UNITED STATES
                       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 September 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 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 of organization)               Identification No.)

     Dwight D. Eisenhower Building
        110 South Ferrall Street
           Spokane, Washington                          99202
     -------------------------------              -----------------
          (Address of principal                       (Zip code)
            executive offices)

     Registrant's telephone number, including area code: (509) 534-6200

     Indicate by check mark whether the registrant (1) has filed all reports
     required to be filed by Section 13 or 15(d) of the Securities Exchange
     Act of 1934 during the 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 number of shares outstanding of each of the issuer's classes
     of common stock, as of the latest practical date:

           Common shares outstanding as of October 30, 1998:  9,911,911

     <PAGE>
     AMBASSADORS INTERNATIONAL, INC.
     FORM 10-Q QUARTERLY REPORT

     Table of Contents

     PART I   FINANCIAL INFORMATION

     Item 1.  Consolidated Financial Statements (unaudited)

                Consolidated Balance Sheets at September 30, 1998 and
                  December 31, 1997
                Consolidated Statements of Income and Comprehensive 
                  Income for the Nine and Three Months Ended 
                  September 30, 1998 and 1997
                Consolidated Statements of Cash Flows for the Nine
                  Months Ended September 30, 1998 and 1997
                Notes to Consolidated Financial Statements

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


     PART II  OTHER INFORMATION

     Item 6.  Exhibits and Reports on Form 8-K


     SIGNATURES
     <PAGE>
     Ambassadors International, Inc.
     Consolidated Balance Sheets (Unaudited)
     September 30, 1998 and December 31, 1997



                                                September 30,  December 31,
                                                    1998           1997
                                                -------------  ------------
                   ASSETS

     Current assets:
       Cash and cash equivalents                $ 61,809,885   $ 22,870,546
       Investments                                33,199,708
       Restricted cash equivalents                   120,000        125,000
       Accounts receivable                         2,494,992      1,753,369
       Prepaid program costs and expenses          9,395,566      2,004,995
       Deferred income taxes                          31,229         31,229
       Other assets                                   88,411        498,129
                                                ------------   ------------
           Total current assets                  107,139,791     27,283,268

     Property, plant and equipment, net            3,548,496      2,148,305
     Investment in joint venture                     464,000        462,500
     Goodwill and covenant-not-to-compete, 
       net of $1,437,577 and $470,196 of
       accumulated amortization                   21,210,681      4,442,734
     Other assets                                    133,069         85,573
     Deferred income taxes                            26,608         26,608
                                                ------------   ------------
           Total assets                         $132,522,645   $ 34,448,988
                                                ============   ============


     The accompanying notes are an integral part of the consolidated
       financial statements.

     <PAGE>
     Ambassadors International, Inc.
     Consolidated Balance Sheets (Unaudited), Continued
     September 30, 1998 and December 31, 1997



                                                September 30,  December 31,
                                                    1998           1997
                                                -------------  ------------
               LIABILITIES AND
             STOCKHOLDERS' EQUITY

     Current liabilities:
       Accounts payable                         $  2,144,531   $  1,616,120
       Accrued expenses                            3,349,658        724,008
       Participants' deposits                     17,621,241      7,397,924
       Customer advances                             633,755        980,834
       Notes payable, current portion                 86,808        171,241
       Unrealized loss on foreign currency
         exchange contracts                          338,343        674,625
                                                ------------   ------------
           Total current liabilities              24,174,336     11,564,752

     Notes payable, due after one year               376,896        328,696
                                                ------------   ------------
           Total liabilities                      24,551,232     11,893,448
                                                ------------   ------------

     Commitments and contingencies 

     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, 9,911,911
         and 6,768,223 shares                         99,119         67,682
       Additional paid-in capital                 89,913,144     13,760,963
       Retained earnings                          18,172,306      8,726,895
       Accumulated other comprehensive loss         (213,156)
                                                ------------   ------------
           Total stockholders' equity            107,971,413     22,555,540
                                                ------------   ------------
           Total liabilities and stock-
             holders' equity                    $132,522,645   $ 34,448,988
                                                ============   ============


