SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 10-Q

(Mark One)

[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities  Exchange
Act of 1934 for the quarterly period ended June 30, 1998 or

[ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the transition period from _________ to _________.

                        Commission file number: 333-23519

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

        New Jersey                                           22-3477425
(State or other jurisdiction of                            (I.R.S. Employer
 incorporation or organization)                            Identification No.)

                            1100 Valley Brook Avenue
                           Lyndhurst, New Jersey 07071
           (Address of principal executive office, including zip code)

                                  201-935-7666
              (Registrant's telephone number, including area code)


--------------------------------------------------------------------------------
      Former name, former address and former fiscal year, if changed since
                                  last report)


Indicate by check mark whether  registrant (1) has filed all reports required to
be filed by section 13 or 15(d) of the  Securities  Exchange  Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days.


                           Yes [X]                No [ ]


The  number of shares of common  stock  outstanding  as of August 1,  1998,  was
8,788,590 shares.


<PAGE>


                           VESTCOM INTERNATIONAL, INC.
                  FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
                                      INDEX


Part I:  Financial Information

                                                                      Page(s)

Item 1:  Financial Statements

Condensed Consolidated Balance Sheets - as of December 31, 1997 
and June 30, 1998 (unaudited)                                            3

Condensed Consolidated Statements of Operations - For the 
Three Months and Six Months Ended June 30, 1997 (unaudited) 
and 1998 (unaudited)                                                     4


Condensed Consolidated Statements of Cash Flows - For the  
Six Months Ended June 30, 1997 (unaudited) and 1998 (unaudited)          5

Notes to Condensed Consolidated Financial Statements (unaudited)        6-10

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

Overview; Disclosures Regarding Forward Looking 
Statements; Introduction                                               10-11

Pro Forma Results of Operations                                        11-12

Liquidity and Capital Resources                                        12-13

Impact of the Year 2000 Issue                                           13

Recently Issued Accounting Pronouncements; Inflation                    14

Part II:  Other Information

Item 2. Changes in Securities and Use of Proceeds                       15

Item 4. Submission of Matters to a Vote of Security Holders             15

Item 6. Exhibits and Reports on Form 8-K                                15

    Signature                                                           15

Exhibit - Financial Data Schedule (For Electronic Submission Only)      16


<PAGE>

<TABLE>
<CAPTION>

                  VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                    As of December 31, 1997 and June 30, 1998


                                     ASSETS

                                                                                December 31,          June 30,
                                                                                    1997                1998
                                                                                  (note 1)           (unaudited)
CURRENT ASSETS:
<S>                                                                              <C>                <C>         
     Cash and cash equivalents                                                   $   4,092,000      $   2,481,788
     Marketable securities                                                          13,494,886            263,501
     Accounts receivable, net                                                       13,999,511         17,024,154
     Other current assets                                                            6,076,847          9,010,914
                                                                                 -------------    ---------------
                           Total current assets                                     37,663,244         28,780,357

PROPERTY AND EQUIPMENT, net                                                         21,684,918         26,217,985
GOODWILL, net                                                                       54,336,937         67,781,499
OTHER ASSETS                                                                           660,660            648,515
                                                                                 -------------    ---------------
                           Total assets                                          $ 114,345,759      $ 123,428,356
                                                                                 =============    ===============

                                       LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
     Current portion of long-term debt and capitalized lease obligation          $   2,627,178       $  2,698,329
     Accounts payable                                                                4,780,082          7,800,679
     Other liabilities                                                              13,108,691         15,844,137
                                                                                 -------------       ------------
                           Total current liabilities                                20,515,951         26,343,145

LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS                                         7,933,572          7,014,761
OTHER NONCURRENT LIABILITIES                                                         2,868,410          2,719,464
                                                                                 -------------       ------------
                           Total liabilities                                     $  31,317,933      $  36,077,370
                                                                                  ------------      -------------

COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
   Preferred Stock
     Class A  convertible,  200 shares  authorized, 
     issued and outstanding at December 31, 1997 and 
     -0- shares authorized, issued and outstanding 
     at June 30, 1998, respectively 
     Class B, 1 share authorized,  issued and 
     outstanding at December 31, 1997 and 
     June 30, 1998                                                                   2,651,867         2,651,867
     Class C convertible, 100 shares authorized,  
     issued and outstanding at December 31, 1997 
     and June 30, 1998 
   Common stock, no par value;  20,000,000
     shares authorized; 8,483,811 and 8,788,590  
     shares issued and outstanding at December 31,                                  
     1997 and June 30, 1998 respectively                                            84,229,597        86,782,015
   Accumulated deficit                                                              (3,770,054)       (1,837,799)
   Cumulative translation adjustment                                                   (83,584)         (245,097)
                                                                                 -------------     -------------
                           Total stockholders' equity                               83,027,826        87,350,986
                                                                                 -------------     --------------

                           Total liabilities and stockholders' equity             $114,345,759     $ 123,428,356
                                                                                  ============      ============

</TABLE>



      The accompanying notes to condensed consolidated financial statements
                  are an integral part of these balance sheets.


