SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    FORM 10-Q



                   Quarterly Report Under Section 13 or 15(d)
                     of the Securities Exchange Act of 1934


   For the Quarter Ended                                Commission File Number
     September 30, 1998                                           0-19516


                    SUNRISE INTERNATIONAL LEASING CORPORATION
             (Exact name of registrant as specified in its charter)


              DELAWARE                                      41-1632858
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)

                        5500 Wayzata Boulevard, Suite 725
                         Golden Valley, Minnesota 55416
                    (Address of principal executive offices)

               Registrant's telephone number, including area code
                                 (612) 593-1904


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

7,822,796 shares of Common Stock, $.01 par value as of October 20, 1998.





<PAGE>


PART I - FINANCIAL INFORMATION

Item 1.  Financial Statements
          Included herein is the following unaudited financial information:

          Consolidated Balance Sheets as of September 30,1998 and March 31,1998.

          Consolidated Statements of Operations for the three and six month
          periods ended September 30, 1998 and 1997.

          Consolidated Statements of Cash Flows for the six month periods ended
          September 30, 1998 and 1997.

          Notes to Consolidated Financial Statements.


<PAGE>


SUNRISE INTERNATIONAL LEASING CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS (Unaudited)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                                    September 30,             March 31,
                                                                                          1998                    1998
                                                                                    ---------------     --------------
<S>                                                                                 <C>                <C>             
ASSETS
   Cash and cash equivalents                                                        $     1,066,000    $      2,140,000
   Accounts receivable, less allowance for doubtful accounts
     of $564,000 and $260,000                                                             1,070,000           3,413,000
   Income taxes receivable                                                                       --             672,000
   Inventory held for sale                                                                  184,000             207,000
   Loans receivable, less allowance for possible losses of $1,132,000
     and $1,105,000                                                                       2,317,000           3,328,000

   Investment in leasing operations:
     Direct financing leases                                                             21,107,000          27,200,000
     Operating leases, less accumulated depreciation of
       $29,838,000 and $24,646,000                                                       57,386,000          49,687,000
     Equipment held for lease                                                             1,886,000           4,262,000
      Initial direct costs                                                                  325,000             451,000
                                                                                    ---------------    ----------------
       Total investment in leasing operations                                            80,704,000          81,600,000
                                                                                    ---------------    ----------------

   Furniture and fixtures, less accumulated depreciation
     of $601,000 and $658,000                                                               254,000             326,000
   Other assets                                                                           2,213,000           2,254,000
                                                                                    ---------------    ----------------
       Total Assets                                                                $     87,808,000    $     93,940,000
                                                                                   ================    ================

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
   Financing arrangements:
     Notes payable                                                                  $     8,598,000    $      6,661,000
     Securitized borrowings                                                               2,190,000            7,532,00
     Discounted lease rentals                                                            19,571,000          25,476,000
     Notes payable to King Management Corporation                                        15,042,000          14,986,000
                                                                                    ---------------    ----------------
       Total financing arrangements                                                      45,401,000          54,655,000
                                                                                     --------------    ----------------
Accounts payable                                                                            748,000           1,457,000
   Accrued liabilities                                                                    4,857,000           3,085,000
   Accrued income taxes                                                                     438,000                  --
   Deferred tax liability                                                                 3,735,000           3,735,000
                                                                                    ---------------    ----------------
       Total Liabilities                                                                 55,179,000          62,932,000
                                                                                    ---------------    ----------------

COMMITMENTS AND CONTINGENCIES (Note 6)

SHAREHOLDERS' EQUITY
   Common stock, $.01 par value, 17,500,000 shares authorized
     7,823,000 shares issued and outstanding, respectively                                   78,000              78,000
   Capital stock, undesignated, $.01 par value,
     2,500,000 shares authorized, none issued or outstanding                                     --                  --
   Additional paid-in capital                                                            27,773,000          27,655,000
   Retained earnings                                                                      4,778,000           3,275,000
                                                                                    ---------------      --------------
       Total Shareholders' Equity                                                        32,629,000          31,008,000
                                                                                    ---------------      --------------
       Total Liabilities and Shareholders' Equity                                  $     87,808,000        $ 93,940,000
                                                                                   ================        ============
</TABLE>

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

<PAGE>

SUNRISE INTERNATIONAL LEASING CORPORATION AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                     Three Months                           Six Months
                                                 Ended September 30,                    Ended September 30,
                                            ---------------------------------       -----------------------
                                                   1998               1997               1998                1997
                                            -----------------   -------------       ---------------    ----------

