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

                                   FORM 10-QSB

/ X /    QUARTERLY  REPORT  PURSUANT  TO SECTION  13 OR 15(d) OF THE  SECURITIES
         EXCHANGE ACT OF 1934

                      For the Quarter Ended March 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: 0-27256

                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
        (Exact name of small business issuer as specified in its charter)

            DELAWARE                                   65-0512785
(State or other jurisdiction of          (I.R.S. Employer Identification number)
incorporation or organization)

        200 East Palmetto Park Road, Suite 200, Boca Raton, Florida 33432
                    (Address of principal executive offices)

Registrant's telephone no., including area code:   (561) 393-6685

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15 (d) of the  Securities  Exchange  Act of 1934 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 of common
equity, as of the latest practicable date.

            CLASS                               OUTSTANDING AS OF JUNE 5, 1998
-----------------------------                   --------------------------------
Common Stock, $.001 par value                                 9,832,348



<PAGE>
                                TABLE OF CONTENTS


Heading                                                                   Page

                         PART 1. - FINANCIAL INFORMATION

Item 1.    Financial Statements .............................................2

           Consolidated Balance Sheet - March 31, 1998 (Unaudited) ........3-4

           Consolidated Statement of Operations..............................5

           Consolidated Statement of Changes in Stockholders' Equity ........6

           Consolidated Statement of Cash Flows - Three months
           ended March 31, 1998 (unaudited)................................7-8

           Notes to Consolidated Financial Statements (Unaudited) ........9-13

Item 2.    Management's Discussion and Analysis of Financial Condition
           and Results of Operations ....................................14-15


                          PART II. - OTHER INFORMATION

Item 1.    Legal Proceedings

Item 2.    Changes In Securities ...........................................16

Item 3.    Defaults Upon Senior Securities..................................16

Item 4.    Submission of Matters to a Vote of Securities Holders ...........16

Item 5.    Other Information ...............................................16

Item 6.    Exhibits and Reports on Form 8-K ................................16

           Signatures ......................................................17


<PAGE>
                                     PART 1


Item 1.    Financial Statements

           The following  unaudited  financial  Statements  for the period ended
           March  31,  1998,  have  been  prepared  by  Atlantic   International
           Entertainment, Ltd. (the "Company").



                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.

                              Financial Statements

                                 March 31, 1998



                                       2
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
                     CONSOLIDATED BALANCE SHEET (UNAUDITED)
                              AS OF MARCH 31, 1998

<TABLE>
<CAPTION>

                                                                                         MARCH 31, 1998
                                                                                         --------------
                                                                                         (Unaudited)
                                       ASSETS

CURRENT ASSETS
<S>                                                                                      <C>
   Cash and Cash Equivalents                                                             $       -0-
   Accounts Receivable [Net of Allowance for Doubtful Accounts of $24,781                     42,159
   Notes Receivable                                                                        1,197,655
   Refundable Income Tax                                                                      77,215
   Deferred Tax Asset                                                                        176,812
   Prepaid Expenses                                                                            6,423
   Other Current Assets                                                                       26,192
                                                                                        ------------

   TOTAL CURRENT ASSETS:                                                                   1,526,456
                                                                                        ------------

Furniture, Fixtures and Equipment - (Net of Accumulated Depreciation of $161,162)            439,557
Software (Net of Accumulated Amortization of $359,588)                                     1,335,470

Cost in Excess of Net Assets of Business Acquired
   (Net of Accumulated Amortization of $103,853)                                           1,439,427

OTHER ASSETS
   Due From Related Parties                                                                   50,602
   Other Assets                                                                               18,104
   Investments                                                                                 8,100
   Notes Receivable (Net of Discounts and Reserve)                                         2,721,327
                                                                                        ------------

   TOTAL OTHER ASSETS                                                                      2,798,133

   TOTAL ASSETS                                                                           $7,539,043
                                                                                        ------------


</TABLE>

                                       3

<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
               CONSOLIDATED BALANCE SHEET (UNAUDITED) (Continued)
                              AS OF MARCH 31, 1998

