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

                                  FORM 10-QSB

[X]  QUARTERLY REPORT UNDER SECTION 13 OF 14(D) OF THE SECURITIES EXCHANGE ACT
     OF 1934

For quarterly period ended November 28, 1998

[ ]  TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE EXCHANGE ACT
     For the transition period from _______________ to _______________________

                        Commission file number 0-21634
                                               -------
                            METRO GLOBAL MEDIA, INC.
                   -----------------------------------------
       (Exact name of small business issuer as specified in its charter)

            Delaware                                            65-0025871
--------------------------------                            -------------------
  (State or other jurisdiction                                 (IRS Employer 
of incorporation or organization)                           Identification No.)


                1060 PARK AVENUE, CRANSTON, RHODE ISLAND 02910
                ----------------------------------------------
                   (Address of principal executive offices)
                                        
                                 (401)942-7876
                                 -------------
                          (Issuer's telephone number)


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

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

               APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
                  PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be
filed by Section 12,13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by court.
Yes ___  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: 6,630,687 at December 31, 1998
<PAGE>
 
PART I - FINANCIAL INFORMATION
 
ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS
         Balance Sheets                                               F-1
         Statements of Income                                         F-2
         Statements of Cash Flows                                     F-3
         Notes to Consolidated Financial Statements            F-5 to F-8
 

ITEM 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 28, 1998 VERSUS THREE
MONTHS ENDED NOVEMBER 29, 1997


The Company had revenues of $9,577,470 for the three months ended November 28,
1998 versus revenues of $4,551,635 for the three months ended November 29, 1997,
an increase of $5,025,835 or 110%. Revenues are primarily derived from two
segments: the sale of prerecorded videocassettes, magazines, novelties,
electronic media products and related items primarily through its subsidiary
Metro, Inc. (the entertainment segment) and the sale of magazines, magazine
poster books and calendars through its subsidiary, Fanzine International, Inc.
("Fanzine"), (the publishing segment).

Revenues for the entertainment segment totaled $5,994,141 for the three months
ended November 28, 1998, as compared to $4,551,635 for the three months ended
November 29, 1997, an increase from1,442,505 or 31.7%. The increase in revenue
is primarily attributable to business within three of the Company's
subsidiaries: (1) increase in revenue from Metro, Inc.'s adult entertainment
business lines of approximately $1,024,000; (2) revenues from Maxstone's adult
magazine distribution of approximately $257,000 and; (3) revenues from Metro
International's foreign adult entertainment lines of approximately $146,000.
During the quarter ended November 28, 1998, the Company released 3 feature
films, 53 feature videocassettes and 45 video compilations. The Company is also
recognizing revenues from the sale of DVD's of which 20 titles have been
released through November 28, 1998.

Revenues for Fanzine totaled $3,583,329 for the quarter ended November 28, 1998.
During the current quarter Fanzine published 34 products comprised of magazines,
magazine poster books and calendars. A significant portion of the product was
distributed in the United States and Canada with the balance distributed in
Europe, South America, the Middle East and Australia.  In addition, Fanzine
launched "Celebrity Style" and "Teen Celebrity" magazines during the quarter.
Celebrity Style and Teen Celebrity are published monthly and are distributed in
the United States, Canada and the United Kingdom.

The female teen market, which like any other market fluctuates with it's own
seasonality, generally experiences declines during the selling months of
September, October, and November.  Although Fanzine products are mainly targeted
towards the teen market, with the expansion of new titles in non teen market
like Celebrity Style, Gym and Burn magazines, Fanzine hopes to soften the impact
in the future.  Celebrity Style is a Fashion and Entertainment magazine with a
targeted female audience between the ages of 18 and 40 years old.  Gym and Burn
magazines, which are to be published bimonthly starting in January and February,
1999, respectively, are health, fitness and lifestyle magazines geared towards
men ranging from 18 to 40 years old.
<PAGE>
 
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED NOVEMBER 28, 1998 VERSUS THREE
MONTHS ENDED NOVEMBER 29, 1997. (CONTINUED)

Cost of revenues (including amortization of film costs) for the three month
period ended November 28, 1998, increased to $6,261,005 from $2,593,446 for the
corresponding period in the prior year.  Costs of revenues as a percentage of
revenues increased to 65% for the three months ended November 28, 1998, as
compared to 57% for the three months ended November 29, 1997.  The primary
reason for the increase in the cost of revenue percentage is due to Fanzine,
whose costs of revenue percentage was 69% due to higher costs associated with
the new publications.  This percentage will decrease as circulation of the new
publications increases.