<S>                                          <C>                  <C>               <C>                <C>          
REVENUES
   Operating leases                          $     9,420,000    $     8,316,000     $    18,156,000    $    16,236,000
   Direct financing leases                           704,000          1,288,000           1,549,000          2,678,000
   Equipment sales                                 1,872,000          1,763,000           3,571,000          3,420,000
   Interest Income                                    14,000             67,000             14,000             137,000
   Fee income                                         61,000            194,000             175,000            282,000
                                             ---------------    ---------------     ---------------    ---------------
   Total Revenues                                 12,071,000         11,628,000          23,465,000         22,753,000
                                             ---------------    ---------------     ---------------    ---------------

COSTS AND EXPENSES
   Depreciation                                    5,911,000          4,621,000          11,377,000          8,953,000
   Interest                                          931,000          1,395,000           1,971,000          2,886,000
   Provision for lease and loan losses               416,000            345,000             829,000            615,000
   Cost of equipment sold                          1,704,000          1,807,000           3,423,000          3,457,000
   Compensation expense                              812,000            872,000           1,597,000          1,836,000
   Other operating expenses                          836,000            745,000           1,537,000          1,479,000
                                             ---------------    ---------------     ---------------    ---------------
     Total Costs and Expenses                     10,610,000          9,785,000          20,734,000         19,226,000
                                             ---------------    ---------------     ---------------    ---------------

INCOME BEFORE PROVISION
   FOR INCOME TAXES                                1,461,000          1,843,000           2,731,000          3,527,000

PROVISION FOR INCOME TAXES                           658,000            885,000           1,229,000          1,692,000
                                             ---------------    ---------------     ---------------    ---------------

NET INCOME                                   $       803,000    $       958,000     $     1,502,000    $     1,835,000
                                             ===============    ===============     ===============    ===============

NET INCOME PER COMMON
     Basic and Diluted                       $         0.10     $          0.12     $          0.19    $          0.24
                                             ==============     ===============     ===============     ==============

WEIGHTED AVERAGE NUMBER
   OF COMMON
   SHARES OUTSTANDING
     Basic                                        7,820,000           7,856,000           7,812,000          7,586,000
                                             ==============     ===============     ===============    ===============
     Fully Diluted                                7,846,000           7,856,000           7,839,000          7,586,000
                                             ==============     ===============     ===============    ===============

</TABLE>

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




<PAGE>


SUNRISE INTERNATIONAL LEASING CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
-------------------------------------------------------------------------------
<TABLE>
<CAPTION>

                                                                              Six Months
                                                                          Ended September 30,
                                                                    1998                   1997
                                                                ---------------     ---------------
<S>                                                                 <C>            <C>            
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                            1,502,000     $     1,835,000
Adjustments to reconcile net income to net cash
      provided by operating activities:
    Provision for lease and loan losses                                 829,000             615,000
    Depreciation and amortization                                    11,565,000           9,358,000
    Stock options issued to non-employees                                26,000                 --
                                                                                                
    Change in operating assets and liabilities:
        Accounts receivable                                           2,014,000             (41,000)
    Income taxes receivable                                             672,000           1,245,000
        Other assets                                                    (22,000)             98,000
    Inventory held for sale                                              23,000            (135,000)
    Accounts payable                                                   (709,000)         (2,407,000)
    Accrued liabilities                                               1,773,000            (912,000)
    Accrued income taxes                                                438,000           1,100,000
                                                                ---------------     ---------------
           NET CASH PROVIDED BY OPERATING
              ACTIVITIES                                             18,111,000          10,756,000
                                                                ---------------     ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of equipment for lease                                 (21,363,000)        (18,666,000)
    Principal portion of direct financing leases collected           10,334,000          13,914,000
    Principal portion of loans receivable collected                   1,011,000           1,876,000
    Purchase of furniture and fixtures                                   (7,000)            (52,000)
                                                                ----------------    ----------------
NET CASH USED IN INVESTING ACTIVITIES                               (10,025,000)         (2,928,000)
                                                                ----------------    ----------------
CASH FLOWS FROM FINANCING ACTIVITIES

    Borrowings on notes payable                                      19,130,000          22,999,000
    Payments on notes payable                                       (17,194,000)        (16,132,000)
    Payments on securitized borrowings                               (5,341,000)         (6,313,000)
    Proceeds from discounted lease financing                          2,813,000           4,492,000
    Payments on discounted lease financing                           (8,717,000)        (12,278,000)
    Payments on participations in loans receivable                                         (401,000)
    Proceeds from note payable to related party                       4,295,000
    Payments on note payable to related party                        (4,238,000)                 --
    Stock option exercises                                               92,000                  --
                                                                ---------------     ---------------
        NET CASH USED IN FINANCING
              ACTIVITIES                                             (9,160,000)         (7,633,000)
                                                                ----------------    ----------------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                 (1,074,000)            195,000

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                      2,140,000           2,191,000
                                                                ---------------     ---------------