                      LIABILITIES AND STOCKHOLDERS'EQUITY:

<TABLE>
<CAPTION>

CURRENT LIABILITIES
<S>                                                                       <C>
   Accounts Payable and Accrued Expenses                                  $   823,327
   Notes Payable - Officers                                                   255,145
   Due to Customers                                                            75,000
   Current Portion of Long-Term Debt                                           39,073
   Current Portion of Capital Lease Obligations                                51,096
   Income Taxes Payable - Federal                                             630,841
   Income Taxes Payable - State                                                34,123
   Line of Credit                                                              24,791
   Other Current Liabilities                                                   41,157
                                                                          -----------

   TOTAL CURRENT LIABILITIES                                                1,974,553

Long-Term Debt                                                                  3,000

Capital Lease obligations                                                      38,309
                                                                          -----------

   TOTAL LIABILITIES                                                        2,015,862
                                                                          -----------

SHAREHOLDERS'S EQUITY:
   Preferred Stock - Par Value $.001 Per Share, Authorized
      10,000,000 Shares, None Issued or Outstanding                               -0-

   Common Stock - Par Value $001 Per Share;
      Authorized 100,000,000 Shares, Issued and
      Outstanding 9,590,184 Shares                                              9,590

   Additional Paid - in - Capital                                           4,449,806

   Unrealized Holding Loss on Marketable Securities                           (44,788)

   Retained Earnings                                                        1,108,573
                                                                          -----------

   Total Stockholders' Equity                                               5,523,181
                                                                          -----------

   Total Liabilities and Stockholders' Equity                             $ 7,539,043
                                                                          ===========

</TABLE>

The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements.


                                       4
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
                CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

<TABLE>
<CAPTION>

                                                                                           FOR THE THREE MONTHS ENDED
                                                                                                     March 31,
                                                                                      ---------------------------------
                                                                                            1998                 1997
                                                                                      --------------      -------------

<S>                                                                                    <C>                <C>         
REVENUE                                                                                $  1,155,041       $    604,248

Cost of Sales                                                                               151,720                -0-
                                                                                      --------------      -------------

   Gross Profit                                                                           1,003,321            604,248

General and Administrative                                                                  452,999            279,768
Provision for Doubtful Accounts and Notes                                                   100,576                -0-
Depreciation and  Amortization                                                              136,752             73,627
                                                                                      --------------      -------------

    Total Operating Expenses                                                                690,327            353,395

   Income From Operations                                                                   312,994            250,853

OTHER INCOME (EXPENSE)
    Interest Income                                                                           3,371              2,602
    Interest Expense                                                                        (6,758)              (291)
    Interest Expense - Related Party                                                        (3,508)                -0-
    Other Income Expense                                                                        -0-                -0-
                                                                                      --------------      -------------

    Other (Expenses) Income - Net                                                           (6,895)              2,311

    Income (Loss) From Continuing Operations Before
        Income Tax Expense (Benefit) Expense                                                306,099            253,164

Income Tax Expense (Benefit) Expense                                                       (27,412)           (58,858)
                                                                                      --------------      -------------

      Income (Loss) From Continuing Operations                                              278,687            194,306

Discontinued Operations - (Net of Income Taxes of 51,047)
  (Loss) from Operations of Discontinued Foreign Subsidiary                                     -0-           (69,531)
  Gain on the Disposal of Discontinued Foreign Subsidiary                                       -0-            120,895
                                                                                      --------------      -------------

NET INCOME                                                                            $     278,687       $    245,670

Income (Loss) Per Common Share:
    Continuing Operations                                                                       .03               .021
    Discontinued Operations                                                                     -0-               .005
                                                                                      --------------      -------------

Basic and Diluted Net Income Per Share of Common Stock                                $         .03       $       .026
                                                                                      ==============      =============

Weighted Average Shares of Common Stock Outstanding                                       9,590,184          9,357,934
                                                                                      ==============      =============
</TABLE>


