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 September 30, 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 NOVEMBER 16, 1998
 -------------------------------         -----------------------------------
  Common Stock, $.001 par value                      12,102,668


<PAGE>
                                TABLE OF CONTENTS


Heading                                                                    Page

                         PART 1. - FINANCIAL INFORMATION

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

          Consolidated Balance Sheet - September 30, 1998 (Unaudited).......3-4

          Consolidated Statement of  Income and Comprehensive
          Income (Unaudited) .................................................5

          Consolidated Statement of Changes in Stockholders'
          Equity (Unaudited)..................................................6

          Consolidated Statement of Cash Flows - Nine Months ended
          September 30, 1998 (Unaudited)   .................................7-8

          Notes to Consolidated Financial Statements (Unaudited) ..........9-15

Item 2.   Management's Discussion and Analysis of Financial Condition
          and Results of Operations ......................................16-18


                          PART II. - OTHER INFORMATION

Item 1.   Legal Proceedings..................................................19
Item 2.   Changes In Securities..............................................19

Item 3.   Defaults Upon Senior Securities....................................19

Item 4.   Submission of Matters to a Vote of Securities Holders .............19

Item 5.   Other Information .................................................19

Item 6.   Exhibits and Reports on Form 8-K...................................19

          Signatures ........................................................20


<PAGE>
                                     PART 1


Item 1.  Financial Statements

         The  following  unaudited  financial  Statements  for the period  ended
         September  30,  1998,  have been  prepared  by  Atlantic  International
         Entertainment, Ltd. (the "Company") and Subsidiaries.



           ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES

                              Financial Statements

                               September 30, 1998


                                        2
<PAGE>

           ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEET (UNAUDITED)
                            AS OF SEPTEMBER 30, 1998

<TABLE>
<CAPTION>

                                                                                                     SEPTEMBER 30, 1998
                                                                                                     ------------------
                                                                                                          (Unaudited)
                             ASSETS

CURRENT ASSETS
<S>                                                                                                    <C>
   Cash and Cash Equivalents                                                                            $      96,024
   Accounts Receivable [Net of Allowance for Doubtful Accounts of $ 37,180]                                    52,720
   Notes Receivable                                                                                           534,763
   Refundable Income Tax                                                                                       77,215
   Deferred Tax Asset                                                                                          51,000
   Prepaid Expenses                                                                                            12,940
   Investment                                                                                               3,770,000
   Other Current Assets                                                                                        96,570
                                                                                                       ---------------

   TOTAL CURRENT ASSETS:                                                                                    4,691,232
                                                                                                       ---------------

Furniture, Fixtures and Equipment - (Net of Accumulated Depreciation of $ 184,830)                            545,158
Software (Net of Accumulated Amortization of $ 579,422)                                                     1,773,569

Cost in Excess of Net Assets of Business Acquired
   (Net of Accumulated Amortization of $ 155,296)                                                           1,387,985

OTHER ASSETS
   Due From Related Parties                                                                                    77,879
   Other Assets                                                                                                17,756
   Investments                                                                                              4,777,892
   Notes Receivable (Net of Discounts and Reserve)                                                          1,791,754
                                                                                                       ---------------

   TOTAL OTHER ASSETS                                                                                       6,665,281
                                                                                                       ---------------

   TOTAL ASSETS                                                                                        $   15,063,225
                                                                                                       ===============
</TABLE>


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


                                        3
<PAGE>
           ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
               CONSOLIDATED BALANCE SHEET (UNAUDITED) (Continued)
                            AS OF SEPTEMBER 30, 1998
<TABLE>
<CAPTION>

                                                                                       September 30,
                                                                                           1998
                                                                                       -------------
                                                                                        (Unaudited)

                      LIABILITIES AND STOCKHOLDERS'EQUITY:

CURRENT LIABILITIES
<S>                                                                                   <C>         
   Accounts Payable and Accrued Expenses                                              $    775,509
   Notes Payable - Officers                                                                 49,795
   Current Portion of Long-Term Debt                                                       100,828
   Current Portion of Capital Lease Obligations                                             30,905
   Income Taxes Payable - Federal                                                          535,884
   Income Taxes Payable - State                                                             20,014
   Other Current Liabilities                                                                39,250
                                                                                      -------------

   TOTAL CURRENT LIABILITIES                                                             1,552,185

Long-Term Debt                                                                                   -

Capital Lease Obligations                                                                   28,250
                                                                                      -------------