CASH AND CASH EQUIVALENTS AT END OF PERIOD                      $     1,066,000     $     2,386,000
                                                                ===============     ===============

SUPPLEMENTAL CASH FLOW INFORMATION
    Interest paid                                                     1,083,000           1,621,000
Income taxes paid (received)                                             28,000            (700,000)
Stock issued in arbitration settlement (See Note 6)                                       2,022,000

</TABLE>

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



<PAGE>


SUNRISE INTERNATIONAL LEASING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE AND SIX MONTH PERIOD ENDED SEPTEMBER 30, 1998 and 1997 (Unaudited)
-------------------------------------------------------------------------------

1.   ACCOUNTING POLICIES

     In the opinion of management, the accompanying financial statements contain
     all adjustments necessary to present fairly the financial position of
     Sunrise International Leasing Corporation (formerly known as Sunrise
     Resources, Inc.) and Subsidiaries (the Company) as of September 30, 1998
     and March 31, 1998 and the results of operations and cash flows for the six
     months ended September 30, 1998 and 1997. All such adjustments are of a
     normal and recurring nature.

     These statements should be read in conjunction with the Consolidated
     Financial Statements and the notes thereto, and "Management's Discussion
     and Analysis of Financial Condition and Results of Operations" contained in
     the Company's Annual Report on Form 10-K for the fiscal year ended March
     31, 1998, filed with the Securities and Exchange Commission, and with
     "Management's Discussion and Analysis of Financial Condition and Results of
     Operations" appearing in this quarterly report. Results for the interim
     periods are not necessarily indicative of sales trends or future results
     and performance.

     During March 1997, the Financial Accounting Standards Board released SFAS
     No. 128, Earnings per Share, which requires the disclosure of basic
     earnings per share and fully diluted earnings per share. The Company
     adopted SFAS No. 128 in fiscal 1998 and it has had no material impact on
     the financial position or the results of operations of the Company.

     In June 1997, the Financial Accounting Standards Board issued SFAS No. 131,
     Disclosures about Segments of an Enterprise and Related Information, which
     will be effective for the Company beginning April 1, 1998. SFAS No. 131
     redefines how operating segments are determined and requires disclosure of
     certain financial and descriptive information about a company's operating
     segments. The Company has not yet completed its analysis and final
     determination of future reporting segments.

     Comprehensive income, as defined by SFAS No. 130, Reporting Comprehensive
     Income, for the periods presented are equivalent to net income.

     In June 1998, the Financial Accounting Standards Board released SFAS No.
     133 "Accounting for Derivative Instruments and Hedging Activities", which
     will be effective for the Company beginning April 1, 2000. SFAS No. 133
     establishes new accounting and reporting standards for the derivative
     instruments embedded in other contracts, and for hedging activities. The
     Company has not yet completed its analysis of the effect, if any, this
     standard will have on future operating results.

2.   INCOME TAXES

     Income tax expense has been provided based on management's estimate of the
     annualized effective tax rate of 45% for the six months ended September 30,
     1998, and 48% for the six months ended September 30, 1997.

3.   LOANS RECEIVABLE

     Loan Portfolio Activity and Allowance for Possible Loan Losses

     As of September 30, 1998 and March 31, 1998, the Company's recorded
     investment in impaired loans and the related valuation allowances were as
     follows:
<TABLE>
<CAPTION>

                                      September 30, 1998                       March 31, 1998
                             ------------------------------------    ------------------------
                                  Recorded           Valuation          Recorded            Valuation
                                 Investment          Allowance         Investment           Allowance

<S>                          <C>                 <C>                 <C>                <C>           
     Impaired loans          $    3,449,000      $    1,132,000      $    4,433,000     $    1,105,000
                             ================    ==============      ===============    ==============
</TABLE>

<PAGE>

4.   DISCOUNTED LEASE RENTALS

     Discounted lease rentals consist of the following:
                                           September 30,         March 31,
                                               1998                1998
                                          ---------------    ---------------

         Non-recourse                     $    18,657,000    $    23,697,000
         Recourse                                 914,000          1,779,000
                                          ---------------    ---------------
                                           $   19,571,000    $    25,476,000
                                           ==============    ===============

5.   FINANCING ARRANGEMENTS

     Lines of Credit

     The Company has a $25 million line of credit facility with a bank for use
     in its normal operations. Advances under this line of credit are subject to
     a borrowing base limitation of $25.0 million at September 30, 1998. The
     loan balance outstanding as of quarter end was $8.6 million. Advances under
     the line bear interest at prime, (8.5% at September 30, 1998) and are
     collateralized by substantially all otherwise unsecured assets of the
     Company. This line of credit facility matures on October 31, 1998. The
     Company believes this credit facility will be renewed on terms similar to
     the current facility.

