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

                                   FORM 10-QSB

          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended July 31, 1998

          [ ] 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 0-8422
                                                 ------

                           TRANSACT INTERNATIONAL INC.
        -----------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)

           CONNECTICUT                                     06-0732124
--------------------------------               ---------------------------------
(State or other jurisdiction of                (IRS Employer Identification No.)
incorporation  or  organization)

                  22 THORNDAL CIRCLE, DARIEN, CONNECTICUT 06820
                  ---------------------------------------------
                    (Address of principal executive offices)

                                 (203) 656-0777
                           ---------------------------
                           (Issuer's telephone number)


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


     Check  whether  the issuer (1) filed all  reports  required  to be filed by
Section 13 or 15 (d) of the  Exchange Act during the past 12 months (or for such
shorter period that the issuer was required to file such  reports),  and (2) has
been subject to such filing requirements for the past 90 days.

YES  [X]    NO  [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

     State the number of shares  outstanding of each of the issuer's  classes of
common equity as of August 14, 1998 was 6,123,235.

     Transitional Small Business Disclosure Format (check one):  YES [ ]  NO [X]

<PAGE>

                           TRANSACT INTERNATIONAL INC.

                    FORM 10-QSB - QUARTER ENDED JULY 31, 1998


                                    CONTENTS


                                                                           Page
                                                                           ----

PART I    FINANCIAL INFORMATION

Item 1    Financial Statements

          Balance Sheets
          July 31, 1998 (Unaudited) and April 30, 1998 ..................   3

          Statements of Operations (Unaudited)
          Three Months Ended July 31, 1998 and July 31, 1997 ............   4

          Statements of Cash Flows (Unaudited)
          Three Months Ended July 31, 1998 and July 31, 1997 ............   5

          Notes to the Financial Statements (Unaudited) .................   6


 Item 2   Management's Discussion and Analysis of Financial
          Condition and Results of Operations ...........................   8


PART II  OTHER INFORMATION

Item 6   Exhibits and Reports on Form 8-K ...............................   9


SIGNATURE ...............................................................   9

                                       2
<PAGE>

                          PART I: FINANCIAL INFORMATION
                          -----------------------------

                           TRANSACT INTERNATIONAL INC.

                                 BALANCE SHEETS

<TABLE>
<CAPTION>
                                                               JULY 31,      APRIL 30,
                                                                 1998          1998
                                                             -----------    -----------
ASSETS                                                       (UNAUDITED)
CURRENT ASSETS
<S>                                                          <C>            <C>        
     Cash                                                    $     1,412    $    53,307
     Accounts receivable, net of allowance for doubtful
       accounts of $58,000                                       738,947        643,109
     Inventories                                                 180,903        209,121
     Costs and estimated earnings in excess of billings on
       incomplete contracts                                      106,092        114,602
     Prepaid expenses and other current assets                    11,488         20,382
                                                             -----------    -----------
       TOTAL CURRENT ASSETS                                    1,038,842      1,040,521

PROPERTY, PLANT AND EQUIPMENT, AT COST                           301,628        301,628
     Less accumulated depreciation                              (281,995)      (278,677)
                                                             -----------    -----------
                                                                  19,633         22,951

OTHER ASSETS                                                       2,300          2,300
                                                             -----------    -----------
       TOTAL ASSETS                                          $ 1,060,775    $ 1,065,772
                                                             ===========    ===========

LIABILITIES AND STOCKHOLDERS' DEFICIENCY
CURRENT LIABILITIES
     Bank borrowings                                         $    37,500    $    56,250
     Note payable to stockholder                                  65,000         85,000
     Trade accounts and notes payable                          1,346,641      1,328,721
     Accrued expenses                                            373,506        354,065
     Current portion of long-term debt                            23,657         23,657
     Billings in excess of costs and estimated earnings on
       Incomplete contracts                                      354,056        417,807
                                                             -----------    -----------
       TOTAL CURRENT LIABILITIES                               2,200,360      2,265,500

STOCKHOLDERS' DEFICIENCY
     Preferred stock, no par value, authorized
       2,000,000 shares, none issued                                  --             --
     Common stock, no par value, authorized
       12,000,000 shares, issued 6,201,735 shares                852,541        852,541
     Additional paid-in capital                                5,224,726      5,224,726
     Treasury stock, at cost : 78,500 shares                     (29,606)       (29,606)
     Deficit                                                  (7,187,246)    (7,247,389)
                                                             -----------    -----------
       TOTAL STOCKHOLDERS' DEFICIENCY                         (1,139,585)    (1,199,728)
                                                             -----------    -----------
       TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY        $ 1,060,775    $ 1,065,772
                                                             ===========    ===========
</TABLE>

SEE NOTES TO FINANCIAL STATEMENTS.

                                       3
<PAGE>

                           TRANSACT INTERNATIONAL INC.

