end of year           $ 55,289,580   $ 22,870,546   $ 18,281,433
                                                       ============   ============   ============
      Supplemental disclosure of cash flow information:
        Cash paid for interest                         $     39,818   $      9,535   $      1,515
        Cash paid for income taxes                        4,568,700      3,688,507      1,440,000

      </TABLE>

        See Notes 7 and 10 for noncash investing and financing activities.


     The accompanying notes are an integral part of the consolidated
       financial statements.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      1.  COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

            ORGANIZATION AND BASIS OF CONSOLIDATION

            The Company is an educational travel, travel services and
            performance improvement company.  The Company is engaged
            primarily in the business of (i) organizing, marketing and
            operating international education travel programs on a
            worldwide basis for students and adults (the Education Group)
            and (ii) developing, marketing and managing performance
            improvement programs for a nationwide roster of corporate
            clients that utilize merchandise awards and incentive travel,
            providing business meeting management services and providing
            comprehensive housing reservation, registration and travel
            services for meetings, conventions, expositions and trade shows
            (the Performance Group).

            The Company was founded in 1967 and was reincorporated in
            Delaware in 1995.  The Education Group represented the entire
            operations of the Company until 1996 when the Performance Group
            commenced operations. 

            The consolidated financial statements include the accounts of
            Ambassadors International, Inc. (the Company) and its
            subsidiaries.  All significant intercompany accounts and
            transactions are eliminated in consolidation.

            CREDIT RISK

            The Company's financial instruments that are exposed to
            concentrations of credit risk consist primarily of cash and
            cash equivalents, investments and trade accounts receivable.
            The Company places its cash and temporary cash investments with
            high credit quality institutions.  At times, such investments
            may be in excess of the federal  insurance limit or at
            institutions which are not covered by this insurance.  The
            Company believes that its primary trade accounts receivable
            credit risk exposure is limited as travel program participants
            are required to pay for their entire program costs prior to the
            program departure and trade accounts receivable for non-travel
            related programs are principally with large credit-worthy
            corporations.  The Company invests in foreign currency
            contracts and options to hedge its foreign currency risk.  The
            Company is exposed to credit risk under these contracts to the
            extent that the counterparty is unable to perform under the
            agreement.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      1.  COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

            CASH AND CASH EQUIVALENTS

            The Company invests cash in excess of operating requirements in
            short-term time deposits, money market instruments, government
            mutual bond funds and marketable securities.  The Company
            considers investments with remaining maturities at date of
            purchase of three months or less to be cash equivalents.

            The Company's restricted cash equivalents represent
            certificates of deposit issued in the Company's name and held
            by four airline companies as collateral for airfare purchase
            agreements. 

            DERIVATIVE FINANCIAL INSTRUMENTS AND INVESTMENTS

            In June 1998, Statement of Financial Accounting Standards No.
            133 (SFAS 133), "Accounting for Derivative Instruments and
            Hedging Activities" was issued.  The Company elected to
            implement the Statement early on July 1, 1998.  The Statement
            requires that all derivative instruments be recorded on the
            balance sheet at fair value.  Changes in the fair value of
            derivatives are recorded each period in current earnings or
            other comprehensive income, depending on whether a derivative
            is designated as part of a hedge transaction and, if it is,
            depending on the type of hedge transaction.  For cash flow
            hedge transactions in which the Company is hedging the
            variability of cash flows related to a variable-rate asset,
            liability or a forecasted transaction, changes in the fair
            value of the derivative instrument will be reported in other
            comprehensive income.  The gains and losses on the derivative
            instrument that are reported in other comprehensive income will
            be reclassified as earnings in the periods in which earnings
            are impacted by the variability of the cash flows of the hedged
            item.  The ineffective portion of all hedges will be recognized
            in current period earnings.  The adoption of SFAS 133 on
            July 1, 1998 resulted in the cumulative effect of an accounting
            change of $127,710, net of income taxes, being recognized as
            income in the statement of income.

            The Company classifies its marketable investments as available-
            for-sale securities.  Available-for-sale securities consist of
            foreign currency futures, forward contracts, options and debt
            securities which are carried at fair value.  The Company uses
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      1.  COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

            DERIVATIVE FINANCIAL INSTRUMENTS AND INVESTMENTS, CONTINUED

            foreign currency exchange contracts as part of an overall risk-
            management strategy.  These instruments are used as a means of
            mitigating exposure to foreign currency risk connected to
            anticipated travel programs.  In entering into these contracts,
            the Company has assumed the risk which might arise from the
            possible inability of counterparties to meet the terms of their
            contracts.  The Company does not expect any losses as a result
            of counterparty defaults.  Prior to the adoption of SFAS 133 on
            July 1, 1998, the Company classified the foreign currency
            contracts as trading securities with realized and unrealized
            gains and losses on these securities recognized in the
            statement of income.

            The fair value of foreign currency exchange contracts is based
            on quoted market prices and the spot rate of the foreign
            currencies subject to contracts at year end.  The fair value of
            the foreign currency options is based on the estimated amount
            to terminate the put and call contracts with the counterparties
            at year end.

            Unrealized gains and losses on available-for-sale securities
            are excluded from operations and reported as accumulated other
            comprehensive income, net of deferred income taxes.  Realized
            gains and losses on the sale of available-for-sale securities
            are recognized on a specific identification basis in the
            statement of income in the period the investments are sold.