     This credit facility requires compliance with financial covenants,
     including the maintenance of certain liquidity and net worth ratios and
     prohibits the payment of dividends. As of September 30, 1998, the Company
     is in compliance with the terms of this agreement.

     Term Loan

     On May 16, 1997, Sunrise Leasing Corporation completed a $5,500,000 funding
     on a term loan with National City Bank of Minneapolis. This term loan is
     secured by certain leases of the Company. These funds were used to reduce
     the debt outstanding under the Company's bank line of credit. As of
     September 30, 1998 the outstanding balance on this loan was $2.2 million.

     Securitization

     During fiscal year 1997, the Company entered into an agreement with a
     subsidiary of Dougherty Dawkins, Inc. which placed $20 million of notes
     issued by the Company to private institutional investors. The remaining
     note balances of $1,528,000 were paid in full July 31, 1998.

     Financing arrangement with The King Management Corporation

     On June 16, 1997, the Company entered into a financing arrangement with The
     King Management Corporation (King Management). The agreement was extended
     in June 1998. Under the financing arrangement, for the period from July 1,
     1997 through June 30, 2000, King Management has committed to provide or
     assist the Company in arranging whatever financing is necessary to enable
     the Company to grow its vendor leasing business unencumbered by the
     availability of financing. During the period from June 16, 1997 through
     September 30,1998, King Management has provided fundings totaling
     $19,767,000 with a balance outstanding of $15,042,000 at September 30,
     1998. The notes bear interest at prime minus 0.25% (8.25% at September 30,
     1998), and are secured by certain leases and lease equipment.

     In consideration for the commitment described above and other services, the
     Company agreed to allow King Management to participate in specific
     percentages of vendor leasing transactions consummated during the period
     from July 1, 1997 through June 30, 2000. Specific leases are identified as
     the property of King Management and are not included in the Company's
     balance sheet.

<PAGE>

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

Revenues

The Company classifies its lease transactions, as required by the Statement of
Financial Accounting Standards No. 13 ("FASB 13"), as either direct financing or
operating leases. Revenue, costs and resulting income are recognized during each
of the accounting periods during the term of the lease. The allocation of income
among the accounting periods within a lease term will vary depending upon the
lease classification.

The Company segregates the sources of its revenue into five categories for
financial statement purposes: (i) operating leases; (ii) direct financing
leases; (iii) sales of new and used equipment; (iv) fee income; and (v) interest
income.

Operating Leases. All leases that are not classified as direct financing leases
are treated as operating leases. Monthly payments from these leases are
recognized as leasing revenue. The Company's cost of the leased equipment is
recorded on the balance sheet and is depreciated on a straight-line basis over
the lease term to the Company's estimate of residual value. Revenue and
depreciation expense for operating leases are recorded evenly over the term of
the lease. If the lease is discounted to a financial institution, the related
interest expense declines over the term of the lease as the principal is
reduced, with the resultant net margin being lower in the early periods of the
lease and higher in the later periods.

Direct Financing Leases. Direct financing leases consist of future lease
payments plus the residual value (collectively referred to as the "gross
investment"). Residual value is the estimated fair market value at the time of
lease termination. The difference between the gross investment in the lease and
the cost (or carrying amount, if different) of the leased equipment is recorded
as unearned revenue. The "net investment" in the lease is the gross investment
less unearned revenue. The unearned revenue is amortized to leasing revenue over
the lease term to produce a constant percentage return on the net investment
whether or not the lease is discounted to a financial institution.

Equipment Sales. Revenue from equipment sales transactions is recognized by the
Company at the time title to the equipment passes to the customer. Leases that
entitle the customer to purchase the leased equipment for a nominal sum at the
end of the lease term and which are discounted on a nonrecourse basis at the
lease commencement date, leaving the Company with no interest in the
transaction, are treated by the Company as a sale of equipment.

Fee Income. Fee income primarily consists of late fees collected on past due
accounts.

Interest Income. Interest income is accrued on unimpaired loans receivable under
the effective interest method. Interest income is not recognized on loans which
have been identified by the Company as impaired.

Results of Operations for the Three and Six Months Ended September 30, 1998 and
1997

Total revenue from leasing activity increased approximately $520,000 (5.4%) and
$791,000 (4.2%) for the three and six month periods ended September 30, 1998,
respectively, as compared to the corresponding periods in fiscal 1998. The
revenue increase came from a $1.1 million (13.3%) and a $1.9 million (11.8%)
increase in operating lease revenue for the three and six month periods ended
September 30, 1998, respectively, as compared to the previous fiscal year. The
increase in operating lease revenues was partially offset by a decrease in
direct financing lease revenue of $584,000 (45.3%) and $1,129,000 (42.2%) for
the three and six month periods ended September 30, 1998, respectively, as
compared to the corresponding periods in fiscal 1998.