     The accompanying notes are an integral part of the consolidated
       financial statements.
     <PAGE>
     Ambassadors International, Inc.
     Consolidated Statements of Income and Comprehensive Income (Unaudited)
     for the nine months and three months ended September 30, 1998 and 1997
     <TABLE>
     <CAPTION>
                                                     Nine Months Ended         Three Months Ended
                                                       September 30,             September 30,
                                                  ------------------------  ------------------------
                                                     1998         1997         1998         1997
                                                  -----------  -----------  -----------  -----------
     <S>                                          <C>          <C>          <C>          <C>
     Revenue                                      $33,651,957  $23,247,371  $14,285,212  $ 9,532,271
                                                  -----------  -----------  -----------  -----------
     Operating expenses:
       Selling and tour promotion                  11,276,307    7,367,535    4,622,852    3,322,905
       General and administrative                  10,264,754    5,673,691    3,984,856    1,959,022
                                                  -----------  -----------  -----------  -----------
                                                    21,541,061  13,041,226    8,607,708    5,281,927
                                                  -----------  -----------  -----------  -----------
     Operating income                              12,110,896   10,206,145    5,677,504    4,250,344
                                                  -----------  -----------  -----------  -----------
     Other income (expense):
       Interest expense                               (19,884)        (648)      (5,086)        (265)
       Interest and dividend income                 2,737,494    1,274,483    1,238,866      411,430
       Realized and unrealized loss on
         investments                                  (25,787)    (508,432)                  (36,286)
       Other, net                                     (12,717)         647      (12,546)
                                                  -----------  -----------  -----------  -----------
                                                    2,679,106      766,050    1,221,234      374,879
                                                  -----------  -----------  -----------  -----------
     Income before income taxes                    14,790,002   10,972,195    6,898,738    4,625,223
     Provision for income taxes                     5,472,301    3,939,057    2,552,533    1,634,895
                                                  -----------  -----------  -----------  -----------
     Income before cumulative effect of change
       in accounting principle                      9,317,701    7,033,138    4,346,205    2,990,328
     Cumulative effect of change in accounting
       principle, net of income taxes                 127,710                   127,710
                                                  -----------  -----------  -----------  -----------
     Net income                                     9,445,411    7,033,138    4,473,915    2,990,328
     Other comprehensive loss:
       Change in unrealized gains and losses
         in foreign exchange contracts, net
          of income taxes                            (213,156)                 (213,156)
                                                  -----------  -----------  -----------  -----------
     Comprehensive income                         $ 9,232,255  $ 7,033,138  $ 4,260,759  $ 2,990,328
                                                  ===========  ===========  ===========  ===========
     </TABLE>
     <PAGE>
     Ambassadors International, Inc.
     Consolidated Statements of Income and Comprehensive Income, Continued
     (Unaudited)
     for the nine months and three months ended September 30, 1998 and 1997
     <TABLE>
     <CAPTION>                                       Nine Months Ended         Three Months Ended
                                                       September 30,             September 30,
                                                  ------------------------  ------------------------
                                                     1998         1997         1998         1997
                                                  -----------  -----------  -----------  -----------
     <S>                                          <C>          <C>          <C>          <C>
     Earnings per share - basic:
       Income per share before cumulative
         effect of change in accounting
         principle                                $      1.08  $      1.04  $      0.44  $      0.44  
       Cumulative effect of accounting change            0.02           --         0.01           --
                                                  -----------  -----------  -----------  -----------
     Net income per share                         $      1.10  $      1.04  $      0.45  $      0.44
                                                  ===========  ===========  ===========  ===========
     Weighted average common shares outstanding     8,610,455    6,756,090    9,910,087    6,761,586
                                                  ===========  ===========  ===========  ===========
     Earings per share - diluted:
       Income per share before cumulative
         effect of change in accounting
         principle                                $      1.05  $      1.03  $      0.43  $      0.43
       Cumulative effect of accounting change            0.01           --         0.01           --
                                                  -----------  -----------  -----------  -----------
     Net income per share                         $      1.06  $      1.03  $      0.44  $      0.43
                                                  ===========  ===========  ===========  ===========
     Weighted average common shares outstanding     8,877,509    6,837,092   10,162,795    6,922,609
                                                  ===========  ===========  ===========  ===========
     </TABLE>

