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
      June 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 August 7, 1998.





<PAGE>


PART I - FINANCIAL INFORMATION

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

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

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

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

          Notes to Consolidated Financial Statements.


<PAGE>


SUNRISE INTERNATIONAL LEASING CORPORATION AND SUBSIDIARIES

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

                                                                                          June 30,           March 31,
                                                                                          1998                 1998
                                                                                    ---------------     --------------
<S>                                                                                 <C>                <C>             
ASSETS
   Cash and cash equivalents                                                        $     1,912,000    $      2,140,000
   Accounts receivable, less allowance for doubtful accounts
     of $376,000 and $260,000                                                               426,000           3,413,000
   Income taxes receivable                                                                  200,000             672,000
   Inventory held for sale                                                                  132,000             207,000
   Loans receivable, less allowance for possible losses of $1,120,000
     and $1,105,000                                                                       2,962,000           3,328,000

   Investment in leasing operations:
     Direct financing leases                                                             24,303,000          27,200,000
     Operating leases, less accumulated depreciation of
       $26,640,000 and $24,646,000                                                       52,344,000          49,687,000
     Equipment held for lease                                                             2,076,000           4,262,000
      Initial direct costs                                                                  405,000             451,000
                                                                                    ---------------    ----------------
       Total investment in leasing operations                                            79,128,000          81,600,000
                                                                                    ---------------    ----------------

   Furniture and fixtures, less accumulated depreciation
     of $601,000 and $658,000                                                               293,000             326,000
   Other assets                                                                           2,398,000           2,254,000
                                                                                    ---------------    ----------------
       Total Assets                                                                $     87,451,000    $     93,940,000
                                                                                   ================    ================

LIABILITIES AND SHAREHOLDERS' EQUITY

LIABILITIES
   Financing arrangements:
     Notes payable                                                                  $     8,039,000    $      6,661,000
     Securitized borrowings                                                               4,077,000            7,532,00
Discounted lease rentals                                                                 21,817,000          25,476,000
     Notes payable to King Management Corporation                                        12,975,000          14,986,000
                                                                                    ---------------    ----------------
       Total financing arrangements                                                      46,908,000          54,655,000
                                                                                     --------------    ----------------
Accounts payable                                                                            851,000           1,457,000
   Accrued liabilities                                                                    4,101,000           3,085,000
   Accrued income taxes                                                                      78,000                  --
   Deferred tax liability                                                                 3,735,000           3,735,000
                                                                                    ---------------    ----------------
       Total Liabilities                                                                 55,673,000          62,932,000
                                                                                    ---------------    ----------------

COMMITMENTS AND CONTINGENCIES (Note 6)

SHAREHOLDERS' EQUITY
   Common stock, $.01 par value, 17,500,000 shares authorized
     7,810,000 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                                                            27,725,000          27,655,000
   Retained earnings                                                                      3,975,000           3,275,000
                                                                                    ---------------      --------------
       Total Shareholders' Equity                                                        31,778,000          31,008,000
                                                                                    ---------------      --------------
       Total Liabilities and Shareholders' Equity                                  $     87,451,000      $   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
                                                              Ended June  30,
                                                          1998                1997
                                                    ---------------    ---------------
<S>                                                 <C>                <C>            
REVENUES
   Operating leases                                 $     8,735,000    $     7,920,000
   Direct financing leases                                  845,000          1,390,000
   Equipment sales                                        1,699,000          1,658,000
   Interest Income                                             --               70,000
   Fee income                                               114,000             87,000
                                                    ---------------    ---------------
     Total Revenues                                      11,393,000         11,125,000
                                                    ---------------    ---------------

COSTS AND EXPENSES
   Depreciation                                           5,466,000          4,332,000
   Interest                                               1,039,000          1,491,000
   Provision for lease and loan losses                      413,000            270,000
   Cost of equipment sold                                 1,718,000          1,650,000
   Compensation expense                                     785,000            964,000
   Other operating expenses                                 701,000            734,000
                                                    ---------------    ---------------
     Total Costs and Expenses                            10,122,000          9,441,000
                                                    ---------------    ---------------