<PAGE>

Total leasing revenues were as follows (dollar amounts in millions):

<TABLE>
<CAPTION>

                                                     Three Months                             Six Months
                                                  Ended September 30,                      Ended September 30,
                                                 1998             1997                   1998              1997
                                            -------------     -------------         --------------     ------------
                                            Amount    %       Amount    %           Amount     %       Amount   %
                                            -------  ----     ------   ----         ------    ----     ------  ----
<S>                                         <C>       <C>     <C>       <C>         <C>        <C>     <C>      <C>
   Leasing Revenues:
         Vendor                             $   7.7   76%     $  6.8    71%         $ 14.9     76%     $ 13.2   70%
         Direct                                 2.4   24         2.8    29             4.8     24         5.7   30
                                            -------  ----     ------   ----         ------    ----     ------  ----

              Total                         $  10.1  100%     $  9.6   100%         $ 19.7    100%     $ 18.9  100%
                                            =======  ====     ======   ====         ======    ====     ======  ====

   As a percent of total revenues                 83.7%            82.6%                  84.0%              83.1%
                                                  =====            =====                  =====              =====
</TABLE>


Margins from leasing activities (leasing revenue less depreciation and interest
expense) were 32.4% compared to 37.3% and 32.3% compared to 37.4% for the three
and six month periods of fiscal 1999 and fiscal 1998, respectively. Leasing
margins for the quarter and six month periods were impacted by acceleration of
depreciation on certain lease equipment. Margins also fluctuate from period to
period based upon the mix of direct financing and operating leases, the extent
to which the Company finances leases with internally generated funds, and the
mix and age of direct finance and operating leases in the portfolio.

Revenue from equipment sales increased $109,000 (6.2%) and $151,000 (4.4%) for
the three and six month periods ended September 30, respectively, as compared to
the corresponding periods in fiscal 1998. The gross margins on equipment sales
were 9.0% and 4.1% of sales revenue for the three and six month periods of
fiscal 1999, respectively, compared to negative gross margins of (2.5%) and
(1.1%) for the corresponding periods in fiscal 1998.

Interest income decreased $53,000 (79.1%) and $123,000 (89.8%) for the three and
six month periods of fiscal 1999, respectively, as compared to the corresponding
periods in fiscal 1998.

Fee income decreased $133,000 (68.6%) and $107,000 (37.9%) for the three and six
month periods of fiscal 1999, respectively, as compared to the same periods in
fiscal 1998.

Depreciation expense for the three and six month periods ended September 30,
1998 increased $1.3 million (27.9%) and $2.4 million (27.1%), respectively, over
the same periods in fiscal 1998. This increase was due to the continued increase
in vendor operating leases, as well as accelerating the depreciation on a
specific vendor program and increasing the amount of depreciation relative to
interim rents.

Interest expense decreased $464,000 (33.3%) and $915,000 (31.7%) for the three
and six month periods of fiscal 1999, respectively, as compared to the
corresponding periods in fiscal 1998. The decrease in interest expense reflects
lower average borrowings during the period, as well as lower cost of borrowing
under King Management's financing commitment.

The provision for lease and loan losses increased $71,000 (20.6%) and $214,000
(34.8%) for the three and six month periods of fiscal 1999, respectively, as
compared to the corresponding periods in fiscal 1998. This is due to increasing
efforts to reserve for unrecognized losses in an increased risk environment.

Compensation expense decreased $60,000 (6.9%) and $239,000 (13.0%) for the three
and six month periods ended September 30, 1998, respectively, as compared to the
same periods in fiscal 1998. The decrease is directly attributable to a decrease
in employees as compared to the prior fiscal periods.


<PAGE>

Other operating expense increased $91,000 (12.2%) and $58,000 (3.9%) for the
three and six month periods ended September 30, 1998, respectively, as compared
to the previous periods in fiscal 1998.

Income tax provision as a percentage of income before taxes was 45.0% for the
three and six month periods ended September 30, 1998 and 48.0% for the
corresponding periods in fiscal 1998. The reduction in the effective tax rate
results primarily from the absence, in the current period, of non-deductible
shareholder arbitration costs which were incurred in fiscal 1998.

Liquidity and Capital Resources

General

The Company uses a combination of its credit lines and internally generated cash
flows to finance, on an interim basis, the acquisition of revenue generating
equipment. Where appropriate, upon commencement of an equipment lease, the
Company attempts to assign the remaining lease payment stream to a financial
institution on a discounted, nonrecourse basis. The discounted lease proceeds
received by the Company are used to reduce borrowings under the Company's credit
lines. At September 30, 1998, the Company had total borrowings outstanding of
$45.4 million, of which 41.2% were nonrecourse. At March 31, 1998, the Company
had total borrowings outstanding of $54.7 million, of which 43.4% were
nonrecourse.

