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


                                   FORM 10-QSB
(Mark One)

[x]  QUARTERLY  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

                For the quarterly period ended: December 31, 1997

[  ] TRANSITION  REPORT UNDER  SECTION 13 OR 15(d) OF THE EXCHANGE ACT 

             For the transition period from __________ to __________
                         Commission file number 1-14168

                           Bell Technology Group Ltd.
        (Exact name of small business issuer as specified in its charter)

                                    Delaware
         (State or other jurisdiction of incorporation or organization)

                                   13-3781263
                        (IRS Employer Identification No.)

              295 Lafayette Street, 3rd. Floor, New York, NY 10012
                    (Address of principal executive offices)

                                 (212) 334-8500
                           (Issuer's telephone number)


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

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports),  and (2) has been
subject to such filing requirements for the past 90 days. Yes [x] No [ ]

                      APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer's classes or common
equity, as of the latest practicable date:

 ** 3,448,450 shares of Common Stock as of February 13, 1998

Transitional Small Business Disclosure Format (Check One): Yes [ ]   No [x]


<PAGE>


                           Bell Technology Group Ltd.
                                and Subsidiaries

    Table of Contents
                                                                        Page No.
PART  I -  FINANCIAL INFORMATION
  Item  1.  Consolidated Balance Sheet as of December 31, 1997 and
                September 30, 1997                                            2

            Consolidated Statements of Operations
               For the Three Months Ended December 31, 1997 and 1996          3

            Consolidated Statements of Cash Flows
               For the Three Months Ended December 31, 1997 and 1996          4

            Notes to Consolidated Financial Statements                      5-6

  Item  2.  Management's Discussion and Analysis of Financial Condition     7-12
               and Results of Operations

PART  II -  OTHER INFORMATION                                                 13


<PAGE>


                   Bell Technology Group Ltd. and Subsidiaries
                           Consolidated Balance Sheets

                                                     December 31,     Sept 30,
                     Assets                             1997            1997
                                                     (Unaudited)
Current assets:
  Cash and cash equivalents                           $ 1,561,516    $ 2,401,446
  Accounts receivable, net of allowance for
   doubtful accounts of $214,684
   as of December 31, 1997 and $194,684 as of
   September 30, 1997, respectively                     3,586,243      3,259,548
  Inventories                                             494,526        487,542
  Prepaid expenses and other current assets               185,039        727,765
                                                      -----------    -----------
     Total current assets                               5,827,324      6,876,301

Property and equipment, net                             4,135,739      3,548,838
Long-term investment                                      325,000        325,000
Loan to stockholder                                       145,408        145,408
Other assets                                              212,559        129,441
                                                      -----------    -----------
     Total assets                                     $10,646,030    $11,024,988
                                                      ===========    ===========

                      Liabilities and Stockholders' Equity

Current liabilities:
  Short-term borrowings                           $  1,910,352     $  2,001,157
  Current portion of notes payable                     330,869          335,021
  Accounts payable                                   2,550,770        2,010,507
    Accrued expenses                                    34,624          425,852
    Deferred revenues                                   87,599          123,046
                                                  ------------     ------------
     Total current liabilities                       4,914,214        4,895,583

  Notes payable, less current portion                  825,900          923,217
  Other long term liabilities                          230,907          191,928
                                                  ------------     ------------

     Total liabilities                               5,971,021        6,010,728
                                                  ------------     ------------
  Commitments and contingencies

Stockholders' equity:
  Preferred Stock, $.01 par value; 500,000
  shares authorized; no shares issued and
  outstanding                                             --               --
  Common Stock, $.01 par value; 10,000,000
  shares authorized; 3,448,450
  shares issued and outstanding                         34,485           34,485
  Additional paid-in capital                        10,011,836       10,069,474
  Accumulated deficit                               (5,371,312)      (5,089,699)
                                                  ------------     ------------
     Total stockholders' equity                      4,675,009        5,014,260
                                                  ------------     ------------
     Total liabilities and stockholders'
        equity                                    $ 10,646,030     $ 11,024,988
                                                  ============     ============

