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 June 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 August 26, 1998
----------------------------------            ---------------------------------
Common Stock, $.001 par value                           20,551,857
<PAGE>
                                TABLE OF CONTENTS


Heading                                                                    Page

                         PART 1. - FINANCIAL INFORMATION

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

         Consolidated Balance Sheet - June 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 - Three and Six Months
         ended June 30, 1998 (Unaudited)   ................................7-10

         Notes to Consolidated Financial Statements (Unaudited) ..........11-15

Item 2.  Management's Discussion and Analysis of Financial Condition
         and Results of Operations .......................................16-17


                          PART II. - OTHER INFORMATION

Item 1.  Legal Proceedings ...................................................18

Item 2.  Changes In Securities ...............................................18

Item 3.  Defaults Upon Senior Securities......................................18

Item 4.  Submission of Matters to a Vote of Securities Holders ...............18

Item 5.  Other Information ...................................................18

Item 6.  Exhibits and Reports on Form 8-K ....................................18

         Signatures ..........................................................19

<PAGE>
                                     PART 1


Item 1.  Financial Statements

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



                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.

                              Financial Statements

                                  June 30, 1998



                                       -2-
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
                     CONSOLIDATED BALANCE SHEET (UNAUDITED)
                               AS OF JUNE 30, 1998




<TABLE>
<CAPTION>
                                                                                                       June 30, 1998
                                                                                                -------------------------
                                                                                                      (Unaudited)
                                                           ASSETS
<S>                                                                                                   <C> 
CURRENT ASSETS
   Cash and Cash Equivalents                                                                          $3,457,834
   Accounts Receivable [Net of Allowance for Doubtful Accounts of $20,296]                                39,182
   Notes Receivable                                                                                    1,529,701
   Refundable Income Tax                                                                                  77,215
   Deferred Tax Asset                                                                                    176,812
   Prepaid Expenses                                                                                        6,423
   Other Current Assets                                                                                   14,628
                                                                                                     -----------


   TOTAL CURRENT ASSETS:                                                                               5,301,795
                                                                                                     -----------

Furniture, Fixtures and Equipment - (Net of Accumulated Depreciation of $217,023)                        436,782
Software (Net of Accumulated Amortization of $419,991)                                                 1,484,767

Cost in Excess of Net Assets of Business Acquired
   (Net of Accumulated Amortization of $129,575)                                                       1,413,705

OTHER ASSETS
   Due From Related Parties                                                                               76,361
   Other Assets                                                                                           18,079
   Investments                                                                                           535,821
   Notes Receivable (Net of Discounts and Reserve)                                                     3,544,007
                                                                                                     -----------

   TOTAL OTHER ASSETS                                                                                  4,174,268

   TOTAL ASSETS                                                                                      $12,811,317
                                                                                                     ===========

</TABLE>
                                       -3-
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
               CONSOLIDATED BALANCE SHEET (UNAUDITED) (Continued)
                               AS OF JUNE 30, 1998


<TABLE>
<CAPTION>
                      LIABILITIES AND STOCKHOLDERS'EQUITY:
<S>                                                                                             <C>
CURRENT LIABILITIES
   Accounts Payable and Accrued Expenses                                                        $    760,349
   Notes Payable - Officers                                                                          272,566
   Due to Customers                                                                                      -0-
   Current Portion of Long-Term Debt                                                                 217,442
   Current Portion of Capital Lease Obligations                                                        9,081
   Income Taxes Payable - Federal                                                                    740,081
   Income Taxes Payable - State                                                                       43,882
   Line of Credit                                                                                        -0-
   Other Current Liabilities                                                                          47,278
                                                                                                ------------

   TOTAL CURRENT LIABILITIES                                                                       2,090,679

Long-Term Debt                                                                                        15,444

Capital Lease Obligations                                                                             18,011
                                                                                                ------------

   TOTAL LIABILITIES                                                                               2,124,134
                                                                                                ------------

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

   Common Stock - Par Value $001 Per Share;
      Authorized 100,000,000 Shares, Issued and
      Outstanding 20,540,184 Shares                                                                   20,540

   Additional Paid - in - Capital                                                                  9,355,396

   Unrealized Holding Loss on Marketable Securities                                                  (61,615)

   Retained Earnings                                                                               1,372,852
                                                                                                ------------

   Total Stockholders' Equity                                                                     10,687,183
                                                                                                ------------

   Total Liabilities and Stockholders' Equity                                                   $ 12,811,317
                                                                                                ============
</TABLE>
The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements.