            The Company owns a 20% interest in a company which provides
            packaged tours primarily to Formula One, Indy Car and NASCAR
            races.  This investment is reported on the equity method.  The
            Company also owns a 15% interest in a joint venture.  The joint
            venture's purpose is the acquisition of preferred stock (which
            represents 8.2% of the total outstanding stock) of an internet
            company.  This investment is reported at the lower of cost or
            estimated net realizable value.  The chairman of the board of
            the internet company is also a director of the Company.  Also,
            the president of the Company is a director of the internet
            company.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      1.  COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

            PROPERTY AND EQUIPMENT

            Property and equipment are stated at cost.  Cost of maintenance
            and repairs which do not improve or extend the lives of the
            respective assets are expensed currently.  Major additions and
            betterments are capitalized.  Depreciation and amortization are
            provided over the lesser of the estimated useful lives of the
            respective assets or the lease term (including extensions),
            using the straight-line method, generally 5 to 8 years.

            When property and equipment are sold or retired, the related
            cost and accumulated depreciation are removed from the accounts
            and any gain or loss is recognized in operations.

            GOODWILL AND COVENANTS-NOT-TO-COMPETE

            Goodwill is being amortized using the straight-line method over
            10 to 30 years.  Costs of covenants-not-to-compete are
            amortized using the straight-line method over the term of the
            agreements, generally 5 to 10 years.

            In 1996, the Company adopted Statement of Financial Accounting
            Standards No. 121 (SFAS 121), "Accounting for the Impairment of
            Long-Lived Assets or Long-Lived Assets to be Disposed Of". 
            SFAS 121 requires certain long-lived assets, including
            goodwill, be reviewed for impairment in value when the carrying
            value of such assets may not be recoverable.  There was no
            effect on the Company's financial statements of adopting SFAS
            121 on January 1, 1996.

            REVENUE RECOGNITION

            The Company bills travel participants in advance, which are
            recorded as participants' deposits.  The Company pays for
            certain direct program costs such as airfare, hotel, rail
            passes and other program costs in advance of travel, which are
            recorded as prepaid program costs and expenses.  The Company
            recognizes travel revenue and related costs when travel
            convenes.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      1.  COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

            REVENUE RECOGNITION, CONTINUED

            Revenue from housing reservation, registration and related
            travel services is recognized when the convention commences.
            Revenue from the sale of merchandise is recognized when the
            merchandise is shipped.  Revenue from pre-paid certificate-
            based merchandise incentive programs is deferred as customer
            advances until the Company's obligations are fulfilled or upon
            management's estimates (based upon historical trends) that the
            certificate will not be redeemed.  Revenue is recognized from
            printing and administration based upon the percentage of
            completion of the related program.

            SELLING AND TOUR PROMOTION EXPENSES

            The Company expenses all selling, tour promotion and
            advertising costs as incurred.

            NET INCOME PER SHARE

            Net income per share - basic is computed by dividing net income
            by the weighted-average number of common shares outstanding
            during the period.  Net income per share - diluted is computed
            by increasing the weighted-average number of common shares
            outstanding by the additional common shares that would have
            been outstanding if the dilutive potential common shares had
            been issued.

            ACCOUNTING FOR STOCK OPTIONS

            As permitted by Statement of Financial Accounting Standards No.
            123 (SFAS 123), "Accounting for Stock-Based Compensation", the
            Company has chosen to measure compensation cost for stock-based
            employee compensation plans using the intrinsic value method of
            accounting prescribed by Accounting Principles Board Opinion
            No. 25, "Accounting for Stock Issued to Employees", and to
            provide the disclosure only requirements of SFAS 123.

     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      1.  COMPANY BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES,
          CONTINUED:

            ESTIMATES

            The preparation of financial statements in conformity with
            generally accepted accounting principles requires management to
            make estimates and assumptions that affect the reported amounts
            of assets and liabilities and disclosure of contingent assets
            and liabilities at the date of the financial statements and the
            reported amounts of revenues and expenses during the reporting
            period.  Actual results could differ from those estimates.

            RECLASSIFICATIONS

            Certain prior year amounts have been reclassified to conform
            with the 1998 presentation.  These reclassifications had no
            effect on net income or retained earnings as previously
            reported.

            NEW ACCOUNTING PRONOUNCEMENTS

            In June 1997, the Financial Accounting Standards Board issued
            Statement of Financial Accounting Standards No. 130 (SFAS 130),
            "Reporting Comprehensive Income".  SFAS 130 establishes
            standards for reporting and display of comprehensive income
            (loss) and its components in a full set of general purpose
            financial statements.  The Company adopted SFAS 130 in 1998.
            Accordingly, prior periods' financial statements presented
            herein have been restated to reflect this new standard.  As of
            December 31, 1998, the only component of comprehensive income
            is the unrealized gains and losses on derivative instruments of
            $182,272, which has been presented net of $107,049 of deferred
            income taxes.