   TOTAL LIABILITIES                                                                     1,580,435
                                                                                      -------------

STOCKHOLDERS' EQUITY:
   Preferred Stock - Par Value $.001 Per Share, Authorized
      10,000 Shares, Issued and Outstanding                                                      9

   Common Stock - Par Value $.001 Per Share;
      Authorized 100,000,000 Shares, Issued and
      Outstanding  12,039,149 Shares                                                        12,039

   Additional Paid - in - Capital                                                       13,365,359

   Unrealized Holding Loss on Marketable Securities                                        (38,859)

   Retained Earnings                                                                       144,242
                                                                                      -------------

   Total Stockholders' Equity                                                           13,482,790
                                                                                      -------------

   Total Liabilities and Stockholders' Equity                                         $ 15,063,225
                                                                                      =============
</TABLE>


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


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

<TABLE>
<CAPTION>

                                                      FOR THE THREE MONTHS ENDED                   FOR THE NINE MONTHS ENDED
                                                              SEPTEMBER 30,                              SEPTEMBER 30,
                                                    --------------------------------------------------------------------------------
                                                        1998                1997                1998                       1997
                                                    --------------------------------------------------------------------------------

<S>                                                <C>               <C>                 <C>                          <C>        
REVENUE                                            $   789,013       $   2,306,017       $    3,497,281               $ 4,070,440
   Cost of Sales                                       114,413             145,935              489,817                   288,306
   General and Administrative                          636,312             508,259            1,783,615                 1,155,276
   Provision for Doubtful Accounts                   1,046,295                   -            1,213,349                 
   Depreciation and Amortization                       153,283             109,861              433,220                   316,228
   Other Losses and (Gains)                           (127,055)              4,072              (77,920)                   22,484
                                                   ------------      -------------       --------------               ------------

Income (Loss) from Continuing Operations
   Before Income Tax Expense                        (1,034,235)          1,537,890             (344,800)                2,288,146
Income Tax Benefit (Expense)                            99,095                   -              (47,374)                 (119,068)
                                                   ------------      -------------         ------------               ------------
Income (Loss) From Continuing Operations              (935,140)          1,537,890             (392,174)                2,169,078

Discontinued Operations
   Loss from Discontinued Operations                         -                   -                    -                   (69,531)
   Gain on Sale of Discontinued Operations                   -                   -                    -                   120,895
                                                   ------------      -------------         ------------               ------------
NET INCOME (LOSS)                                     (935,140)          1,537,890             (392,174)                2,220,442

Unrealized Holding Loss Arising During Period           (1,021)                  -              (52,309)                        -
                                                   ------------      -------------         ------------               ------------
Comprehensive Income (Loss)                        $  (936,161)      $   1,537,890       $     (444,483)              $ 2,220,442
                                                   ------------      -------------         ------------               ------------

Income (Loss) Per Common Share
   Continuing Operations                           $     (0.09)      $        0.16       $        (0.04)              $      0.23
   Discontinued Operations                                   -                   -                    -                         -
                                                   ------------      -------------         ------------               ------------

Basic Net Income Per Share of
   Common Stock                                    $     (0.09)      $        0.16       $        (0.04)              $      0.23
                                                   ------------      -------------         ------------               ------------

Fully Diluted Net Income Per Share of
   Common Stock                                    $     (0.09)      $        0.16       $        (0.04)              $      0.23
                                                   ------------      -------------       --------------               ------------

Weighted Average Shares of Common
   Stock Outstanding                                10,854,290           9,465,184           10,312,479                 9,429,434
                                                   ------------      -------------       --------------               ------------

Weighted Average Fully Diluted Shares Of
   Common Stock Outstanding                         10,854,290           9,465,184           10,312,479                 9,429,434
                                                   ------------      -------------       --------------               ------------
</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
                                   PREFERRED STOCK              COMMON STOCK   ADDITIONAL   LOSS ON        RETAINED      TOTAL
                                      NUMBER OF        NUMBER OF                  PAID IN   MARKETABLE     EARNINGS   SOCKHOLDERS'
                                  SHARES    AMOUNT     SHARES      AMOUNT       CAPITAL     SECURITIES     (DEFICIT)     EQUITY

<S>                               <C>       <C>     <C>            <C>        <C>           <C>           <C>         <C>         
BALANCE - JANUARY 1, 1997            --       --     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           --       --            --          --             --     (42,763)            --       (42,763)
   On Marketable Securities