The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements

                                       5
<PAGE>
ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY

<TABLE>
<CAPTION>

                                                                                           UNREALIZED
                                                         COMMON STOCK        ADDITIONAL    LOSS ON      RETAINED        TOTAL
                                       PREFERRED    NUMBER OF                 PAID IN     MARKETABLE    EARNINGS      STOCKHOLDERS'
                                        STOCK        SHARES       AMOUNT      CAPITAL     SECURITIES    (DEFICIT)       EQUITY

<S>                                 <C>            <C>           <C>        <C>           <C>          <C>           <C>
   BALANCE - DECEMBER 31, 1996            --       9,190,184     $9,190      $1,887,376   $     --     $ (217,431)   $ 1,679,135

Sale of Common Stock                      --          75,000         75         350,175         --             --        350,250

Sale of Common Stock                      --          25,000         25             --          --             --             25

Asset Acquisition [Note 8]                --         200,000        200       1,598,880         --             --      1,599,080

Conversion of Debt to Equity              --              --         --         313,475         --             --        313,475

Issuance of Shares in Escrow              --         100,000        100              --         --             --            100

Unrealized Holding Loss on
 Marketable Securities                    --              --         --              --    (42,763)            --        (42,763)

Income from Continuing Operations         --              --         --              --         --        948,225        948,225


Income from Discontinued Operations       --              --         --              --         --         99,092         99,092
                                     -------       ---------     -------     ----------   ---------     ----------    ----------

      BALANCE - DECEMBER  31, 1997   $    --       9,590,184     $9,590      $4,149,906   $(42,763)     $ 829,886     $4,946,619
                                     =======       =========     =======     ==========   =========     =========     ==========

Sale of Common Stock
   Shares in Escrow                       --              --          --       299,900          --             --      299,900

Unrealized Holding Loss on
   Marketable Securities                  --              --          --            --      (2,025)            --       (2,025)

Income from Continuing
   Operations                             --              --          --            --          --        278,687      278,687
                                    --------       ---------     -------   -----------    --------     ----------    --------------

  BALANCE - MARCH 31, 1998          $     --       9,590,184     $9,590     $4,449,806    $(44,788)    $1,108,573    $5,523,181
                                    --------       ---------     -------   -----------    ------       ----------    --------------

</TABLE>

The  accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements

                                       6
<PAGE>

ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                   THREE MONTHS ENDED
                                                                        MARCH 31,
                                                                  1 9 9 8       1 9 9 7
                                                                 -------        -------

OPERATING ACTIVITIES:

<S>                                                              <C>          <C>
   Income [Loss] Income from Continuing Operations               $ 278,687    $ 194,306
   Adjustments to Reconcile Net Income [Loss] to
      Net Cash Provided by [Used for] Operating Activities:
      Depreciation and Amortization                                136,752       73,627
      Provision for Doubtful Accounts                              100,576         --
   Changes in Assets and Liabilities:
      [Increase] Decrease in:
         Accounts Receivable                                         1,069     (848,000)
         Prepaid Expenses                                              141       39,950
         Notes Receivable                                         (731,359)        --
         Restricted Cash                                           (15,000)        --
         Other Assets                                               (1,192)        (229)
      Increase [Decrease] in:
         Accounts Payable and Accrued Expenses                    (130,751)      45,386
         Income Taxes Payable                                       30,628         --
         Other Current Liabilities                                  28,583         --
         Due to Customer                                            54,279       37,242
                                                                 ---------    ---------
      NET CASH - CONTINUING OPERATIONS                            (247,587)    (457,718)
                                                                 ---------    ---------
DISCONTINUED OPERATIONS:
   [Loss] from Discontinued Operations                                --        (69,531)
   Gain on disposal of Discontinued Operations                        --        120,895
   Adjustments to Reconcile Net [loss] to Net Cash Operations:
      Depreciation                                                    --          1,366
                                                                 ---------    ---------
                                                                      --         52,730
CHANGES IN ASSETS AND LIABILITIES:
   (Increase) Decrease in:
      Other Assets                                                    --            815
   Increase (Decrease in:
      Accounts Payable                                                --        (14,808)
      Customer Deposits                                               --        (27,648)
                                                                 ---------    ---------
TOTAL ADJUSTMENTS                                                     --        (41,641)
   NET CASH - DISCONTINUED OPERATIONS                                 --         11,089
                                                                 ---------    ---------
   NET CASH - OPERATING ACTIVITIES - FORWARD                      (247,587)    (446,629)
                                                                 ---------    ---------
INVESTING ACTIVITIES - CONTINUING OPERATIONS:
   Increase in Due from Related Parties                               (747)        (845)
   Purchase of Investments                                              --     (109,643)
   Purchase of Property and Equipment                             (135,869)     (54,792)
                                                                 ---------    ---------
   NET CASH - INVESTING ACTIVITIES - CONTINUING OPERATIONS -      (136,616)    (165,280)
      FORWARDED