                                       -4-
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
            CONSOLIDATED STATEMENTS OF INCOME & COMPREHENSIVE INCOME
                                   (UNAUDITED)
<TABLE>
<CAPTION>
                                                                 For The Three Months Ended              For The Six Months Ended
                                                                           June 30,                              June 30,
                                                               ---------------------------------------------------------------------
                                                                    1997              1998               1997              1998
                                                               ---------------------------------------------------------------------
<S>                                                           <C>                <C>                <C>                <C>          
REVENUE                                                       $  1,160,180       $  1,553,227       $  1,764,428       $   2,708,268
   Cost of Sales                                                  (133,436)          (223,683)          (133,435)          (375,404)
   General and Administrative                                     (380,350)          (709,428)          (660,118)        (1,168,207)
   Provision for Doubtful Accounts                                    --              (66,477)              --             (171,539)
   Depreciation and Amortization                                  (128,574)          (143,185)          (202,201)          (279,937)
   Other Gains and Losses                                          (20,728)           (27,117)           (18,416)           (23,746)
                                                              ------------       ------------       ------------       ------------

Income (Loss) from Continuing Operations
   Before Income Tax Expense                                       497,092            383,337            702,528            689,435

Income Tax Benefit (Expense)                                       (60,210)          (119,057)          (119,068)          (146,469)
                                                              ------------       ------------       ------------       ------------

Income From Continuing Operations                             $    436,882       $    264,280       $    583,460       $    542,966

Discontinued Operations (Net of Income
   Taxes of $51,047)
   Loss from Discontinued Operations                                  --                 --              (45,890)              --
   Gain on Sale of Discontinued Operations                            --                 --              144,982               --
                                                              ------------       ------------       ------------       ------------

NET INCOME                                                    $    436,882       $    264,280       $    682,552       $    542,966

Unrealized Holding Loss Arising During Period                         --              (61,615)              --              (61,615)
                                                              ------------       ------------       ------------       ------------

Comprehensive Income                                          $    436,882       $    202,665       $    682,552       $    481,351
                                                              ------------       ------------       ------------       ------------


Income (Loss) Per Common Share
   Continuing Operations                                      $      0.046       $      0.012       $      0.005       $      0.036
   Discontinued Operations                                            --                 --                0.068               --
                                                              ------------       ------------       ------------       ------------

Basic Net Income Per Share of
   Common Stock                                               $      0.046       $      0.012       $      0.073       $      0.036
                                                              ------------       ------------       ------------       ------------

Diluted Net Income Per Share of
   Common Stock                                               $      0.046       $      0.012       $      0.073       $      0.035
                                                              ------------       ------------       ------------       ------------

Weighted Average Shares of Common
   Stock Outstanding                                             9,465,184         17,107,684          9,357,934         13,400,184
                                                              ------------       ------------       ------------       ------------

Weighted Average Fully Diluted Shares Of
   Common Stock Outstanding                                      9,465,184         17,975,684          9,357,934         13,925,184
                                                              ------------       ------------       ------------       ------------
</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 Loss
                                             Preferred Stock  Common Stock        Additional     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
 On Marketable Securities                         --     --        --       --          --     (42,763)         --          (42,769)

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)

Sale of Common Stock                              --     --   1,250,000    1,250   3,998,750      --            --        4,000,000

Sale of Common Stock                              --     --   9,700,000    9,700        --        --            --            9,700

Sale of Preferred Stock                         10,000   10        --       --       906,840      --            --          906,850