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


                                      -2-
<PAGE>



                           Bell Technology Group Ltd.
                                and Subsidiaries
                      Consolidated Statements of Operations
                                   (Unaudited)


                                                         Three Months Ended
                                                           December 31,
                                                      1997              1996

Revenue                                            $ 4,739,567      $ 3,696,399
Costs and expenses:
  Cost of revenues (exclusive of
     depreciation expense shown below)               3,113,899        2,790,300
  Selling, general and administrative                1,609,438        1,444,795
  Depreciation and amortization                        241,860          156,466
                                                   -----------      -----------

     Total costs and expenses                        4,965,197        4,391,561
                                                   -----------      -----------

Loss from operations                                  (225,630)        (695,162)

  Interest income (expense), net                       (55,984)          14,356
                                                   -----------      -----------

Net loss                                           $  (281,614)     $  (680,806)
                                                   ===========      ===========

Basic net loss per common share                    $     (0.08)     $     (0.22)
                                                   ===========      ===========


Basic weighted average
   shares outstanding                                3,448,450        3,084,339



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


                                      -3-
<PAGE>


                   Bell Technology Group Ltd. and Subsidiaries
                      Consolidated Statements of Cash Flows
                                   (Unaudited)


                                                         Three Months Ended
                                                            December 31,
                                                         1997            1996
Cash flows from operating activities:
  Net loss                                          $  (281,614)    $  (680,806)
  Adjustments to reconcile net (loss)
  to net cash used in operating activities
    Depreciation and amortization                       241,860         156,466
    Provision for bad debts                              20,000            --
Changes in operating assets and liabilities:
    (Increase) in accounts receivable                  (306,695)     (1,277,477)
    (Increase)in inventories                             (6,984)       (247,228)
    Decrease in prepaid expenses
       and other current assets                         542,726          67,779
    Decrease (increase) in other assets                 (83,118)         43,897
    Increase in accounts payable                        540,743         520,397
    (Decrease)increase in accrued expenses             (391,228)         29,803
    (Decrease)increase in deferred revenues             (35,447)         32,726
                                                    -----------     -----------
Net cash provided by (used in) operations               240,243      (1,354,443)
                                                    -----------     -----------
Cash flows from investing activities:
  Purchases of property and equipment,
    net of landlord reimbursement                      (828,761)       (691,270)
                                                    -----------     -----------
Net cash used in investing activities                  (828,761)       (691,270)
                                                    -----------     -----------
Cash flows from financing activities:
  Net proceeds from short term borrowings               (90,805)        779,392
  Net repayments of notes payable                      (101,469)        (11,801)
  Additional costs incurred with private
   placement from September 1997                        (59,138)           --
                                                    -----------     -----------
Net cash provided by financing activities              (251,412)        767,591
                                                    -----------     -----------
Net (decrease)increase in cash and
  cash equivalents                                     (839,930)     (1,278,122)
    Cash and cash equivalents,
     beginning of period                              2,401,446       2,342,011
                                                    -----------     -----------
Cash and cash equivalents,
 end of period                                      $ 1,561,516     $ 1,063,889
                                                    ===========     ===========

     The  accompanying   notes  are  an  integral  part  of  these  consolidated
statements

                                      -4-
<PAGE>


                           BELL TECHNOLOGY GROUP LTD.
                                AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. THE COMPANY AND SIGNIFICANT ACCOUNTING POLICIES

The  consolidated  balance  sheets  as  of  December  31,  1997,  statements  of
operations  for the  three  months  ended  December  31,  1997  and 1996 and the
statements  of cash flows for the three months ended  December 31, 1997 and 1996
have been prepared by Bell Technology Group Ltd. (the "Company")  without audit.
All material inter-company  accounts and transactions have been eliminated.  The
consolidated  results should be read in conjunction  with the audited  financial
statements  and notes thereto  included in the Company's Form 10KSB on file with
the  Securities  and  Exchange   Commission.   Results  of  operations  for  the
three-month  period are not necessarily  indicative of the operating results for
the full year.  Interim  statements  are  prepared  on a basis  consistent  with
year-end statements.