INCOME FROM OPERATIONS
   BEFORE PROVISION
   FOR INCOME TAXES                                       1,271,000          1,684,000
PROVISION FOR INCOME TAXES                                  572,000            807,000
                                                    ---------------     --------------

NET INCOME                                            $     699,000       $    877,000
                                                    ===============     ==============

NET INCOME PER COMMON SHARE
       BASIC                                          $        0.09       $       0.12
                                                    ===============     ==============
       FULLY DILUTED                                  $        0.09       $       0.12
                                                    ===============     ==============

WEIGHTED AVERAGE NUMBER OF
   COMMON SHARES OUTSTANDING - BASIC                      7,804,000          7,291,000
                                                    ===============     ==============

WEIGHTED AVERAGE NUMBER OF
   COMMON SHARES OUTSTANDING - DILUTED                    7,840,000          7,291,000
                                                    ===============     ==============
</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>

                                                                         Three Months
                                                                        Ended June 30,
                                                                  1998                1997
                                                              ---------------     --------
<S>                                                           <C>                 <C>            
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income                                                    $       699,000     $       877,000
Adjustments to reconcile net income to net cash
      provided by operating activities:
    Provision for lease and loan losses                               413,000             270,000
    Depreciation and amortization                                   5,949,000           4,588,000
    Stock option exercises                                             58,000
    Stock options issued to non-employees                              12,000
    Stock issued for arbitration settlement                                             2,022,000
    Change in operating assets and liabilities:
        Accounts receivable                                         2,822,000         (1,049,000)
Income taxes receivable                                               472,000           1,245,000
        Other assets                                                 (217,000)             21,000
        Inventory held for sale                                        75,000              (4,000)
        Accounts payable                                             (606,000)            670,000
        Accrued liabilities                                         1,016,000          (1,799,000)
        Accrued income taxes                                           78,000             230,000
                                                              ---------------     ---------------
           NET CASH PROVIDED BY OPERATING
              ACTIVITIES                                           10,771,000           7,071,000
                                                              ---------------     ---------------

CASH FLOWS FROM INVESTING ACTIVITIES
    Purchase of equipment for lease                                (8,131,000)        (11,346,000)
    Principal portion of direct financing leases collected          4,518,000           6,540,000
    Principal portion of loans receivable collected                   366,000             661,000
    Purchase of furniture and fixtures                                 (6,000)             (9,000)
                                                              ----------------    ---------------
           NET CASH USED IN INVESTING ACTIVITIES                   (3,253,000)         (4,154,000)
                                                              ----------------    ---------------

CASH FLOWS FROM FINANCING ACTIVITIES
    Borrowings on notes payable                                     9,050,000           8,000,000
    Payments on notes payable                                      (7,672,000)         (8,872,000)
    Proceeds from securitized borrowings                                   --           5,499,000
    Payments on securitized borrowings                             (3,454,000)         (3,298,000)
    Proceeds from discounted lease financing                          834,000           1,420,000
Payments on discounted lease financing                             (4,493,000)         (6,145,000)
    Payments on participations in loans receivable                         --            (124,000)
    Payments on note payable to related party                      (2,011,000)                 --
                                                              ---------------     ---------------
           NET CASH USED IN FINANCING
              ACTIVITIES                                           (7,746,000)         (3,520,000)
                                                              ----------------    ----------------

NET INCREASE IN CASH AND CASH EQUIVALENTS                            (228,000)           (603,000)

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

CASH AND CASH EQUIVALENTS AT END OF PERIOD                    $     1,912,000     $     1,588,000
                                                              ===============     ===============

SUPPLEMENTAL CASH FLOW INFORMATION
    Interest paid                                                     551,000             821,000
    Income taxes paid (received)                                       21,000                  --
</TABLE>

See notes to financial statements.


