U.S. Securities and Exchange Commission
                             Washington, D.C. 20549


                                    FORM 10-Q


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

           [  ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
                SECURITIES EXCHANGE ACT OF 1934
                For the transition period from ____________ to ____________


                         Commission file number 0-25866
                         ------------------------------


                        PHOENIX GOLD INTERNATIONAL, INC.
                        --------------------------------
             (Exact name of registrant as specified in its charter)


             OREGON                                      93-1066325
--------------------------------------------------------------------------------
  (State or other jurisdiction                        (I.R.S. Employer
  of incorporation or organization)                 Identification Number)


                9300 NORTH DECATUR STREET, PORTLAND, OREGON  97203
                ---------------------------------------------------
         (Address of principal executive offices)        (Zip code)


                                 (503) 288-2008
                                 --------------
              (Registrant's telephone number, including area code)


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 [ ]

There were  3,248,745  shares of the  issuer's  common stock  outstanding  as of
January 29, 1999.

<PAGE>

<TABLE>
<CAPTION>

                                               PHOENIX GOLD INTERNATIONAL, INC.
                                       FORM 10-Q FOR THE QUARTER ENDED DECEMBER 31, 1998


                                                            INDEX
                                                            -----


Part I.        FINANCIAL INFORMATION                                                                              Page
                                                                                                                  ----
<S>                                                                                                               <C>

               Item 1.     Financial Statements

                           Balance Sheets at December 31, 1998 (unaudited)
                           and September 30, 1998 (audited)                                                         3

                           Statements of Earnings for the Three Months Ended
                           December 31, 1998 and 1997 (unaudited)                                                   4

                           Statements of Cash Flows for the Three Months Ended
                           December 31, 1998 and 1997 (unaudited)                                                   5

                           Notes to Financial Statements                                                            6

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


Part II.       OTHER INFORMATION

               Item 6.      Exhibits and Reports on Form 8-K                                                        11
               


SIGNATURES                                                                                                          12

INDEX TO EXHIBITS                                                                                                   13


</TABLE>

                                                                   2


<PAGE>

Part I.   FINANCIAL INFORMATION
Item 1.   Financial Statements

<TABLE>
<CAPTION>

                                                 PHOENIX GOLD INTERNATIONAL, INC.
                                                           BALANCE SHEETS


                                                                             DECEMBER 31,         SEPTEMBER 30,
                                                                                1998                  1998
                                                                          ------------------    ------------------
                                                                             (UNAUDITED)            (AUDITED)
<S>                                                                      <C>                    <C>                
ASSETS

Current assets:
    Cash and cash equivalents                                              $        2,599        $        2,602
    Accounts receivable, net                                                    4,594,460             4,287,965
    Inventories                                                                 6,321,512             6,886,720
    Prepaid expenses                                                              254,438               169,621
    Deferred taxes                                                                434,000               446,000
                                                                          ------------------    ------------------
        Total current assets                                                   11,607,009            11,792,908

Property and equipment, net                                                     2,316,748             2,522,005
Goodwill, net                                                                     207,798               217,702
Deferred taxes                                                                    569,000               567,000
Other assets                                                                      100,089               108,513
                                                                          ------------------    ------------------

        Total assets                                                       $   14,800,644         $  15,208,128
                                                                          ==================    ==================


LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                                       $    1,197,355         $   1,781,341
    Line of credit                                                              1,508,189               900,000
    Accrued payroll and benefits                                                  262,577               420,209
    Other accrued expenses                                                        379,432               448,214
    Current portion of long-term obligations                                      218,061               222,529
                                                                          ------------------    ------------------
        Total current liabilities                                               3,565,614             3,772,293

Long-term obligations                                                             887,492               938,233

Shareholders' equity:
    Preferred stock;
        Authorized - 5,000,000 shares; none outstanding                                 -                     -
    Common stock, no par value;
        Authorized - 20,000,000 shares
        Issued and outstanding - 3,248,745 and 3,464,745 shares                 7,192,422             7,548,822
    Retained earnings                                                           3,155,116             2,948,780
                                                                          ------------------    ------------------
        Total shareholders' equity                                             10,347,538            10,497,602
                                                                          ------------------    ------------------