<PAGE>

<TABLE>
<CAPTION>

                              VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES

                              CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                For the Three  Months and Six Months  Ended
                                        June 30, 1997 and 1998
                                              (unaudited)


                                                       Three Months Ended                       Six Months Ended
                                                       ------------------                       ----------------
                                               June 30, 1997        June 30, 1998       June 30, 1997       June 30, 1998
                                               -------------        -------------       -------------       -------------
<S>                                          <C>                     <C>                <C>                   <C>         
REVENUES                                     $             --        $25,738,749        $          --         $ 51,298,245
COST OF REVENUES                                           --          16,628,905                  --           32,860,240
                                             ----------------        ------------       -------------         ------------
     Gross profit                                          --           9,109,844                  --           18,438,005

SELLING, GENERAL AND ADMINISTRATIVE
       EXPENSES                                       342,794           7,133,086             346,691           14,334,652
                                             ----------------        ------------       -------------         ------------
     Income (loss) from operations                   (342,794)          1,976,758            (346,691)           4,103,353

OTHER INCOME (EXPENSE)
     Interest expense                                 (27,881)           (238,103)            (54,694)            (480,622)
     Interest and other income                          5,018             114,972              16,878              262,515
                                             ----------------        ------------     ---------------         ------------
     Income  (loss)  before  provision  for          (365,657)          1,853,627            (384,507)           3,885,246
     income taxes

PROVISION FOR INCOME TAXES                                 --             951,769                  --            1,952,991
                                             ----------------        ------------     ---------------         ------------
     Net income (loss)                       $       (365,657)       $    901,858     $      (384,507)        $  1,932,255
                                             ================        ============     ===============         ============

Net income per share - basic                                         $        .10                             $        .22
                                                                     ============                             ============

Net income per share - diluted                                       $        .10                             $        .21
                                                                     ============                             ============

</TABLE>


      The accompanying notes to condensed consolidated financial statements
                    are an integral part of these statements.


<PAGE>

<TABLE>
<CAPTION>

                                   VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES

                                  CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  For the Six Months Ended June 30, 1997 and 1998
                                                    (unaudited)


                                                                               Six Months Ended June 30,
                                                                                1997                1998
                                                                                ----                ----

CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                          <C>                 <C>       
Net income (loss)                                                            $  (384,507)        $1,932,255
     Adjustments to reconcile net income to net cash
     provided by operating activities-
     Depreciation and amortization                                                   878         2,956,526
     Changes in operating assets (increase) decrease in-
         Accounts receivable                                                          --           (345,905)
         Other current assets                                                 (1,756,530)        (1,259,509)
         Other assets                                                                 --             40,806
     Changes in operating liabilities increase (decrease) in-
         Accounts payable                                                             --          1,758,143
         Other current liabilities                                               772,133          1,235,702
         Other non-current liabilities                                                --           (148,946)
                                                                             -----------        ------------
                    Net cash provided by (used in) operating activities       (1,368,026)         6,169,072

CASH FLOWS FROM INVESTING ACTIVITIES:
     Acquisition of property and equipment                                       (17,438)        (4,210,437)
     Acquisition of businesses, net of cash acquired                                  --        (17,083,148)
     Sale of marketable securities                                                    --         13,231,385
                                                                             -----------         ----------

                   Net cash (used in) investing activities                       (17,438)        (8,062,200)

CASH FLOWS FROM FINANCING ACTIVITIES:
     Collection of subscriptions receivable                                      279,082                 --
     Net payments on borrowings and capital leases                                    --         (2,107,989)
     Cumulative translation adjustments                                               --           (161,513)
     Issuance of common stock                                                         --          2,552,418
                                                                             -----------        -----------

             Net cash provided by financing activities                           279,082            282,916
                                                                             -----------       ------------

             Net (decrease) in cash and cash equivalents                      (1,106,382)        (1,610,212)
                                                                             ------------        -----------

CASH AND CASH EQUIVALENTS, beginning of period                                 1,344,758          4,092,000
                                                                             -----------          ---------

CASH AND CASH EQUIVALENTS, end of period                                     $   238,376         $2,481,788
                                                                             ===========         ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES:
     Capital lease obligations                                               $     --            $   24,717
                                                                             ===========         ===========

</TABLE>

  The accompanying notes to condensed consolidated financial statements 
                    are an integral part of these statements.


<PAGE>


                  VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (unaudited)

(1)    BASIS OF PRESENTATION

       The accompanying  unaudited condensed  consolidated  financial statements
       have been  prepared in  accordance  with  generally  accepted  accounting
       principles for interim financial information and with the instructions to
       Form 10-Q and  Article 10 of  Regulation  S-X.  Accordingly,  they do not
       include  all of the  information  and  footnotes  required  by  generally
       accepted  accounting  principles for complete financial  statements.  The
       financial statements include the accounts of Vestcom International,  Inc.
       (a New Jersey  corporation)  ("Vestcom" or the  "Company"),  the Founding
       Companies (as defined  below),  and subsequent  acquisitions  since their
       respective  acquisition dates. The balance sheet at December 31, 1997 has
       been derived from the audited  financial  statements at that date. In the
       opinion of management,  all adjustments  (consisting of normal  recurring
       adjustments)  considered  necessary  for a fair  presentation  have  been
       included.  Operating  results for the three-month  and six-month  periods
       ended June 30, 1998 are not  necessarily  indicative  of the results that
       may be expected  for the year ending  December 31,  1998.  The  condensed
       consolidated  financial statements should be read in conjunction with the
       consolidated  financial  statements  of the Company and the notes related
       thereto  contained in Vestcom's  Annual  Report on Form 10-K for the year
       ended December 31, 1997.