<PAGE>


SUNRISE INTERNATIONAL LEASING CORPORATION AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTH PERIOD ENDED JUNE 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 June 30, 1998 and
     March 31, 1998 and the results of  operations  and cash flows for the three
     months ended June 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.

2.   INCOME TAXES

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

3.   LOANS RECEIVABLE

     Loans by Collateral Type
     The composition of the loans receivable portfolio by collateral type was as
     follows:

                                                  June 30,       March 31,
                                                    1998           1998
                                                 -----------    -----------

     Real estate loans                                   --         99,000
     Non-accrual loans                            4,141,000      4,393,000
                                                 -----------    -----------
                                                  4,141,000      4,492,000

     Less:
       Allowance for possible loan losses        (1,120,000)    (1,105,000)
       Unearned fees from loan origination          (59,000)       (59,000)
                                                 -----------    -----------
                                                 $ 2,962,000    $ 3,328,000
                                                 ===========    ===========



<PAGE>


     Loan Portfolio Activity and Allowance for Possible Loan Losses

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

                                     June 30, 1998                     March 31, 1998
                                Recorded       Valuation          Recorded      Valuation
                               Investment      Allowance          Investment    Allowance

<S>                          <C>             <C>                <C>            <C>       
     Impaired loans -
       Nonaccrual            $   3,916,000   $   895,000        $  4,168,000   $  880,000
       Other                       225,000       225,000             225,000      225,000
     Performing loans                   --            --              99,000           --
                             -------------   -----------        ------------   ----------
                             $   4,141,000   $ 1,120,000        $  4,492,000   $1,105,000
                             =============   ===========        ============   ==========
</TABLE>



4.   DISCOUNTED LEASE RENTALS

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

         Non-recourse               $    20,534,000    $    23,697,000
         Recourse                         1,283,000          1,779,000
                                    ---------------    ---------------
                                    $    21,817,000    $    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 $23.8  million at June 30, 1998.  The loan
     balance outstanding as of quarter end was $8.0 million.  Advances under the
     line bear interest at prime, (8.5% at June 30, 1998) and are collateralized
     by substantially all otherwise  unsecured assets of the Company.  This line
     of credit facility matures on September 30, 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,
     prohibits  the payment of  dividends  and  requires  compliance  with other
     financial covenants. As of June 30, 1998, the Company is in compliance with
     the terms of these agreements.


<PAGE>



     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 June
     30, 1998 the outstanding balance on this loan was $2.5 million.

     Securitization

     On  October  31,  1996,  the  Company  entered  into  an  agreement  with a
     subsidiary of Dougherty  Dawkins,  Inc. to place up to $20 million of notes
     issued  by  the   Company  to   private   institutional   investors.   This
     securitization  facility  was closed on November  8, 1996,  with an initial
     funding of $13,000,000 and subsequent advance of $7.0 million was funded on
     January 31,  1997.  As of June 30,  1998,  the  outstanding  balance on the
     transaction was $1,528,000.

     Financing arrangement with King Management Corporation

     On June 16, 1997, the Company entered into a financing arrangement with KMC
     which was extended in June 1998. Under the financing  arrangement,  for the
     period  from July 1, 1997  through  June 30,  2000,  KMC 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  fiscal 1998,  under the financing
     arrangement,  KMC provided two fundings totaling  $15,472,000.  The balance
     outstanding  was  $12,975,000  at June 30, 1998. The notes bear interest at
     prime  minus  0.25%  (8.25% at March 31,  1998),  and are  secured by lease
     equipment.

     In consideration for the commitment described above and other services, the
     Company  agreed to allow KMC 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
     KMC and are not included in the Company's  portfolio.  In the first quarter
     of 1999,  King  Management  purchased  leases in the amount of  $1,915,000.
     Total  purchased  leases from  inception of the agreement  through June 30,
     1998 are $6,884,000.