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             --       --            --          --             --       3,904             --         3,904

Sale of Common Stock                 --       --    12,110,000      12,110      7,767,590          --             --     7,779,700
Sale of Preferred Stock          10,000       10            --          --        906,840          --             --       906,850

Cancellation of Common Stock         --       --    (9,700,000)     (9,700)            --          --             --        (9,700)

Conversion of Preferred Stock    (1,050)      (1)       38,965          39            (38)         --             --            --

Beneficial Conversion of
    Preferred Stock                  --       --            --          --        241,161          --       (241,161)           --
Income from Continuing
   Operations                        --     $ --            --          --             --          --       (444,483)     (444,483)
                                 ------     ----    ----------     -------    -----------  ----------     ----------  ------------
  BALANCE - SEPTEMBER 30, 1998    8,950     $  9    12,039,149     $12,039    $13,365,359   $ (38,859)    $  144,242  $ 13,482,790
                                 ------     ----    ----------     -------    -----------  -----------    ----------  ------------
</TABLE>


The  accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements 6

                                       6
<PAGE>
ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
                                                                        NINE MONTHS ENDED
                                                                          SEPTEMBER 30,
                                                                     1 9 9 8        1 9 9 7
                                                                     -------        -------
<S>                                                              <C>            <C>        
OPERATING ACTIVITIES:

   Income [Loss] Income from Continuing Operations               $  (444,483)   $ 2,169,078
   Adjustments to Reconcile Net Income [Loss] to
      Net Cash Provided by [Used for] Operating Activities:
      Depreciation and Amortization                                  433,220        316,228
      Deferred Taxes                                                 125,812           --
      Provision for Doubtful Accounts                              1,213,349           --   
      Gain on Sale of Assets                                         (48,726)          --
      Gain (Loss) on Sale of Investments                                --          (20,784)
      Regulated Loss on Carrying Value of Investments                 47,385           --
      Unregulated Loss on Carrying Value of Investments               (3,904)          --
   Changes in Assets and Liabilities:
      [Increase] Decrease in:
         Accounts Receivable                                         (88,546)    (3,726,296)
         Prepaid Expenses                                             (6,376)        70,323
         Security Deposits                                              --          (23,831)
         Investments                                                    --          (52,962)
         Refundable Income Tax                                          --           77,215
         Notes Receivable                                           (110,982)          --
         Deferred Income Taxes                                          --         (548,400)
         Other Assets                                             (2,097,341)          (552)

      Increase [Decrease] in:
         Accounts Payable and Accrued Expenses                      (176,083)       292,280
         Income Taxes Payable                                        (78,438)          --
         Other Current Liabilities                                   (10,457)        76,754
         Due to Customer                                             (20,721)        64,026
         Loans payable - stockholders                                   --           (9,709)
 Deferred Income Taxes                                                  --          585,405
                                                                 -----------    -----------

      NET CASH - CONTINUING OPERATIONS                            (1,266,291)      (731,225)
                                                                 -----------    -----------
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                      (1,266,291)      (720,136)
                                                                 -----------    -----------
INVESTING ACTIVITIES - CONTINUING OPERATIONS:
   Increase in Due from Related Parties                              (28,024)          --
   Purchase of Investments                                        (6,766,623)       (73,746)
   Purchase of Property and Equipment                               (929,070)      (322,870)
   Sale of Investments                                               177,371           --
   Sale (Purchase) of Subsidiary                                        --       (1,620,000)
                                                                 -----------    -----------

NET CASH - INVESTING ACTIVITIES - CONTINUING OPERATIONS -        $(7,546,346)   $(2,016,616)
      FORWARD
</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 (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                        NINE MONTHS ENDED
                                                                                          SEPTEMBER 30,
                                                                                    1 9 9 8           1 9 9 7
                                                                                    -------           -------

<S>                                                                                <C>            <C>         
NET CASH - INVESTING ACTIVITIES - CONTINUING OPERATIONS: -                         $(7,546,346)   $(2,016,616)
      FORWARD

INVESTING ACTIVITIES - DISCONTINUING OPERATIONS

Disposition of Property and Equipment                                                     --           11,110
                                                                                   -----------    -----------

NET CASH INVESTING ACTIVITIES                                                       (7,546,346)    (2,005,506)


   NET CASH - OPERATING ACTIVITIES - FORWARDED                                      (1,266,291)      (720,136)
                                                                                   -----------    -----------