INVESTING ACTIVITIES - DISCONTINUED OPERATIONS:
   Disposition of Property and Equipment                                --       11,110
                                                                 ---------    ---------
NET CASH INVESTING ACTIVITIES
                                                                 $(136,616)   $(154,170)

</TABLE>

The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements

                                       7
<PAGE>
ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>

                                                                THREE MONTHS ENDED
                                                                    MARCH 31,
                                                             1 9 9 8          1 9 9 7
                                                             -------          -------

<S>                                                          <C>          <C>
   NET CASH - OPERATING ACTIVITIES - FORWARDED               $(247,587)   $(446,629)
                                                             ---------   -----------

   NET CASH - INVESTING ACTIVITIES -  FORWARDED               (136,616)    (154,170)
                                                             ---------   -----------

FINANCING ACTIVITIES - CONTINUING OPERATIONS:

   Proceeds from the Conversion of Debt to Equity                 --           --
   Proceeds from Issuance of Common Stock                      299,900      329,330
   Increase in Loan Payable to Shareholder                      88,509       (9,709)
   Proceeds from Long-Term Debt                                   --           --
   Line of Credit                                               (1,900)        --
   Payment of Notes Payable                                       --           --
   Payment of Lease Payable                                    (16,152)        --
                                                             ---------   -----------

   NET CASH - FINANCING ACTIVITIES - CONTINUING OPERATIONS     370,457      319,621
                                                             ---------   -----------

Financing - Activities - Discontinued Operations
   Additions to Paid In Capital                                   --         98,775
                                                             ---------   -----------

   NET CASH - FINANCING ACTIVITIES                             370,457      418,396
                                                             ---------   -----------

(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS               (13,746)    (182,403)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                 11,260      421,188
                                                             ---------   -----------

   CASH AND CASH EQUIVALENTS - END OF PERIOD                 $  (2,486)   $ 238,785
                                                             =========   ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the years for:
      Interest                                               $   6,758    $     291
      Income Taxes                                           $     -0-    $     -0-
       Income Tax Refund (Applied)                           $     -0-    $  58,858
</TABLE>



The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements

                                       8
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
             Notes to Consolidated Financial Statements (Uunaudited)
                                 March 31, 1998

Note 1 -    BASIS OF PREPARATION

            The accompanying  unaudited interim financial statements include all
            adjustments  (consisting only of those of a normal recurring nature)
            necessary  for a fair  statement  of the  results  for  the  interim
            periods.  The  results  of  operations  and cash flows for the three
            month period ended March 31, 1998, are not necessarily indicative of
            the results of  operations or cash flows to be reported for the full
            year ending December 31, 1998.