Unrealized Holding Loss on
   Marketable Securities                          --     --        --       --          --     (16,827)         --          (16,827)

Income from Continuing Operations                 --     --        --       --          --        --         542,966        542,966
                                                ------  ---  ----------  -------  ----------  --------   -----------   ------------

BALANCE - JUNE 30, 1998                         10,000  $10  20,540,184  $20,540  $9,355,396  $(61,615)  $ 1,372,852   $ 10,687,183
                                                ======  ===  ==========  =======  ==========  ========   ===========   ============
</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
                                                                                                              June 30,
                                                                                                    1 9 9 8                1 9 9 7
                                                                                                    ------                 -------
OPERATING ACTIVITIES:
<S>                                                                                              <C>                    <C>        
   Income [Loss] Income from Continuing Operations                                               $   264,280            $   436,882
   Adjustments to Reconcile Net Income [Loss] to
      Net Cash Provided by [Used for] Operating Activities:
      Depreciation and Amortization                                                                  143,185                128,574
      Provision for Doubtful Accounts                                                                 48,976                   --
      Regulated Loss on Carrying Value of Investments                                                 51,289                   --
      Unregulated Loss on Carrying Value of Investments                                               16,827                 56,681

   Changes in Assets and Liabilities:
      [Increase] Decrease in:
         Accounts Receivable                                                                           7,462             (1,002,217)
         Prepaid Expenses                                                                               --                   37,486
         Notes Receivable                                                                         (1,278,187)                  --
         Restricted Cash                                                                                --                     --
         Other Assets                                                                                 11,564                  3,460

   Increase [Decrease] in:
         Accounts Payable and Accrued Expenses                                                       (62,978)                93,787
         Income Taxes Payable                                                                        118,999                 37,105
         Other Current Liabilities                                                                   (18,670)                38,836
         Due to Customer                                                                             (75,000)                46,000
                                                                                                 -----------            -----------

   NET CASH - CONTINUING OPERATIONS                                                                 (772,253)              (123,406)
                                                                                                 -----------            -----------

DISCONTINUED OPERATIONS:
   [Loss] from Discontinued Operations                                                                  --                     --
   Gain on disposal of Discontinued Operations                                                          --                     --
   Adjustments to Reconcile Net [loss] to Net Cash Operations:
      Depreciation                                                                                      --                     --
                                                                                                 -----------            -----------
CHANGES IN ASSETS AND LIABILITIES:
   (Increase) Decrease in:
      Other Assets                                                                                      --                     --

   Increase (Decrease in:
      Accounts Payable                                                                                  --                     --
      Customer Deposits                                                                                 --                     --
                                                                                                 -----------            -----------

TOTAL ADJUSTMENTS                                                                                       --                     --

   NET CASH - DISCONTINUED OPERATIONS                                                                   --                     --
                                                                                                 -----------            -----------
   NET CASH - OPERATING ACTIVITIES - FORWARD                                                        (772,253)              (123,406)
                                                                                                 -----------            -----------

INVESTING ACTIVITIES - CONTINUING OPERATIONS:
   Increase in Due from Related Parties                                                              (25,759)                  (737)
   Purchase of Investments                                                                          (600,000)                35,897
   Purchase of Property and Equipment                                                               (264,226)              (167,927)
   Sale of Investments                                                                               156,650                   --
                                                                                                 -----------            -----------
   NET CASH - INVESTING ACTIVITIES - CONTINUING OPERATIONS -                                        (733,335)              (132,767)
      FORWARDED

INVESTING ACTIVITIES - DISCONTINUED OPERATIONS:
   Disposition of Property and Equipment                                                                --                     --
                                                                                                 -----------            -----------
NET CASH INVESTING ACTIVITIES
                                                                                                 $  (733,335)           $  (132,767)
</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
                                                                                                              June 30,
                                                                                                   1 9 9 8               1 9 9 7
                                                                                                   -------               -------
<S>                                                                                             <C>                     <C>         
   NET CASH - OPERATING ACTIVITIES - FORWARDED                                                  $  (772,253)            $  (123,406)
                                                                                                -----------             -----------