Selling, general and administrative (SG&A) expenses for the three months ended
November 28, 1998, increased 90% to $2,719,035 from $1,430,571 for the three
months ended November 29, 1997. Selling, general and administrative expenses, as
a percentage of revenue, improved to 28% in 1998 as compared to 31% for the
three months ended November 29, 1997. The primary reason for the improvement in
the percentage is due to Fanzine having $470,902 in selling, general and
administrative expenses on revenue of $3,583,329.

Operating income for the three month period ended November 28, 1998 was $597,430
as compared to operating income of $527,618 for the corresponding period in the
prior year.  Net income for the quarter ended November 28, 1998, was $236,424 as
compared to $272,308 for the quarter ended November 29, 1997, resulting in a
basic earning per share of $.04 for the quarter ended November 28, 1998 and $.08
for the quarter ended November 29, 1997.

RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED NOVEMBER 28, 1998 VERSUS SIX
MONTHS ENDED NOVEMBER 29, 1997.

Revenues increased 92% or $7,994,682 to $16,642,538 for the six months ended
November 28,1998, as compared to $8,647,856 for the six months ended November
29, 1997. Revenues totaled $11,077,473 for the entertainment segment and
$5,565,65 for the publishing segment for the six months ended November 28, 1998,
as compared to revenues of $8,647,856 for the entertainment segment and no
revenue for the publishing segment for the six months ended November 29, 1997.
Revenues increased in the entertainment segment due to an increase in film,
videocassette, video compilation, and DVD releases of 35% over the corresponding
prior period, revenues of Maxstone of approximately $407,000 and revenues of
Metro International of approximately $234,000. Overall, the Company's gross
profit percentage remained constant at 37%. The gross profit percent for the
entertainment segment decreased slightly to 35% while the gross profit percent
for Fanzine was 40%.

Selling, general and administrative expenses for the six months ended November
28, 1998 increased 56% or $1,652,981 to $4,610,809 from $2,957,828 for the six
months ended November 29, 1997. Selling, general and administrative expenses as
a percentage of revenues improved to 28% for the six months ended November 28,
1998, as compared to 34% for the six months ended November 29, 1997, due to
Fanzine having a low percentage as is discussed above.

Net income for the six months ended November 28, 1998 increased to $813,932 from
$43,850 in the prior year's corresponding period.
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES AT NOVEMBER 28, 1998

Cash and cash equivalents amounted to $943,807 at quarter-end. Cash provided by
operating activities amounted to $735,466 for the six month ended November 28,
1998 and $1,577,813 for the same period in the prior fiscal year. The Company's
primary sources of cash in fiscal 1998 consisted of: (1) proceeds from issuance
of preferred stock of $1,317,000, (2) proceeds from notes payable of $1,700,000
and (3) proceeds from issuance of convertible debentures of $1,000,000, and (4)
proceeds from the exercise of warrants of $600,000. The primary uses of cash for
the six months ended November 28, 1998 consisted of: (1) investments in motion
pictures and other films of $1,594,884, (2) acquisition of Fanzine for
$2,000,000, (3) purchases of property and equipment of $236,374, and (4)
purchase of treasury stock of $507,500.

Working capital amounted to $2,653,034 in November, 1998 as compared to
$3,378,438 in May, 1998. The net increase in accounts receivable of $2,952,635
was primarily due to the increase of sales for the period and the inclusion of
approximately $2,042,000 of receivables of Fanzine of which there was zero at
May 31, 1998.  Inventory increased $1,036,367 due to the increase in purchasing
to support the increase in sales as well as inventory held by Metro
International totaling approximately $130,500. Accounts payable and accrued
expenses increased $1,772,098 due to increase purchasing, increased spending for
film production and the inclusion of payables of Fanzine.  Additionally, notes
payable and short-term borrowings increased approximately $3,600,000 due to the
acquisition of Fanzine.

During 1998, notes payable totaling $300,000 were converted into 250,000 of the
Company's restricted common stock.

On July 1, 1998, the Company entered into an 8% convertible debenture totaling
$200,000.  The note is due on July 1, 1999, in either cash or common stock, at a
conversion rate of $2.25 per share.  Proceeds from the debenture were used for
working capital.

On August 1, 1998, the Company entered into notes payable totaling $400,000.
The notes, which bear interest at 8%, are due August 1, 1999.  Proceeds from the
notes were used in the acquisition of Fanzine.