        Total liabilities and shareholders' equity                         $   14,800,644          $ 15,208,128
                                                                          ==================    ==================


                                                 SEE NOTES TO FINANCIAL STATEMENTS

</TABLE>
                                                                 3
<PAGE>
<TABLE>
<CAPTION>

                                                    PHOENIX GOLD INTERNATIONAL, INC.
                                                          STATEMENTS OF EARNINGS
                                                                 (UNAUDITED)


                                                                                    THREE MONTHS ENDED
                                                                                        DECEMBER 31,
                                                                           ----------------------------------------
                                                                                 1998                  1997
                                                                           ------------------    ------------------
<S>                                                                       <C>                    <C>               

Net sales                                                                   $    6,665,935        $    6,058,001

Cost of sales                                                                    4,944,883             4,643,204
                                                                           ------------------    ------------------

    Gross profit                                                                 1,721,052             1,414,797


Operating expenses:
    Selling                                                                        786,681               755,053
    General and administrative                                                     542,177               566,278
                                                                           ------------------    ------------------
        Total operating expenses                                                 1,328,858             1,321,331
                                                                           ------------------    ------------------

Income from operations                                                             392,194                93,466

Other income (expense):
    Interest expense                                                               (48,858)              (97,439)
    Other income, net                                                                    -                 7,975
                                                                           ------------------    ------------------

        Total other income (expense)                                               (48,858)              (89,464)
                                                                           ------------------    ------------------

Earnings before income taxes                                                       343,336                 4,002

Income tax expense                                                                (137,000)               (1,000)
                                                                           ------------------    ------------------

Net earnings                                                                $      206,336       $         3,002
                                                                           ==================    ==================

Earnings per share - basic and diluted                                      $         0.06       $          0.00
                                                                           ==================    ==================

Average shares outstanding - basic                                               3,436,261             3,464,555
                                                                           ==================    ==================

Average shares outstanding - diluted                                             3,436,261             3,485,296
                                                                           ==================    ==================


                                                SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
                                                                  4
<PAGE>
<TABLE>
<CAPTION>

                                                PHOENIX GOLD INTERNATIONAL, INC.
                                                    STATEMENTS OF CASH FLOWS
                                                           (UNAUDITED)

                                                                                    THREE MONTHS ENDED
                                                                                        DECEMBER 31,
                                                                               ----------------------------------
                                                                                    1998               1997
                                                                              ---------------    ----------------
<S>                                                                           <C>               <C>    

Cash flows from operating activities:
    Net earnings                                                               $   206,336        $      3,002
    Adjustments to reconcile net earnings to
     net cash provided by (used in) operating activities:
        Depreciation and amortization                                              245,825             252,424
        Deferred taxes                                                              10,000              31,000
        Changes in operating assets and liabilities:
            Accounts receivable                                                   (306,495)            852,700
            Inventories                                                            565,208             311,300
            Prepaid expenses                                                       (84,817)           (142,537)
            Other assets                                                                 -              (3,106)
            Accounts payable                                                      (583,986)           (446,397)
            Accrued expenses                                                      (226,414)           (164,187)
                                                                             ----------------      --------------

    Net cash provided by (used in) operating activities                           (174,343)            694,199

Cash flows from investing activities:
    Capital expenditures, net                                                      (22,240)            (70,718)
                                                                             ----------------     ---------------

    Net cash used in investing activities                                          (22,240)            (70,718)

Cash flows from financing activities:
    Line of credit, net                                                            608,189            (554,219)
    Repayment of long-term obligations                                             (55,209)            (96,221)
    Purchase of common stock                                                      (356,400)                  -
    Proceeds from exercise of stock options                                              -              26,957
                                                                             ----------------    ----------------

    Net cash provided by (used in) financing activities                            196,580            (623,483)
                                                                             ----------------    ----------------

Decrease in cash and cash equivalents                                                   (3)                 (2)