   NET CASH - INVESTING ACTIVITIES -  FORWARDED                                                    (733,335)               (132,767)
                                                                                                -----------             -----------


FINANCING ACTIVITIES - CONTINUING OPERATIONS:

   Proceeds from the Conversion of Debt to Equity                                                      --                      --
   Proceeds from Issuance of Common Stock                                                         4,000,000                    --
   Proceeds from Issuance of Preffered Stock                                                        906,850                    --
   Increase in Loan Payable to Shareholder                                                           17,421                    --
   Proceeds from Long Term Debt                                                                      25,423                  30,900
   Payment from Notes Receivable                                                                     70,000                    --
   Payment of Notes Payable                                                                         (41,733)                 (7,265)
   Payment of Lease Payable                                                                         (12,053)                   --
   Additions to Paid In Capital                                                                        --                    14,238
                                                                                                -----------             -----------


   NET CASH - FINANCING ACTIVITIES - CONTINUING OPERATIONS                                        4,965,908                  37,873
                                                                                                -----------             -----------

Financing - Activities - Discontinued Operations
   Additions to Paid In Capital                                                                        --                      --
                                                                                                -----------             -----------

   NET CASH - FINANCING ACTIVITIES                                                                4,965,908                  37,873
                                                                                                -----------             -----------


(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS                                                  3,460,320                (218,300)

CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD                                                      (2,486)                238,785
                                                                                                -----------             -----------

   CASH AND CASH EQUIVALENTS - END OF PERIOD                                                    $ 3,457,834             $    20,485
                                                                                                ===========             ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the quarter for:
      Interest                                                                                  $       782             $     1,077
      Income Taxes                                                                              $       -0-             $    60,210
      Income Tax Refund (Applied)                                                               $       -0-             $   (23,100)

</TABLE>
The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements


                                       -8-
<PAGE>
ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                                         Three Months Ended
                                                                                                              June 30,
                                                                                                   1 9 9 8               1 9 9 7
                                                                                                   -------               -------
OPERATING ACTIVITIES:
<S>                                                                                              <C>                    <C>        
   Income [Loss] Income from Continuing Operations                                               $   542,967            $   631,188
   Adjustments to Reconcile Net Income [Loss] to
      Net Cash Provided by [Used for] Operating Activities:
      Depreciation and Amortization                                                                  279,937                202,201
      Provision for Doubtful Accounts                                                                149,552                   --
      Regulated Loss on Carrying Value of Investments                                                 51,289                   --
      Unregulated Loss on Carrying Value of Investments                                               16,827                   --

   Changes in Assets and Liabilities:
      [Increase] Decrease in:
         Accounts Receivable                                                                           8,531             (1,850,217)
         Prepaid Expenses                                                                                141                 77,436
         Notes Receivable                                                                         (2,009,546)                  --
         Restricted Cash                                                                             (15,000)                  --
         Investments                                                                                    --                   56,681
         Other Assets                                                                                 10,372                  3,231

   Increase [Decrease] in:
         Accounts Payable and Accrued Expenses                                                      (193,729)               139,173
         Income Taxes Payable                                                                        149,627                 37,105
         Customer Deposits                                                                              --                   83,242
         Other Current Liabilities                                                                     9,913                 38,836
         Due to Customer                                                                             (20,721)                  --
                                                                                                 -----------            -----------

   NET CASH - CONTINUING OPERATIONS                                                               (1,019,840)              (581,124)
                                                                                                 -----------            -----------

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
                                                                                                 -----------            -----------

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                                                      (1,019,840)              (570,035)
                                                                                                 -----------            -----------

INVESTING ACTIVITIES - CONTINUING OPERATIONS:
   Increase in Due from Related Parties                                                              (26,506)                (1,582)
   Purchase of Investments                                                                          (600,000)            (1,620,000)
   Purchase of Property and Equipment                                                               (400,095)              (222,719)
   Sale (Purchase) of Investments                                                                       --                  (73,746)
   Sale of Investments                                                                               156,650                   --
                                                                                                 -----------            -----------

