U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D. C. 20549


                                   FORM 10-QSB


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


          For the quarterly period ended FEBRUARY 28, 1998


                                       OR

    [  ]  TRANSITION  REPORT  UNDER  SECTION 13 OR 15 (D) OF THE EXCHANGE ACT OF
          1934

          FOR THE PERIOD FROM December 1, 1997 thru February 28, 1998


                         Commission File No. 33-37968-A

                           IMAGICA ENTERTAINMENT, INC.

             (Exact name of Registrant as specified in its charter )

           Florida                                          59-2762999

(State or other jurisdiction or                  (I.R.S. Employer Identification
incorporation or organization)                            Number)

                    1518 SW 12th Avenue, Ocala, Florida 34474
                    (Address of principal executive offices)

                                ( 352 ) 867-7861
                            Issuer's telephone number

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 ( )

Number of common shares  outstanding as February 28, 1998 (including the 100,000
shares of redeemable common stock) - 889,708.

Transitional Small Business Disclosure Format:
      Yes ( X ) No ( )

<PAGE>



                                      INDEX



     PART I - FINANCIAL INFORMATION                                  Page Number
                                                                     -----------

     Item 1.  Financial Statements  (Unaudited):


              Balance Sheets                                               3

              Statement of Operations                                      5

              Statement of Cash Flows                                      6

              Notes to Financial Statements                                7



              Managements Discussion and Analysis                          8
                of Financial Condition and Results
                of Operations



              SIGNATURE                                                    9



<PAGE>



                           IMAGICA ENTERTAINMENT, INC.

                                 BALANCE SHEETS






                                                   February 28,       May 31,
ASSETS                                                 1998            1997
                                                   (Unaudited)     (Unaudited)
                                                   -----------     -----------

CURRENT ASSETS:

Cash and equivalents                             $     2,435.84 $      55,849.79
Accounts receivable, less allowance for              394,389.60
      possible losses of $9,926 and $13,189          317,081.91
Inventories (less obsolete of $39,000)               186,221.91       188,210.24
Prepaid expenses                                     102,253.19     1,264,665.82
                                                 -------------- ----------------


      Total Current Assets                           685,300.54     1,825,807.76
                                                 -------------- ----------------



Property and equipment, net                          224,718.89       328,658.55



Other Assets:
      Land held for future development                  --               --
      Equipment not yet placed in service               --             37,500.00
      Deposits on equipment                             --            206,632.00
      Other                                           14,777.90         6,277.90
                                                 -------------- ----------------
        Total Other Assets                            14,777.90       250,409.90




TOTAL ASSETS                                     $   924,797.33 $   2,404,876.21
                                                 -------------- ----------------


                                       3

<PAGE>
<TABLE>
<CAPTION>


                                 IMAGICA ENTERTAINMENT, INC.

                                       BALANCE SHEETS

                                                           February 28,             May 31,
                                                              1998                   1997
                                                           (Unaudited)            (Unaudited)
                                                           -----------            -----------

LIABILITIES and STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
<S>                                                         <C>                    <C>       
      Notes Payable                                         229,053.61             324,196.22
      Accounts Payable - Trade                              392,224.59             365,465.96
      Accrued Liabilities                                   305,975.97             295,968.54
      Current Portion of Stockholder Note Payable              --                     --
      Current Maturities of Long-Term Debt                  215,837.66             293,820.33
      Current Portion of Obligations Under Capital           48,776.75              24,859.25
          Leases
                                                      ----------------       ----------------
             Total Current Liabilities                    1,191,868.58           1,304,310.30

Stockholder Note Payable, less current portion                 --                  304,654.96
Long-Term Debt, Less Current Maturities                      28,591.08              31,648.84
Obligations Under Capital Leases, Less                       11,681.18              14,910.91
         Current Maturities
                                                      ----------------       ----------------
             Total Liabilities                            1,232,140.84           1,655,525.01

Redeemable Common Stock                                     100,000.00             100,000.00

Stockholder's Equity
      Common Stock, $.001 Par Value,                          3,021.67               7,021.67
          shares authorized 50,000,000;
           issued 8,441,944
      Additional Paid-in-Capital                          4,417,255.32           4,504,730.51
      Accumulated Deficit                                (3,399,199.89)         (3,766,121.20)
                                                      ----------------       ----------------
                                                          1,021,077.10             745,630.98

Less: Treasury Stock, at cost, 680,000 shares               (96,279.77)            (96,279.77)
      Notes Receivable arising from the
          Exercise of Stock Options
         Total Stockholders' Equity                         924,797.33             649,351.21
                                                      ----------------       ----------------


TOTAL LIABILITIES
      and STOCKHOLDERS' EQUITY                        $   2,256,938.17       $   2,404,876.22


                                             4
</TABLE>

<PAGE>
<TABLE>
<CAPTION>

                                          IMAGICA ENTERTAINMENT, INC.