(2)    NATURE OF BUSINESS

       Vestcom was formed in September 1996 to create an international  provider
       of  computer  output and  document  management  services.  The  Company's
       primary  strategy is to acquire,  integrate and  facilitate the growth of
       similar and  complementary  companies in the highly  fragmented  computer
       output and document management services industry.

       On July 30,  1997,  Vestcom  announced  the  initial  public  offering of
       3,850,000  shares of its common stock (the "Common  Stock") at a price of
       $13.00 per share. The Company's  underwriters exercised in full an option
       to purchase an additional 577,500 shares of the Company's Common Stock at
       $13.00 per share to cover over allotments of the initial public offering.
       The  initial  public  offering  was  consummated  on August 4, 1997.  The
       capital  raised by this  offering  was  $53,528,475  net of  underwriting
       discounts.

(3)    ACQUISITIONS

       Concurrently  with  the  consummation  of the  Company's  initial  public
       offering, it acquired seven companies in the computer output and document
       management  services  industry - Comvestrix  Corp.,  Morris County Direct
       Mail Services, Inc. and related companies,  Image Printing Systems, Inc.,
       Electronic  Imaging  Services,  Inc.,  COS  Information,   Inc.,  Vestcom
       Connecticut,  Inc. (formerly known as Computer Output Systems,  Inc.) and
       Vestcom  Massachusetts,  Inc.  (formerly known as Mystic Graphic Systems,
       Inc.)   (collectively   the   "Founding   Companies").    The   aggregate
       consideration  paid by the  Company to  acquire  the  Founding  Companies
       (including certain earnouts) was, subject to working capital adjustments,
       approximately  $19.1 million in cash (which includes an obligation to pay
       $1,160,000  in the future in  connection  with an earnout) and  3,156,890
       shares of Vestcom Common Stock.  These acquisitions were accounted for as
       of  August  1,  1997  using  the  purchase   method  of  accounting   and
       accordingly, the purchase price has been allocated to the assets acquired
       and the  liabilities  assumed  based upon the fair  values at the date of
       acquisition.  For purposes of computing the estimated  purchase price for
       accounting  purposes,  the value of the  shares  was  determined  using a
       discount of fifteen  percent from the estimated fair market value at date
       of issuance due to  restrictions on the sale and  transferability  of the
       shares issued.  The  acquisitions of the Founding  Companies  resulted in
       goodwill of approximately  $52.4 million which is being amortized over 30
       years,  and is based on preliminary  allocations of the purchase price to
       the net assets acquired and is subject to revisions and certain remaining
       earnout determinations.

<PAGE>


                  VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (unaudited)


       On  November,  14, 1997 the  Company  acquired  substantially  all of the
       assets of Vestcom Rhode Island, Inc. (formerly known as New England Laser
       Printing,  Inc.). On December 15, 1997, the Company acquired the stock of
       Moreau Promotional Services,  Inc., now doing business as Vestcom Ontario
       (formerly  known as Campbell  Abbot Laser Mail),  an Ontario  corporation
       located  in  Toronto,   Canada.   The  aggregate  price  paid  for  these
       acquisitions   was   approximately   $7,000,000   in  cash  and   134,520
       unregistered  shares of Vestcom  Common  Stock,  the fair market value of
       which was based on a fifteen percent  discount from the fair market value
       due to length and type of  restrictions in the purchase  agreements.  The
       estimated  goodwill   associated  with  these   acquisitions   aggregated
       approximately $8,200,000.

       As of January 20, 1998,  the Company  acquired  substantially  all of the
       assets of Creative Data Services, Inc. ("CDS") and D.B. Acquisition, Inc.
       doing business as Business Mail Express  ("BME").  The combined  purchase
       price was  $9,500,000 in cash plus the potential to receive an earnout of
       up to  $2,500,000  payable 50% in cash and 50% in shares of the Company's
       Common  Stock.  The  estimated  fair  value of the assets  purchased  was
       $4,705,000 and the estimated goodwill was $4,795,000.

       The above four  acquisitions were accounted for using the purchase method
       of accounting and  accordingly,  the purchase price has been allocated to
       the  assets  acquired  and the  liabilities  assumed  based upon the fair
       values  at the  dates  of  acquisition.  The  estimated  goodwill  values
       reflected  above are based on preliminary  estimates and  assumptions and
       are  subject  to  revision.   In  management's  opinion  the  preliminary
       allocations  are not expected to be materially  different  than the final
       allocations subject to the potential earnout for CDS and BME.

       On April 14, 1998, the Company  acquired  through Vestcom  Massachusetts,
       Inc.  (formerly  known as Mystic Graphic  Systems,  Inc.,) a wholly owned
       subsidiary based in Woburn Massachusetts, substantially all of the assets
       of Dee Cee  Graphics  Inc.,  also  located in Woburn  Massachusetts.  The
       operations  of Dee  Cee  Graphics  were  consolidated  into  the  Vestcom
       Massachusetts  operations.   Dee  Cee's  1997  revenues  were  less  than
       $1,000,000.

       The following Pro Forma  Statements of Operations for Vestcom assume that
       all acquisitions were consummated on January 1 of the periods  presented.
       This information is not necessarily indicative of the results the Company
       would have  obtained had these events  actually  then  occurred or of the
       Company's actual or future results.