            In June 1997, the Financial Accounting Standards Board issued
            Statement of Financial Accounting Standards No. 131,
            "Disclosures about Segments for an Enterprise and Related
            Information".  This Statement requires presentation of segment
            information in reports to stockholders including disclosures
            about the products and services an entity provides and its
            major customers.  The Company adopted SFAS 131 in 1998.
            Accordingly, prior periods presented include disclosures
            required by this new standard.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      2.  INVESTMENTS:

          At December 31, 1998 and 1997, the Company had foreign currency
          forward contracts, foreign currency put and call options and U.S.
          government and agency obligations.  The cost and estimated fair
          values of these investments were as follows:

     <TABLE>
     <CAPTION>
                                                          Gross         Gross         Fair Value/
                                                          Unrealized    Unrealized    Carrying
                                            Cost          Gains         Losses        Value
                                            -----------   -----------   -----------   -----------
      <S>                                   <C>           <C>           <C>           <C>
              December 31, 1998:
                 U.S. government and 
                   agency obligations       $37,659,994   $        --   $        --   $37,659,994
                                            ===========   ===========   ===========   ===========
              Foreign currency contracts 
                 and options                $        --   $   177,929   $  (467,251)  $  (289,322)
                                            ===========   ===========   ===========   ===========
              December 31, 1997:
                 Foreign currency contracts $        --   $   374,775   $(1,049,400)  $  (674,625)
                                            ===========   ===========   ===========   ===========
      </TABLE>

          The fair value of the Company's investments in foreign currency
          forward contracts is based upon the spot price of these
          currencies at December 31, 1998 and 1997.  All available-for-sale
          investments mature in 1999.

          Net realized gains (losses) on investments of $25,787, $(426,901)
          and $290,253 for the years ended December 31, 1998, 1997 and
          1996, respectively, were included in the determination of net
          income. 

          Prior to the adoption of SFAS 133 on July 1, 1998, the Company
          classified the foreign currency contracts as trading securities
          with realized and unrealized gains and losses on these securities
          recognized in the statement of income.  The net unrealized loss
          reclassified to revenue from other comprehensive income for the
          year ended December 31, 1998 (subsequent to the adoption of
          SFAS 133) was $212,388.

          The substantial majority of the Company's travel programs take
          place outside of the United States and most foreign suppliers
          require payment in currency other than the U.S. dollar.
          Accordingly, the Company is exposed to foreign currency risk
          relative to changes in foreign currency exchange rates between
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996

      2.  INVESTMENTS, CONTINUED:

          those currencies and the U.S. dollar.  The Company has a program
          to provide a hedge against certain of these foreign currency
          risks.  The Company uses forward contracts which allow the
          Company to acquire the foreign currency at a fixed price for a
          specified period of time.  Additionally, the Company uses foreign
          currency call options which provide the Company with the option
          to acquire certain foreign currencies at a fixed exchange rate
          and time period.  Concurrent with the purchase of a foreign
          currency call option, the Company sells a foreign currency put
          option to minimize the net premium paid for the call option.  The
          strike prices on these options generally straddle the exchange
          rate at the time the options are purchased and utilized.  Since
          July 1, 1998, unrealized gains or losses associated with these
          transactions are reported in other comprehensive income.  Prior
          to July 1, 1998, any unrealized gains or losses associated with
          these transactions were recognized in operations based upon the
          fair value of the instruments.  Any realized gains or losses
          associated with these transactions are recognized in the
          Company's operations in the period the investments are sold.  The
          Company also purchases future contracts to similarly hedge its
          foreign currency risk.  The Company is exposed to credit risk
          under the foreign currency contracts to the extent that the
          counterparty is unable to perform under the agreement.  The
          Company has a $25,000,000 credit facility through July 1999 to
          support foreign currency purchases and foreign exchange forward
          contracts.

          At December 31, 1998, the Company had outstanding forward
          exchange contracts and call and put options to purchase and sell
          foreign currencies as follows:

            Currency                      Amount          Matures
            ---------------------------   -----------     ---------------
            Forward contracts:
               Australian dollar          $ 3,449,954     March-July 1999
               New Zealand dollar              62,902     June 1999
               British pound                  776,348     April 1999
                                          -----------
                                          $ 4,289,204
                                          ===========
            Call options purchased:
               Australian dollar          $ 1,750,000     March 1999
               New Zealand dollar             550,000     April 1999
               British pound                7,380,000     June 1999
                                          -----------
                                          $ 9,680,000
                                          ===========
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      2.  INVESTMENTS, CONTINUED:

            Currency                      Amount          Matures
            -----------------------       -----------     ---------------
            Put options sold:
               Australian dollar          $   714,000     March 1999
               New Zealand dollar             226,800     April 1999
                                          -----------
                                          $   940,800
                                          ===========

          At December 31, 1998, 1997 and 1996, the Company had unrealized
          foreign currency losses associated with these financial
          instruments of $(289,322), $(674,625) and $0, respectively. 
          Since all of the Company's outstanding contracts at December 31,
          1998 mature in 1999, all of the unrealized losses are expected to
          be reclassified as a reduction to revenue during the year ending
          December 31, 1999.


      3.  PROPERTY AND EQUIPMENT:

          Property and equipment consists of the following:

                                                December 31,
                                                -------------------------
                                                1998          1997
                                                -----------   -----------
            Office furniture, fixtures and 
              equipment                         $ 2,847,937   $ 1,519,240
            Computer equipment                    3,406,937     2,308,828
            Leasehold improvements                1,058,255       676,065
                                                -----------   -----------
                                                  7,313,129     4,504,133
            Less accumulated depreciation and 
              amortization                       (3,113,240)   (2,355,828)
                                                -----------   -----------
                                                $ 4,199,889   $ 2,148,305
                                                ===========   ===========

          Depreciation and amortization expense on property and equipment
          of approximately $757,000, $444,000 and $327,000 for the years
          ended December 31, 1998, 1997 and 1996, respectively, were
          included in the determination of net income.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      4.  NOTE PAYABLE:

          During 1997, in conjunction with an acquisition, the Company
          issued an unsecured $541,143 note payable with a three-year
          maturity and quarterly payments of $50,000, including interest at
          6.5%.  At December 31, 1998, $185,851 is due during the year
          ending December 31, 1999, and $145,243 is due during 2000.