As of September 30, 1998, the Company had a total investment in leasing
operations of $80.7 million, as compared to $81.6 million at March 31, 1998. The
decrease in investment in leasing operations is due to the decrease in direct
finance leases, which was partially offset by growth in the investment in
operating leases.

Net cash provided by operating activities was $18.1 million for the six month
period of fiscal 1999. The Company expects to fund future requirements through
internally generated funds, as well as borrowings under various credit
facilities.

Equipment expenditures (net of disposals) of $21.4 million for the six month
period of fiscal 1999 were financed through cash flows from operations and
through the use of the Company's lines of credit. The Company does not have any
material commitments for capital expenditures, other than equipment held for
lease.

Inflation has not been a significant factor in the Company's business in any of
the periods presented.

Liquidity and Financing Sources

As of June 30, 1998, the Company had available a $25 million line of bank credit
subject to a borrowing base limitation of $25.0 million. Of this amount, $8.6
million had been utilized as of September 30, 1998. Advances under the line are
collateralized by substantially all of the Company's assets. This credit
facility also requires compliance with certain financial covenants, including
the maintenance of certain liquidity and net worth ratios and prohibits the
payment of dividends. As of September 30, 1998, the Company is in compliance
with the terms of this agreement. The interest rate is at prime. The Company's
line of credit matures on October 31, 1998. The Company believes this credit
facility will be renewed on terms similar to the current facility.

During fiscal year 1997, the Company entered into an agreement with a subsidiary
of Dougherty Dawkins, Inc. which placed $20 million of notes issued by the
Company to private institutional investors. The remaining note balances of
$1,528,000 were paid in full July 31, 1998.

During the first quarter of fiscal 1998, the Company entered into a
Discretionary Revolving Credit Agreement with National City Bank of Minneapolis.
In May 1997, the Company originally borrowed $5.5 million under this credit
facility, and $2.2 million remains outstanding as of September 30, 1998.

During fiscal 1998, the Company entered into an agreement with King Management
wherein King Management agreed to provide funding for approved vendor leasing
programs, including making direct loans, and providing certain subordinations
and arranging financing packages for the period July 1, 1997 through June 30,
1999. Any direct financing utilized will be on terms as attractive as any other
financing facility utilized by the Company. In consideration for the financing
commitment, and other services, the Company agreed to allow King Management to

<PAGE>

participate in specific percentages of vendor lease transactions consummated
during the agreement term noted above. Since the inception of this financing
agreement, King Management has made direct loans to Sunrise totaling
$19,767,000, of which $15,042,000 remained outstanding as of September 30, 1998.
In the second quarter of fiscal 1999, under the lease participation provision of
this agreement, King Management purchased leases in the amount of $2,819,000.
Leases purchased from inception of the agreement through September 30, 1998
total $9,726,000. In June 1998, the Company extended the term of its agreement
with King Management through June 30, 2000. In addition, King Management's
financing commitment has been expanded to include financing of direct leases
with terms of two years or shorter.

On October 13, 1998 the Company announced that its Board had approved a stock
repurchase program under which the Company had allocated up to $5 million to
purchase its common stock at suitable market prices. The Company believes it has
adequate borrowing capacity to fund this stock repurchase without inhibiting its
capacity to fund pending and future lease equipment purchases.

The Company continues to monitor problem leases and loans. While there are
leases and loans payable to the Company which could force the Company to take
additional write-offs, management does not currently believe that any such
write-offs would be material.

Year 2000 Compliance

The Company is currently expending resources to review its internal use computer
systems in order to identify and modify those systems that are not Year 2000
compliant. The costs associated with this effort are not incremental to the
Company, but represents a reallocation of existing resources. The Company
believes any modifications deemed necessary will be made on a timely basis and
does not believe that the cost of such modifications will have a material effect
on the Company's operating results.

In addition, the Company faces risks to the extent that suppliers of leased
equipment purchased by the Company and others with whom the Company transacts
business do not have business systems or products that comply with the Year 2000
requirements. The Company is beginning the process of obtaining assurances from
such vendors that their systems and products are Year 2000 compliant. The
Company also plans to advise the Company's customers that they should seek
certification for equipment under lease from the vendor to assure that their
equipment is Year 2000 compliant.

Additionally, the Company is in the process of evaluating the need for
contingency plans with respect to Year 2000 requirements. The necessity of any
contingency plan must be evaluated on a case-by-case basis and will vary
considerably in nature depending on the Year 2000 issue it may need to address.

Although the Company believes that the cost of Year 2000 modifications for
internal-use systems are not material, there can be no assurance that the
various factors relating to the Year 2000 compliance issues, including the
ability of the Company's suppliers to provide the Company with products that are
Year 2000 compliant, will not have a material adverse effect on the Company's
business, operating results or financial position.