<TABLE>
<CAPTION>

                                                Three Months Ended                          Six Months Ended
                                                ------------------                          ----------------
                                        June 30, 1997         June 30, 1998        June 30, 1997         June 30, 1998
                                     Pro Forma Combined    Pro Forma Combined    Pro Forma Combined   Pro Forma Combined

<S>                                        <C>                    <C>                <C>                   <C>        
Revenues                                   $25,549,732            $25,771,416        $51,731,611           $53,191,834
Income from operations                       2,638,253            1,987,559            5,495,037             4,304,072
Net income                               $   1,276,102          $   907,841            2,745,468             2,026,775

Net income per share - basic                  $.15                   $.10                 $.31                  $.23
Net income per share - diluted                $.14                   $.10                 $.30                  $.22

</TABLE>


<PAGE>


                  VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (unaudited)



     (4)  EARNINGS PER SHARE

       In  December  1997,  the  Company  adopted the  provisions  of  Financial
       Accounting  Standards Board Statement No. 128, "Earnings per Share". This
       statement  supersedes  APB  Opinion  No.  15,  "Earnings  per  Share" and
       simplifies the computation of earnings per share ("EPS").  Primary EPS is
       replaced with a presentation of basic EPS.

       Basic EPS  includes  no  dilution  and is  computed  by  dividing  income
       available to common stockholders by the weighted-average number of common
       shares  outstanding  for the period.  Fully  diluted EPS is replaced with
       diluted  EPS.  Diluted EPS  reflects  the  potential  dilution if certain
       securities  are  converted  and also  includes  certain  shares  that are
       contingently  issuable.  SFAS No. 128 requires dual presentation of basic
       and diluted EPS by entities that issue any securities other than ordinary
       common stock.  The  computation of net income per share for the three and
       six months  ended June 30,  1998,  is based upon  shares of common  stock
       outstanding   and  common  stock   equivalents.   The  following  is  the
       computation of earnings per share:

<TABLE>
<CAPTION>
                                         For the Three Months Ended June 30, 1998       For the Six Months Ended June 30, 1998
                                         ----------------------------------------       --------------------------------------
                                                                         Per Share                                     Per-Share
                                           Net Income       Shares        Amount       Net Income       Shares           Amount
<S>                                       <C>             <C>            <C>           <C>             <C>   
      Basic Earnings Per Share:
      Net income/weighted average
          shares outstanding               $901,858        8,790,565       $0.10     $  1,932,255      8,789,583         $0.22
                                           --------        ---------       -----     ------------      ---------         -----
      Diluted Earnings Per Share:
      Net income/weighted average
          shares outstanding                901,858        8,790,565                    1,932,255      8,789,583
      Goodwill adjustment on
          earnouts                          (23,287)                                      (23,287)
      Stock Options                                              314                                       1,620
      Assumed shares earned
          by Founding Companies                              240,291                                     210,024
                                           ---------       ---------                  -----------      ---------
      Net income/weighted average
          shares outstanding adjusted
          for assumed conversions to
          common stock                   $  878,571        9,031,170       $0.10       $1,908,968      9,001,227         $0.21
                                         ----------        ---------       -----       ----------      ---------         -----
</TABLE>

(5)    COMMITMENTS AND CONTINGENCIES

       In May 1997 the Company  entered into an agreement with CIBC  Oppenheimer
       Corp.  (formerly known as Oppenheimer & Co., Inc., and referred to herein
       as "Oppenheimer") pursuant to which the Company agreed to pay Oppenheimer
       an aggregate amount of up to $1.8 million for advisory  services provided
       by Oppenheimer.  In addition,  Vestcom reimbursed Oppenheimer $75,000 for
       out-of-pocket  expenses related to such services. As of June 30, 1998 the
       Company  had paid  Oppenheimer  $1.0  million  in  connection  with  that
       Agreement and had agreed to pay  Oppenheimer  the additional  $800,000 in
       four quarterly installments.

<PAGE>


                  VESTCOM INTERNATIONAL, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                                   (unaudited)

       Certain  of the  companies  acquired  by  Vestcom  are  eligible  to earn
       additional  amounts,  consisting of a combination of cash and securities,
       as  adjustments  to the  purchase  prices  paid for those  companies.  In
       connection with a determination  of the earnout  payments to three of the
       Founding Companies (including two earnouts which ended as of December 31,
       1997 and the early  settlement  of an earnout which  previously  extended
       through June 1999),  in April,  1998, the Company paid, in the aggregate,
       $1,278,000  in cash,  and issued  304,779  shares of its Common  Stock to
       certain former stockholders of those Founding Companies. In addition, the
       Company  incurred a future  obligation  to pay  $1,160,000  in cash.  The
       increase to goodwill as a result of the above  payments is  approximately
       $5,000,000.

       The  maximum  additional  earnouts  which could be paid if certain of the
       other acquired  companies  attained their revenue and profit goals during
       certain periods ending on or before December 31, 1998 would be $3,800,000
       in  cash  (including  the  $1,160,000  referred  to  above,)  and  up  to
       approximately  325,000  shares of Common Stock (based upon current market
       prices).