On July 31, 1998, the Company entered into an 8% convertible debenture with a
total offering of $7,000,000.  The Company received proceeds of $1,000,000 in
August, 1998 which was used in the purchase of Fanzine.  The remaining
$6,000,000 of the offering will be sold at the Company's option at calls of
$500,000 each for a period of two years following the date of this agreement.
The $1,000,000 debenture matures on July 31, 2000.  Interest is payable on a
quarterly basis.  The holder of the debenture is entitled to convert, after 120
days of the agreement, the principal value into the Company's common stock at a
discounted market price.

In April 1998, the Company entered into an Offshore Securities Subscription
Agreement for convertible Preferred Shares pursuant to regulation S of the U.S.
Securities Act of 1933.  Under the terms of the agreement, the Company  issued
2,175 shares of 1998 Series A Convertible Preferred Stock ("Series A Shares") at
a price of $1,000 per share with a 5% cumulative dividend payable in common
stock at conversion.  For the six months ended November 28, 1998, the Company
received proceeds of $1,317,000, net of offering costs.  The Company received
proceeds of $846,500 during the quarter ended May 30, 1998.  Proceeds from such
agreement were used to fund working capital.
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES AT NOVEMBER 28, 1998 (CONTINUED)


The Series A Shares are convertible at a rate of 100 shares plus accrued
dividends per week at 80% of the 15 day average closing bid price.  These shares
are subject to a 24 month mandatory conversion feature. For the six months ended
November 28, 1998, 1,400 shares and accrued dividends were converted into
610,481 shares of the Company's common stock.

In addition to the Series A Shares the Company issued 400,000 warrants to
purchase the Company's common stock at $1.50 per share commencing April 20, 1998
exercisable over 5 years. During the six months ended November 28, 1998, the
Company received $600,000 in proceeds for the exercise of the warrants.

On October 28, 1998, the Company entered into a note payable for $1,100,000.
The note, which bears no interest, is due in quarterly installments of $275,000
commencing December 31, 1998.  In consideration of the loan, the Company issued
the lender 150,000 restricted shares of the Company's common stock.  The Company
used $507,500 of the proceeds to repurchase 169,167 of its outstanding common
stock.

Of Metro's total accounts receivable at November 28, 1998, $2,306,716 (30%) as
compared to $2,477,041 (49%) at May 30, 1998 is owed by Capital Video
Corporation ("CVC"), a chain of retail stores of which a former
officer/shareholder of the Company is the sole shareholder.  Because of the
amount of this receivable and the concentration of business with CVC, this
receivable is monitored very closely.  Metro has the personal guaranty of its
one shareholder.  Accordingly, no allowance for related party receivables and no
related party bad debt expense has been recorded in the Company's financial
statements.

At November 28, 1998 the Company estimates 60 new feature films and videos which
will be released during fiscal 1999.  The completion of these movies will
require approximately $1,500,000 to $2,000,000.  Financing for these activities
has been and will continue to be generated through operating cash flows as well
as funds received from its line of credit.

During June, 1997, Metro, Inc. entered into a line of credit agreement with a
finance company.  Under the agreement, Metro, Inc. may borrow up to 75% of
assigned accounts receivable less than 90 days old, up to a maximum of
$1,000,000.  The balance due under the line of credit bears interest at the
prime rate plus 5% per annum.  In addition, Metro, Inc. shall pay the finance
company a collateral management or notification fee equal to 3/4 of 1% of sales
submitted to the finance company for inclusion in the net security value of
accounts receivable, but no more than $7,500 per month.  The outstanding balance
under the line is secured by accounts receivable of Metro, Inc and guaranties of
the Company and certain officers/shareholders.  The line of credit expires
during June, 1999, but includes an option for an additional year.  As of
November 28, 1998, the balance on the line of credit was $778,703.

Capital Expenditures: Capital expenditures for the six months ended November 28,
1998 amounted to $236,374 as compared to $44,182 for the six months ended
November 29, 1997.  The Company anticipates that its capital expenditures for
1999 will be approximately $700,000 to $1,000,000 primarily used for computer
equipment, a new convention booth, and interactive media center units.  The
Company is currently negotiating a $1,000,000 lease line for its use which
management believes will be sufficient.
<PAGE>
 
LIQUIDITY AND CAPITAL RESOURCES AT NOVEMBER 28, 1998 (CONTINUED)


Management believes that funds provided by operations, existing and new line of
credit, are adequate to meet the anticipated short-term and long-term capital
needs.  Management believes that inflation has not had a material effect on its
operations.