     The accompanying notes are an integral part of the consolidated
       financial statements.
     <PAGE>
     Ambassadors International, Inc.
     Consolidated Statements of Cash Flows (Unaudited)
     for the nine months ended September 30, 1998 and 1997


                                                    1998         1997
                                                 -----------  -----------
     Cash flows from operating activities:
       Net income                                $ 9,445,411  $ 7,033,138
       Adjustments to reconcile net income
         to net cash provided by operating 
         activities:
           Depreciation and amortization           1,470,664      651,288
           Deferred income tax benefit                             (7,017)
           Loss on investments                        25,787      508,432
           Loss on sale of property, plant
             and equipment                            13,857       12,373
           Change in assets and liabilities,
             net of effects of purchases of
             subsidiaries:
               Restricted cash                         5,000       10,000
               Accounts receivable                 1,794,954      (16,799)
               Prepaid program costs and 
                 expenses                         (6,971,954)     174,436
               Other assets                          288,695       42,589
               Accounts payable and accrued 
                 expenses                            388,852    2,555,051
               Participants' deposits              3,338,659   (2,447,446)
               Customer advances                    (347,079)    (571,157)
                                                 -----------  -----------
                   Net cash provided by 
                     operating activities          9,452,846    7,944,888
                                                 -----------  -----------
     Cash flows from investing activities:
       Purchase of property, plant and 
         equipment                                (1,348,003)    (890,235)
       Investment in joint venture                    (1,500)
       Purchase of investments                   (33,199,708)
       Net cash paid for acquisitions of 
         subsidiaries                             (6,316,323)    (311,229)
       Payment for covenant not-to-compete          (200,000)    (117,293)



     The accompanying notes are an integral part of the consolidated
       financial statements.
     <PAGE>
     Ambassadors International, Inc.
     Consolidated Statements of Cash Flows (Unaudited), Continued
     for the nine months ended September 30, 1998 and 1997


                                                    1998         1997
                                                 -----------  -----------
     Cash flows from investing activities,
       Continued:
         Maturity of investments                              $   345,732
         Payments received on (issuance of)
           notes receivable, net                 $   149,455     (162,102)
                                                 -----------  -----------
                 Net cash used in investing
                   activities                    (40,916,079)  (1,135,127)
                                                 -----------  -----------

     Cash flows from financing activities:
       Cash received from exercise of stock
         options                                     142,209      119,470
       Payments of notes payable                     (87,608)    (201,146)
       Net proceeds from sale of common stock     70,347,971
                                                 -----------  -----------
                 Net cash provided by (used in)
                   financing activities           70,402,572      (81,676)
                                                 -----------  -----------
     Net increase in cash and cash 
       equivalents                                38,939,339    6,728,085
     Cash and cash equivalents, beginning 
       of period                                  22,870,546   18,281,433
                                                 -----------  -----------
     Cash and cash equivalents, end of 
       period                                    $61,809,885  $25,009,518
                                                 ===========  ===========
     Non-cash investing and financing
       activities:
         Common shares issued for acquisition
           of subsidiaries                       $ 5,693,438
                                                 ===========


     The accompanying notes are an integral part of the consolidated 
       financial statements.
     <PAGE>
     AMBASSADORS INTERNATIONAL, INC.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     1.  BASIS OF PRESENTATION

         The consolidated financial statements included herein have been
         prepared by Ambassadors International, Inc. (the Company), without
         audit, pursuant to the rules and regulations of the Securities and
         Exchange Commission.  Certain information and footnote disclosures,
         normally included in financial statements prepared in accordance
         with generally accepted accounting principles, have been condensed
         or omitted as permitted by such rules and regulations.  The Company
         believes the disclosures included herein are adequate; however,
         these consolidated statements should be read in conjunction with
         the financial statements and the notes thereto for the year ended
         December 31, 1997 previously filed with the Securities and Exchange
         Commission on Form 10-K.