(6)    COMPREHENSIVE INCOME

       Statement  of  Financial  Accounting  Standards  Number  130,  "Reporting
       Comprehensive  Income" ("SFAS 130"),  establishes standards for reporting
       and displaying  comprehensive  income and its components in a full set of
       general  purpose  financial  statements.  The objective of SFAS 130 is to
       report a measure of all  changes in equity of an  enterprise  that result
       from  transactions  and other  economic  events of the period  other than
       transactions with owners ("comprehensive  income").  Comprehensive income
       is the total of net  income  and all other  non-owner  changes in equity.
       SFAS 130 is effective for fiscal years beginning after December 15, 1997,
       with  earlier  application  allowed  but  not  required.  Upon  adoption,
       reclassification of comparative  financial  statements provided for prior
       periods is required.  The Company has adopted this standard as of January
       1, 1998.

       The following represents comprehensive income:
<TABLE>
<CAPTION>

                                                           Three Months Ended June 30,             Six Months Ended June 30,
                                                              1997              1998               1997                 1998
<S>                                                        <C>                <C>               <C>                 <C>        
                       Net income (loss)                   $(365,657)         $ 878,571         $(384,507)          $ 1,908,968
                       Foreign  Currency  Translation
                       Adjustment                              --              (129,236)           --                  (161,513)
                                                           ----------         ----------        ----------            ---------
                       Comprehensive Income(loss)          $(365,657)         $ 749,335         $(384,507)          $ 1,747,455
                                                           ==========         =========         ==========          ===========
</TABLE>

(7)    NEW ACCOUNTING PRONOUNCEMENTS

       The  Financial  Accounting  Standards  Board has issued a new  statement.
       Statement  of Financial  Accounting  Standards  Number 131,  "Disclosures
       about  Segments of an Enterprise  and Related  Information"("SFAS  131"),
       introduces  a new model for  segment  reporting,  called the  "management
       approach."  The  management  approach  is based on the way that the chief
       operating  decision maker organizes  segments within a company for making
       operating  decisions and assessing  performance.  Reportable segments are
       based on products and services,  geography,  legal structure,  management
       structure - any manner in which management  disaggregates a company.  The
       management  approach  replaces  the  notion of  industry  and  geographic
       segments in current  FASB  standards.  SFAS 131 is  effective  for fiscal
       years beginning after December 15, 1997 and early adoption is encouraged.
       However,  SFAS 131 need  not be  applied  to  interim  statements  in the
       initial year of application.  SFAS 131 requires  restatement of all prior
       period information  reported.  Management  believes that adoption of SFAS
       131 will not have an impact on its method of reporting  since it believes
       that its business operates in one reportable segment.

(8)    SUBSEQUENT EVENT

       On August 4, 1998, the Company,  through Vestcom Retail  Solutions Group,
       Inc., one of its wholly-owned subsidiaries, acquired substantially all of
       the assets and liabilities of Graphic Technology Systems, Inc. ("GTS"), a
       company  based  in Los  Angeles,  California.  GTS had 1997  revenues  of
       approximately $3 million.

<PAGE>

Item 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
         OF OPERATIONS

OVERVIEW

The following discussion of the financial condition and results of operations of
the  Company  should  be  read  in  conjunction  with  the  Company's  Condensed
Consolidated  Financial  Statements  and the  related  notes  thereto  appearing
elsewhere herein.

DISCLOSURES REGARDING FORWARD LOOKING STATEMENTS

This  Quarterly  Report on Form 10-Q contains  forward-looking  statements  made
pursuant to the safe harbor  provisions  of the  Private  Securities  Litigation
Reform  Act of 1995  ("Forward-Looking  Statements"),  which  involve  risks and
uncertainties.  Important  factors  that could  cause  actual  results to differ
materially from those indicated by such  Forward-Looking  Statements include the
risks and  uncertainties  relating  to the  Company's  ability  to  acquire  and
successfully  integrate acquired companies,  to execute its growth strategy,  to
conduct  activities in a competitive  environment,  to develop and implement new
products and services,  to attract and retain  customers and key executives,  to
the  Company's  assessment of and ability to implement its Year 2000 program and
to the variations in quarterly results, the sufficiency of the Company's working
capital, the ability of the Company to obtain consolidation synergies, including
through the  consolidation of administrative  functions and facilities,  and the
effects  of cross  selling  on the  Company's  revenue,  as well as the  factors
referred  to in the  Company's  Annual  Report on Form  10-K for the year  ended
December  31,  1997 filed with the  Securities  and  Exchange  Commission.  Such
factors also may cause substantial volatility in the Company's Common Stock.

INTRODUCTION

Vestcom  International,  Inc. was  incorporated in September 1996.  Concurrently
with the consummation of the Company's  initial public offering (the "Offering")
on August 4, 1997,  the Company  acquired  seven  computer  output and  document
management  service companies (the "Founding  Companies") each of which had been
operating  as a  separate  independent  entity.  For  accounting  purposes,  the
acquisitions  of the Founding  Companies  were deemed to be made August 1, 1997,
using  purchase  accounting,  with the Company as the  acquirer.  Following  the
Offering,  the Company has  acquired  additional  computer  output and  document
management  services  companies which are detailed below  (collectively with the
Founding Companies referred to herein as "Acquired Companies").