   NET CASH - INVESTING ACTIVITIES - CONTINUING OPERATIONS -                                        (869,951)            (1,918,047)
      FORWARDED

INVESTING ACTIVITIES - DISCONTINUED OPERATIONS:
   (Purchase) Disposition of Property and Equipment                                                     --                   11,110
                                                                                                 -----------            -----------

NET CASH INVESTING ACTIVITIES                                                                    $  (869,951)           $(1,906,937)
</TABLE>
The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements

                                       -9-
<PAGE>
ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
                                                                                                         Three Months Ended
                                                                                                              June 30,
                                                                                                   1 9 9 8               1 9 9 7
                                                                                                   -------               -------
<S>                                                                                             <C>                     <C>         
   NET CASH - OPERATING ACTIVITIES - FORWARDED                                                  $(1,019,840)            $  (570,035)
                                                                                                -----------             -----------

   NET CASH - INVESTING ACTIVITIES -  FORWARDED                                                    (869,951)             (1,906,937)
                                                                                                -----------             -----------


FINANCING ACTIVITIES - CONTINUING OPERATIONS:

   Proceeds from the Conversion of Debt to Equity                                                      --                 1,949,330
   Proceeds from Issuance of Common Stock                                                         4,299,900                    --
   Proceeds from Issuance of Preffered Stock                                                        906,850                    --
   Increase in Loan Payable to Shareholder                                                          105,930                  (9,709)
   Proceeds from Long Term Debt                                                                      25,423                    --
   Payment from Notes Receivable                                                                     70,000                    --
   Line of Credit                                                                                    (1,800)
   Increase in equipment loans                                                                         --                    30,900
   Payment of Notes Payable                                                                         (41,733)                 (7,265)
   Payment of Lease Payable                                                                         (28,205)                   --
   Additions to Paid In Capital                                                                        --                    14,238
                                                                                                -----------             -----------


   NET CASH - FINANCING ACTIVITIES - CONTINUING OPERATIONS                                        5,336,365               1,977,494
                                                                                                -----------             -----------

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

   NET CASH - FINANCING ACTIVITIES                                                                5,336,365               2,076,269
                                                                                                -----------             -----------


INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS                                                  3,446,574                (400,703)

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

CASH AND CASH EQUIVALENTS - END OF PERIOD                                                       $ 3,457,834             $    20,485
                                                                                                ===========             ===========

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the quarter for:
      Interest                                                                                  $       782             $     1,368
      Income Taxes                                                                              $       -0-             $   (77,215)
       Income Tax Refund (Applied)                                                              $       -0-             $   119,068

</TABLE>
The  Accompanying  Notes are an Integral  Part of these  Consolidated  Financial
Statements

                                      -10-
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
             Notes to Consolidated Financial Statements (Uunaudited)
                                  June 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  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 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.


                                                        Years ended December 31
                                                             1997        1996
            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)

                                      -11-
<PAGE>

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

Note 3 -    MAJOR CUSTOMERS

            Income fees derived from major customers are tabulated as follow:

<TABLE>
<CAPTION>
                                           Three Months Ended                     Six Months Ended
                                                June 30,                             June 30,
                                        1997               1998              1997                1998
                                              (Unaudited)                                     (Unaudited)
<S>                                   <C>                  <C>                 <C>                  <C>
Customer A (Software System)             --                 --                 --                 --
Customer B (Software System)             --                 --                 --                 --
Customer C (Software System)             --                 --                 --                 --
Customer D (Software System)             --                 --                 --                 --
Customer E (Software System)          410,000               --              600,000               --
Customer F (Software System)          450,000               --              410,000               --
Customer G (Software System)          150,000               --              450,000               --
Customer H (Software System)             --                 --              150,000               --
Customer I (Software System)             --                 --                 --                 --
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               --              615,000
Customer O (Software System)             --              675,000               --              675,000
</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 3].