                            STATEMENTS OF OPERATIONS

                                   (Unaudited)

                                                        THREE MONTHS ENDED
                                                   ----------------------------

                                                     7/31/98          7/31/97
                                                   -----------      -----------
SALES:
      Net Sales                                    $   380,827      $   959,461
      Licensing Fees                                   400,000               --
                                                   -----------      -----------
                                                       780,827          959,461
COSTS AND EXPENSES :
     Cost of sales                                     472,085          889,300
     Selling and administrative                        240,397          326,978
                                                   -----------      -----------
                                                       712,482        1,216,278
                                                   -----------      -----------

INCOME (LOSS) FROM OPERATIONS                           68,345         (256,817)

OTHER (EXPENSE) INCOME:
     Interest expense                                   (8,202)          (3,004)
     Other income                                           --           12,161
                                                   -----------      -----------
                                                        (8,202)           9,157
                                                   -----------      -----------

NET  INCOME (LOSS)                                 $    60,143      $  (247,660)
                                                   ===========      ===========
NET INCOME (LOSS) PER SHARE OF
     COMMON STOCK - BASIC AND DILUTED              $       .01      $      (.04)
                                                   ===========      ===========
WEIGHTED AVERAGE SHARES
     OUTSTANDING                                     6,123,235        6,123,235
                                                   ===========      ===========

SEE NOTES TO FINANCIAL STATEMENTS.

                                       4
<PAGE>

                           TRANSACT INTERNATIONAL INC.

                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                                THREE MONTHS ENDED
                                                                              ----------------------
                                                                               7/31/98      7/31/97
                                                                              ---------    ---------
OPERATING ACTIVITIES:
<S>                                                                           <C>          <C>       
     Net income (loss)                                                        $  60,143    $(247,660)
     Adjustments to reconcile net income (loss) to cash used in operations:
         Depreciation of property, plant and equipment                            3,318        6,332
         Changes in assets and liabilities :
              Accounts receivable                                               (95,838)     152,349
              Inventories                                                        28,218      (22,997)
              Other current assets                                                8,894        7,714
              Costs and estimated earnings in excess of billings on
                 incomplete contracts - net                                     (55,241)     (15,000)
              Trade accounts and notes payable and accrued expenses              37,361       15,724
                                                                              ---------    ---------
NET CASH USED IN OPERATIONS :                                                   (13,145)    (103,538)

INVESTING ACTIVITIES :
     Capital expenditures                                                            --       (5,414)
                                                                              ---------    ---------
NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES:                                 --       (5,414)

FINANCING ACTIVITIES :
     Proceeds from stockholder loan                                                  --      100,000
     Repayment of debt                                                          (38,750)     (18,750)
                                                                              ---------    ---------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES:                            (38,750)      81,250
                                                                              ---------    ---------

NET DECREASE IN CASH AND CASH EQUIVALENTS                                       (51,895)     (27,702)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD                                   53,307       85,370
                                                                              ---------    ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD                                      $   1,412    $  57,668
                                                                              =========    =========
SUPPLEMENTAL CASH FLOW INFORMATION :
     Cash paid during the period for Interest                                 $   8,202    $   3,004
</TABLE>


SEE NOTES TO FINANCIAL STATEMENTS.

                                       5
<PAGE>

                           TRANSACT INTERNATIONAL INC.

                  NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)


1.   The  accompanying  financial  statements  have been prepared  assuming that
     Transact  International  Inc.  (the  "Company")  will  continue  as a going
     concern.  The Company's ability to continue as a going concern is uncertain
     based on the matters discussed in the next three sentences. The Company has
     a stockholders' deficiency and working capital deficiency of $1,139,585 and
     $1,161,518,  respectively,  at July 31, 1998. The Company's backlog is $2.4
     million at July 31, 1998 and the Company is seeking  additional  orders and
     is  exploring  the sale or licensing  of certain  product  lines that would
     enable the  Company to continue as a going  concern.  However,  there is no
     assurance  that the Company  will be  successful  in  attaining  additional
     profitable orders or in selling or licensing certain product lines.

     The balance sheet as of July 31, 1998, and the statements of operations and
     cash  flows for the three  months  ended  July 31,  1998 and 1997 have been
     prepared by the Company,  without audit. In the opinion of management,  all
     adjustments (which include only normal recurring  adjustments) necessary to
     present fairly the financial  position,  the results of operations and cash
     flows at July 31, 1998 and all periods presented have been made.

     Certain information and footnote disclosures normally included in financial
     statements  prepared  in  accordance  with  generally  accepted  accounting
     principles  have been  condensed  or omitted.  These  financial  statements
     should  be read in  conjunction  with the  financial  statements  and notes
     thereto  included  in  the  Company's  April  30,  1998  annual  report  to
     stockholders.   Seasonality   is  not  a  major  factor  in  the  Company's
     operations. The results of operations for the three-month period ended July
     31, 1998 are not necessarily indicative of those for a full fiscal year.


2.   Inventories consist of raw materials and manufacturing supplies.


3.   On June 4, 1997 a stockholder  of the Company  loaned the Company  $100,000
     with interest at 8% per annum.  The Company has repaid  $35,000 of the loan
     with the balance including  interest payable with the proceeds of a project
     in India.