The Company acquired Vestcom Rhode Island,  Inc.  (formerly known as New England
Laser  Printing,  Inc.) and Vestcom  Ontario  (formerly  known as Campbell Abbot
Laser Mail) in November and December 1997,  respectively,  and as of January 20,
1998 the  Company  acquired  substantially  all of the assets of  Creative  Data
Services,  Inc. ("CDS") and of DB Acquisition Inc. (d/b/a Business Mail Express)
a wholly owned subsidiary of CDS ("BME"). On April 14, 1998 the Company acquired
through Vestcom  Massachusetts,  Inc. (formerly known as Mystic Graphic Systems,
Inc.),  a wholly owned  subsidiary,  substantially  all of the assets of Dee Cee
Graphics Inc. ("Dee Cee"). The operations of Dee Cee Graphics were  consolidated
into Vestcom  Massachusetts'  operations.  The Acquired  Companies  were managed
prior to their acquisition as independent  private companies,  and their results
of  operations   reflect   different  tax  structures  (S  corporations   and  C
corporations for the U.S.  Acquired  Companies),  which have  influenced,  among
other things, the Acquired

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF
            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

Companies  historical  levels of owners'  compensation.  In connection  with the
acquisition  of the Acquired  Companies,  these owners and certain key employees
agreed to certain  reductions in their  compensation  which  commenced as of the
date of acquisition.

The Company's Condensed  Consolidated Balance Sheet as of June 30, 1998 includes
the Founding Companies and Vestcom Rhode Island, Inc., Vestcom Ontario, CDS, BME
and Dee Cee. The results of operations for the three months and six months ended
June 30, 1998, and the statement of cash flows for the six months ended June 30,
1998,  include the results of Vestcom and all of the companies  acquired in 1997
for the entire  period,  and CDS and BME from January 20, 1998, and Dee Cee from
April 14, 1998 respectively.

In connection with the Company's acquisitions,  Vestcom has made certain earnout
payments and may be required to pay  additional  earnouts if  specified  revenue
thresholds,  margins or earnings  are attained  during  certain  periods  ending
December 31, 1998. In April,  1998,  the Company paid an aggregate of $1,278,000
in cash and issued 304,779 shares of Vestcom Common Stock to former stockholders
of certain of the Founding  Companies in connection with a determination  of the
earnout  payments  owed to  three  Founding  Companies,  and  incurred  a future
obligation to pay $1,160,000 in cash. After the payments and  determinations  in
April,  the aggregate  maximum earnout payments which Vestcom may be required to
make going forward are $3,800,000 in cash (including the $1,160,000  referred to
above) and up to another  approximately  325,000  shares of Vestcom Common Stock
(based upon current market  prices).  Any payments of earnouts will increase the
goodwill   recorded  for  the  acquisition  of  the  applicable   company.   The
amortization  of any  additional  goodwill  and the  increased  number of shares
issued in connection with earnouts will negatively  affect the Company's  future
earnings per share.

Vestcom, which conducted no operations prior to the consummation of the Offering
other than in connection with the acquisitions of the Founding Companies and the
financing  activities related thereto,  including the Offering,  had no revenues
and  limited  corporate  expenses  in the first six  months of 1997.  Therefore,
Management's Discussion and Analysis based on actual results would compare three
and six months of operating  activity in 1998 to limited  corporate  expenses in
the three months and six months of 1997.  For this and other  reasons  discussed
above,  management believes that Management's Discussion and Analysis would only
be meaningful  based on the unaudited Pro Forma Results of Operations of Vestcom
for the three and six months  ended  June 30,  1998 and the three and six months
ended June 30, 1997,  which assumes that all of the companies  owned at June 30,
1998 were acquired on January 1, respectively of 1997 and 1998.

The following  discussion of Pro Forma Results of Operations is not  necessarily
indicative  of the  results  the Company  would have  obtained  had all of these
acquisitions  actually  then  occurred  or of the  Company's  actual  or  future
results.

PRO FORMA RESULTS OF OPERATIONS

Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997

Pro Forma revenues increased  $1,460,000,  or 2.8%, from $51,732,000 for the six
months  ended June 30,  1997 to  $53,192,000  for the six months  ended June 30,
1998. This increase was primarily  attributable to increased volume of Vestcom's
production of  statements,  point-of  purchase  labels and  micrographics.  This
increase offset the loss of a major customer,  at one of the Founding Companies,
and  lower  revenues  from two of the  companies  acquired  in 1998.  These  two
companies closed certain facilities in 1997, in an effort to downsize and reduce
costs, resulting in a decrease in revenues for those companies in 1998.

Vestcom's Pro Forma gross profit increased  $989,000,  or 5.5%, from $18,112,000
for the six months ended June 30, 1997 to  $19,101,000  for the six months ended
June 30, 1998. The Pro Forma gross profit margin increased from 35.0% in 1997 to
35.9% in 1998 primarily due to improved capacity utilization  resulting from the
increased  volume of business  and the  refinancing  through  capital  leases of
certain  existing  production  equipment  which  resulted  in reduced  lease and
maintenance costs.

<PAGE>


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF

            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)


Pro Forma selling, general and administrative expenses increased $2,180,000,  or
17.3%,  from  $12,617,000  for the six months ended June 30, 1997 to $14,797,000
for the six months ended June 30, 1998.  As a  percentage  of revenues,  selling
general and  administrative  expenses  increased  from 24.4% in 1997 to 27.8% in
1998. The increase in Pro Forma selling, general and administrative expenses was
primarily due to increased  compensation  expense for new  technical  personnel,
increased commissions,  increased administrative expenses to support the greater
volume of business and the costs associated with the increased Vestcom corporate
management  staff.  The majority of the expenses of the Vestcom  corporate staff
operations  did not come into  existence  until  after the  consummation  of the
initial public offering in August of 1997.