In the  opinion  of  management,  the  unaudited  interim  financial  statements
furnished  herein include all adjustments  necessary for a fair  presentation of
the results of operations of the Company.  All such  adjustments are of a normal
recurring nature.

2. REVOLVING CREDIT AGREEMENT

The Company (through its subsidiary NAFT International  Ltd.) presently has $3.0
million   available  to  it  pursuant  to  a  Revolving  Credit  Agreement  with
NationsCredit  ("Nations") which may be used to finance its accounts  receivable
and  inventory.  The  availability  of  credit  is  based  upon the  balance  of
collateral  available which is 80% of its current qualifying accounts receivable
and 100% of its  inventory.  As of  December  31,  1997,  the  Company  had both
available  and  outstanding  a  balance  of  approximately  $1.9  million.  Such
obligation  is  secured  by a  continuing  security  interest  in  the  accounts
receivable and inventory of NAFT,  and  guaranties  and cross  guaranties of the
Company and its other  subsidiaries.  The borrowings  bear interest at the prime
rate plus 1.75%. Pursuant to the terms of these agreements,  NAFT is required to
maintain certain  liquidity  ratios.  NAFT is in compliance with this agreement.
While the Credit  Agreement  gives  Nations the right to demand  repayment if it
deems itself "insecure,"  Nations has given the Company no indication that it is
considering  utilizing  this  provision.  Furthermore,  incurring  losses as the
Company builds its new businesses was  anticipated in setting its covenants with
Nations in October 1996. The Company deems its  relationship  with Nations to be
normal.


                                      -5-
<PAGE>


3. NOTES AND MORTGAGES PAYABLE

The Company has entered  into leases for various  items of its office  furniture
and  equipment  as well as for its  telephone  system  accounted  for as capital
leases. The terms on these leases vary from 36 to 60 month terms.

The Company  financed  certain of its furniture and computer  equipment in April
1997 in the amount of  approximately  $874,000 with FINOVA Capital  Corporation.
Such loan is for a term of three years,  bears  interest at 12.19% per annum and
is self-liquidating over its term.

4. COMMITMENTS AND CONTINGENCIES

In  February  1996,  the  Company   entered  into  a  lease  for  its  corporate
headquarters  effective  July 1996. The lease is for eleven years and six months
starting with an initial  annual base rental of $309,250  escalating to $563,547
in the final year. Under the lease, the landlord reimbursed the Company $500,000
for leasehold improvements. The Company is required by the terms of the lease to
maintain a  security  deposit in the form of a letter of credit in the amount of
$400,000. In order to obtain a standby letter of credit, the Company maintains a
restricted  certificate  of deposit  presently in the amount of $400,000.  As of
March  1998,  this  amount is to be reduced to $325,000 if the Company is not in
default  under the terms of the  lease.  Therefore  $75,000  of this  deposit is
classified  as other  current  assets and  $325,000 is  included  in  "Long-term
Investment" of the Company's consolidated balance sheets as of December 31, 1997
and September 30, 1997, respectively.

5. DEPRECIATION AND AMORTIZATION

Depreciation expense relating to cost of revenues is $63,266 and $45,016 for the
three months ended December 31, 1997 and 1996, respectively.

6. RECENTLY ISSUED ACCOUNTING STANDARDS

In the first quarter of fiscal 1998, the Company adopted  Statement of Financial
Accounting Standards No. 128 ("SFAS 128"),  "Earnings per Share," which requires
the presentation of both basic and diluted earnings per share on the face of the
Consolidated Statements of Operations.  Options and warrants are not included in
the  calculation  of  diluted   earnings  per  share  if  the  effect  would  be
antidilutive.  Accordingly,  basic and  diluted net loss per share do not differ
for any period presented.

Net loss per share under the  provisions  of SFAS 128 for  periods  prior to the
first  quarter  of  fiscal  1998 did not  differ  from the net loss per share as
reported in those prior periods.

The following table  summarizes  securities that were outstanding as of December
31, 1997 and 1996,  but not included in the  calculation of diluted net loss per
share because such shares are antidilutive.