      5.  INCOME TAXES:

          The provision (benefit) for income taxes for the years ended
          December 31, 1998, 1997 and 1996 consisted of the following:

      <TABLE>
      <CAPTION>
                                                    1998         1997         1996
                                                    ----------   ----------   ----------
      <S>                                           <C>          <C>          <C>
              Current:
                 Federal                            $3,541,697   $3,396,592   $1,542,186
                 State                                 312,806      145,170       33,974
              Deferred                                 449,843     (196,297)     458,235
                                                    ----------   ----------   ----------
                                                    $4,304,346   $3,345,465   $2,034,395
                                                    ==========   ==========   ==========
      </TABLE>

          Components of the net deferred tax assets and liabilities are as
          follows:

      <TABLE>
      <CAPTION>
                                                    December 31, 1998
                                                    ------------------------------------
                                                    Assets       Liabilities  Total
                                                    ----------   -----------  ----------
      <S>                                           <C>          <C>          <C>
              Accrued vacation                      $   80,778                $   80,778
              Depreciation                                       $ (198,442)    (198,442)
              Unrealized loss on futures contracts     107,049                   107,049
              Amortization of goodwill and non-
                 compete agreements                                 (83,964)     (83,964)
              Net operating loss carryforwards         293,045                   293,045
              Customer advances                                    (492,738)    (492,738)
              Inventory valuation                       29,467                    29,467
              Other                                      1,257      (21,409)     (20,152)
                                                    ----------   ----------   ----------
              Total temporary differences and 
                tax attributes                      $  511,596   $ (796,553)  $ (284,957)
                                                    ==========   ==========   ==========
      </TABLE>
      <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      5.  INCOME TAXES, CONTINUED:

     <TABLE>
     <CAPTION>
                                                    December 31, 1997
                                                    ------------------------------------
                                                    Assets       Liabilities  Total
                                                    ----------   -----------  ----------
      <S>                                           <C>          <C>          <C>
              Accrued vacation                      $   44,051                $   44,051
              Depreciation                                       $ (199,614)    (199,614)
              Unrealized loss on futures contracts     272,565                   272,565
              Amortization of goodwill and non-
                 compete agreements                     31,782                    31,782
              Net operating loss carryforwards         293,045                   293,045
              Customer advances                                    (415,661)    (415,661)
              Inventory valuation                       29,467                    29,467
              Other                                      2,202                     2,202
                                                    ----------   ----------   ----------
              Total temporary differences and 
                 tax attributes                     $  673,112   $ (615,275)  $   57,837
                                                    ==========   ==========   ==========

      </TABLE>

          The income tax provision (benefit) for the years ended 
          December 31, 1998, 1997 and 1996 differs from that computed using
          the federal statutory rate applied to income before income taxes
          as follows:

     <TABLE>
     <CAPTION>
                                          1998               1997               1996
                                          -----------------  -----------------  -----------------
                                          Amount      %      Amount      %      Amount      %
                                          ----------  -----  ----------  -----  ----------  -----
      <S>                                 <C>         <C>    <C>         <C>    <C>         <C>
              Provision at the federal 
                statutory rate            $4,388,520  35.0%  $3,054,083   34.0% $2,033,516  34.0%
              Nondeductible goodwill         144,349   1.1       78,869    0.9          --    --
              State income tax, net of 
                federal benefit              203,324   1.6       67,892    0.8          --    --
              Tax exempt interest           (404,418) (3.2)          --     --          --    --
              Adjustment of prior years' 
                taxes                             --    --      104,144    1.2          --    --
              Other                          (27,429) (0.2)      40,477    0.3         879    --
                                          ----------  ----   ----------  -----  ----------  ----
                                          $4,304,346  34.3%  $3,345,465   37.2% $2,034,395  34.0%
                                          ==========  ====   ==========  =====  ==========  ====
      </TABLE>

          At December 31, 1998, the Company has acquired companies with
          federal net operating loss carryforwards of approximately
          $792,000, which can be used to offset future regular taxable
          income of the subsidiary, up to approximately $133,000 annually. 
          These carryforwards expire in 2011.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      6.  COMMITMENTS AND CONTINGENCIES:

          The Company leases office facilities and office equipment under
          non-cancelable operating leases.  At December 31, 1998, future
          non-cancelable lease commitments are as follows:

            Year Ending
            December 31,
            ------------
            1999                                  $1,420,387
            2000                                   1,349,294
            2001                                   1,260,636
            2002                                   1,004,092
            2003                                     902,134
            Thereafter                             1,091,814
                                                  ----------
                                                  $7,028,357
                                                  ==========

          Total rent expense for the years ended December 31, 1998, 1997
          and 1996 was approximately $1,319,000, $747,000 and $503,000,
          respectively.  The Company may cancel the lease on the Company's
          Education Group office without penalty (upon one year's prior
          notice) and also may extend the term of the lease for an
          additional ten-year period upon providing written notice to the
          lessor at least six months prior to the end of the initial lease
          term.

          The Company entered into agreements to sublease office facilities
          in Newport Beach, California.  Sublease rental income for the
          year ended December 31, 1998 was $40,464.  Future minimum rental
          income under the non-cancelable subleases is $83,628 and $43,164
          for the years ended December 31, 1999 and 2000, respectively.