FINANCING ACTIVITIES - CONTINUING OPERATIONS:

   Proceeds from the Conversion of Debt to Equity                                         --             --
   Proceeds from Issuance of Common Stock                                               12,110      1,949,330
   Proceeds from Issuance of Preferred Stock                                                10
   Decrease in Loan Payable to Shareholder                                            (116,841)        (9,709)
   Proceeds from Long-Term Debt                                                        123,500        155,000
   Line of Credit                                                                         --             --
   Payment of Notes Payable                                                            (89,160)          --
   Payment of Lease Payable                                                             (6,548)          --
   Additional Paid In Capital                                                        8,974,330         27,713
   Increase in equipment loans                                                            --           95,557
   Principal payments on capitalized lease and not borrowing                              --          (10,565)
                                                                                   -----------    -----------

   NET CASH - FINANCING ACTIVITIES - CONTINUING OPERATIONS                           8,897,401      2,207,326

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

   NET CASH - FINANCING ACTIVITIES                                                   8,897,401      2,306,101
                                                                                   -----------    -----------

NET INCREASE DECREASE IN CASH AND CASH EQUIVALENTS                                      84,764       (419,541)

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

CASH AND CASH EQUIVALENTS - END OF PERIOD                                          $    96,024    $     1,647
                                                                                   ===========    ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
      Cash paid during the years for:
      Interest                                                                     $    14,616    $     5,441
      Income Taxes                                                                 $      --      $    77,215
      Income Tax Refund (Applied)                                                  $      --      $   119,068
</TABLE>

SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCIAL ACTIVITIES:
During the third quarter of 1998, $105,000 worth of convertible preferred 
stock was converted into 38,965 shares of common stock.



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

                                        8
<PAGE>

                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
             Notes to Consolidated Financial Statements (Uunaudited)
                               September 30, 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 for the three-month period ended
            September 30, 1998, are not necessarily indicative of the results of
            operations  to be  reported  for the full year ending  December  31,
            1998.
    

Note 2 -    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 of acquisition onward.

            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 year ended  December  31, 1997 is presented as if the EmiNet
            acquisition has been made at the beginning of the period  presented.
            The  EmiNet  Domain,  Inc.  operated  as an S  Corporation  prior to
            acquisition.  Included in the expenses to arrive at Net Earnings are
            reclassifications  of  Shareholders'  Draw to Officers  Salaries and
            Income Tax Expense in the amount of $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.


                                                          Year ended December 31
                                                                 1997
                                                                 ----
            Net Sales                                       $  4,593,078
            Net Earnings Income (Loss)                      $  1,096,976
            Basic Net Income (Loss) per common share        $      .12
            Diluted Net Income (Loss) per common share      $      .12


                                        9
<PAGE>

           ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
       Notes to Consolidated Financial Statements (Uunaudited) (Continued)
                               September 30, 1998

Note 3 -    MAJOR CUSTOMERS

                        Income fees derived from major customers are tabulated
as follow:

<TABLE>
<CAPTION>
                                                THREE MONTHS ENDED                    NINE MONTHS ENDED
                                                   SEPTEMBER 30,                         SEPTEMBER 30,
                                              1997              1998               1997               1998
                                                    (UNAUDITED)                         (UNAUDITED)
                                        ----------------------------------------------------------------------

<S>                                         <C>                <C>                <C>               <C>
Customer A  (Software System)               375,000               --              375,000               --
Customer B  (Software System)               600,000               --              600,000               --
Customer C  (Software System)               450,000               --              450,000               --
Customer D  (Software System)               150,000               --              150,000               --
Customer E  (Software System)                  --                 --              600,000               --
Customer F  (Software System)                  --                 --              410,000               --
Customer G  (Software System)                  --                 --              450,000               --
Customer H  (Software System)                  --                 --              150,000               --
Customer I  (Software System)               585,000               --              585,000               --
Customer J  (Software System)                  --                 --                 --                 --
Customer K  (Software System)                  --                 --                 --              450,000
Customer L  (Software System)                  --                 --                 --              220,000
Customer M  (Software System)                  --                 --                 --              350,000
Customer N  (Software System)                  --                 --                 --              615,000
Customer O  (Software System)                  --                 --                 --              675,000
Customer P  (Software System)                  --              450,000               --              450,000
Customer Q  (Software System)                  --              175,000               --              175,000

</TABLE>

Note 4 -    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 2].