Three Months Ended June 30, 1998 Compared to Three Months Ended June 30, 1997

Pro Forma revenues increased  $221,000,  or 0.9%, from $25,550,000 for the three
months  ended June 30, 1997 to  $25,771,000  for the three months ended June 30,
1998. This increase was primarily  attributable to increased volume of Vestcom's
production of  statements,  point-of  purchase  labels and  micrographics.  This
increase offset the loss of a major customer,  at one of the Founding Companies,
and lower revenues from two of the companies  acquired in 1998.  These companies
closed  certain  facilities  in 1997 in an effort to downsize and reduce  costs,
resulting in a decrease in revenues for those companies in 1998.

Vestcom's Pro Forma gross profit  increased  $258,000,  or 2.9%, from $8,868,000
for the three  months  ended June 30, 1997 to  $9,126,000  for the three  months
ended June 30, 1998.  The Pro Forma gross profit margin  increased from 34.7% in
1997 to 35.4% in 1998 primarily due to improved capacity utilization.

Pro Forma selling,  general and administrative  expenses increased $909,000,  or
14.6%,  from  $6,230,000  for the three months ended June 30, 1997 to $7,139,000
for the three months ended June 30, 1998. As a percentage  of revenues,  selling
general and  administrative  expenses  increased  from 24.4% in 1997 to 27.7% in
1998. The increase in Pro Forma selling, general and administrative expenses was
due to the same factors discussed in the six month comparison.

LIQUIDITY AND CAPITAL RESOURCES

The  following  discussion  of  liquidity  and capital  resources  reflects  the
Company's  actual results of operations  and financial  position for the periods
discussed.

On July 30, 1997  Vestcom  International,  Inc.  announced  the  initial  public
offering of 3,850,000 shares of its Common Stock at a price of $13.00 per share.
The Company's underwriters exercised in full an option to purchase an additional
577,500  shares of the Company's  Common Stock at $13.00 per share to cover over
allotments of the initial public  offering.  The capital raised by this offering
was  approximately   $54,000,000  net  of  underwriting   discounts,   of  which
approximately  $35,000,000  was  used  for the  cash  portion  of the  Company's
acquisitions  and  approximately  $12,000,000 was used for the repayment of debt
and capital leases.

At June 30, 1998, Vestcom had working capital of approximately  $2,437,000.  Net
cash  provided by operating  activities  for the six months ended June 30, 1998,
was  approximately  $6,169,000  and was generated  primarily from net income and
depreciation and amortization charges. Net cash used in investing activities for
the six months ended June 30, 1998, was approximately $8,062,000 which consisted
of   approximately   $13,231,000   from  the  sale  of  marketable   securities,
approximately  $17,083,000  of cash  used for  acquisitions,  and  approximately
$4,210,000 used for the purchase of property and equipment. Net cash provided by
financing  activities for the six months ended June 30, 1998, was  approximately
$283,000 which  included  approximately  $2,552,000  from the issuance of common
stock to former  stockholders of certain of the Founding Companies in connection
with earnout  provisions and debt and capital lease  repayments of approximately
$2,108,000.  On August 13,  1997,  the Company and Summit Bank  entered  into an
Equipment Loan and Revolving Credit  Agreement in the amount of $30,000,000.  At
June 30, 1998, the entire credit line was available.

<PAGE>

                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF

            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

The  Company  incurs  postage  costs on behalf  of  customers  of  approximately
$4,000,000 to $6,000,000  each month.  The Company seeks to collect such postage
costs from its customers in advance.  At June 30, 1998,  the Company had postage
advances  from  customers  in the  amount of  approximately  $5,600,000  and had
prepaid  postage and postage  receivables of  approximately  $3,600,000.  To the
extent the Company is unsuccessful in obtaining  postage costs in advance,  cash
flow is  negatively  affected and Vestcom may be required to utilize its working
capital or credit  facility to cover the cash outlay.  Capital  expenditures  of
approximately  $6,000,000  to  $8,000,000  for plant and equipment and leasehold
improvements are anticipated in 1998. This  investment,  which is expected to be
financed  primarily  by working  capital  and vendor  financing,  relates to the
anticipated  facility  consolidations of certain of the operating  companies and
the  purchase of  supplemental  production  equipment  to meet  customer  output
processing  demands.  There  are no other  significant  commitments  for  future
capital  expenditures,  although it is likely that cash  outflows  for  business
acquisitions  and  leases  will  continue.  While  no  assurance  can be  given,
management  believes that its cash flow from  operations  combined with existing
cash and the availability of funds under the Equipment Loan and Revolving Credit
Agreement will be sufficient to meet its working  capital,  capital  expenditure
and debt  service  requirements  and its  current  plans to  acquire  additional
related businesses for the foreseeable future.

IMPACT OF THE YEAR 2000 ISSUE


The Year 2000 Issue is primarily the result of computer  programs  being written
using two  digits  rather  than  four to define  the  applicable  year.  Certain
computer  programs may  recognize a date using "00" as the year 1900 rather than
the year 2000. This could result in a system failure or miscalculations  causing
disruptions of operations,  including, among other things, a temporary inability
to process  transactions,  send  invoices or engage in similar  normal  business
activity.