Forward Looking Statements

     This Form 10-QSB Report contains "forward-looking statements," including
statements in "Management's Discussion and Analysis of Financial Condition and
Results of Operations," as to expectations, beliefs, plans, objectives and
future financial performance, and assumptions underlying or concerning the
foregoing.  Such forward-looking statements involve risks and uncertainties
which could cause actual results or outcomes to differ materially from those
expressed in the forward-looking statements.  One such factor that could cause
actual results or outcomes to differ materially from those discussed in the
forward-looking statements would be government actions or initiatives, such as
attempts to limit or otherwise regulate the sale of adult-oriented materials,
including print, video and online materials.


Year 2000 Compliance

     As the year 2000 approaches, an issue has emerged regarding how existing
application software programs and operating systems can accommodate this date
value.  Failure to adequately address this issue could have potentially serious
repercussions.  The Company is in the process of working with the service
providers to prepare for the year 2000.  Based on information currently
available, the Company does not expect that it will incur significant operating
expenses or be required to incur material costs to year 2000 compliant.
<PAGE>
 
                   METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
                          CONSOLIDATED BALANCE SHEETS


                                    Assets

<TABLE> 
<CAPTION> 
                                                                           November 28,          May 30,
                                                                               1998                1998 
                                                                           (Unaudited)          (Audited)
                                                                            ---------            ------- 
<S>                                                                        <C>                  <C> 
Current assets
--------------
   Cash                                                                    $   943,807          $   184,995
   Accounts receivable, less allowance for doubtful accounts of                                           
     $223,030 and $163,030, respectively                                     7,984,890            5,092,255
   Inventory                                                                 4,763,330            3,726,963
   Deferred income taxes                                                       248,500              248,500
   Prepaid expenses and other current assets                                   419,346               78,751
                                                                           -----------          -----------

     Total current assets                                                   14,359,873            9,331,464 
     --------------------                                                                                  
                                                                                                           
                                                                                                           

Motion pictures and other films at cost, less accumulated                                                  
   amortization of $7,495,426 and $6,575,623, respectively                   4,818,060            4,142,979 
                                                                                                           
                                                                                                           
Property and equipment at cost, less accumulated depreciation and                                          
   amortization of $1,905,602 and $1,681,138, respectively                   1,906,993            1,479,426 
                                                                           
                                                                           
Goodwill, net of accumulated amortization of $160,276                        7,339,724                    - 
                                                                                                            
                                                                                                            
Other assets                                                                   273,452              483,472 
                                                                           -----------          ----------- 

          Total assets                                                     $28,698,102          $15,437,341 
          ------------                                                     ===========          =========== 
</TABLE> 
<PAGE>
 
                      Liabilities and Shareholders' Equity
                      ------------------------------------

<TABLE> 
<CAPTION> 
                                                                                November 28,        May 30, 
                                                                                    1998             1998  
                                                                                (Unaudited)        (Audited)
                                                                                -----------        --------  
<S>                                                                             <C>                <C> 
Current liabilities                                                                                          
-------------------                                                                                          
   Note payable - selling shareholders                                          $ 1,666,667        $         -  
   Current portion of capital lease obligations                                     344,440            363,956          
   Short-term borrowings                                                          2,978,703          1,030,272  
   Accounts payable and accrued expenses                                          5,741,440          4,232,679  
   Income taxes payable                                                             975,589            326,119  
                                                                                -----------        -----------  

     Total current liabilities                                                   11,706,839          5,953,026  
     -------------------------                                                  
                                                                                                                
Convertible debentures                                                            1,000,000                  -  
Capital lease obligations, less current portion                                     254,066            351,538  
Deferred income taxes                                                                59,300             59,300  
                                                                                -----------        -----------  