                                       10

<PAGE>

           ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
       Notes to Consolidated Financial Statements (Uunaudited) (Continued)
                               September 30, 1998

Note 4 -    CAPITAL STOCK - CONTINUED
            -------------------------

            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 Registration Statement S-8.

            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.

            In the second quarter of 1998, the Company sold 1,000,000 shares for
            a total of $4,000,000 pursuant to Regulation D.

            Also in the second quarter of 1998, 9,700,000 shares of common stock
            were issued to Atlantic  International  Entertainment  Australia,  a
            wholly  owned  subsidiary  for  use in a  proposed  takeover  of the
            Australian Company,  Coms21. In the third quarter of 1998, 1,160,000
            shares of the above  9,700,000  shares were issued to the  accepting
            COMS21 stockholders pursuant to the company's offer for Coms21 stock
            and the balance of 9,700,000 shares issued were cancelled.

            In the  second  quarter  of 1998,  10,000  shares of 5%  Convertible
            Preferred Stock,  $.001 par value,  were issued for cash. Each share
            is convertible into common stock by virtue of a formula contained in
            the Purchase  Agreement which relates to the average price per share
            of common stock within the conversion period.

            During the third  quarter  of 1998,  $105,000  worth of  convertible
            preferred  stock was converted into 38,965 shares of common stock by
            virtue  of a  formula  contained  in the  purchase  agreement  which
            relates to the average  price per share of common  stock  within the
            conversion period.

Note 5 -    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.  The  diluted  net income per share is based upon the  options
            issued and  outstanding  as well as the  assumed  conversion  of the
            Company's issued and outstanding preferred stock.

Note 6 -     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.

                                       11

<PAGE>
           ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
       Notes to Consolidated Financial Statements (Uunaudited) (Continued)
                               September 30, 1998



Note 6 -    INCENTIVE STOCK OPTION PLAN (CONTINUED)

            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.

            In addition, options were granted to the Board of Directors on April
            2, 1998 for an aggregate amount of 700,000 options. 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
                                                    -------           -----

GRANTED AT APRIL 2, 1998                            700,000            4.125
                                                    -------           -----

GRANTED AT SEPTEMBER 30, 1998                        88,000            2.50
                                                    -------           -----

OUTSTANDING AT SEPTEMBER 30, 1998                   963,000            3.83
                                                    -------           -----




                                       12
<PAGE>

           ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
       Notes to Consolidated Financial Statements (Uunaudited) (Continued)
                               September 30, 1998



Note 6 -    INCENTIVE STOCK OPTION PLAN (CONTINUED)


The following table summarizes information about stock options at September 30,
1998:

<TABLE>
<CAPTION>
                                                                                 Exercisable
                     Outstanding Stock Options                                   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      4.50               $   3.25          175,000       $   3.25
$ 4.125             700,000      4.75               $   4.75          700,000       $   4.75
$ 2.50               88,000      5.00               $   2.50           88,000       $   2.50
</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 and 1998  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
            and 1998.

            The  Black-Scholes  option  valuation model was developed for use in
            estimating  the fair value of traded  options  which have no vesting
            restrictions  and  are  fully  transferable.   In  addition,  option
            valuation models require the input of highly subjective  assumptions
            including the expected stock price volatility.  The weighted average
            fair value of stock options granted to employees used in determining
            pro forma  amounts is  estimated  at $4.13 and $2.50 during the nine
            and three months ended September 30, 1998.

            Pro forma information  regarding net loss and net loss per share has
            been  determined  as if the Company has  accounted  for its employee
            stock options under the fair value method  prescribed under SFAS No.
            123,  Accounting  for Stock  Based  Compensation.  The fair value of
            these  options  was  estimated  at  the  date  of  grant  using  the
            Black-Scholes  option-pricing  model for the pro forma  amounts with
            the following weighted average assumptions:

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

Risk-Free Interest Rate            5.6%             --        5.6%           --
Expected Life                      5 years          --        5 years        --
Expected Volatility                153.0%           --        153.0%         --
Expected Dividends                 --               --        --             --

                                       13
<PAGE>

           ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
       Notes to Consolidated Financial Statements (Uunaudited) (Continued)
                               September 30, 1998


Note 6 -    INCENTIVE STOCK OPTION PLAN (CONTINUED)

The pro forma amounts are indicated below (in thousands, except per share
amounts):