          The Company is subject to claims, suits and complaints which have
          arisen in the ordinary course of business.  In the opinion of
          management and its legal counsel, all matters are adequately
          covered by insurance or, if not covered, are without merit or are
          of such a nature, or involve such amounts as would not have a
          material effect on the financial position, cash flows or results
          of operations of the Company.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      7.  STOCK PLANS:

          The Company adopted the 1995 Equity Participation Plan (the Plan)
          during 1995 and amended and restated the Plan in 1998.  The Plan
          provides for the grant of stock options, awards of restricted
          stock, performance or other awards or stock appreciation rights
          to directors, key employees and consultants of the Company.  The
          maximum number of shares which may be awarded under the Plan is
          900,000 shares.  Awards cannot exceed 100,000 shares to any
          individual in a calendar year.

          Under the terms of the Plan, options to purchase shares of the
          Company's common stock are granted at a price set by the
          Compensation Committee of the Board of Directors, not to be less
          than the par value of a share of common stock and if granted as
          performance-based compensation or as incentive stock options, no
          less than the fair market value of the stock on the date of
          grant.  The Compensation Committee establishes the vesting period
          of the awards.  The options may be exercised any time after they
          are fully vested for a period up to 10 years from the grant date.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      7.  STOCK PLANS, CONTINUED:

          Had compensation cost for the Company's plans been determined
          based on the fair value at the grant dates for awards under the
          plans consistent with the method of SFAS No. 123, the Company's
          pro forma net income and net income per share would have been
          changed to the pro forma amounts indicated below:
     <TABLE>
     <CAPTION>

                                                   Year Ended                Year Ended                YearEnded
                                                   December 31, 1998         December 31, 1997         December 31, 1996
                                                   -----------------------   -----------------------   -----------------------
                                                   As           Pro          As           Pro          As           Pro
                                                   Reported     Forma        Reported     Forma        Reported     Forma
                                                   ----------   ----------   ----------   ----------   ----------   ----------
      <S>                                          <C>          <C>          <C>          <C>          <C>          <C>
              Income before cumulative
                 effect of change in accounting
                 principle                         $8,234,283   $7,648,036   $5,637,132   $5,388,258   $3,946,535   $3,783,749
              Cumulative effect of accounting
                 change                               127,710      127,710           --           --           --           --
                                                   ----------   ----------   ----------   ----------   ----------   ----------
              Net income                           $8,361,993   $7,775,746   $5,637,132   $5,388,258   $3,946,535   $3,783,749
                                                   ==========   ==========   ==========   ==========   ==========   ==========
              Net income per share - basic:
                 Income before cumulative
                    effect of change in accounting
                    principle                      $     0.92   $     0.86   $     0.83   $     0.80   $     0.60   $     0.57
                 Cumulative effect of accounting
                    change                               0.01         0.01           --           --           --           --
                                                   ----------   ----------   ----------   ----------   ----------   ----------
              Net income per share - basic         $     0.93   $     0.87   $     0.83   $     0.80   $     0.60   $     0.57
                                                   ==========   ==========   ==========   ==========   ==========   ==========
              Net income per share - diluted:
                 Income before cumulative
                    effect of change in accounting
                    principle                      $     0.91   $     0.84   $     0.82   $     0.78   $     0.59   $     0.57
                 Cumulative effect of accounting
                    change                               0.01         0.01           --           --           --           --
                                                   ----------   ----------   ----------   ----------   ----------   ----------
              Net income per share - diluted       $     0.92   $     0.85   $     0.82   $     0.78   $     0.59   $     0.57
                                                   ==========   ==========   ==========   ==========   ==========   ==========
</TABLE>
<PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      7.  STOCK PLANS, CONTINUED:

          The fair value of each option grant is estimated on the date of
          grant using the Black-Scholes option-pricing model with the
          following weighted-average assumptions used for grants in 1998,
          1997 and 1996:

                                          1998       1997       1996
                                          --------   --------   -----------
            Dividend yield                      0%         0%            0%
            Expected volatility                55%        63%           84%
            Risk free interest rates          4.8%      6.50%   6.40%-6.44%
            Expected option lives         10 years  9.7 years       8 years

          Stock option transactions are summarized as follows:

     <TABLE>
     <CAPTION>
                                               Number of   Weighted-Average   Expiration
                                               Shares      Exercise Price     Date
                                               ---------   ----------------   ----------
      <S>                                      <C>         <C>                <C>
              Balance, December 31, 1995         277,050        $ 8.90        2005
                 Granted                         109,400         10.79        2006
                 Forfeited                      (145,087)         9.06
                                               ---------        ------
              Balance, December 31, 1996         241,363          9.66        2005-2006
                 Granted                         269,950         10.84        2007
                 Forfeited                       (49,925)         9.53
                 Exercised                       (14,336)         9.47
                                               ---------        ------
              Balance, December 31, 1997         447,052         10.39        2005-2007
                 Granted                         247,100         24.43        2008
                 Forfeited                       (33,779)        14.94
                 Exercised                       (18,184)         9.82
                                               ---------        ------
              Balance, December 31, 1998         642,189        $15.52        2005-2008
                                               =========        ======

      </TABLE>
      <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      7.  STOCK PLANS, CONTINUED:

          The following table presents information about the options as of
          December 31, 1998:

     <TABLE>
     <CAPTION>
                                                                     Weighted-Average
                                                                     ----------------------------
                                          Number of  Range of                        Remaining
                                          Shares     Exercise Price  Exercise Price  Life (Years)
                                          ---------  --------------  --------------  ------------
      <S>                                            <C>             <C>             <C>
              Exercisable options           58,750    $  8.25-8.75       $ 8.55          7.9
              Exercisable options           93,014      8.76-11.70         9.84          7.2
              Exercisable options           19,750     14.63-17.55        14.84          9.0
                                           -------    ------------       ------          ---
              Total exercisable            171,514      8.25-17.55         9.97          8.3

              Unexercisable options         91,500       8.25-8.75         8.64          7.9
              Unexercisable options         88,425      8.76-11.70         9.96          7.2
              Unexercisable options         94,750     14.63-17.55        15.36          9.0
              Unexercisable options         50,100     17.56-20.48        20.38          9.1
              Unexercisable options         58,800     23.40-26.32        26.25          9.5
              Unexercisable options         87,100     26.33-29.25        29.18          9.4
                                           -------    ------------       ------          ---
              Total all options            642,189    $ 8.25-29.25       $15.52          8.3
                                           =======    ============       ======          ===
              Exercisable, December 31, 
                 1997                       76,326                       $ 9.34
                                           =======                       ======
              Exercisable, December 31, 
                 1996                       36,688                       $ 8.90
                                           =======                       ======

      </TABLE>

          The weighted-average fair value of options granted during 1998,
          1997 and 1996 were $12.15 per share, $8.32 per share and $7.95
          per share, respectively.

          In addition to the stock options above, during 1997, the Company
          granted an executive 50,000 shares of the Company's stock which
          vests over four years.  The Company incurred compensation expense
          of approximately $98,000 and $53,000 in 1998 and 1997,
          respectively, related to this grant of shares.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


      8.  EMPLOYEE BENEFIT PLANS:

          Effective January 1, 1993, the Company established a
          noncontributory profit sharing plan which covers substantially
          all employees.  During 1996, the assets of the plan were
          transferred into a new 401(k) Profit-Sharing Plan (the Plan).

          Employees are eligible to participate in the Plan upon one year
          of service and 21 years of age.  Employees may contribute up to
          15% of their salary, subject to the maximum contribution allowed
          by the Internal Revenue Service.  The Company's matching
          contribution is discretionary based upon approval by management.
          Employees are 100% vested in their contributions and vest in
          Company matching contributions equally over four years.  During
          the years ended December 31, 1998, 1997 and 1996, the Company
          contributed approximately $81,000, $26,000 and $57,000 to the
          Plan, respectively.

      9.  SECONDARY OFFERING:

          In April 1998, the Company completed a public offering of
          2,838,700 shares of the Company's common stock.  During the year
          ended December 31, 1998, a portion of the $70.3 million net
          proceeds have been used for business acquisitions.  Management
          intends to use the remaining net proceeds for additional
          acquisitions of educational travel and performance improvement
          companies and related businesses.  These proceeds will also be
          used for general corporate purposes.

     10.  BUSINESS ACQUISITIONS:

          In February 1998, the Company acquired certain assets of a
          company located in Boston, Massachusetts engaged in providing
          comprehensive housing reservation, registration and travel
          services for meetings, conventions, expositions and trade shows.
          In February 1998, the Company also acquired all of the
          outstanding stock of a performance incentive and meeting
          management company located in Westlake Village, California.  In
          April 1998, the Company acquired all of the outstanding stock of
          a performance incentive and meeting management company located in
          Laguna Hills, California.  In May 1998, the Company acquired
          certain assets of a specialized golf tour company located in
          Burbank, California.  In July 1998, the Company acquired certain
          assets of a company located in Atlanta, Georgia, engaged in
          providing comprehensive housing reservation, registration and
          travel services for meetings, conventions, expositions and trade
          shows.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


     10.  BUSINESS ACQUISITIONS, CONTINUED:

          The total purchase price for these acquisitions in 1998 was $11.7
          million plus 277,927 shares of the Company's restricted common
          stock and certain contingent consideration as described below.
          Total assets acquired and liabilities assumed in these
          acquisitions was approximately $10.5 million and $10.3 million,
          respectively.  Assets acquired consisted primarily of cash,
          accounts receivables and prepaid expenses.  Liabilities consisted
          primarily of accounts payable and participant deposits.  The
          common stock issued to effect the transactions was recorded at
          its estimated fair value based upon quoted market price adjusted
          for trading restrictions of $5.6 million.  Goodwill related to
          these acquisitions of approximately $17.0 million is being
          amortized over 15 to 30 years.

          In September 1997, the Company acquired the assets of a company
          located in Waconia, Minnesota.  The company organizes and
          operates travel and other incentive programs, professional
          meetings, conventions and seminars for businesses.  The total
          purchase price of this company was $500,000 in cash, a $541,000
          note payable and certain contingent consideration as described
          below.  The results of operations of this acquired business for
          the year ended December 31, 1996 and for the 1997 period prior to
          being acquired by the Company were immaterial to the consolidated
          operating results of the Company.