     Total liabilities                                                           13,020,205          6,363,864  
     -----------------                                                          -----------        -----------   
Minority interest                                                                                               
Commitments and contingencies                                                        52,149             18,220  
                                                                                -----------        -----------  
Shareholders' equity                                                                                            
--------------------                                                                                            
  Series A 5% cumulative convertible preferred stock, $.0001 par                                                
     value, $1,000 stated value, authorized 2,175, issued and out-                                              
     standing 775 and 2,175 shares less 1,320 shares outstanding                                                
     subscriptions, respectively                                                    824,688            857,979  
  Preferred stock, no par value; authorized 2,000,000 shares; issued                                             
     and outstanding, none                                                                -                  -  
  Common stock, $.0001 par value; authorized 10,000,000 shares;                                                 
      issued and outstanding, 6,649,854 and 4,245,193 shares,                           665                424  
      respectively                                                               12,837,773          6,546,580  
  Additional paid in capital                                                      2,468,565          1,712,774  
  Retained earnings                                                                   1,557                  -   
                                                                                -----------        -----------  
  Foreign exchange                                                               16,133,248          9,117,757  
  Unearned compensation                                                                   -            (62,500) 
  Less cost of Treasury Stock (169,167 common shares)                              (507,500)                 -   
                                                                                -----------        -----------  
     Total shareholders' equity                                                  15,625,748          9,055,257  
     --------------------------                                                 -----------        -----------  
                                                                                                                
     Total liabilities and shareholders' equity                                 $28,698,102        $15,437,341  
     ------------------------------------------                                 ===========        ===========   
</TABLE> 

                See notes to consolidated financial statements
<PAGE>
 
                   METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
                       CONSOLIDATED STATEMENTS OF INCOME

<TABLE> 
<CAPTION> 
                                              Three              Six         Three              Six                   
                                              months            months       months            months
                                               ended            ended        ended             ended
                                              November         November     November          November
                                              28, 1998         28, 1998     29, 1997           29, 1997
                                            (Unaudited)      (Unaudited)   (Unaudited)       (Unaudited)
                                            -----------     ------------   -----------       -----------   
<S>                                         <C>             <C>            <C>               <C> 
Revenues                                     $9,577,470      $16,642,538    $4,551,635        $8,647,856 

Costs of revenues, including
   amortization of motion pictures                                                                       
   and other films                            6,261,005       10,414,055     2,593,446         5,439,653 
                                            -----------     ------------   -----------       -----------   

                                              3,316,465        6,228,483     1,958,189         3,208,203

Selling, general and administrative           
  expenses                                    2,719,035        4,610,809     1,430,571         2,957,828 
                                            -----------     ------------   -----------       -----------   
                                                
              Income from operations            597,430        1,617,674       527,618           250,375 
              ----------------------
                                                                                                
Other income (expense), net                     (96,541)        (154,272)      (68,345)         (191,905)
                                            -----------     ------------   -----------       -----------   

              Income before income              
              --------------------
                  taxes                         500,889        1,463,402       459,273            58,470 
                  -----

Income tax expense                              264,465          649,470       186,965            14,620 
                                            -----------     ------------   -----------       -----------   
                                               
              Net income                     $  236,424      $   813,932    $  272,308        $   43,850 
              ----------                    ===========     ============   ===========       ===========

                                                  
Basic earnings per common share              $     0.04      $      0.15    $     0.08        $     0.02 

Weighted average number of                    
    shares outstanding                        6,194,763        5,599,416     3,558,168         3,558,168 
</TABLE> 

                See notes to consolidated financial statements.
<PAGE>
 
                   METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENTS OF CASH FLOWS



<TABLE> 
<CAPTION> 
                                                                             November 28,          November 29,
                                                                                1998                  1997    
                                                                             (Unaudited)           (Unaudited)
                                                                              ---------             ---------  
<S>                                                                         <C>                    <C> 
Cash flows from (used by) operating activities:                 
---------------------------------------------- 
  Net income                                                                $    813,932           $     43,850 
  Adjustments to reconcile net income to net cash                           ------------           ------------ 
    provided (used) by operating activities:                                                                    
    Depreciation and amortization                                              1,144,267                854,760 
    Amortization of deferred rent                                                 (7,005)                (7,005) 
    Amortization of unearned compensation                                         62,500                      -  
    Bad debt expense                                                              60,000                      -  
    Amortization of goodwill                                                     160,276                      -  
    Common stock issued for consulting services                                  499,716                      -  
    Minority interest                                                             52,149                      -  
    Foreign exchange                                                               1,557                      -  
                                                                                                                 
    (Increase) decrease in assets:                                                                              
       Accounts receivable                                                    (2,952,635)             1,133,812 
       Inventory                                                              (1,036,367)              (429,045)
       Prepaid expenses and other current assets                                (340,595)               (47,945)
       Other assets                                                             (143,897)               156,972 
                                                                                                                
    Increase (decrease) in liabilities:                                                                         
       Accounts payable and accrued expenses                                   1,772,098                (23,321)
       Income taxes payable                                                      649,470                (60,415) 
                                                                            ------------           ------------  
                                                                                                   