         In the opinion of management, these unaudited, consolidated
         financial statements contain all of the adjustments (normal and
         recurring in nature) necessary to present fairly the consolidated
         financial position of the Company at September 30, 1998, the
         consolidated results of operations for the nine- and three-month
         periods ended September 30, 1998 and 1997 and the consolidated cash
         flows for the nine-month periods ended September 30, 1998 and 1997. 
         The results of operations for the periods presented may not be
         indicative of those which may be expected for the full year.


     2.  PRINCIPLES OF CONSOLIDATION

         The Company was incorporated in the state of Washington in 1967 and
         was reincorporated on August 4, 1995 in the state of Delaware.  The
         consolidated financial statements include the accounts of 
         Ambassadors International, Inc. and its wholly owned operating
         subsidiaries, Ambassadors Education Group, Inc. (AEG) and
         Ambassadors Performance Group, Inc. (APG).  AEG has two wholly
         owned operating subsidiaries.  All significant intercompany
         accounts and transactions are eliminated in consolidation. 


     3.  1998 ACQUISITIONS

         During the nine months ended September 30, 1998, the Company made
         five acquisitions as described below:

         In February 1998, the Company acquired certain assets of a company
         engaged in providing comprehensive housing reservation,
         registration and travel services for meetings, conventions,
         expositions and trade shows.  That company is located in Boston,
         Massachusetts.  In February 1998, the Company also acquired all of
         the outstanding stock of a performance incentives and meeting
         management company located in Westlake Village, California.  In
         April 1998, the Company acquired all of the outstanding stock of
         <PAGE>
     AMBASSADORS INTERNATIONAL, INC.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

     3.  1998 ACQUISITIONS, CONTINUED

         a performance incentives 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 engaged in providing comprehensive housing
         reservation, registration and travel services for meetings,
         conventions, expositions and trade shows.  That company is located
         in Atlanta, Georgia.

         The total purchase price for these acquisitions was $11.7 million
         and 277,927 shares of the Company's restricted common stock and
         certain contingent consideration.  The common stock issued to
         effect the transactions was recorded at fair value.  The contingent
         consideration to be paid is dependent upon the success of the
         acquired companies' programs.  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.

         These 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 and
         comprehensive income since their respective dates of acquisition.

         As of the date of this report, the Company is engaged in informal
         acquisition discussions with several other companies; however,
         other than the acquisitions described above, the Company is not
         currently a party to any additional agreements. 


     4.  EARNINGS 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.

         The following table presents a reconciliation of the numerators and
         denominators used in the basic and diluted earnings per share
         computations. 
     <PAGE>
     AMBASSADORS INTERNATIONAL, INC.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     4.  EARNINGS PER SHARE, CONTINUED
     <TABLE>
     <CAPTION>
                                               Nine Months Ended         Three Months Ended
                                               September 30,             September 30,
                                               -----------------------   -----------------------
                                               1998         1997         1998         1997
                                               ----------   ----------   ----------   ----------
              <S>                              <C>          <C>          <C>          <C>
              Numerator:
                Income before cumulative
                   effect of change in
                   accounting principle        $9,317,701   $7,033,138   $4,346,205   $2,990,328
                Cumulative effect of account-
                   ing change                     127,710           --      127,710           --
                                               ----------   ----------   ----------   ---------- 
                Net income for basic and
                   diluted earnings per share  $9,445,411   $7,033,138   $4,473,915   $2,990,328
                                               ==========   ==========   ==========   ==========
              Denominator:
                Weighted-average shares 
                   outstanding - basic          8,610,455    6,756,090    9,910,087    6,761,586
                Effect of dilutive common 
                   stock options                  267,054       81,002      252,708      161,023
                                               ----------   ----------   ----------   ----------
                Weighted-average shares 
                   outstanding - diluted        8,877,509    6,837,092   10,162,795    6,922,609
                                               ==========   ==========   ==========   ==========
              Earnings per share - basic:
                Income before cumulative
                   effect of change in
                   accounting principle        $     1.08   $     1.04   $     0.44   $     0.44
                Cumulative effect of account-
                   ing change                        0.02           --         0.01           --
                                               ----------   ----------   ----------   ---------- 
                                               $     1.10   $     1.04   $     0.45   $     0.44
                                               ==========   ==========   ==========   ==========
              Earnings per share - diluted:
                Income before cumulative
                   effect of change in
                   accounting principle        $     1.05   $     1.03   $     0.43   $     0.43
                Cumulative effect of account-
                   ing change                        0.01           --         0.01           --
                                               ----------   ----------   ----------   ---------- 
                                               $     1.06   $     1.03   $     0.44   $     0.43
                                               ==========   ==========   ==========   ==========