<TABLE>
<CAPTION>
                                                             Three Months Ended            Nine Months Ended
                                                                September 30,                September 30,
                                                                      1998                        1998
                                                                      ----                        ----
<S>                                                                 <C>                       <C>      
Net Income (Loss):
As Reported                                                         (935,140)                 (392,174)
Pro Forma                                                         (1,180,950)               (3,306,665)
Basic Net Income (Loss) Per Share of Common Stock:
As Reported                                                             (.09)                     (.04)
Pro Forma                                                               (.11)                     (.32)
Diluted Net Income (Loss) Per Share of Common Stock:
As Reported                                                             (.09)                     (.04)
Pro Forma                                                               (.11)                     (.32)
</TABLE>


Note 7 -    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.






                                       14

<PAGE>

           ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
       Notes to Consolidated Financial Statements (Uunaudited) (Continued)
                               September 30, 1998


Note 7 -    BUSINESS AGREEMENTS CONTINUED

            On  September  28, 1998,  the Company  entered into and closed on an
            agreement  of  purchase  and  sale  with  Cybergames,  Inc.  for the
            purchase of several of the  company's  licensees and the exchange of
            the company's  accounts  receivable from said  licensees.  The total
            purchase  price  was $  3,147,000  payable  $  227,000  in cash  and
            $2,920,000 in stock of Cybergames, Inc. (730,000 shares).

Note 8 -    LEGAL PROCEEDING

            On September  3, 1998,  Graeme  Allan  Green,  a former  director of
            COMS21 and  Felscot  PTY LTD.,  a company  in which Mr.  Green has a
            substantial  interest ("Green Group),  filed an application  against
            the Company,  COMS21 and the  directors of COMS21 in the  Australian
            Federal Court.  In addition,  the Green Group has made its own offer
            to purchase the COMS21 stock. The Company has accepted approximately
            11,160,000  shares of COMS21 stock in exchange for 1,160,000  shares
            of the Company  stock.  Counsel  believes  that the above  action is
            without merit and will not materially  affect the Company's  results
            of operation and cash flow.  The Company  believes that it can still
            complete the acquisition of the majority of the COMS21 stock.


Note 9 -    INVESTMENT

            In the third quarter of 1998, the Company  invested  $2,000,000 in a
            5% convertible debenture note from a South African company, Atlantic
            International  Entertainment,  Ltd.  South Africa.  The debenture is
            convertible into common stock by December 31, 2000 or the listing of
            the South African Company, whichever comes first.



                                       15
<PAGE>


           ATLANTIC INTERNATIONAL ENTERTAIMENT, LTD. AND SUBSIDIARIES

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 is convertible 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 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 its 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 second quarter of 1998, the Company  completed  installations
            of four new licenses,  two for Internet  Casino  Extension (ICE) and
            two for webSports products.

            In the third quarter of 1998, the Company  invested  $2,000,000 in a
            5%  convertible  debenture  issued by a foreign South Africa company
            which is partially owned by HCI

            On  September  28, 1998,  the Company  entered into and closed on an
            agreement  of  purchase  and  sale  with  Cybergames,  Inc.  for the
            purchase of several of the  company's  licensees and the exchange of
            the company's  accounts  receivable from said  licensees.  The total
            purchase  price  was $  3,147,000  payable  $  227,000  in cash  and
            $2,920,000 in stock of Cybergames, Inc. (730,000 shares).







                                       16


<PAGE>

           ATLANTIC INTERNATIONAL ENTERTAIMENT, LTD. AND SUBSIDIARIES

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

            RESULT OF OPERATIONS

            THREE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

            NET REVENUES. The Company's revenues decreased  approximately 66% in
            the third  quarter 1998 over the same period in 1997.  Revenues from
            operations  in the third  quarter  1998 were $ 789,013,  as compared
            with $  2,306,017  for the same  period  in 1997.  The  decrease  in
            revenues  was the  result  of the  development  of the  new  product
            version.  The Company  stopped  promotion of the old version and did
            not allocate  large  resources to sales and  marketing.  The Company
            currently  intends  to  conduct  conservative  sales  and  marketing
            campaign  for its new  product  and  expects  revenues  to  increase
            modestly.

            COST OF REVENUES.  Cost of revenues as a percentage  of net revenues
            increased in the third  quarter 1998 to 14 percent from 6 percent in
            the third  quarter  1997.  The increase  resulted from a decrease in
            revenues (cost of revenues is not directly  related to revenues) and
            expenses related to the development of the new product version.