Vestcom has  conducted an  assessment  of all its systems and prepared a plan to
repair or  replace  systems  that are not  currently  Year 2000  compliant.  The
Company  anticipates that the majority of these changes will be completed during
1998. Since Vestcom processes data prepared by its customers,  and does not have
extensive date dependent  proprietary software to repair or replace,  management
believes that the required  changes to Vestcom's  systems will not be extensive.
The immediately preceding sentences constitute  forward-looking statements under
the Private Securities Litigation Reform Act of 1995.

Vestcom has contacted its major  software and hardware  suppliers to verify that
the systems  Vestcom uses are Year 2000  compliant.  Most vendors have  replied,
however,  written responses are still to be obtained from certain vendors. Their
can be no  assurances  that  other  companies'  systems  on which the  Company's
systems  rely will be timely  converted  or that any such  failure to convert by
another  company  would not have a materially  adverse  effect on the  Company's
systems.

Certain of Vestcom's  customers may need to make  appropriate  changes to modify
the data that they send to Vestcom to make the information  Year 2000 compliant.
The  Company  has not yet  assessed  the  extent  to  which  its  customers  may
experience  Year 2000 Issues.  If customers or others with whom the Company does
business  experience  problems  relating to the Year 2000 Issue,  the  Company's
business,  financial  condition  or results of  operations  could be  materially
adversely affected. A loss of business could result from our customers inability
to implement new work  projects  while  focusing  their  information  technology
resources on Year 2000 issues within their existing systems.

The Company is  continuing  its efforts to timely  address the Year 2000 Issues.
Actual  results  could differ  materially  from the  forward-looking  statements
contained  herein as a result  of a  variety  of  factors,  including  potential
unavailability of technological  resources,  increased expenses  associated with
obtaining such resources and unanticipated technological difficulties.

<PAGE>


                     MANAGEMENT'S DISCUSSION AND ANALYSIS OF

            FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Continued)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

The  Financial  Accounting  Standards  Board has issued  Statement  Number  131,
"Disclosures  About  Segments of an Enterprise and Related  Information"  ("SFAS
131").

SFAS 131 introduces a new model for segment  reporting,  called the  "management
approach".  The management approach is based on the way that the chief operating
decision  maker  organizes  segments  within  a  company  for  making  operating
decisions and assessing  performance.  Reportable segments are based on products
and services,  geography, legal structure,  management structure - any manner in
which management  disaggregates a company.  The management approach replaces the
notion of industry and geographic  segments in current FASB standards.  SFAS 131
is  effective  for fiscal  years  beginning  after  December  15, 1997 and early
adoption  is  encouraged.  However,  SFAS  131 need not be  applied  to  interim
statements in the initial year of application.  SFAS 131 requires restatement of
all prior period information reported. Management believes that adoption of SFAS
131 will not have an impact on its method of  reporting  since it believes  that
its business operates in one reportable segment.

INFLATION

Inflation has not had a material effect on the Company's results of operations.


<PAGE>


                           Part II: Other Information

Item 2 - Changes in Securities and Use of Proceeds

In connection with the payments of earnouts to three of the companies previously
acquired by Vestcom,  the Company issued, in April 1998, an aggregate of 304,779
unregistered  shares of its Common Stock to certain former  stockholders of such
acquired  companies.  These  shares were issued  pursuant to Section 4(2) of the
Securities Act of 1933, as amended.


Item 4 - Submission of Matters to a Vote of Security Holders

The  Company's  Annual  Meeting of  Stockholders  was held on May 28,  1998,  in
Secaucus,  New Jersey. At that meeting,  each of the Board of Director's six (6)
nominees were elected to the Board and the stockholders ratified the appointment
of Arthur Andersen LLP as the Company's independent public accountants for 1998.
The following table sets forth the vote which was realized for each nominee:

----------------------------------------- --------------------------------------
Name                             For                        Authority Withheld
----------------------------------------- --------------------------------------
----------------------------------------- --------------------------------------
Stephen Bova                6,732,660                           2,617
----------------------------------------- --------------------------------------
----------------------------------------- --------------------------------------
Joel Cartun                 6,732,660                           2,617
----------------------------------------- --------------------------------------
----------------------------------------- --------------------------------------
Leonard Fassler             6,732,660                           2,617
----------------------------------------- --------------------------------------
----------------------------------------- --------------------------------------
Brendan Keating             6,732,660                           2,617
----------------------------------------- --------------------------------------
----------------------------------------- --------------------------------------
Fred Lafer                  6,732,660                           2,617
----------------------------------------- --------------------------------------
----------------------------------------- --------------------------------------
Richard White               6,732,660                           2,617
----------------------------------------- --------------------------------------

The results of the  ratification  of the appointment of Arthur Andersen LLP were
as follows 6,734,208 For, 669 Against, 460 Abstain, -0- Broker non-votes.

Item 6 - Exhibits and Reports on Form 8-K

         (a)      Exhibits:

                  27.1 Financial Data Schedule (For Electronic Submission Only)

         (b)      Reports on Form 8-K:

                  None


                                   Signatures

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

                           VESTCOM INTERNATIONAL, INC.



                             By: /s/ Harvey Goldman
                                     Harvey Goldman, Executive Vice President
                                       and Chief Financial Officer

                             Dated: August 13, 1998