      </TABLE>


     5.  SECONDARY OFFERING

         On April 29, 1998, the Company completed a public offering of
         2,838,700 shares of the Company's common stock.  The net proceeds
         of approximately $70.3 million have been used for acquisitions
         related to performance improvement companies and will be used for
         additional acquisitions of educational travel and performance
         improvement companies and related businesses.  These proceeds will
         also be used for general corporate purposes.
     <PAGE>
     AMBASSADORS INTERNATIONAL, INC.
     NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED

     6.  NEW ACCOUNTING PRONOUNCEMENTS

         In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was
         issued, which requires reporting of comprehensive income. 
         Comprehensive income is defined as the change in equity of a
         business enterprise arising from non-owner sources.  There was no
         effect of implementing this statement on January 1, 1998.

         In June 1997, the Financial Accounting Standards Board issued SFAS
         No. 131, "Disclosures About Segments for an Enterprise and Related
         Information."  This Statement requires presentation of segment
         information in reports to shareholders, including disclosures
         about the products and services an entity provides and its major
         customers.  The disclosure required by this statement will be
         provided in the Company's 1998 annual financial statements.

         In June 1998, SFAS No. 133, "Accounting for Derivative Instruments
         and Hedging Activities" was issued.  The Statement is effective
         for all fiscal quarters of all fiscal years beginning after 
         June 15, 1999. The Company has 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 the Statement on July 1,
         1998 resulted in the cumulative effect of an accounting change of
         $127,710, net of income tax, being recognized as income in the
         statement of income.
     <PAGE>
     Item 2. Management's Discussion and Analysis of Financial Condition
             and Results of Operations

     This Quarterly Report on Form 10-Q contains forward-looking
     statements.  A forward-looking statement may contain words such as
     "will continue to be," "will be," "continue to," "expect to,"
     "anticipates that," "to be" or "can impact." Management cautions that
     forward-looking statements are subject to risks and uncertainties that
     could cause the Company's actual results to differ materially from
     those projected in forward-looking statements.

     During 1998, the Company and its subsidiaries acquired five companies
     which operate housing reservation, incentive management and travel
     programs.  Although these companies contributed to the gross program
     receipts and revenues of the consolidated group in the first nine
     months of 1998, due to the timing of the acquisitions and future
     changes which management plans to make to the operations of these
     companies, management believes that the future contribution of these
     five acquisitions will further increase the Company's gross program
     receipts and revenues.

     COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1998 TO THE THREE
     MONTHS ENDED SEPTEMBER 30, 1997

     GROSS PROGRAM RECEIPTS AND REVENUES
     -----------------------------------
     Gross program receipts increased to $37.6 million in the third quarter
     of 1998 from $29.0 million in the third quarter of 1997.  This
     increase is attributed to five acquisitions during 1998 as well as
     growth in APG's existing businesses.  AEG also increased its business,
     recording revenues from 5,228 program participants in the third
     quarter of 1998 versus 4,199 in the same period of 1997.
      