                                                      December 31,
                                                  ---------------------
                                                   1997          1996
                                                   ----          ----
                                                             
                                  Options         341,064      214,564
                                  Warrants        695,933      661,250
                                                         


                                      -6-
<PAGE>



PART I  MANAGEMENT'S DISCUSSION AND ANALYSIS OF
        FINANCIAL CONDITION AND RESULTS OF OPERATIONS

General

     Bell  Technology  Group Ltd. (the  "Company"),  is a  diversified  computer
products  and  service   company   which  focuses  its  operation  on  providing
sophisticated computer/Internet business solutions to larger companies which are
engaged primarily in the graphics arts, advertising,  publishing,  entertainment
and financial  industries.  The Company advises clients on the various  computer
solutions available, provide, install and service such solutions and then assist
the client in properly  utilizing the benefits to be gained from using the World
Wide Web (the  "Internet").  The Company has  authorizations to sell and service
equipment  from  hardware  manufacturers  such as Silicon  Graphics,  Inc.,  Sun
Microsystems,  Inc. and Cisco Systems,  Inc. and software  manufacturers such as
Microsoft Corporation, Netscape Corporation, Alias/Wavefront Inc. and Checkpoint
Software Corp. As a result of its growing  experience in the use of the Internet
in commercial  applications,  the Company has done substantial work in the areas
of video/audio streaming, security in credit card transactions, and the creation
of "shopping carts" for catalog sales companies

     The Company operates through two principal  "Operating Segments" consisting
of:

          a)   A Computer Product Sales & Services  Division engaged in the sale
               of  computer  hardware,  software,   networking  (LAN  and  WAN),
               computer  hardware and software repairs and maintenance and other
               product and service sales.

          b)   An  Internet  and  Media  Development  Division  engaged  in  the
               businesses of Web design,  web hosting,  training,  CD ROM design
               and preparation, 3-D and motion capture animation, consulting and
               sales of related products and services

     Computer Product Sales and Services

     The Company has  continued  to narrow its focus as to the types of hardware
and software  products  which it offers for sale and expects the  percentage  of
revenues  from the sale of  computer  hardware  to decline in  relation to total
sales and probably in absolute dollar terms.  Its primary focus now are products
that: (a) are related to its Internet  services  operation;  (b) generate higher
profit  margins;  (c) are of a type which require  greater after market support,
(d)  experience  little  price  competition  from mail  order  houses  and other
resellers,  and (e) which brings the Company into contact with  companies of the
type which can use a broad range of the services offered by the Company.

     When  requested by the client,  the Company  will prepare all  equipment it
sells by loading  customer  programs,  connecting  equipment  to a network,  and
servicing the client's hardware and software. The Company is authorized to carry
out warranty and other  repairs on many of the products it sells.  However,  the
Company  does not  consider  its repair and service  activity to be a mainstream
activity but rather a service,  which is maintained  for the  convenience of its
clients.


                                      -7-
<PAGE>


     Internet and Media Development

     With its  staff of  Internet  engineers  and  systems  administrators,  the
Company offers  multiple  platforms for World Wide Web hosting and  development,
and is  continually  working  on new  and  unique  approaches  to the use of the
Internet  for  business  solutions.  The  Company's  network  operations  center
provides sophisticated  Internet connectivity  available for direct,  high-speed
Internet connections and World Wide Web hosting and co-location facilities.  The
Company operates this aspect of its business on a highly  personalized  level as
opposed to using a  mass-market  approach,  paying  particular  attention to the
particular needs of its clients. It is believed that  facilities-based  Internet
services  are the future of the  industry.  Major  corporations,  which have web
hosting  and/or  co-location  services,  such as MSNBC Desktop Video and General
Media International, work closely with the Company at its facility.

     Among the services and products offered to its clients is video streaming -
a process  whereby a user can view video  transmissions  while  downloading  the
video file.  This allows  companies like MSNBC Desktop Video to distribute  live
video  feeds  to its  customers.  The  Company  is  also  working  with a  major
international  magazine  publisher to stream  multiple  channels of video,  each
carrying its own content,  to the Internet using public. In effect, this enables
the magazine  publisher to produce its own  "cable-like TV  experience"  without
regard to geographic boundaries.