          Total adjustments                                                      (78,466)             1,577,813  
          -----------------                                                 ------------           ------------ 
                                                                                                                
          Net cash provided by operating activities                              735,466              1,621,663  
          -----------------------------------------                         ------------           ------------   
</TABLE> 
  
<PAGE>
 
                   METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE> 
<CAPTION> 
                                                                         November 28,        November 29,     
                                                                            1998                 1997         
                                                                         (Unaudited)         (Unaudited)      
                                                                         ----------          -----------       
<S>                                                                      <C>                 <C>              
Cash flows used by investing activities:                                                                      
---------------------------------------                                                                       
   Investments in motion pictures and other films                        $(1,594,884)        $(1,053,631)     
   Purchase of property and equipment                                       (236,374)            (44,182)     
   Acquisition of Fanzine                                                 (2,000,000)                  -      
   Purchase of treasury stock                                               (507,500)                  -      
                                                                         -----------         -----------      
                                                                                                              
     Net cash  used by investing activities                               (4,338,759)        (1,097,813)      
     --------------------------------------                              -----------         -----------      

                                                                                                              
Cash flows from (used by) financing activities:                                                               
----------------------------------------------                                                                
   Proceeds from issuance of Series A Convertible preferred stock          1,317,000                  -       
   Payments on capital leases                                               (178,728)          (111,140)      
   Net proceeds from line of credit                                          248,431           (456,429)      
   Proceeds from notes payable                                             1,700,000                  -       
   Proceeds from issuance of common stock                                      8,734                  -       
   Proceeds from exercise of warrants                                        600,000                  -       
   Proceeds from issuance of convertible debentures                        1,000,000                  -       
   Payments on note payable - selling shareholders                          (333,333)                 -       
                                                                         -----------         ----------       

     Net cash from (used by) financing activities                          4,362,104           (567,569)      
     --------------------------------------------                        -----------         ----------       

     Increase (decrease) in cash                                             758,812            (43,719)      
     ---------------------------                                             
                                                                                                              
Cash, beginning of period                                                    184,995             57,724       
                                                                         -----------         ----------       

Cash, end of period                                                      $   943,807         $   14,005       
                                                                         ===========         ==========       
</TABLE> 
         
                See notes to consolidated financial statements.
<PAGE>
 
                   METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

<TABLE> 
<CAPTION> 
                                                          Six months ended
                                                      November 28,  November 29
                                                         1998          1997
                                                         ----          ----
<S>                                                   <C>           <C> 
Supplemental disclosures of cash flow information:
-------------------------------------------------

  Cash paid during the period for:
 
    Interest                                           $147,002      $174,687
                                                       ========      ========
    Income taxes
                                                       $      -      $ 74,849
                                                       ========      ========
</TABLE>

Supplemental schedule of non-cash investing and financing activities:
-------------------------------------------------------------------- 

During the six months ended November 28, 1998, a note payable of $300,000 was
converted into 250,000 restricted shares of the Company's common stock.

During the six months ended November 28, 1998, 1,400 shares of Series A
preferred stock plus accrued dividends of $19,934 were converted into 610,481
shares of the Company's common stock.

Property and equipment under capital lease obligations of $61,740 were incurred
for the six months ended November 28, 1998.

On July 31, 1998, the Company acquired 100% of the outstanding stock of Fanzine
International, Inc for a preliminary purchase price of $7,500,000.  The Company
paid cash of $2,000,000, issued 1,000,000 shares of stock valued at $3,500,000
and issued a note payable for $2,000,000.

During the quarter ended November 29, 1997, a wholly-owned subsidiary of the
Company contributed rights to certain magazine titles and other materials
(recorded at zero cost basis in these financial statements) in exchange for 50%
interest into a newly formed joint venture.

                See notes to consolidated financial statements.
<PAGE>
 
METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 28, 1998 AND NOVEMBER 29, 1997
(UNAUDITED)


1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Consolidation

The consolidated financial statements include the accounts of Metro Global
Media, Inc. ("Metro Global") and its wholly-owned subsidiaries (collectively the
"Company").  All intercompany balances and transactions have been eliminated in
consolidation.