Note 2 -    BUSINESS COMBINATION

            On July 16,  1996,  the  Company  entered  into an Exchange of Stock
            Agreement  and  Plan  of   Reorganization   (  the  "Stock  Exchange
            Agreement").  Under the terms of the Stock Exchange  Agreement,  the
            Company  acquired  all  of  the  shares  of  Atlantic  International
            Capital,  Ltd.  ("Atlantic  Capital"),  a Delaware  corporation,  in
            exchange for an aggregate of 25,183,759  shares of its common stock,
            of which 7,000,000 shares were  immediately  issuable and 18,153,759
            shares were to be issued  following  an  increase  in the  Company's
            authorized capital.  The Company plans to satisfy this obligation by
            issuing approximately 6,061,253 shares of Common Stock to the former
            Atlantic  Capital  stockholders  following a 1-for-3 share  exchange
            upon the  consummation  of a merger  with and into its  wholly-owned
            subsidiary,  Atlantic  International  Entertainment,  Ltd. which was
            approved by the Company's  stockholders  on November 18, 1996.  Upon
            consummation of the merger,  the Company's  authorized  capital will
            increase to 100,000,000  shares of Common Stock, $.001 par value and
            10,000,000   shares  of  Preferred  Stock,   $.001  par  value.  The
            combination has been accounted for as a reverse acquisition, and the
            combined   entity   intends  to  operate  under  the  name  Atlantic
            International Entertainment,  Ltd. The consolidated balance sheet as
            of  March  31,   1997  does  not   reflect   the   effects   of  the
            recapitalization,  issuance of the additional  common shares, or the
            reverse stock split,  all of which were approved by the stockholders
            on November 18, 1996.

            CEEE has conducted  only limited  operations  prior to 1984, and has
            been   substantially   inactive   since  that  time.  It  previously
            considered  itself to be a  development  stage company as defined in
            Statement of Financial Accounting Standards No.7.


                                       9
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
       Notes to Consolidated Financial Statements (Uunaudited) (Continued)
                                 March 31, 1998

Note 3 -    BUSINESS ACQUISITIONS

            The  business  acquisition  in the  first  quarter  of 1997 has been
            accounted for under the purchase  method.  The results of operations
            of the acquired business are included in the consolidated  financial
            statements from the date acquisition.

            On March 26, 1997, the Company  concluded its acquisition of 100% of
            the outstanding stock of The EmiNet Domain, Inc., located in Boynton
            Beach,  Florida.  EmiNet is an Internet  Service Provider (ISP), and
            developer of Internet related  software  products as well as hosting
            commercial  Web sites.  The Company  paid $20,000 in cash and issued
            200,000  shares of the Company's  common stock  (approximate  market
            value on date of issue  $2,000,000).  The Stock  Purchase  Agreement
            also contains  additional payments contingent on the future earnings
            performance  of  EmiNet.  Any  additional  payments  made,  when the
            contingency is resolved,  will be accounted for as additional  costs
            of the acquired  assets and amortized over the remaining life of the
            assets.

            The following unaudited pro forma consolidated results of operations
            for the years ended  December 31, 1997 and 1996 are  presented as if
            the EmiNet acquisition has been made at the beginning of each period
            presented.  The EmiNet Domain,  Inc. operated as an S Corporation in
            1995 and 1996.  Included in the  expenses to arrive at Net  Earnings
            are reclassifications of Shareholders' Draw to Officers Salaries and
            Income Tax  Expense in the  amounts of  $132,200  for the short year
            1996 and $86,000 for 1997.  The unaudited pro forma  information  is
            not necessarily  indicative of either the results of operations that
            would have  occurred had the  purchase  been made during the periods
            presented or the future results of the combined operations.

<TABLE>
<CAPTION>

                                                              Years ended December 31
                                                               1997              1996
<S>                                                         <C>             <C>
            Net Sales                                       $4,593,078      $  878,097
            Net Earnings Income (Loss)                      $1,096,976      $ (347,072)
            Basic Net Income (Loss) per common share        $      .12      $     (.04)
            Diluted Net Income (Loss) per common share      $      .12      $     (.04)

</TABLE>

Note 4 -    MAJOR CUSTOMERS

            Income fees derived from major customers are tabulated as follow:

                                                      THREE MONTHS ENDED
                                                           MARCH 31,
                                                 -----------------------------
                                                    1997             1998
                                                 (Unaudited)      (Unaudited)