     Basic Internet Access:  The Company provides  dedicated  Internet access to
corporations and other commercial  entities.  The Company offers four commercial
connection  bandwidths:  56 Kbps,  128  Kbps,  T-1,  and T-3,  and the  hardware
necessary  for basic  Internet  access,  including  routers  and  CSU/DSUs.  The
bandwidth  or capacity of a physical  network to carry  traffic,  of a dedicated
digital line is far greater  than that  possible  through use of a  conventional
modem.  Greater bandwidth allows faster connection and downloading  capabilities
for subscribers. Businesses with medium to large LANs and WANs often require the
bandwidth offered by dedicated digital lines.

     A direct link between a commercial subscriber's LAN or WAN and the Internet
through  the  Company  gives a  subscriber  the  ability  to use  all the  tools
available on the Internet.  A direct link involves a leased line,  provided by a
local telephone  service  provider,  between the  subscriber's  location and the
Company's multi-path (or "redundant")  backbone connection to the Internet.  The
Company derives Basic Internet Access revenues from initial  connection  charges
and monthly service fees, both of which vary directly with the bandwidth chosen.
Each commercial  subscriber receives a numerical Internet address, a descriptive
domain name, and 24-hour access to the Internet.

     The  Company has  embarked  on a program of  expanding  and  up-dating  its
Internet  operations.  To this end, it has  increased the amount of its existing
space at its 295  Lafayette  Street  which is  devoted to  Internet  operations,
including web hosting and  co-location  facilities  and  services.  In the first
quarter it spend approximately $800,000 on such expansion.

     Training

     The Company  maintains  several  classrooms at its  headquarters  facility,
which it rents out to corporations for the training of their professional staff.
The Company also  provides  training at the client's  site on a national  basis.
Some  instructors  are on staff and others are hired on a  freelance  basis,  as
needs dictate.


                                      -8-
<PAGE>


     The Company is a training center for  Alias/Wavefront for the New York City
Metropolitan  area.  Alias  programs are used for high-end  (e.g.  broadcast and
film) animation,  3-D modeling, and rendering. The Company is also an authorized
training provider for Macromedia Authorware/ Director. Training is provided on a
wide range of platforms, including PC, IRIX and MacOs.

     Interactive Development

     The Company's  graphic arts  capabilities  include  creating and assembling
World Wide Web sites,  interactive  applications such as computer based training
and promotional sales material. The Company works with content providers such as
marketing and advertising firms to provide the technical and design aspects of a
project for large-scale  multimedia  projects  including sites to be used on the
Internet.

     The Company designs internal communications products used by businesses for
computer  based in-house  training and Intranet  development.  In addition,  the
Company  provides  front-end  interfaces  and graphics  for database  driven web
sites.

     The Company's main areas of digital design  development  include animation,
interactive and web production. The Company's Authorware division is responsible
for creating  computer-based  training and computer-based  sales tools for major
corporations.  Most recently,  the Company has leveraged its Internet  knowledge
and instructional design expertise to develop interactive training  applications
with rich multi-media content for delivery over corporate Intranets.

     The  Company  provides  consulting  and  project  management  services  for
companies   making  the   transition   from  print  to  electronic  to  Internet
presentations  and is  currently  doing a project  for the  largest  and  oldest
industrial directory of products and services in the world.

Results of Operations
Three Months Ended  December 31, 1997 Compared With Three Months Ended  December
31, 1996

Revenues.  Consolidated  revenues for the three  months ended  December 31, 1997
compared  to the  same  period  in  1996,  increased  approximately  28.2%  from
approximately $3.7 million to approximately $4.7 million.  This increase was due
primarily to a increase in sales from the Internet and Media Development segment
which  increased  sales from  approximately  $409,000 for the three months ended
December  31,  1996 to  approximately  $1,328,000  for the  three  months  ended
December 31, 1997 for an increase of 224.7% over the prior period.  Sales in the
Computer  Products Sales and Service segment  increased 3.7% from  approximately
$3,287,000  for the  three  months  ended  December  31,  1996 to  approximately
$3,408,000  for the three  months  ended  December  31,  1997.  The  Company  is
de-emphasizing  hardware  sales in favor of software and Internet  related sales
which  tend to produce  better  profit  margins.  It intends to focus its future
operations  primarily  in the areas of  Internet  related  activities,  sales of
high-end computer products and systems,  training,  interactive  development and
web site development.