Financial Statements

The interim financial statements are prepared pursuant to the requirements for
reporting on Form 10-QSB.  The May 30, 1998 balance sheet data was derived from
audited financial statements but does not include all disclosures required by
generally accepted accounting principles.  The interim financial information
included herein is unaudited; however, such information reflects all adjustments
(consisting solely of normal recurring adjustments) that are, in the opinion of
management, necessary to a fair presentation of the financial position, results
of operation, and changes in financial position for the interim periods.  The
interim financial statements and notes thereto should be read in conjunction
with the financial statements and notes included in the Company's latest annual
report.  Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted.  The current period results of
operations are not necessarily indicative of results which ultimately will be
reported for the full year ending May 29, 1999.

Earnings Per Share

During the year ended May 30, 1998, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings per Share", which replaces primary and
fully diluted earnings per share with basic and diluted earnings per share.
Under the new requirements the dilutive effect of certain common stock
equivalents is excluded from the computation of basic earnings per share.
Diluted earnings per share is calculated similarly to fully diluted earnings per
share as required under APB 15. All prior period earnings per share data
presented have been restated to conform to the provisions of this statement.

Basic earnings per share is computed by dividing net income available to common
stockholders (net income less preferred stock dividends) divided by the weighted
average number of shares outstanding during the year.  Diluted earnings per
share is consistent with basic earnings per share while giving effect to all
dilutive potential common shares that would have been outstanding if the
dilutive potential common shares had been issued, while adding back to income
any preferred dividend or interest expense on convertible securities.
<PAGE>
 
METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 28, 1998 AND NOVEMBER 29, 1997
(UNAUDITED)


2.   ACQUISITION

On July 31, 1998, the Company acquired 100% of the stock of Fanzine
International, Inc. ("Fanzine") for a preliminary purchase price of $7,500,000.
Fanzine, which began operations on August 1, 1997, publishes event driven,
mainstream magazines translated into seven languages and distributed worldwide.
The acquisition price consists of $4,000,000 cash, and 1,000,000 restricted
shares of the Company's common stock with put option rights at $8.00 per share
to be exercised by the selling shareholder's during the second year on a
quarterly basis, if certain minimum earnings, as defined, are met.  However,
during Fanzines' first year of operations, the Company has the right to call the
shares at the greater of $6.00 per share or 75% of the market price.  The
acquisition agreement, also, provides for a reduction in purchase price if
Fanzine's results of operations do not meet certain minimum earnings.

Management is presently obtaining an independent valuation to finalize the
preliminary estimated purchase price of $7,500,000.  The Company's right to
redeem its shares during the first year and the selling shareholders' right to
put the shares to the Company in the second year could result in an estimated
increase in purchase price ranging from $2,500,000 to $4,500,000.

The acquisition was accounted for as a purchase.  The excess of the purchase
price over the fair market values of net assets acquired, which include, among
others, licences, trademarks, and distribution rights, was allocated to goodwill
and is being amortized over fifteen years.

The cash portion of $4,000,000 is being financed by a long-term convertible
debenture and other short-term borrowings.  Management anticipates financing the
additional consideration to be paid in the near future, (if any), with Fanzine's
cash flow resulting from profitable operations.

As the consolidated financial statements of the Company only include four months
of operations, the following selected unaudited pro-forma information is being
provided to present a summary of the continued results of the Company and
Fanzine as if the acquisition had occurred on August 1, 1997:

Pro-Forma information (Unaudited)
 (In thousands, except per share data)

<TABLE>
<CAPTION> 
                 THREE MONTHS ENDED NOVEMBER 29, 1997 (ONLY)
                 -------------------------------------------
                 <S>                                  <C>    
                 Revenues                             $6,521
                 Net Income                              657
                 Basic Earnings per Common Share         .14 
</TABLE>

<TABLE>
<CAPTION> 
                  FOUR MONTHS ENDED NOVEMBER 29, 1997 (ONLY)
                  ------------------------------------------
                  <S>                                <C>
                  Revenues                           $11,274   
                  Net Income                             484
                  Basic Earnings per Common Share        .11 
</TABLE>

<PAGE>
 
METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 28, 1998 AND NOVEMBER 29, 1997
(UNAUDITED)

3.   NOTES PAYABLE

During June, 1997, Metro, Inc. entered into a line of credit agreement with a
finance company.  Under the agreement, Metro, Inc. may borrow up to 75% of
assigned accounts receivable less than 90 days old, up to a maximum of
$1,000,000.  The balance due under the line of credit bears interest at the
prime rate plus 5% per annum.  In addition, Metro, Inc. shall pay the finance
company a collateral management or notification fee equal to 3/4 of 1% of sales
submitted to the finance company for inclusion in the net security value of
accounts receivable, but no more than $7,500 per month.  The outstanding balance
under the line is secured by accounts receivable of Metro, Inc and guaranties of
the Company and certain officers/shareholders.  The line of credit expires
during June, 1999, but includes an option for an additional year.  As of
November 28, 1998, the balance on the line of credit was $778,703.