     Due to the  loss for the year  ended  April  30,  1998 the  Company  was in
     default of its term loan with its bank and  therefore  the balance  owed at
     April 30,  1998 of $56,250 was  classified  as a current  liability  in the
     April 30, 1998 balance  sheet.  The Company is continuing to repay the bank
     $6,250 per month plus interest.

4.   The Company's licensing agreement with CIMC-TianDa,  a Chinese manufacturer
     was amended.  The revision  provided for total  compensation if $680,000 of
     which  $200,000 was recorded in April 1998,  $400,000 in the quarter  ended
     July 31, 1998 and $80,000 will be recorded when received in November  1998.
     The  $400,000  recorded  in the quarter  ended July 31,  1998 was  received
     $100,000 in June and  $300,000 in August  1998.  The Company has no further
     obligations to CIMC-TianDa pursuant to this licensing agreement.

                                       6
<PAGE>

                           TRANSACT INTERNATIONAL INC.

                  NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
                                   (CONTINUED)



5.   Amounts per share have been computed  using the weighted  average number of
     common shares  outstanding  during each period. No effect has been given to
     shares  issuable  pursuant to outstanding  options as their effect would be
     not material or antidilutive.

6.   There were no income  taxes in the three month  period  ended July 31, 1998
     because the Company had a  substantial  net  operating  loss  carryforward.
     There was no benefit for income  taxes in the three month period ended July
     31, 1997, as the loss generated  cannot be carried back to offset income in
     prior years.

     The  Company  has  operating  loss  carryovers  and  investment  tax credit
     carryforwards  for tax return  purposes  of  approximately  $7,000,000  and
     $2,000 respectively, expiring in 1998 through 2010.

     The tax  effects of  temporary  differences  giving  rise to the  Company's
     deferred tax assets at July 31, 1998 are as follows:

              Net operating loss carryforward         $ 2,600,000
              Investment tax credit carryforward            2,000
              Other reserves and liabilities               83,000
                                                      -----------
                                                        2,685,000
              Valuation allowance                      (2,685,000)
                                                      -----------
                                                      $        --
                                                      ===========

     Due to the Company's  cumulative losses,  management does not consider that
     enough  support to overcome the "more likely than not" criteria  existed at
     July 31, 1998 to record a deferred tax asset.  As a result,  for  financial
     reporting  purposes,  deferred  tax assets are reduced by a full  valuation
     allowance.

                                       7
<PAGE>

                           TRANSACT INTERNATIONAL INC.

                MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL

                       CONDITION AND RESULTS OF OPERATIONS


RESULTS OF OPERATIONS:

The  Company  had net  income of $60,143  in the first  quarter  of fiscal  1999
compared to a net loss of $247,660 for the first quarter of fiscal 1998. The net
income results primarily from licensing fees of $400,000 that the Company earned
applicable to a license agreement as amended for certain terminal equipment with
a Chinese  manufacturer.  Excluding the licensing fees the revenue for the first
quarter of fiscal 1999 was $380,827  compared to $959,461 for the first  quarter
of fiscal 1998.  The decline in revenue is due to the stoppage on the New Delhi,
India  project  which is expected to resume in October  1998 and the lack of any
new major  projects.  Gross profit as a percentage of net sales was negative and
7% respectively  for the three months ended July 31, 1998 and 1997. The negative
gross  profit was due to very low net sales,  the gross  profit from which,  was
less than costs including the operations in the Memphis plant facility.  Selling
and  administrative  expenses  decreased  approximately  $86,600  in the  fiscal
quarter  ended  July 31,  1998  compared  to July 31,  1997.  The  decrease  was
primarily a reduction in officer  salaries and legal expenses net of an increase
in uncollectible accounts receivable written off.

The  Company  sales  order  backlog as of July 31,  1998 is  approximately  $2.4
million of which $1.7 million is for the New Delhi,  India  project which is not
expected to resume in production  until  October  1998.  This compares to a $3.0
million backlog at July 31, 1997.

LIQUIDITY AND CAPITAL RESOURCES:

During the three  months ended July 31,  1998,  the Company  used  approximately
$13,000  in cash in its  operations.  This  usage  primarily  resulted  from the
increase  in  accounts  receivable  offset by net  income.  At July 31, 1998 the
Company has a working capital deficiency of $1,161,518.

The Company's  ability to continue in business is dependent  upon its ability to
increase profitability and/or sell or license certain product lines. The Company
is currently  seeking  additional orders and is exploring the sale or license of
certain  product  lines that would  enable the  Company to  continue  as a going
concern.  However,  there is no assurance that the Company will be successful in
attaining  additional  profitable  orders or in  selling  or  licensing  certain
product lines.

                                       8
<PAGE>

                           PART II: OTHER INFORMATION
                           --------------------------

                           TRANSACT INTERNATIONAL INC.


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

           (a)  Exhibits - 27 - Financial Data Schedule
           (b)  Reports on Form 8-K - None


                                    SIGNATURE


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.



                                        TRANSACT INTERNATIONAL INC.
                                        ---------------------------
                                        Registrant


Date:  September 11, 1998               /s/ Bruno S. Frassetto
-------------------------               -----------------------------------
                                        Bruno S. Frassetto
                                        President and Acting Chief Financial
                                        Officer

                                       9