            Customer A - (Software System)       $    600,000     $ 350,000
            Customer I - (Software System)                -0-       220,000
            Customer J - (Software System)                -0-       350,000


                                       10
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
       Notes to Consolidated Financial Statements (Uunaudited) (Continued)
                                 March 31, 1998

Note 5 -    CAPITAL STOCK

            On  September  18,  1996 and October 31,  1996,  the Company  issued
            521,500  and  365,200  shares,  respectively  of  common  stock in a
            private  placement  of its  securities.  The  Company  received  net
            proceeds of approximately $826,881.

            On January 16,  1997,  the  Company  entered  into a stock  purchase
            agreement with Brindenberg Securities, A/S under Regulation S of the
            Securities  and Exchange  Commission.  A total of 75,000 shares were
            issued under the  agreement  for $525,000 net of offering  costs and
            expenses of approximately $175,000.

            In February  1997,  the Company  issued  25,000 shares of its common
            stock to an outside  consultant  for  services to be  rendered.  The
            consultant never performed the required services and therefore,  the
            common shares issued will be returned in 1998.

            In March 1997,  the Company  issued  200,000 shares of the Company's
            common stock as part of the acquisition of EmiNet Domain,  Inc. [See
            Note 3].

            In  December  of  1997,  the  Company  sold  100,000  shares  of the
            Company's  common  stock  to  Australian  Advisors  for a  total  of
            $300,000 pursuant to the Regulation Statement S8.

            Also in December 1997, the Company  converted debt totaling $313,475
            to equity.  The shares  related to the  conversion  were unissued at
            December 31, 1997 and the conversion ratio has been set at $4.00 per
            share.

Note 6 -    PER SHARE DATA

            Per share data are based on the  weighted  average  number of common
            shares  outstanding  during the  respective  periods,  retroactively
            adjusted to reflect  the common  shares  issued in exchange  for all
            outstanding common shares of The EmiNet Domain,  Inc., including the
            additional  shares sold  pursuant to a "Reg S" offering in February,
            1997.

Note 7 -    INCENTIVE STOCK OPTION PLAN

            On January 1, 1997,  the Company  adopted an Incentive  Stock Option
            Plan  for  Employees,  Directors,   Consultants  and  Advisors  [the
            "Plan"].  The Plan will expire  December  31,  2006  unless  further
            extended by appropriate action of the Board of Directors. Employees,
            directors,  consultants  and advisors of the Company,  or any of its
            subsidiary corporations, are eligible for participation in the Plan.
            The Plan provides for stock to be issued pursuant to options granted
            and shall be limited to 250,000  shares of Common  Stock,  $.001 par
            value. The shares have been reserved for issuance in accordance with
            the terms of the Plan.  The exercise of these options may be for all
            or any  portion of the option and any  portion  not  exercised  will
            remain with the holder until the  expiration  of the option  period.
            The options expire on December 23, 2002.


                                       11
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
       Notes to Consolidated Financial Statements (Uunaudited) (Continued)
                                 March 31, 1998

Note 7 -    INCENTIVE STOCK OPTION PLAN (CONTINUED)


A summary of the changes in outstanding Common Stock options for all outstanding
plans is as follows:

                                                              WEIGHTED-AVERAGE
                                             SHARES           EXERCISE PRICE

OUTSTANDING AT DECEMBER 31, 1995                  --                   --

   Granted                                        --                   --

   Exercised                                      --                   --

   Canceled                                       --                   --

OUTSTANDING AT DECEMBER 31, 1996                  --                   --

   Granted                                   175,000                 3.25

   Exercised                                      --                   --

   Canceled                                       --                   --
                                             -------          -----------

OUTSTANDING AT DECEMBER 31, 1997             175,000                 3.25
                                             -------          -----------

EXERCISABLE AT DECEMBER 31, 1997             175,000                3.25
                                             -------          ----------

OUTSTANDING AT MARCH 31, 1998                175,000                3.25
                                             -------          ----------