<PAGE>



7.    RELATED PARTY

     Management Agreement

     Pursuant to an agreement  by and among the Company,  Mr. Peter King and The
     King Management  Corporation  ("King  Management"),  a corporation which is
     controlled  by Mr. King,  dated June 16, 1997,  as amended on June 23, 1998
     (the  "Management  Agreement"),  it  was  agreed  that  Mr.  King  or  King
     Management would provide certain management services to the Company through
     June  30,  2000.  Pursuant  to the  Management  Agreement,  Mr.  King is an
     employee  of the  Company and will serve as Chairman of the Board and Chief
     Executive  Officer  until June 30, 2000 at a salary of  $200,000  per year.
     Pursuant to the management agreement, Mr. King was granted stock options to
     purchase an  aggregate of 541,506  shares at $3.375 per share,  on June 23,
     1998, Mr. King was granted (i) a fully vested seven-year nonqualified stock
     option to purchase  250,000  shares at $3.25 per share under the  Company's
     1991 Stock Option Plan and (ii) a  seven-year  nonqualified  cliff  vesting
     stock option to purchase  400,000  shares at $3.25 per share outside of the
     Company's 1991 Stock Option Plan. The cliff vesting  options vest after six
     years if Mr. King  continues to be an employee of the  Company.  Vesting is
     accelerated  if the Company's  Common Stock attains  certain agreed closing
     average  stock  prices,  as reflected in the Nasdaq  Market  System,  for a
     period of ten  consecutive  business  days, as follows:  125,000  shares at
     $5.00,  125,000 shares of $6.00 and 150,000 shares at $7.00. The Management
     Agreement  provides  that Mr.  King  and/or King  Management  will  provide
     certain services to the Company,  including but not limited to working with
     management  on current and  prospective  vendor  relationships,  monitoring
     problem  leases  and loans,  assisting  the  Company  on meeting  financing
     requirements and working with the Company's bankers.

     Pursuant to the  Management  Agreement,  King  Management  has provided the
     Company access to, certain of its employees,  including Jeffrey Jacobsen, a
     director of the Company and its Executive Vice  President.  These employees
     have been  expending  at least 85% of their  time on Sunrise  matters  from
     April 1, 1998 through June 30, 1998. For these  services,  King  Management
     has been  paid  $125,000.  Two King  Management  employees,  including  Mr.
     Jacobsen, became full-time employees of the Company on June 23, 1998. Three
     King Management  employees  continue to provide services to the Company for
     which the Company  will be  reimbursed.  Employees  of the Company may also
     provide  services to King  Management for which the King  Management may be
     reimbursed.  Upon joining the Company as an employee on June 23, 1998,  Mr.
     Jacobsen  received  ten-year  options to purchase  100,000 shares of Common
     Stock and the second King Management  employee received options to purchase
     10,000 shares. In addition,  options for 17,000 shares have been granted to
     the three other King Management employees providing services to the Company
     and who remain King  Management  employees.  All of these  options  have an
     exercise price of $3.25 per share.  Pursuant to the  Management  Agreement,
     King Management has agreed to provide  subordinated debt financing,  direct
     financing and/or other financial  assistance to the Company for a period of
     three years in consideration of King  Management's  right to participate as
     lessor to the extent of 25% of certain  higher-risk vendor leasing programs
     and  risk  pools  and to the  extent  of 15% of all  other  vendor  leasing
     programs  of the  Company.  King  Management  has  agreed to provide to the
     Company the use of its  balance  sheet  resources  to enable the Company to
     meet its vendor leasing program financing requirements.