                                      -9-
<PAGE>


Cost of Revenues.  Cost of Revenues for the three months ended December 31, 1997
were approximately $3.1 million, or approximately 65.7% of revenues, as compared
to  approximately  $2.8  million  or  approximately  74.1% of  revenues  for the
comparable period in fiscal 1996. The increase in gross profit margin was due to
the fact that an  increased  percentage  of sales  came from  sales of  services
(including Internet  services)that  generate higher profit margins,  rather than
sales of products.  In addition,  sales of more  sophisticated  computer systems
that required greater pre-sales and after market customer  assistance  generated
higher gross profit margins.

Selling,  General and  Administrative.  For the three months ended  December 31,
1997, Selling,  General and Administrative expenses increased from approximately
$1.4 million to approximately $1.6 million.  However, such increase was actually
a decrease in such expense as a percentage  of revenues from 39.1% for the three
month  period  ended  December 31, 1996 to 33.9% of revenues for the three month
period  ended  December  31,  1997.  The growth in the sales of the Internet and
Media Development  segment resulted in the lower percentage of selling,  general
and  administrative  in comparison to revenues.  The Company  intends to further
increase the number of sales  people  involved in Internet  operations  order to
increase revenues in its Internet and Media Development division.

Net Loss.  For the three month  period  ended  December  31,  1997,  the Company
incurred a net loss of approximately  $282,000 or $0.08 per share as compared to
a net loss of approximately  $681,000 or $0.22 for the corresponding three month
period  ending  December  31,  1996.  The Company  feels that it has  achieved a
leveling  of its  fixed  operating  expenses  and that  variable  expenses  will
fluctuate  in response  to changes in  revenue.  However,  it is  reasonable  to
believe that in the  transition  of product mix the Company  could incur further
losses.

     Liquidity and Capital Resources

The Company (through its subsidiary NAFT International  Ltd.) presently has $3.0
million   available  to  it  pursuant  to  a  Revolving  Credit  Agreement  with
NationsCredit  ("Nations") which may be used to finance its accounts  receivable
and  inventory.  The  availability  of  credit  is  based  upon the  balance  of
collateral  available that is 80% of its current qualifying  accounts receivable
from sales of hardware and software  and 100% of its  inventory.  As of December
31,  1997,  the  Company  had  both  available  and  outstanding  a  balance  of
approximately $1.9 million.  Such obligation is secured by a continuing security
interest in the accounts  receivable  and inventory of NAFT,  and guaranties and
cross guaranties of the Company and its other subsidiaries.  The borrowings bear
interest  at the  prime  rate  plus  1.75%.  Pursuant  to  the  terms  of  these
agreements,  NAFT is required to maintain certain liquidity  ratios.  NAFT is in
compliance  with this  agreement.  While the Credit  Agreement gives Nations the
right to demand repayment if it deems itself  "insecure,"  Nations has given the
Company  no  indication  that  it  is  considering   utilizing  this  provision.
Furthermore,  incurring  losses as the  Company  builds its new  businesses  was
anticipated  in setting its covenants  with Nations in October 1996. The Company
deems its relationship with Nations to be normal.


                                      -10-
<PAGE>


In December  1997,  the  Company  received a  $1,000,000  credit line from Cisco
Systems  Capital  Corporation  ("CSC")  to  lease  Cisco  Systems  products  and
associated peripherals. The credit line is available to the Company for a period
of 180 days,  is to be repaid over a 36 month period and is subject to quarterly
financial  review by CSC. The Company may not purchase more than $500,000 on the
credit  line during any three month  period.  At the end of the lease term,  the
Company has the option of purchasing the equipment for fair market value,  renew
the  lease of the  equipment  for the then  fair  rental  value  or  return  the
equipment.