Cash and cash equivalents, beginning of period                                       2,602               2,603
                                                                              ---------------    ---------------

Cash and cash equivalents, end of period                                       $     2,599       $       2,601
                                                                              ===============    ===============

Supplemental disclosure:
    Cash paid for interest                                                     $    50,000       $     102,000


                                                 SEE NOTES TO FINANCIAL STATEMENTS
</TABLE>
                                                                   5
<PAGE>

                        PHOENIX GOLD INTERNATIONAL, INC.
                          NOTES TO FINANCIAL STATEMENTS
                                   (UNAUDITED)


NOTE 1 - UNAUDITED FINANCIAL STATEMENTS

      Certain  information and note disclosures  normally  included in financial
statements prepared in accordance with generally accepted accounting  principles
have been omitted from these  unaudited  financial  statements.  These unaudited
financial statements should be read in conjunction with the financial statements
and notes  included  in the  Company's  Annual  Report on Form 10-K for the year
ended September 30, 1998 filed with the Securities and Exchange Commission.  The
results of operations for the three-month period ended December 31, 1998 are not
necessarily  indicative  of the  operating  results  for the full  year.  In the
opinion of management,  all  adjustments,  consisting  only of normal  recurring
accruals,  have been made to present fairly the Company's  financial position at
December 31, 1998 and the results of its  operations  and its cash flows for the
three-month periods ended December 31, 1998 and 1997.


NOTE 2 - REPORTING PERIODS

      The Company's fiscal year is the 52-week or 53-week period ending the last
Sunday in  September.  Fiscal  1999 and fiscal  1998 are  52-week  years and all
quarters are 13-week  periods.  For  presentation  convenience,  the Company has
indicated in these financial  statements that its fiscal year ended on September
30 and that the three months presented ended on December 31.


NOTE 3 - PROSPECTIVE ACCOUNTING CHANGE

      In June 1997, the Financial Accounting Standards Board issued Statement of
Financial  Accounting Standards (SFAS) No. 131, DISCLOSURES ABOUT SEGMENTS OF AN
ENTERPRISE  AND RELATED  INFORMATION.  SFAS No. 131  establishes  standards  for
disclosure about operating segments in annual financial  statements and selected
information in interim  financial  reports.  It also  establishes  standards for
related  disclosures  about  products and services,  geographic  areas and major
customers.  This  statement  supersedes  SFAS No. 14,  FINANCIAL  REPORTING  FOR
SEGMENTS OF A BUSINESS  ENTERPRISE.  SFAS No. 131 will be effective for the year
ending September 30, 1999 and requires that comparative information from earlier
years be restated to conform to the requirements of this standard.  Phoenix Gold
operates in a single  industry  segment.  Adoption of SFAS No. 131 may result in
additional  disclosures in the notes to financial  statements,  but will have no
impact on the financial statements.



                                       6
<PAGE>


NOTE 4 - INVENTORIES

      Inventories  are stated at the lower of cost or market and  consist of the
following:
<TABLE>
<CAPTION>

                                                            DECEMBER 31,             SEPTEMBER 30,
                                                                1998                      1998
                                                        ---------------------    ---------------------
     <S>                                                <C>                       <C>
      Raw materials                                       $     2,453,241          $      2,732,112
      Work-in-process                                               5,923                     8,527
      Finished goods                                            3,777,595                 4,058,828
      Supplies                                                     84,753                    87,253
                                                        =====================    =====================
          Total inventories                               $     6,321,512          $      6,886,720
                                                        =====================    =====================
</TABLE>

NOTE 5 - PROPERTY AND EQUIPMENT

      Property and equipment consist of the following:
<TABLE>
<CAPTION>

                                                            DECEMBER 31,              SEPTEMBER 30,
                                                                1998                       1998
                                                        ---------------------    ---------------------
     <S>                                                 <C>                      <C>  
      Machinery, equipment, and vehicles                  $     4,546,702           $     4,526,903
      Leasehold improvements                                    1,527,834                 1,527,834
      Construction in progress                                     49,276                    46,835
                                                        ---------------------    ---------------------
                                                                6,123,812                 6,101,572
      Less accumulated depreciation
        and amortization                                       (3,807,064)               (3,579,567)
                                                        =====================    =====================
          Total property and equipment, net               $     2,316,748           $     2,522,005
                                                        =====================    =====================
</TABLE>


NOTE 6 - LINE OF CREDIT

     During  December  1998,  the  Company  renewed its $5.5  million  revolving
operating line of credit on essentially the same terms through December 1999.