     NET REVENUE
     -----------
     Net revenues increased to $14.3 million in the third quarter of 1998
     from $9.5 million in the comparable 1997 quarter.  This increase in
     net revenue was driven by increases in the gross receipts as well as
     increases in gross margins, from 33% in the third quarter of 1997 to
     39% in the 1998 third quarter.  The increase in net revenue was driven
     by internal growth in both AEG and APG, as well as acquisitions made
     by APG.  The margin increase was primarily driven by AEG.


     SELLING AND TOUR PROMOTION EXPENSES
     -----------------------------------
     The Company's policy is to expense all selling and tour promotion
     costs as they are incurred.

     Selling and tour promotion expenses increased to $4.6 million in the
     quarter ended September 30, 1998 from $3.3 million in the comparable
     quarter in 1997.  This increase is a result of the acquisitions during
     1998 within APG. 
     <PAGE>
     GENERAL AND ADMINISTRATIVE EXPENSES
     -----------------------------------
     General and administrative expenses increased to $4.0 million during
     the quarter ended September 30, 1998 from $2.0 million during the
     quarter ended September 30, 1997.  This increase is primarily due to
     the acquisitions in 1998 within APG as well as increases within APG's
     existing businesses.

     OTHER INCOME/EXPENSE
     --------------------
     Other income includes foreign currency gains or losses, interest
     income, and interest expense.  For the third quarter ended 
     September 30, 1998, other income increased to $1.2 million from $0.4
     million in the comparable 1997 period.  This increase was due to
     interest income from cash management practices on secondary offering
     proceeds.  Net proceeds of approximately $70.3 million were received
     from this offering in April 1998.  The Company is investing the
     offering proceeds in short-term, interest-bearing investments pending
     use of the proceeds.  

     INCOME TAXES
     ------------
     The Company has recorded an income tax provision of $2.6 million for
     the third quarter of 1998, which represents an effective tax rate of
     37%, compared to a $1.6 million income tax provision during the third
     quarter of 1997 or a 35% effective tax rate.  Income tax provisions
     have been recorded based upon the estimated effective income tax rate
     applied to the pre-tax income.

     NET INCOME AND EARNINGS PER SHARE
     ---------------------------------
     Net income for the third quarter of 1998 increased to $4.5 million
     from $3.0 million for the third quarter of 1997.  Net income increased
     $1.5 million although the 47% increase in diluted weighted average
     number of shares outstanding resulted in diluted earnings per share of
     $0.44 compared to $0.43 in the same quarter of 1997.  This small
     increase was the result of the additional number of shares of stock
     issued in the secondary offering in April 1998.  Basic earnings per
     share were $0.45 in the third quarter of 1998 and $0.44 in the third
     quarter of 1997.  The increase in the diluted and basic shares
     outstanding is due to the secondary offering in April 1998.  


     COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1998 TO THE NINE MONTHS
     ENDED SEPTEMBER 30, 1997

     GROSS PROGRAM RECEIPTS
     ----------------------
     Gross program receipts increased to $96.5 million in the nine-month
     period ended September 30, 1998 from $72.3 million in the same period
     of 1997.  This increase is primarily attributed to five acquisitions
     during the first nine months of 1998 as well as development within
     APG's existing business.  AEG's growth in gross receipts also
     contributed to this increase as more program participants have
     traveled in the first nine months 1998 than in the comparable period
     of 1997. 
     <PAGE>
     NET REVENUE
     -----------
     Net revenues increased to $33.7 million in the nine months ended
     September 30, 1998 from $23.2 million in the comparable 1997 period.
     This increase in net revenue was driven by greater business volume
     from both internal growth and acquisitions as well as improvements in
     gross margins.  The increase in gross margins from 32% during the nine
     months ended September 30, 1997 to 35% in the comparable 1998 period
     was primarily driven by AEG.  This $10.4 million increase is a result
     of the aforementioned acquisitions made in 1998 as well as increased
     AEG participants and net revenue per participant.

     SELLING AND TOUR PROMOTION EXPENSES
     -----------------------------------
     The Company's policy is to expense all selling and tour promotion
     costs as they are incurred.