On March 23, 1998, the Company entered into two 8% convertible debentures
totaling $500,000.  Both notes are due on March 23, 1999, in either cash or
common stock, at a conversion rate of $2.25 per share.  Proceeds from the
debentures were used for working capital.

On July 1, 1998, the Company entered into an 8% convertible debenture totaling
$200,000.  The note is due on July 1, 1999, in either cash or common stock, at a
conversion rate of $2.25 per share.  Proceeds from the debenture were used for
working capital.

On August 1, 1998, the Company entered into notes payable totaling $400,000.
The notes, which bear interest at 8%, are due August 1, 1999.  Proceeds from the
notes were used in the acquisition of Fanzine.

On October 28, 1998, the Company entered into a note payable for $1,100,000.
The note, which bears no interest, is due in quarterly installments of $275,000
commencing December 31, 1998.  In consideration of the loan, the Company issued
the lender 150,000 restricted shares of the Company's common stock.  The Company
used $507,500 of the proceeds to repurchase 169,167 of its outstanding common
stock.


4.   CONVERTIBLE DEBENTURES

On July 31, 1998, the Company entered into an 8% convertible debenture with a
total offering of $7,000,000.  The Company received proceeds of $1,000,000 in
August, 1998 which was used in the purchase of Fanzine.  The remaining
$6,000,000 of the offering will be sold at the Company's option at calls of
$500,000 each for a period of two years following the date of this agreement.

The $1,000,000 debenture matures on July 31, 2000.  Interest is payable on a
quarterly basis.  The holder of the debenture is entitled to convert after 120
days of the agreement, the principal value into the Company's common stock at a
discounted market price as is defined in the agreement.
<PAGE>
 
METRO GLOBAL MEDIA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 28, 1998 AND NOVEMBER 29, 1997
(UNAUDITED)

5.   SERIES A CONVERTIBLE PREFERRED STOCK

During 1998, the Company entered into an Offshore Securities Subscription
Agreement for convertible Preferred Shares pursuant to regulation S of the U.S.
Securities Act of 1933.  Under the terms of the agreement, the Company issued
2,175 shares of 1998 Series A Convertible Preferred Stock ("Series A Shares") at
a price of $1,000 per share with a 5% cumulative dividend payable in common
stock at conversion.

The Series A Shares are convertible at a rate of 100 shares plus accrued
dividends per week at 80% of the 15 day average closing bid price.  These Shares
are subject to a 24 month mandatory conversion feature.  During the six months
ended November 28, 1998, 1,400 shares plus accrued dividends of $19,934 were
converted into 610,481 shares of the Company's common stock.

In addition to the Series A Shares the Company  issued 400,000 warrants to
purchase the Company's common stock at $1.50 per share commencing April 20, 1998
exercisable over 5 years.  The warrants were exercised in October, 1998.
<PAGE>
 
PART II - OTHER INFORMATION


ITEM 1.   LEGAL PROCEEDINGS
          -----------------

          Not applicable

ITEM 2.   CHANGES IN SECURITIES
          ---------------------

          None

ITEM 3.   DEFAULTS UPON SENIOR SECURITIES
          -------------------------------

          None

ITEM 4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
          ---------------------------------------------------

          None

ITEM 5.   OTHER INFORMATION
          -----------------

          None

ITEM 6.   EXHIBITS AND REPORTS ON FORM 8-K
          --------------------------------

          (a)  Exhibits

               None

          (b)  Reports of Form 8-K/A

               On October 16, 1998, the Company filed Form 8-K/A with the
               Commission to amend the Form 8-K filed with the Commission on
               August 15, 1998, to report the acquisition of Fanzine
               International, Inc. Form 8K/A reported the proforma Balance Sheet
               and Statement of Income which gave effect to the acquisition of
               Fanzine International, Inc.


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be singed on its behalf by the
undersigned, thereunto duly authorized.

                                        METRO GLOBAL MEDIA, INC.


                                   By:______________________________
                                      Janet Hoey, Treasurer
                                       (duly authorized, principal financial
                                        and chief accounting officer)