                                      -12-
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
       Notes to Consolidated Financial Statements (Uunaudited) (Continued)
                                  June 30, 1998

            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 Regulation 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 1,250,000 shares for
            a total of $4,000,000 pursuant to Regulation Statement S-8.

            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. As of August 21, 1998, the offer had not
            yet been accepted by the shareholders of Coms21.

            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.

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. 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.



                                      -13-
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
       Notes to Consolidated Financial Statements (Uunaudited) (Continued)
                                  June 30, 1998

Note 6 -    INCENTIVE STOCK OPTION PLAN (CONTINUED)
            ---------------------------------------

            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:

<TABLE>
<CAPTION>
                                                                                           Weighted-average
                                                                                           ----------------
                                                                      Shares                Exercise Price
                                                                      ------                --------------
<S>                                                                      <C>                     <C>
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
                                                                      -------                    -----

OUTSTANDING AT JUNE 30, 1998                                          875,000                     3.95
                                                                      -------                    -----
</TABLE>
The following table summarizes information about stock options at December 31,
1997:

<TABLE>
<CAPTION>
                       OUTSTANDING STOCK OPTIONS                                     EXERCISABLE
                           WEIGHTED-AVERAGE                                         STOCK OPTIONS
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
</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.

                                      -14-
<PAGE>
                   ATLANTIC INTERNATIONAL ENTERTAINMENT, LTD.
       Notes to Consolidated Financial Statements (Uunaudited) (Continued)
                                  June 30, 1998

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.


                                      -15-
<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 second quarter of 1998, the Company  completed  installations
            of four new licenses,  two for Internet  Casino  Extension (ICE) and
            two for webSports products.

            RESULTS OF OPERATIONS

            The Company's  revenues  increased  approximately  34% in the second
            quarter 1998 over the same period in 1997.  Revenues from operations
            in the  second  quarter  1998  were  $1,553,227,  as  compared  with
            $1,160,180 for the same period in 1997.  Net income from  continuing
            operations declined  approximately 52% in the second quarter 1998 as
            compared to the second  quarter 1997,  $202,664 (0.01 per share) and
            $436,882 (0.04 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 declined approximately


                                      -16-
<PAGE>
                    ATLANTIC INTERNATIONAL ENTERTAIMENT, LTD.


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

            RESULTS OF OPERATIONS (Continued)


            52% or $234,218.  Operating  expenses rose by  approximately  45% or
            $306,802  over the same period in 1997.  Operating  expenses for the
            second quarter 1998 were  $1,103,413 as compared to $663,088 for the
            second  quarter  1997.  This was  largely  due to  global  expansion
            efforts,  expenses  related to the  development  of new products and
            increased sales and support staffing.

            Operating  expenses rose by  approximately  77% or $508,089 over the
            same period in 1997.  Operating expenses for the second quarter 1998
            were  $709,428 as compared to $380,350 for the second  quarter 1997.
            This was largely due to global expansion  efforts,  expenses related
            to the  development of new products and increased  sales and support
            staffing.

            For the six months  ended June 30, 1998 net income  from  operations
            represented  20% of total  revenues  as  compared to 38% for the six
            months  ended  June 30,  1997.  The  decline  in net income to total
            revenues  was a result of  continued  global  expansion  and product
            development.

            During  the  second  quarter  of  1998,  funds  of  $5,216,450  were
            generated  from the sale of  10,950,000  shares of common and 10,000
            shares of preferred  stock. In the opinion of management,  inflation
            has not had a material impact in the operations of the Company.

                                      -17-
<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

                                      -18-
<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:  August 27, 1998              By:/s/ Richard A. Iamunno
                                       ---------------------------------
                                       (Signature)
                                       Richard A. Iamunno, President
                                       And Chief Executive Officer



Date:  August 27, 1998              By:/s/ David P. Halaburda
                                       ---------------------------------
                                       (Signature)
                                       David P. Halaburda
                                       Chief Financial Officer

                                      -19-