<PAGE>




Outlook

Certain statements contained in this Outlook section and other sections of this
document are forward looking, based on current expectations, and actual results
may differ materially from those projected. The forward looking statements, in
particular the statements regarding growth of the company's vendor leasing
business, the Company's ability to finance its business, and management's belief
that any future loan or lease write-offs will not be material, involve a number
of risks and uncertainties including the Company's reliance on a few large
vendors for its business, its ability to cope with accelerating obsolescence,
and to remarket its off-lease equipment at prices that are equal to or better
than its book value. In addition to the factors discussed above which could
cause actual results to differ from those projected other factors which could
cause actual results to differ from expected include the following:

Future Growth. The Company's ability to grow at an acceptable rate is dependent
to a great extent on the expansion of its vendor leasing business. The Company's
ability to expand its vendor business is dependent upon successfully servicing
existing vendor accounts and attracting new vendor accounts. As of September 30,
1998, the Company had only two significant vendor leasing programs, although it
has signed agreements with several other vendors. While the Company believes it
has the ability and capacity to develop other large vendor leasing programs,
there is no assurance that it will be successful in this regard or that it will
be able to generate acceptable revenue growth over the long term.

During fiscal year 1998, in order to broaden the base of potential lessees, the
Company redefined its underwriting policies. These policy changes result in a
greater focus on very short-term leases (1-2 year), expanding its business with
customers that traditionally are of lower credit quality, and accepting
significantly larger transactions from credit worthy customers at rates which
are lower than usual. These changes will result in an increased level of
transaction and portfolio risk for the Company and an increased reliance on
recourse financing.

Highly Competitive Industry. The equipment leasing business is highly
competitive. The Company competes with numerous companies, including leasing
companies, commercial banks and financial institutions, some of which the
Company relies on to obtain capital to finance its leases. Most of the Company's
competitors are significantly larger and have substantially greater resources
than the Company. The Company typically chooses not to compete with large
leasing companies for those leases in which the cost of the equipment greatly
exceeds the amount of nonrecourse financing available.

Risk of Additional Loan and Lease Write-Offs. While the Company believes that
its current reserves are adequate, it continues to monitor a restructured loan
and lease, as to which the Company has a book value of $ 3.1 million. The
Company has reviewed its position relative to the collateral and guaranty and
believes that they adequately support the Company's present book value. While
lease payments are being received on a monthly basis, there is no assurance that
such payments will continue on an uninterrupted basis.

Financing. The Company's growth and profitability are dependent to a great
extent on the Company's ability to finance revenue producing assets. The King
Management Corporation's financing commitment, as well as continued reduction in
the amount of non-performing assets, have enhanced the Company's ability to
obtain required financing. While the Company has been successful in obtaining
required recourse and non-recourse financing to date, there is no assurance that
all required financing will be available in the future.

Major Customers/Vendors. At September 30, 1998 and March 31,1998, no leases
outstanding to any individual lessee exceeded 5% of the total lease portfolio,
except in cases where the leases had been discounted without recourse to a
financial institution. 62.3 % of the Company's leasing revenue for the three and
six months ended September 30, 1998 was generated through two vendor leasing
programs. During the quarter, the largest vendor, representing 47.2 % of the
Company's leasing revenue for the six months ended September 30, 1998 has
informed the Company that the vendor intends to enter the leasing business and
write leases on its own behalf. While the vendor advised the Company that it
would continue to utilize the Company in the vendor's niche markets, there is no
assurance how long this utilization will continue.


<PAGE>

If this change results in a termination of the Company's relationship or a
reduction in the Company's volume of purchases, the Company would continue to
realize declining revenues attributable to this vendor's equipment for a period
of one to three years. To the extent that the Company is unable to replace that
vendor's declining volume with leasing business from other vendors, the
Company's future financial results would be materially and adversely affected.

Residual Values of Leased Equipment. The value of the data processing equipment
leased by the Company to its customers represents a substantial portion of the
Company's capital. At the inception of each lease, the Company estimates the
residual value of the leased equipment, which is the estimated market value of
the equipment at the end of the initial lease term. The actual realized residual
value of leased equipment may differ from its estimated residual value,
resulting in profit or loss when the leased equipment is sold. If a lessee
defaults on a lease which has been discounted by the Company to a financial
institution, the financial institution may foreclose on its security interest in
the leased equipment and the Company may not realize any portion of such
residual value. In addition, the high technology equipment which comprises the
bulk of the Company's lease portfolio is subject to rapid technological
obsolescence typical of the computer industry. During the past fiscal year, the
Company has experienced losses on a specific vendor program and established
reserves to cover anticipated losses in future periods. In addition, the Company
has accelerated the depreciation on new equipment acquisitions from this vendor
program. The trend towards shortened product life cycles will continue to add
additional risk to maintaining historical leasing margins.