            OPERATING EXPENSES.  Operating expenses increased by 28 percent or $
            171,475 in the third quarter 1998 over the same period in 1997.  The
            increase  was  largely  due to global  expansion  efforts,  expenses
            related to product development and increased support staffing.

            PROVISION FOR DOUBTFUL ACCOUNTS.  Provision for doubtful accounts in
            the third quarter 1998 were $ 1,046,295 as compared with $ 0 for the
            same period in 1997.  The increase  resulted  from a major  customer
            forced to cease  operations due to non-industry and software related
            matters, and management taking an conservative approach in recording
            its provision for doubtful  accounts.  The Company currently expects
            that the  provision  for doubtful  accounts will not increase at the
            same rate going forward.

            NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997

            NET  REVENUES The  Company's  net revenues for the nine months ended
            September 30, 1998 were $ 3,497,281  which  represented a 14 percent
            decrease  from the same  period of the prior year.  The  decrease in
            revenues  was the  result  of the  development  of the  new  product
            version.  The Company  stopped  promotion of the old version and did
            not allocate  large  resources to sales and  marketing.  The Company
            currently intends to conduct aggressive sales and marketing campaign
            for its new product and expects revenues to increase modestly.

            COST OF REVENUES.  Cost of revenues as a percentage  of net revenues
            for the nine  months  ended  September  30,  1998 was 14  percent as
            compared to 7 percent  for the same  period of the prior  year.  The
            increase  resulted from a decrease in revenues  (cost of revenues is
            not  directly  related  to  revenues)  and  expenses  related to the
            development of the new product version.



                                       17

<PAGE>

           ATLANTIC INTERNATIONAL ENTERTAIMENT, LTD. AND SUBSIDIARIES


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

            RESULT OF OPERATIONS CONTINUED

            OPERATING  EXPENSES.  Operating  expenses  for the nine months ended
            September 30, 1998 increased approximately 50 percent to $ 2,216,835
            as compared  to $  1,471,504  for the same period of the prior year.
            The increase was largely due to global expansion  efforts,  expenses
            related to product development and increased support staffing.

            PROVISION FOR DOUBTFUL ACCOUNTS. Provision for doubtful accounts for
            the nine  months  ended  September  30,  1998  were $  1,213,349  as
            compared with $ 0 for the same period in 1997. The increase resulted
            from a major customer forced to cease operations due to non-industry
            and software related matters,  and management taking an conservative
            approach in  recording  its  provision  for doubtful  accounts.  The
            Company  currently  expects that the provision for doubtful accounts
            will not increase at the same rate going forward.

            LIQUIDITY AND CAPITAL RESOURCES

            Cash,  cash  equivalents  and marketable  securities,  which consist
            primarily of high risk,  priced  securities  totaled  $6,439,916  at
            September  30, 1998  compared to $21,385 at December 31,  1997.  The
            increase in cash, cash equivalents and marketable securities was due
            primarily   to  cash   proceeds   from  the  sale  of  Common  Stock
            ($4,000,000)  pursuant to  Registration  Statement S-8,  issuance of
            Common  Stock of a  foreign  public  traded  company  in a  proposed
            takeover of the foreign company  ($3,770,000) and issuance of Common
            Stock of a public  traded  company  (purchaser)  in lieu of  certain
            assets  sold  to  the  purchaser  ($2,137,000).   The  increase  was
            partially  offset  by cash  used  for  operations  and a  $2,000,000
            debenture note issued by a foreign corporation.  Management believes
            that existing  cash,  cash  equivalents,  marketable  securities and
            anticipated  cash  generated from  operations  will be sufficient to
            satisfy the Company's currently anticipated cash requirements.





                                       18
<PAGE>


           ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES

                                     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.

             An application has been filed against the Company claiming that the
             Company made false and misleading  statements in connection  with a
             proposed takeover. Counsel believes that the application is without
             merit and will not materially affect the Company.

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






                                       19

<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:    November 16, 1998          By:   /s/ Richard A. Iamunno
                                          -----------------------------
                                          (Signature)
                                          Richard A. Iamunno, President
                                          And Chief Executive Officer



Date:    November 16, 1998          By:   /s/ David P. Halaburda
                                          -----------------------------
                                          (Signature)
                                          David P. Halaburda
                                          Chief Financial Officer










                                       20