<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.  These leases transfer  substantially all benefits and
risks of equipment  ownership to the lessee. A lease is a direct financing lease
if the creditworthiness of the customer and the collectibility of lease payments
are reasonably certain and it meets one of the following criteria: (i) the lease
transfers  ownership  of the  equipment  to the customer by the end of the lease
term; (ii) the lease contains a bargain purchase option; (iii) the lease term at
inception  is at  least  75% of  the  estimated  economic  life  of  the  leased
equipment;  or (iv) the present value of the minimum lease  payments is at least
90% of the fair value of the leased equipment at inception of the lease.

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.



<PAGE>


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

Total revenue from leasing activity increased  approximately $270,000 (2.9%) for
the three months ended June 30, 1998, as compared to the corresponding period in
fiscal 1998. The majority of the revenue  increase came from a $815,000  (10.3%)
increase in  operating  lease  revenue for the three month period ended June 30,
1998, as compared to the previous  fiscal year. The increase in operating  lease
revenues was offset by a decrease in direct  financing lease revenue of $545,000
(39.2%)  for the three  month  period  ended June 30,  1998,  as compared to the
corresponding period in fiscal 1998. The increase in operating lease revenue and
the decrease in direct finance revenue are a result of the Company's  continuing
effort to expand  and focus on the  vendor  leasing  business.  Operating  lease
revenue was, and will  continue to be,  affected by King  Management's  right to
participate as lessor to the extent of 15% or 25% of the Company's  vendor lease
programs.
See Note 7 to Consolidated Financial Statements.

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

                                             Three Months
                                            Ended June 30,
                                        1998              1997
                                    --------------    -------------
                                    Amount   %        Amount    %
   Leasing Revenues:
         Vendor                    $  7.1    74%    $  6.4     69%
         Direct                       2.5    26        2.9     31
                                   ------   ---     ------    --- 
            Total                  $  9.6   100%    $  9.3    100%
                                   ======   ====    ======    ====
    
   As a percent of total revenues       84.1%             83.7%
                                        =====             =====

Margins from leasing activities  (leasing revenue less depreciation and interest
expense)  were  32.1% and 37.5% for the three  month  period of fiscal  1999 and
fiscal 1998,  respectively.  Margins will  fluctuate from period to period based
upon the mix of direct  financing and  operating  leases and the extent to which
the Company finances leases with internally  generated funds.  Margins will also
be affected by the mix and age of direct  finance  and  operating  leases in the
current  portfolio.  Leasing margins for the quarter were impacted by changes in
management's estimates relative to depreciation on a specific vendor program and
depreciation relative to interim rents.

In order to limit the impact of any interest  rate  fluctuations  on its leasing
transactions,  the Company continually  monitors its lease rate factors relative
to  interest  rates on  borrowed  funds.  The lease rate  factors  are  adjusted
periodically  on new leases to  correspond  to any change in  interest  rates on
borrowed funds supporting the related transactions.

Revenue from equipment sales increased $41,000 for the three-month  period ended
June 30, as  compared  to the  corresponding  period in fiscal  1998.  The gross
margin loss on  equipment  sales were 1.1% of sales  revenue for the three month
period of fiscal 1999, compared to gross margin income 0.5 for the corresponding
period in fiscal 1998.

Interest  income  decreased  $70,000 (100%) for the three month period of fiscal
1999 as compared to the  corresponding  period in fiscal 1998. This decrease was
caused by the continuing  liquidation of the SFR loan portfolio  which coincided
with the  Company's  decision to  discontinue  its  commercial  and  asset-based
lending services.

Fee income  increased  $27,000 (31.0%) for the three month period of fiscal 1999
as  compared  to the same  period in fiscal  1998.  This  increase  is due to an
increase in the collection of late fees.

Total costs and expenses increased $681,000 for the three month period of fiscal
1999 as compared to the  corresponding  period in fiscal  1998.  The decrease in
interest expense reflects lower average borrowings during the period, as well as
the lower cost of borrowing under King Management's financing commitment.