NOTE 7 - COMMITMENTS

      The Board of Directors has  authorized  the Company to purchase up to $1.0
million of Company  common  stock.  On December 15, 1998,  the Company  acquired
216,000 shares of its common stock from a third party for $356,400.

      During  December  1998,  the Company  exercised its option to purchase the
facility  which it leases under an operating  lease.  The purchase price is $3.1
million  and the  closing  is  expected  to occur on June 30,  1999.  Management
intends to sell and leaseback the facility as soon as the purchase is completed.
The completion of the sale and leaseback  transaction assumes that management is
able to locate a buyer and negotiate the sale and leaseback on acceptable  terms
to the Company. There is no assurance that management will be able to identify a
buyer for the  facility  and to  negotiate a sale and  leaseback  on  acceptable
terms.

                                       7
<PAGE>
PART I.    FINANCIAL INFORMATION
ITEM 2:    Management's Discussion and Analysis of Financial Condition and 
           Results of Operations


RESULTS OF OPERATIONS
---------------------

      Net sales  increased  $608,000,  or 10.0%,  to $6.7  million for the three
months  ended  December  31, 1998  compared to $6.1 million for the three months
ended December 31, 1997 due principally to increased  domestic  sales.  Domestic
sales  increased  $1.1 million,  or 30.9%,  to $4.8 million for the three months
ended  December  31, 1998  compared to $3.7  million for the three  months ended
December 31, 1997.  International  sales decreased 22.3% to $1.8 million for the
three months ended December 31, 1998,  from $2.4 million in the comparable  1997
period.  International  sales  represented  27.7% and 39.2% of net sales for the
three months ended December 31, 1998 and 1997, respectively. The Company expects
international  sales for fiscal 1999 to remain at levels lower than historically
achieved due to current world-wide economic conditions.

      Sales of electronics,  speakers and accessories  increased 14.9%, 4.9% and
2.9%,  respectively for the three months ended December 31, 1998 compared to the
corresponding quarter in fiscal 1998 due to increased domestic sales.

      Gross  profit  increased  to 25.8%  from  23.4% of net sales for the three
months  ended  December  31,  1998  and  1997,  respectively,  primarily  due to
increased  sales  volume which  caused  manufacturing  overhead to decrease as a
percentage of sales.

     Operating expenses consist of selling, general and administrative expenses.
Total operating  expenses increased $8,000, or 0.6%, to $1,329,000 for the three
months ended December 31, 1998 compared to $1,321,000 for the three months ended
December 31, 1997.  Operating  expenses were 19.9% and 21.8% of net sales in the
respective three-month periods.

      Selling  expenses  increased  $32,000,  or 4.2%, to $787,000 for the three
months ended  December 31, 1998  compared to $755,000  for the  comparable  1997
period.  Selling  expenses  were 11.8% and 12.5% of net sales in the  respective
three-month periods. The increased selling expenses in dollar amount were due to
higher payroll costs as a result of additional sales and marketing personnel.

      General  and  administrative  expenses  decreased  $24,000,  or  4.3%,  to
$542,000 for the three months ended  December 31, 1998  compared to $566,000 for
the comparable fiscal 1998 period. General and administrative expenses were 8.1%
and 9.3% of net  sales in the  respective  three-month  periods.  The  decreased
general and administrative  expenses were due to lower payroll costs as a result
of decreases in personnel.

      Interest  expense  decreased  by $49,000 to $48,000  for the three  months
ended  December 31, 1998 compared to $97,000 for the three months ended December
31, 1997. The decrease in interest  expense was due to lower average debt levels
during the three months ended  December 31, 1998 due to the reduction of debt as
compared to the corresponding quarter in fiscal 1998 and lower interest rates on
the outstanding borrowings.