          In December 1996, the Company acquired all of the outstanding
          common stock of a company which is located in Minneapolis,
          Minnesota, with sales offices in Des Moines, Iowa; Newport Beach
          and Novato, California; Philadelphia, Pennsylvania and Fairway,
          Kansas.  The company administers incentive travel and merchandise
          programs.  In connection with this acquisition, the Company also
          entered into a ten-year covenant-not-to-compete agreement for a
          total of $1.2 million, payable in equal annual installments over
          eight years.  In February 1996, the company acquired the assets
          of a company which has offices in Winnebago, Illinois and
          Birmingham, Alabama and provides adult travel programs.  In
          January 1996, the Company acquired all of the outstanding stock
          of a meeting management and incentive travel company located in
          Newport Beach, California.  Total purchase price for these
          acquisitions was $1.45 million plus 218,857 shares of the
          Company's restricted common stock, with an estimated fair value
          of $1.7 million.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


     10.  BUSINESS ACQUISITIONS, CONTINUED:

          All of the above acquisitions have been accounted for using the
          purchase method of accounting.  The results of operations of
          these companies have been included in the consolidated statement
          of income since their respective dates of acquisition.  The
          contingent consideration to be paid is dependent upon the success
          of the acquired companies' programs.  Substantially all of the
          contingent consideration will be accounted for as goodwill and
          will be amortized accordingly when, and if, the contingency is
          removed and additional consideration is paid.

          The following unaudited pro forma summary presents the
          consolidated results of operations of the Company as if the 1998
          acquisitions had occurred at January 1, 1997:

                                                1998          1997
                                                -----------   -----------

            Revenue                             $42,716,000   $40,396,000
                                                ===========   ===========
            Net income                          $ 8,632,000   $ 7,125,000
                                                ===========   ===========
            Net income per share - basic        $      0.96   $      1.01
                                                ===========   ===========
            Net income per share - diluted      $      0.95   $      0.99
                                                ===========   ===========

          The above amounts are based upon certain assumptions and
          estimates which the Company believes are reasonable and do not
          reflect any benefit from economies which might be achieved from
          combined operations.  The pro forma results do not necessarily
          represent results which would have occurred if the acquisitions
          had taken place on the bases assumed above, nor are they
          indicative of the results of future combined operations.

          In January 1999, the Company acquired a minority interest in a
          company located in Arlington, Virginia.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


     11.  FAIR VALUE OF FINANCIAL INSTRUMENTS:

          The following disclosure of the estimated fair value of financial
          instruments is made in accordance with the requirements of
          Statement of Financial Accounting Standards No. 107, "Disclosures
          about Fair Value of Financial Instruments."  The estimated fair
          value amounts have been determined using available market
          information and appropriate valuation methodologies.  However,
          considerable judgment is necessarily required to interpret market
          data and to develop the estimates of fair value.  Accordingly,
          the estimates presented herein are not necessarily indicative of
          the amounts the Company could realize in a current market
          exchange.  The use of different market assumptions and/or
          estimation methodologies may have a material effect on the
          estimated fair value amounts.

          The following methods and assumptions were used to estimate the
          fair value of each class of financial instrument for which it is
          practicable to estimate that value.  Potential income tax
          ramifications related to the realization of unrealized gains and
          losses that would be incurred in an actual sale and/or settlement
          have not been taken into consideration.

            CASH AND CASH EQUIVALENTS - The carrying value of cash and cash
            equivalents approximates fair value due to the nature of the
            cash investments.

            INVESTMENTS - The fair value of the Company's investments in
            foreign currency forward contracts is based on quoted market
            prices and the spot rate of the foreign currencies subject to
            contracts at year end.  The fair value of the Company's foreign
            currency put and call options is based on the estimated amount 
            to  terminate  the  put  and call contracts with the
            counterparties at year end.  The fair value of the Company's
            investment in debt securities is based on quoted market prices.

            OTHER ASSETS - The fair value of the note receivable, which is
            included in other assets, is based on the discounted value of
            contractual cash flows.  The discount rate is estimated using
            the rates currently offered for notes with similar remaining
            maturities and credit risks.

            OTHER INVESTMENTS - The fair value of other investments
            approximates carrying value.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


     11.  FAIR VALUE OF FINANCIAL INSTRUMENTS, CONTINUED:

            NOTE PAYABLE - The fair value of the note payable is based on
            the discounted value of contractual cash flows of the note. 
            The discount rate is estimated using the rates currently
            offered for debt with similar remaining maturities.

            The estimated fair values of the financial instruments as of
            December 31, 1998 and 1997 are as follows:

     <TABLE>
     <CAPTION>
                                            1998                        1997
                                            -------------------------   -------------------------
                                            Carrying      Fair          Carrying      Fair
                                            Amount        Value         Amount        Value
                                            -----------   -----------   -----------   -----------
      <S>                                   <C>           <C>           <C>           <C>
                 Financial assets:
                   Cash and cash 
                     equivalents            $55,289,580   $55,289,580   $22,870,546   $22,870,546
                   Investments and foreign 
                     currency contracts 
                     and options             37,370,672    37,370,672      (674,625)     (674,625)
                   Other assets                      --            --       162,354       162,354
                   Other investments            462,500       462,500       462,500       462,500
                 Financial liabilities:
                   Note payable                 331,094       331,094       499,937       499,937

      </TABLE>

            LIMITATIONS - The fair value estimates are made at a discrete
            point in time based on relevant market information and
            information about the financial instruments.  Fair value
            estimates are based on judgments regarding current economic
            conditions, risk characteristics of various financial
            instruments and other factors.  These estimates are subjective
            in nature and involve uncertainties and matters of significant
            judgment and, therefore, cannot be determined with precision.
            Changes in assumptions could significantly affect the
            estimates.  Accordingly, the estimates presented herein are not
            necessarily indicative of what the Company could realize in a
            current market exchange.
     <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


     12.  EARNINGS PER SHARE:

          The following table presents a reconciliation of basic and
          diluted EPS computations and the number of dilutive securities
          (stock options) that were included in the dilutive EPS
          computation.