     Selling and tour promotion expenses increased during the nine-month
     period ended September 30, 1998 when compared to the same period in
     1997, to $11.3 million from $7.4 million.  This increase is primarily
     due to the acquisitions during 1998 and the assumption of their
     additional costs within APG, coupled with an increase in marketing
     campaigns within AEG. 

     GENERAL AND ADMINISTRATIVE EXPENSES
     -----------------------------------
     General and administrative expenses increased in the 1998 nine-month
     period to $10.3 million from $5.7 million in the comparable 1997
     period.  This increase is also primarily due to the acquisitions in
     1998 in APG and increases within the existing businesses.

     OTHER INCOME/EXPENSE
     --------------------
     Other income includes foreign currency gains or losses, interest
     income, and interest expense.  For the nine months ended September 30,
     1998, other income increased to $2.7 million from $0.8 million in the
     comparable 1997 period.  This increase was due to interest income
     earned on the $70.3 million of secondary offering proceeds received in
     April 1998. 

     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.  The Company is exposed to credit risk under forward
     contracts and options to the extent that the counter-party is unable
     to perform under the agreement.  The Company anticipates hedging the
     majority of its foreign currency risk in future periods.  There can be
     no assurance that the Company's hedging strategies will be successful
     <PAGE>
     in mitigating the impact of foreign currency fluctuations.  The face
     amount of forward foreign exchange contracts outstanding at 
     September 30, 1998 was $4.3 million.  At September 30, 1998, the cost
     to the Company to terminate such forward exchange contracts with
     counterparties was approximately $338,000.

     INCOME TAXES
     ------------
     The Company has recorded an income tax provision of $5.5 million for
     the nine-month period ended September 30, 1998, which represents an
     effective tax rate of 37%, in comparison to a $3.9 million income tax
     provision for the comparable 1997 period at a 36% effective tax rate. 
     Income tax provisions have been recorded based upon the estimated
     effective income tax rate applied to pre-tax income.

     NET INCOME AND EARNINGS PER SHARE
     ---------------------------------
     Net income for the nine-month period ended September 30, 1998
     increased to $9.5 million from $7.0 million for the comparable 1997
     period.  Even with a 30% increase in diluted weighted average number
     of shares outstanding, the increased net income resulted in diluted
     earnings per share in the nine-month period ended September 30, 1998
     of $1.06 compared to $1.03 for the comparable 1997 period.   Basic
     earnings per share also increased to $1.10 from $1.04 for the nine-
     month period ended September 30, 1998 when compared to the nine-month
     period ended September 30, 1997.  The increase in the basic and
     diluted shares outstanding is due to the secondary offering in April
     1998.

     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 nine-month period ended
     September 30, 1998 increased to $9.5 million from $7.9 million for the
     nine-month period ended September 30, 1997.  The increased cash flow
     from operations results primarily from the $2.4 million increase in
     net income.

     Net cash used in investing activities increased to $40.9 million for
     the nine-month period ended September 30, 1998 from $1.1 million in
     the 1997 comparable period.  The increase is due to $6.3 million cash
     used for business acquisitions and investments purchased with the
     proceeds of the secondary offering in 1998. 

     The Company's financing activities generated $70.4 million during the
     nine months ended September 30, 1998 compared to using $0.1 million
     cash during the comparable 1997 period.  The 1998 activity was
     primarily due to the $70.3 million secondary offering in April 1998.  
     <PAGE>
     The Company does not have any material capital expenditure commitments
     for the ensuing year.   However, the Company is continuing to pursue
     further acquisitions of related educational travel and performance
     improvement companies that will require some of its available cash and
     cash equivalents.  The Company's acquisitions of certain subsidiaries/
     businesses include contingent consideration.  The remaining contingent
     consideration, which is dependent upon the success of the acquired
     companies' businesses, will not have a significant effect on the
     Company's cash flows.