                                       8
<PAGE>

      Net earnings were $206,000, or $0.06 per share (basic and diluted) for the
three months ended  December  31, 1998,  compared to net earnings of $3,000,  or
$0.00 per share (basic and  diluted)  for the three  months  ended  December 31,
1997.  The increase in net earnings in the first quarter of fiscal 1999 compared
to the corresponding quarter in fiscal 1998 was due to increased sales, improved
gross margin and cost control  programs  which reduced  operating  expenses as a
percentage of sales.

LIQUIDITY AND CAPITAL RESOURCES
-------------------------------

      The Company's  primary  needs for funds are for working  capital and, to a
lesser extent,  for capital  expenditures.  The Company  financed its operations
during  the first  quarter  of fiscal  1999 from cash  provided  from  financing
activities.  Net cash used in  operating  activities  was $174,000 for the three
months  ended  December 31, 1998.  When cash flow from  operations  is less than
current needs, the Company  increases the balance owing on its operating line of
credit.  When cash flow from operations  exceeds current needs, the Company pays
down in part the  balance  owing on its  operating  line of credit  rather  than
investing and accumulating excess cash, resulting in low reported cash balances.

      Accounts  receivable  increased by $306,000  during the three months ended
December  31, 1998 due to the  increase in net sales.  Inventories  decreased by
$565,000 and accounts  payable  decreased  $584,000  during the first quarter of
fiscal 1999 due to management's continuing efforts to reduce inventory levels in
order to reduce  outstanding  liabilities.  Prepaid expenses  increased  $85,000
during the three months ended  December  31, 1998,  primarily  due to trade show
deposits and insurance  costs incurred at the beginning of the Company's  fiscal
year.  The line of credit  increased  $608,000 due to the  reduction in accounts
payable and accrued expenses.  Accrued expenses  decreased $226,000 due to lower
accrued payroll and benefits at December 31, 1998. Overall,  net working capital
increased $21,000 during the first quarter of fiscal 1999.

      During the first quarter of fiscal 1999, the Board of Directors authorized
the Company to purchase up to $1.0 million of Company common stock.  On December
15, 1998, the Company  acquired  216,000 shares of its common stock from a third
party for $356,400 financed by borrowings under the Company's  operating line of
credit.

      During the first  quarter of fiscal 1999,  the Company also  completed its
restructuring  plan  implemented  during the fourth quarter of fiscal 1998. Cash
payments were not material.

      The Company made capital expenditures of $22,000 in the three months ended
December  31,  1998.   Management   anticipates   that   discretionary   capital
expenditures  for the remainder of fiscal 1999 will not exceed  $400,000.  These
anticipated  expenditures  will be financed from proceeds of short-term debt and
cash provided from operations.

      During  December  1998,  the Company  exercised its option to purchase the
office and manufacturing  facility which it leases under an operating lease. The
purchase  price is $3.1 million and the closing is expected to occur on June 30,
1999.  Management  intends to sell and  leaseback  the  facility  as soon as the
purchase is completed.  The  completion  of the sale and  leaseback  transaction
assumes that  management  is able to locate a buyer and  negotiate  the sale and
leaseback  on  acceptable  terms  to the  Company.  There is no  assurance  that
management  will be able to identify a buyer for the facility and to negotiate a
sale and leaseback on acceptable terms.

                                       9
<PAGE>

     During  December  1998,  the  Company  renewed its $5.5  million  revolving
operating line of credit on essentially the same terms through December 1999.

      The Company has assessed  its  exposure to market risks for its  financial
instruments  and  has  determined  that  its  exposures  to such  risks  are not
material.