     <TABLE>
     <CAPTION>
                                                    1998         1997         1996
                                                    ----------   ----------   ----------
      <S>                                           <C>          <C>          <C>
              Numerator:
                Income before cumulative effect 
                   of change in accounting 
                   principle                        $8,234,283   $5,637,132   $3,946,535
                 Cumulative effect of accounting 
                   change                              127,710           --           --
                                                    ----------   ----------   ----------
                 Net income for basic and diluted 
                   earnings per share               $8,361,993   $5,637,132   $3,946,535
                                                    ==========   ==========   ==========

              Denominator:
                 Weighted-average shares out-
                   standing - basic                  8,938,812    6,759,541    6,618,454
                 Effect of dilutive common stock 
                   options                             148,586      133,690       31,430
                                                    ----------   ----------   ----------
                 Weighted-average shares out-
                   standing - diluted                9,087,398    6,893,231    6,649,884
                                                    ==========   ==========   ==========

              Earnings per share - basic:
                 Income before cumulative effect 
                   of change in accounting 
                   principle                        $     0.92   $     0.83   $     0.60
                 Cumulative effect of accounting 
                   change                                 0.01           --           --
                                                    ----------   ----------   ----------
                                                    $     0.93   $     0.83   $     0.60
                                                    ==========   ==========   ==========

              Earnings per share - diluted:
                 Income before cumulative effect 
                   of change in accounting 
                   principle                        $     0.91   $     0.82   $     0.59
                 Cumulative effect of accounting 
                   change                                 0.01           --           --
                                                    ----------   ----------   ----------
                                                    $     0.92   $     0.82   $     0.59
                                                    ==========   ==========   ==========

      </TABLE>
      <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


     13.  BUSINESS SEGMENTS:

          All of the Company's assets are located in the United States.
          During the years ended December 31, 1998, 1997 and 1996, the
          Company's revenues as a percentage of total revenues were derived
          from programs in the following geographic areas:

                                                         1998   1997   1996
                                                         ----   ----   ----
            Europe                                       30%    35%    39%
            South Pacific                                19%    24%    26%
            China                                         6%    11%    10%
            United States                                39%    19%     4%
            Other                                         6%    11%    21%

          The Company operated the Education Group segment and the
          Performance Group segment during 1998, 1997 and 1996.  Corporate
          and other consists of general corporate assets (primarily cash
          and investments) and other activities which are not directly
          related to the Education or Performance Groups.  Selected
          financial information related to these segments is as follows:

     <TABLE>
     <CAPTION>
                                           Education     Performance   Corporate
                                           Group         Group         and Other     Total
                                           ------------  ------------  ------------  ------------
      <S>                                  <C>           <C>           <C>           <C>
              1998
              -------------------------
              Revenue                      $ 24,407,294  $ 15,607,942  $    132,289  $ 40,147,525
                                           ============  ============  ============  ============
              Depreciation and 
                amortization               $    416,089  $    316,776  $  1,210,348  $  1,943,213
                                           ============  ============  ============  ============
              Operating income (loss)      $ 10,786,215  $    520,942  $ (2,291,533) $  9,015,624
                                           ============  ============  ============  ============
              Total additions to 
                property, equipment, 
                goodwill and covenant-
                not-to-compete             $    380,607  $  1,741,641  $ 17,604,064  $ 19,726,312
                                           ============  ============  ============  ============
              Total assets                 $ 26,010,847  $  9,006,736  $ 92,714,201  $127,731,784
                                           ============  ============  ============  ============

      </TABLE>
      <PAGE>
     Ambassadors International, Inc.
     Notes to Financial Statements, Continued
     as of December 31, 1998 and 1997 and for the years ended
     December 31, 1998, 1997 and 1996


     13.  BUSINESS SEGMENTS, CONTINUED:


     <TABLE>
     <CAPTION>
                                           Education     Performance   Corporate
                                           Group         Group         and Other     Total
                                           ------------  ------------  ------------  ------------
      <S>                                  <C>           <C>           <C>           <C>
              1997
              -------------------------
              Revenue                      $ 21,296,003  $  5,236,505  $      8,389  $ 26,540,897
                                           ============  ============  ============  ============
              Depreciation and 
                amortization               $    334,835  $    107,812  $    452,316  $    894,963
                                           ============  ============  ============  ============
              Operating income (loss)      $  9,176,078  $    490,146  $ (1,161,621) $  8,504,603
                                           ============  ============  ============  ============
              Total additions to 
                property, equipment, 
                goodwill and covenant-
                not-to-compete             $    916,049  $    100,174  $  1,476,817  $  2,493,040
                                           ============  ============  ============  ============
              Total assets                 $ 20,930,033  $  3,095,490  $ 10,423,465  $ 34,448,988
                                           ============  ============  ============  ============

              1996
              -------------------------
              Revenue                      $ 17,635,199  $  1,208,223  $         --  $ 18,843,422
                                           ============  ============  ============  ============
              Depreciation and 
                amortization               $    238,873  $     36,982  $    116,548  $    392,403
                                           ============  ============  ============  ============
              Operating income (loss)      $  5,158,389  $    218,828  $   (723,820) $  4,653,397
                                           ============  ============  ============  ============
              Total additions to 
                property, equipment, 
                goodwill and covenant-
                not-to-compete             $    315,936  $         --  $  3,298,136  $  3,614,072
                                           ============  ============  ============  ============
              Total assets                 $ 21,074,647  $  5,297,064  $    897,339  $ 27,269,050
                                           ============  ============  ============  ============
      </TABLE>

<PAGE>