The Company had a negative  cash flow of  approximately  $840,000  for the three
months  ended  December 31, 1997.  This  resulted in part from cash  provided by
operations  of   approximately   $240,000  which  represents  the  net  loss  of
approximately  $282,000,  the increase in accounts  receivable of  approximately
$307,000  million (offset by the increase in accounts  payable of  approximately
$543,000 and the decrease of accrued  expenses of  $391,000).  In addition,  the
Company purchased property and equipment in the amount of approximately $829,000
million.  The negative  cash flow and  purchases of property and  equipment  has
caused a decrease in working capital from approximately  $1,981,000 at September
30, 1997 to  approximately  $913,000 at December  31, 1997 and a decrease in the
current  ratio from 1.4 to 1 at  September  30, 1997 to 1.2 to 1 at December 31,
1997.  The decrease in prepaid  expenses and other current  assets is mainly the
result of the Company's  private  placement in September  1997 of which $600,000
which was included as of September  30, 1997 as a receivable  which was received
in October 1997.

The  variances in the  Statements  of Cash Flows  between the three months ended
December 31, 1997 and the three months ended  December 31, 1996 are a reflection
of the development of the Company during 1997, which is discussed above, and the
aggressive expansion program which followed. The significant increase in capital
expenditures is due to the Company's  continuing focus on the development of its
Internet  related  activities  which included the purchase of servers,  routers,
cabinets,  monitors  and other  equipment  necessary  to create  and  expand the
equipment used to host web sites.  While the Company does not anticipate failing
to comply with the financial  covenants discussed above, it must either increase
its borrowings under its Nations line of credit,  and/or raise additional equity
or loan capital from outside sources. There can be no assurance that the Company
could successfully raise such additional capital.

Recently Issued Accounting Standards

In the first quarter of fiscal 1998, the Company adopted  Statement of Financial
Accounting Standards No. 128 ("SFAS 128"),  "Earnings per Share," which requires
the presentation of both basic and diluted earnings per share on the face of the
Consolidated Statements of Operations.  Options and warrants are not included in
the  calculation  of  diluted   earnings  per  share  if  the  effect  would  be
antidilutive.  Accordingly,  basic and  diluted net loss per share do not differ
for any period presented.

Net loss per share under the  provisions  of SFAS 128 for  periods  prior to the
first  quarter  of  fiscal  1998 did not  differ  from the net loss per share as
reported in those prior periods.


                                      -11-
<PAGE>


The following table  summarizes  securities that were outstanding as of December
31, 1997 and 1996,  but not included in the  calculation of diluted net loss per
share because such shares are antidilutive.

                                                          December 31,
                                                       -------------------
                                                        1997         1996
                                                        ----         ----
                                                                  
                                      Options          341,064     214,564
                                      Warrants         695,933     661,250
                                                               
Forward Looking Statements                           

The   foregoing   management    discussion   and   analysis   contains   certain
forward-looking  statements.  Due to the fact  that the  Company  faces  intense
competition in a business characterized by rapidly changing technology, and must
raise  additional  capital  in  order to  continue  with  its  existing  capital
expenditure program,  actual results and outcomes may differ materially from any
such forward looking  statements.  Future results of operations are, in general,
difficult  to forecast due to the fast moving pace of the  industry.  Additional
information  concerning  factors  that  could  cause  actual  results  to differ
materially from those in the forward  looking  statements is contained under the
heading "Risk  Factors"  listed from time to time in the Company's  filings with
the Securities and Exchange Commission.


                                      -12-
<PAGE>


PART  II - OTHER INFORMATION

Item 1.   Legal Proceedings

Not applicable

Item 2.   Changes in Securities

Not Applicable

Item 3.   Defaults upon Senior Securities

Not applicable

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

Not applicable

Item 5.   Other Information

Not applicable

Item 6.   Exhibits and Reports on form 8-K

Not applicable


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.

Bell Technology Group Ltd.

Date:  February 13, 1998      By: /s/  Marc H. Bell
                              -------------------------------------
                              Marc H. Bell, President & CEO


Date:  February 13, 1998      By: /s/ Robert B. Bell
                              -------------------------------------
                              Robert B. Bell, Exec. Vice President & CFO


Date:  February 13, 1998      By: /s/  Alan Levy
                              -------------------------------------
                              Alan Levy, Treasurer and Chief Accounting Officer


                                      -13-