Accounting Changes. SFAS No. 131, "Disclosure about Segments of the Enterprise
and Related Information" was issued in June 1997 and must be adopted by the
Company no later than fiscal 1999. The statement establishes standards which
redefine how operating segments are determined and requires public companies to
report financial and descriptive information about reportable operating
segments. The Company has not completed the process of evaluating the effect of
SFAS No. 131, but does not believe the new accounting pronouncement will
significantly effect the Company's financial condition or operating results.

ITEM 3.  Quantitative and Qualitative Disclosures about Market Risk.

         None.



<PAGE>


PART II-OTHER INFORMATION

ITEM 1.  Legal Proceedings - None.

ITEM 2.  Changes in Securities - None.

ITEM 3.  Defaults on Senior Securities - None.

ITEM 4.  Submission of Matters to a Vote of Security Holders

         (a)      The Company held its Annual Meeting on September 17, 1998.

         (b)      Proxies for the Annual Meeting were solicited pursuant to
                  Regulation 14A under the Securities Exchange Act of 1934.
                  There was no solicitation in opposition to management's
                  nominees as listed in the proxy statement, and all of such
                  nominees were elected.

                  The shareholders set the number of directors at four (4) by a
                  vote of 6,511,558 shares in favor, with 5,056 shares voted
                  against and 9,300 shares abstaining. The following persons
                  were elected to serve as directors of the Company until the
                  next annual meeting of shareholders with the following votes:

                                             Number of             Number of
                   Nominee                   Votes For           Votes Withheld
                   
                   Peter J. King             6,509,537               16,377
                   Donald R. Brattain        6,515,614               10,300
                   Thomas R. King            6,515,414               10,500
                   Jeffrey G. Jacobsen       6,512,614               13,300
          
                  The shareholders approved the grant to Peter J. King of a
                  stock option to purchase 400,000 by a vote of 4,250,653 shares
                  in favor, with 613,285 shares voted against, 25,133 shares
                  abstaining and 1,636,843 shares present for determining the
                  quorum but which lacked authority to vote on this matter
                  (broker non-votes).

                  The shareholders approved an amendment to the Company's 1991
                  Stock Option Plan to (i) increase shares reserved from 750,000
                  to 1,000,000, (ii) increase formula grants to outside
                  directors upon initial election from 10,000 to 15,000 shares,
                  (iii) permit discretionary grants to outside directors and
                  (iv) change definition of a committee to make the Plan
                  consistent with the revised Rule 16b-3 under the Securities
                  Exchange Act of 1934, by a vote of 4,671,458 shares in favor,
                  with 202,558 shares voted against, 15,233 shares abstaining
                  and 1,636,665 shares present for determining the quorum but
                  which lacked authority to vote on this matter (broker
                  non-votes).

ITEM 5. Other Information - None.

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

        a.       Exhibits

                 See Exhibit Index immediately following the signature page.

        b.       Form 8-K

                 There have been no Current Reports on Form 8-K filed on behalf
                 of the Company during the quarter ended September 30, 1998.

<PAGE>


                                    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.



                                       SUNRISE INTERNATIONAL LEASING CORPORATION



Date:   October 22, 1998               By: /s/ Peter J. King
                                       Peter J King, Chairman of the Board, 
                                         Chief Executive Officer and Director 
                                         (principal executive officer)


                                       By:  /s/ Jeffrey G. Jacobsen
                                       Jeffrey G. Jacobsen, Executive Vice 
                                         President, Chief Financial Officer 
                                         (principal financial officer)



                                       By: /s/ James C. Teal
                                       James C. Teal, Corporate Controller 
                                         (principal accounting officer)



<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                           EXHIBIT INDEX TO FORM 10-Q


Commission File No.:  0-19516
For the quarter ended
September 30, 1998

                    SUNRISE INTERNATIONAL LEASING CORPORATION


      Exhibit
      Number                                           Description

         3.1      Certificate of Incorporation -- incorporated by reference to
                  Exhibit 3.1 to the Company's Quarterly Report Form 10-Q for
                  the quarter ended September 30, 1997

         3.2      Bylaws--incorporated by reference to Exhibit 3.2 to the
                  Company's Quarterly Report on Form 10-Q for the quarter ended
                  September 30, 1997

         4.1      Specimen of Common Stock Certificate--incorporated by
                  reference to Exhibit 4.1 to the Company's Quarterly Report
                  Form 10-Q for the quarter ended September 30, 1997

         10.1*    1991 Stock Option Plan, as amended through June 23, 1998

         11.1     Per Share Earnings Computations

         27.0     Financial Data Schedule (filed with electronic version only)




*  Management contract or other compensation plan