Depreciation  expense for the three month period  ended June 30, 1998  increased
$1.1 million  (26.2%) over the same period in fiscal 1998. This increase was due
to the continued  increase in vendor operationg  leases, as well as accelerating
the  depreciation  on a specific  vendor  program and  increasing  the amount of
depreciation relative to interim rents.


<PAGE>

Interest expense decreased $452,000 (30.3%) for the three month period of fiscal
1999 as compared to the  corresponding  period 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 $143,000 (53.0%).  This is due
to increasing  efforts to reserve for  unrecognized  losses in an increased risk
environment.

Cost of equipment  sold  increased  $68,000 (4.1%) for the three month period of
fiscal 1999 as compared to the corresponding period in fiscal 1998.

Compensation expense decreased $179,000 (18.6%) for the three month period ended
June 30, 1998 as compared to the same period in fiscal 1998. The decrease is the
result of fewer employees as compared to the prior fiscal period.

Other  operating  expense  decreased  $33,000  (4.5%) for the three month period
ended June 30, 1998, 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 month period ended June 30, 1998 and 48.0% for the corresponding period 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.



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.  Generally, upon commencement of an SLC original equipment lease, the
Company  attempts to assign the remaining  lease  payment  stream to a financial
institution  on a discounted,  nonrecourse  basis.  In this manner,  the Company
limits its risk, if any, to its equity investment in the loan or equipment.  The
discounted lease proceeds  received by the Company are used to reduce borrowings
under the Company's credit lines.  Where the Company finances the equipment cost
either internally or on a recourse basis, the Company assumes the entire risk on
its investment in the loan or equipment.

At June 30, 1998, the Company had total borrowings outstanding of $46.9 million,
of which  43.7% were  nonrecourse.  At March 31,  1998,  the  Company  had total
borrowings outstanding of $54.7 million, of which 43.4% were nonrecourse.

As of June 30, 1998, the Company had a total investment in leasing operations of
$79.1  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
as a result of the reduction of the direct customer leases.

Net cash provided by operating  activities was $10.6 million for the three 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  $8.1million  for the three 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.


<PAGE>

Liquidity and Financing Sources

As of June 30,  1998,  the  Company had  available a $25 million  line of credit
subject to a borrowing base  limitation of $23.8 million.  Of this amount,  $8.0
million  had been  utilized  as of June 30,  1998.  Advances  under the line are
collateralized  by  substantially  all of the  Company's  assets and this credit
facility requires compliance with financial covenants, including the maintenance
of certain  liquidity and net worth  ratios,  prohibits the payment of dividends
and requires compliance with other financial covenants. As of June 30, 1998, the
Company  is in  compliance  with the  revised  terms of  these  agreements.  The
interest rate is at prime,  and the Company is subject to certain  financial and
other covenants relating to net worth ratios and liquidity requirements.

 The  Company's  line of credit  matures on  September  30,  1998.  The  Company
believes  this credit  facility  will be renewed on terms similar to the current
facility.

On October 31, 1996, the Company  entered into an agreement with a subsidiary of
Dougherty  Dawkins,  Inc.  to place up to $20  million  of notes  issues  by the
Company to private  institutional  investors.  This securitization  facility was
closed  on  November  8,  1996,  with an  initial  funding  of  $13,000,000  and
subsequent  advance of $7.0 million was funded on January 31,  1997.  As of June
30, 1998, the outstanding balance on the transaction was $1,528,000.

During  the  first  quarter  of  fiscal  1998,  the  Company's  Sunrise  Leasing
Corporation  subsidiary entered into a Discretionary  Revolving Credit Agreement
with National City Bank of Minneapolis.  In May 1997, the Company  borrowed $5.5
million under this credit facility,  and $2.5 million remains  outstanding as of
June 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
participate  in specific  percentages of vendor lease  transactions  consummated
during the  agreement  term noted above.  King  Management  made direct loans to
Sunrise totaling  $15,472,000,  of which $12,975,000 were outstanding as of June
30, 1998. In the first quarter of fiscal 1999, King Management  purchased leases
in the amount of  $1,915,000.  Total  purchased  leases  from  inception  of the
agreement  through June 30, 1998 are  $6,884,000.  Subsequent to March 31, 1998,
the Company has  extended the term of this  agreement  for one  additional  year
through June 30,  2000,  and King  Management's  financing  commitment  has been
extended  to  include  financing  of direct  leases  with  terms of two years or
shorter.