     The Company had $0.3 million in long-term debt at September 30, 1998. 
     The Company has a credit facility available with a bank for $25.0
     million US dollars for foreign currency purchases and forward
     contracts.

     At September 30, 1998, the Company had approximately $95.0 million of
     cash, cash equivalents and liquid investments.  Management believes
     existing cash, cash equivalents, investments and cash flows from
     operations will be sufficient to fund the Company's anticipated
     operating needs, capital expenditures and acquisitions for the
     foreseeable future.


     FOREIGN CURRENCY; HEDGING POLICY
     ---------------------------------
     The substantial majority of the Company's programs takes place outside
     the United States and most foreign suppliers require payment in their
     own 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.  In 1993, the Company initiated a program to hedge against
     these foreign currency risks in the currencies of countries in which
     the largest amount of program pass-through expenses are denominated in
     foreign currency.  To hedge against foreign currency risks, the
     Company has used forward contracts which allow the Company to acquire
     the foreign currency at a fixed price for a specified period of time. 
     The Company also 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 sold.  Additionally, the
     Company purchases futures contracts to similarly hedge its foreign 
     currency risk.  The Company is exposed to credit risk under the
     forward contracts and options to the extent that the counterparty is
     unable to perform under the agreement.  The Company anticipates
     hedging the majority of its foreign currency risk in future periods. 
     There can be no assurance that the Company's hedging strategies will
     be successful in mitigating the impact of foreign currency
     fluctuations.
     <PAGE>
     NEW ACCOUNTING PRONOUNCEMENTS
     -----------------------------
     In June 1997, SFAS No. 130, "Reporting Comprehensive Income," was
     issued, which requires reporting of comprehensive income.
     Comprehensive income is defined as the change in equity of a business
     enterprise arising from non-owner sources. There was no effect of
     implementing this statement on January 1, 1998.

     In June 1997, the Financial Accounting Standards Board issued SFAS No.
     131, "Disclosures About Segments for an Enterprise and Related
     Information."  This Statement requires presentation of segment
     information in reports to shareholders, including disclosures about
     the products and services an entity provides and its major customers.
     The disclosure required by this statement will be provided in the
     Company's 1998 annual financial statements.

     In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
     Hedging Activities" was issued.  The Statement is effective for all
     fiscal quarters of all fiscal years beginning after June 15, 1999; the
     Company has 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 the Statement on July 1, 1998 resulted in
     the cumulative effect of an accounting change of $127,710, net of
     income tax, being recognized as income in the statement of income.


     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 project is
     currently in the assessment phase and, with respect to certain
     information systems and products, is in the remediation phase. The
     Company has been storing years as a four-digit field in all
     <PAGE>
     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 the end of 1998.
     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 is
     expected to be completed by February 1999.  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 compliant.  The Company intends to
     upgrade this software to a Year 2000 compliant version by the end of
     1998.  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 1998 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 cost of remediation of all
     Year 2000 issues.  Costs identified to date have not been material. 
     The Company does not currently expect the total 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 traveling on AEG millennium programs on and immediately 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.
     <PAGE>
     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 April 15, 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 information 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 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.


     PART II.  OTHER INFORMATION


     Items 1, 2, 3, 4 and 5 are not presented as they are not applicable.


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

             Exhibits: 27 - Financial Data Schedule

             Reports on Form 8-K:

             During the period covered by this Quarterly Report on 
             Form 10-Q, the Company filed (i) Amendments No. 1 and No. 2 to
             a Current Report on Form 8-K originally filed on June 5, 1998,
             with respect to the acquisition, by its wholly owned
             subsidiary, APG, of the common stock of Incentive Associates,
             Inc.; and (ii) a Current Report on Form 8-K with respect to
             the acquisiton, by APG, of certain assets of Destination, Inc.
     <PAGE>
     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.


     AMBASSADORS INTERNATIONAL, INC.

     Date: November 16, 1998    By: /s/Jeffrey D. Thomas
           -----------------        ----------------------------------
                                    Jeffrey D. Thomas, 
                                    Chief Financial Officer
<PAGE>