EXERCISABLE AT MARCH 31, 1998                175,000                3.25
                                             -------          ----------

The following table summarizes information about stock options at December 31,
1997:

<TABLE>
<CAPTION>

                          OUTSTANDING STOCK OPTIONS                         EXERCISABLE STOCK OPTIONS
                                   WEIGHTED-AVERAGE
RANGE OF                             REMAINING        WEIGHTED-AVERAGE                  WEIGHTED AVERAGE
EXERCISE PRICES        SHARES      CONTRACTUAL LIFE   EXERCISE PRICE       SHARES       EXERCISE PRICE
---------------        ------       ---------------   ----------------     ------       ------------------
<S>                 <C>             <C>               <C>                   <C>         <C>
$    3.25           175,000         4.75              $    3.25             175,000     $    3.25
</TABLE>

The Company applies  Accounting  Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations, for stock options issued
to employees in  accounting  for its stock option plans.  The exercise  price of
certain  options  issued  during 1997 was the market price at the date of grant.
Accordingly,  no  compensation  expense has been  recognized  for the  Company's
stock-based compensation plans for fiscal year 1997.


                                       12
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
       Notes to Consolidated Financial Statements (Uunaudited) (Continued)
                                 March 31, 1998

Note 8 -    Business Agreements

            In February  1998,  the Company  entered into an agreement  with ELG
            Health   Management   Services   ["ELG"]  to  market  the   Atlantic
            International  Medical  ["AIM"]  products  and  services.  ELG  will
            provide  the  Company  40% of the net  profits  from  the  sale  and
            distribution of medical products.

            In February  1998,  the Company  entered into a Development  Service
            Agreement with International  Transaction System Corp. ["ITS'].  The
            Company's  responsibilities  under the agreement include engaging in
            the  development  activity  required  to host  ITS on the  Company's
            software   and   selling   debt  card   processing   [`DCP'].   ITS'
            responsibilities  include  development  activity required to develop
            the DCP test  methodology  and/or test cases so that the Company may
            validate correct operation of the DCP and provide service support.

            Under the  Agreement,  the Company paid $20,000 to acquire access to
            DCP through ITS for the purpose  and  exclusive  application  in the
            Company's  software.  Transaction  fees earned by customers  will be
            distributed  75% and 25% to the Company and ITS,  respectively.  The
            initial term of the agreement is 10 years, and automatically  renews
            in 5 year consecutive periods, unless terminated by either party.


                                       13
<PAGE>
                    ATLANTIC INTERNATIONAL ENTERTAIMENT, LTD.

Item 2.     MANAGEMENT'S  DISCUSSION  AND  ANALYSIS OF FINANCIAL  CONDITION  AND
            RESULTS OF OPERATIONS

            RECENT DEVELOPMENTS

        On  April  3,  1998  the  company  entered  into a  Securities  Purchase
        Agreement  for the sale of  $500,000 of a newly  created 5%  Convertible
        Preferred  Stock.  The Agreement  also grants the purchaser the right to
        purchase up to an  additional  $2,500,000 in said class of securities at
        market prices. The preferred stock contributed into the Company's common
        stock at the purchaser's  option. In June 1998 the second tranche for an
        additional $500,000 was sold under the same rights and restrictions.

        On April 30,  1998,  the  Company  entered  into a  Securities  Purchase
        Agreement with Hosken Consolidated Investments,  Ltd. ["HCI"], where HCI
        purchased  one  million  shares  of  the  Company's   common  stock  for
        $4,000,000 pursuant to Regulation D.

        In a  simultaneous  transaction,  HCI  has  subscribed  for  25%  of the
        Company's    South   African    subsidiary,    Atlantic    International
        Entertainment,   Ltd.   South   Africa.   HCI  received  its  equity  in
        consideration for its services to be rendered related to introducing the
        Company to the South African gaming and wagering community.