YEAR 2000 CONVERSION
--------------------

      The  Company  has begun a process  to prepare  its  computer  systems  and
applications for the Year 2000 date conversion. The process includes a review of
information  systems used in the Company's internal business as well as by third
party  vendors,  manufacturers  and  suppliers.  The Company  has  substantially
completed its internal  assessment  of Year 2000  conversion  requirements.  The
Company's products do not include embedded technology, such as microcontrollers.
The  Company's  third  party  interfaces,  such as those  with its  vendors  and
customers,  are not computerized,  and the Company's information systems utilize
standard, readily available business software. As a result, the Company believes
the effect of the Year 2000 conversion on its business will not be material.

      Information systems that are determined not to be Year 2000 compliant will
be modified, upgraded or replaced through acquisition and implementation of "off
the shelf" upgrades to existing  information  system software.  A portion of the
upgrades has already been  acquired  from third party  vendors at a cost of less
than  $10,000,  and the  balance  of the  upgrades  is  believed  to be  readily
available.  The Company plans to implement such upgrades  during fiscal 1999 and
believes the aggregate cost of all such upgrades will not be material.

      There can be no assurance,  however,  because of the existence of numerous
systems and related  components  within the Company and the  interdependency  of
these systems,  that certain systems at the Company, or systems at entities that
provide  services or goods for the Company,  will operate in the Year 2000.  The
Company is continuing to evaluate the risks to the Company of failure to be Year
2000 compliant and to develop a contingency  plan.  Although it is not currently
anticipated,  the inability to complete the Company's Year 2000  conversion on a
timely  basis or the  failure of a system at the  Company  or at an entity  that
provides  services  and goods to the Company is not  expected to have a material
impact on future operating results, financial condition or cash flows.

FORWARD-LOOKING STATEMENTS
--------------------------

      This Report contains  "forward-looking  statements"  within the meaning of
the  Private  Securities  Litigation  Reform  Act of  1995,  including,  without
limitation,  statements  as  to  expectations,   beliefs  and  future  financial
performance,  that are based on current  expectations and are subject to certain
risks,  trends and  uncertainties  that could cause actual  results to vary from
those  projected,  which  variances  may have a material  adverse  effect on the
Company.  Among the factors that could cause actual results to differ materially
are the following: business conditions and growth in the car audio, professional
sound and custom  audio/video and home theater markets and the general  economy;
business  conditions  in  international  markets;   changes  in  the  number  of
customers;  the  timing  and size of orders  by  dealers,  distributors  and OEM
customers;  competitive factors such as rival products and price pressures;  the
failure of new products to compete  successfully in existing or new markets; the
failure to achieve timely  improvement in the manufacturing ramp with respect to
new  products;  changes in product mix;  availability  and price of  components,
subassemblies and products  supplied by third party vendors;  and cost and yield
issues associated with production at the Company's factory.

                                       10
<PAGE>

PART II. OTHER INFORMATION
ITEM 6.  Exhibits and Reports on Form 8-K


         (a) Exhibits

                 10.1    Loan Agreement dated December 18, 1998 between the
                         Company and U.S. National Bank Association

                 10.2    Promissory Note dated December 28, 1998 made by the
                         Company in favor of U.S. National Bank Association

                 27      Financial Data Schedule

         (b) Reports on Form 8-K

                 A current report on Form 8-K, dated December 18, 1998, was
                 filed  on  December  21,  1998  to  report  the  Company's
                 purchase of 216,000 shares of its common stock.










                                       11
<PAGE>

                                   SIGNATURES


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

                                  PHOENIX GOLD INTERNATIONAL, INC.



                                  /s/ Joseph K. O'Brien   
                                  ------------------------
                                  Joseph K. O'Brien
                                  Chief Financial Officer
                                  (Principal Financial and Accounting Officer)

Dated:  February 4, 1999










                                       12
<PAGE>
<TABLE>
<CAPTION>


                                                             INDEX TO EXHIBITS



       Exhibit                                                                                           Page
       -------                                                                                           ----
       <S>         <C>                                                                                  <C>   
        10.1        Loan Agreement dated December 18, 1998 between the Company
                    and U.S. National Bank Association                                                    14

        10.2        Promissory Note dated December 28, 1998 made by the Company
                    in favor of U.S. National Bank Association                                            20

        27          Financial Data Schedule                                                               27


</TABLE>



                                       13