The Company  continues to monitor several 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,  other than the loan described in Risk of Additional  Loan and Lease
Write-offs  below , would be  material  or that they would  create new  covenant
violations  on current  facilities  or otherwise  limit or reduce the  Company's
access to credit.

Year 2000 Compliance

The Company's  internal  systems  require  certain  minimal  modifications.  The
Company  expects  these to be  completed  on a timely basis and does not believe
that the cost of  modifications  will have a  material  effect on the  Company's
operating  results.  The Company has not begun inquiry procedures of third party
vendor customer compliance. In the event the Company's systems are not compliant
and third  party  vendors  cannot  timely  provide the  Company  with  products,
services  or  systems  that  meet  the year  2000  requirements,  the  Company's
operating results could be materially adversely affected.


<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.  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-off 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 June 30,
1998, the Company had only two significant  vendor leasing programs  although it
has signed agreements for eight other vendor leasing programs. While the Company
believes  it has the  ability  and  capacity  to develop  large  vendor  leasing
programs,  other than the two it is currently  servicing,  there is no assurance
that it will be  successful  in this  regard or that it will be able to generate
acceptable revenue growth.

In order to broaden the base of potential  lessees the Company has 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  closely  a
restructured loan and a material lease, as to which the Company has a book value
of $3.6  million  and a  remaining  investment  of $9.5  million.  While  lessee
payments are being  received on a monthly basis there is no assurance  that such
payments  will  continue  on an  uninterrupted  basis  or that  the  Company  is
adequately secured. Any future losses on such loans and lease incurred in excess
of the Company's  reserves would likely  materially  affect the Company's future
earnings and cash flows,  and may cause the Company to be in violation of one or
more of its covenants under its credit agreements with its financing sources.

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  June  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.

However,  59.8% of the  Company's  total revenue for the three months ended June
30, 1998 was generated  through two vendor  leasing  programs.  Should either of
these programs terminate, the Company would continue to realize related revenues
for a period of up to three  years.  If the  Company is unable to  replace  this
business,  the  Company's  future  financial  results  would be  materially  and
adversely affected.


<PAGE>

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 or leased again at
the end of the  initial  lease term.  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.


<PAGE>




PART II-OTHER INFORMATION

ITEM 1.  Legal Proceedings - None.

ITEM 2.  Changes in  Securities - Pursuant to the June 23, 1998  amendment of
         an agreement dated June 16, 1997 among the Company, The King Management
         Corporation and Peter King, Chairman and Chief Executive Officer of the
         Company,  the  Company  granted to Mr. King a  seven-year  nonqualified
         stock option to purchase  400,000 shares of the Company's  Common Stock
         at $3.25 per share,  which option will become  exercisable  on June 23,
         2004 if Mr. King is still  employed by the Company;  provided  however,
         that the vesting of such option will be accelerated if the price of the
         Company's Common Stock reaches certain  targets.  The option was issued
         in  reliance  upon  the  exemption  provided  in  Section  4(2)  of the
         Securities Act.

ITEM 3.  Defaults on Senior Securities - None

ITEM 4.  Submission of Matters to a Vote of Security Holders - None.

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 June 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:   August 14, 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
                                 (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
June 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*    Agreement dated June 16, 1997 among the Company,  Peter J. King and The
         King Management Corporation

11.1     Per Share Earnings Computations

27.0     Financial Data Schedule (filed with electronic version only)