        In May 1998, the Company's wholly-owned subsidiary, AIE, Australia, Ltd.
        submitted an acquisition bid for an Australian  listed company,  Coms21.
        The  Company  offered  Coms21   shareholders   the  equivalent  of  $.70
        Australian dollar per share in the form of the Company's U.S. shares.

        In May of 1998,  the Company  instituted  a Section 125 benefit plan for
        it's Employees.  In June of 1998, the Company instituted a 401K Employee
        benefit plan on behalf of its Employees.  The Company is not required to
        make matching contributions under this plan.

        In the first quarter of 1998,  the Company  completed  installations  of
        three new licenses,  two for Internet Casino Extension (ICE) and one for
        a webSports product. In addition, contracts were signed for and deposits
        received for two additional licenses.

            RESULTS OF OPERATIONS

        The Company's revenues increased  approximately 91% in the first quarter
        1998 over the same period in 1997. Revenues from operations in the first
        quarter 1998 were  $1,155,041,  as compared  with  $604,248 for the same
        period in 1997. Net income from continuing operations rose approximately
        43% or  $84,381  in the  first  quarter  1998 as  compared  to the first
        quarter  1997,  $278,687  (.03 per share) and $194,306  (.021 per share)
        respectively.  In 1997, the sale of Atlantic's  foreign subsidiary added
        approximately  $51,364 of income  (.005 per  share) to the  bottom  line
        resulting  in net  income  between  1998 and 1997 of  $278,687  (.03 per
        share) and $245,670 (.026 per share) respectively.

        The increase in revenues was the result of continued market  penetration
        from industry awareness of Atlantic's products as well as a strong sales
        and marketing push. The net profit after taxes and  extraordinary  items
        rose  by  approximately  13% or  $33,017.  Operating  expenses  rose  by
        approximately  95% or $336,932  over the same period in 1997.  Operating
        expenses  for the first  quarter of 1998 were  $690,327  as  compared to
        $353,395  for the first  quarter  1997.  This was  largely due to global
        expansion  efforts,  expenses related to the development of new products
        and increased sales and support staffing.

                                       14

<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.

            RESULTS OF OPERATIONS  (Continued)

            For the year ended  December  31, 1997,  net income from  operations
            represented  24% of total  revenues as compared to 24% for the first
            quarter  1998 and 40% for the first  quarter  of 1997.  The  greater
            profit  percentage  for the first quarter of 1997 was due largely to
            the sale of  Atlantic's  wholly  owned  subsidiary  as an  operating
            entity.

            During the first  quarter of 1998 funds of $299,900  were  generated
            from the sale of 100,000  shares of common  stock.  The shares  were
            issued in 1997 under an escrow  provision  and transfer of funds was
            completed in January 1998.

            In the  opinion  of  management,  inflation  has not had a  material
            impact on the operation of the Company.




                                       15

<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
                                     PART II

Item 1.     Legal Proceedings

            Litigation  - The Company is party to  litigation  arising  from the
            normal course of business. In management's' opinion, this litigation
            will not materially affect the Company's financial position, results
            of operations or cash flows.

Item 2.     Changes in Securities

            This Item is not applicable to the Company.

Item 3.     Defaults upon Senior Securities

            This Item is no applicable to the Company.

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

            This Item is not applicable to the Company.

Item 5.     Other Information

            This Item is not applicable to the Company.

Item 6.     Exhibits and Reports on Form 8-K

            (a)   Exhibits

                  27   Financial Data Schedule

                                       16
<PAGE>
            In accordance with the  requirements of the Securities  Exchange Act
of 1934,  the  Registrant  caused  this report to be signed on its behalf by the
undersigned, thereunto duly authorized.


                                    Atlantic International Entertainment, Ltd.



Date: June 15, 1998                 By: /s/ Richard Iamunno
                                        -------------------------------------
                                        (Signature)
                                        Richard A. Iamunno, President
                                        And Chief Executive Officer



Date: June 15, 1998                 By: /s/ David P. Halaburda
                                        -------------------------------------
                                       (Signature)
                                       David P. Halaburda
                                       Chief Financial Officer

                                       17