                                            STATEMENT OF OPERATIONS


                                              Three Months ended February 28,       Nine Months ended February 28,
                                              -------------------------------       ------------------------------

                                                 1998                1997              1998               1997
                                                 ----                ----              ----               ----
                                              (Unaudited)        (Unaudited)        (Unaudited)        (Unaudited)


<S>                                           <C>                <C>                <C>                <C>        
SALES                                         $   627,990        $   674,975        $ 1,989,786        $ 2,509,409

COST OF SALES                                 $   430,832        $   569,452        $ 1,322,363        $ 1,988,073


       GROSS PROFIT                           $   197,158        $   105,523        $   667,423        $   521,336



OPERATING EXPENSES                            $   291,896        $ 1,111,518        $   785,874        $ 2,934,596


   INCOME (LOSS) FROM OPERATIONS              $   (94,738)       $(1,005,995)       $  (118,450)       $(2,413,260)


OTHER INCOME (EXPENSES):

   INTEREST                                   $     1,645        $  (107,588)       $    (6,735)       $  (333,430)



NET INCOME (LOSS)                             $   (93,093)       $(1,113,583)       $  (125,185)       $(2,746,690)





Earnings (loss) per Share                     $     (0.10)       $     (0.21)       $     (0.14)       $     (0.53)



Weighted average common shares outstanding        889,708          5,162,764            889,708          5,162,764




                                                      5


</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                              IMAGICA ENTERTAINMENT, INC.

                                                STATEMENTS OF CASH FLOW


                                                      Three Months ended February 28,      Nine Months ended February 28,
                                                      -------------------------------      ------------------------------

                                                           1998              1997              1998              1997
                                                           ----              ----              ----              ----
                                                       (Unaudited)       (Unaudited)       (Unaudited)       (Unaudited)

Cash Flows from operating activities:
<S>                                                    <C>               <C>               <C>               <C>         
   Net Income (loss)                                   $   (94,093)      $(1,113,583)      $  (125,185)      $(2,746,690)
   Adjustments to reconcile net income (loss)
     to net cash provided by operating activities:
       Depreciations and Amortization                  $    17,875       $   272,539       $    83,940       $   449,534
   Cash provided by (used for):
       Accounts Receivable                             $   (83,901)      $  (107,248)      $   (87,234)      $    95,800
       Inventories                                     $     1,476       $    28,933       $   (31,012)      $   126,737
       Prepaid Expenses                                $   (56,460)      $   660,058       $ 1,162,413       $ 1,557,364
       Stockholders' Advance                           $      --                           $      --
       Accounts Payable - Trade                        $   (11,420)      $  (298,556)      $   (26,759)      $   328,755
       Notes Payable                                   $   308,250       $    82,465       $(1,670,320)      $  (502,538)
       Customer Deposits                               $      --         $      --         $      --
       Accrued Liabilities                             $  (122,638)      $  (170,154)      $   (10,007)      $   (32,788)

Net Cash Provided by Operating Activities              $   (40,911)      $  (645,546)      $  (704,164)      $  (723,826)

Cash Flows from investing activities:
   Purchase of Property and Equipment
   Decrease in other Assets                            $     3,000       $   217,947       $   235,632       $   364,054
Net Cash Provided by (used for)                        $     3,000       $   217,947       $   235,632       $   364,054
       investing activities:

Cash Flows from financing activities:
   Decrease in Note Payable                            $    20,067       $   426,221       $    95,143       $    26,109
   Proceeds from issuance of Convertible N-Pyble       $      --                           $      --
   Proceeds from issuance of  Stock                    $      --                           $      --
   Additional Paid-in-Capital                          $      --                           $      --
   Net Decrease in Stockholder Note Payable            $      --         $    19,025       $   304,655       $   401,593
   Principal Payments of Long-Term Debt and            $   (10,818)      $        10       $    71,170       $    28,947
       Capital Lease Obligations
   Debt Issuance Costs
Net Cash used for financing activities                 $     9,249       $   445,256       $   470,968       $   456,649

Net Increase (decrease) in cash and                    $   (28,662)      $    17,657       $     2,436       $    96,877
         cash equivalents

Cash and Cash Equivalents, beginning                   $    31,098       $    58,451                 0       $   (20,769)
         of Period

Cash and Cash Equivalents,                             $     2,436       $    76,108       $     2,436       $    76,108
         end of Period



                                                        6

</TABLE>
<PAGE>



                           IMAGICA ENTERTAINMENT, INC.


                          NOTES TO FINANCIAL STATEMENTS




NOTE  1 -  BASIS OF PRESENTATION


The  unaudited  financial  statements  presented  herein  have been  prepared in
accordance with the  instructions to Form 10-QSB,  and do not include all of the
information  and   disclosures   required  by  generally   accepted   accounting
principles.  These  statements  should be read in conjunction with the financial
statements and notes thereto  included in the Company's Form 10-KSB for the year
ended May 31, 1996 ( year ended May 31, 1997 Form 10-KSB no  completed to date).
The accompanying  financial  statements have not been examined by an independent
accountant in accordance with generally accepted auditing standards,  but in the
opinion of  management,  such  financial  statements  include  all  adjustments,
consisting only of normal recurring  adjustments and accruals,  to fairly report
the  Company's  financial  position  and results of  operations.  The results or
operations  for the interim  periods  shown in this  report are not  necessarily
indicative of results to be expected for the fiscal year.


The results for fiscal 1997 have been restated from previous  10-QSB  reports to
reflect the elimination of transactions  subsequently  determined to be improper
and for the removal of Imagica,  Inc. (a Subsidiary) from the results of Imagica
Entertainment,  Inc.  This  was  done  due to  determination  that  the  minutes
authorizing  the  transaction  only  authorized  the  acquisition of stock not a
pooling of interests.




                                       7


<PAGE>



                           IMAGICA ENTERTAINMENT, INC.


ITEM  2.              MANAGEMENTS DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS




Results of Operations

Sales for the three  months  ended  February  1998 were  $627,990  reflecting  a
decline of $46,985 or 7% from the comparable  period in fiscal 1997. the Company
believes this was due to working  capital  constraints and a reduction in worker
moral and  efficiency  due to the Companies  having filed for  protection  under
Chapter 11 of the Federal Bankruptcy Code.

Gross profit for the three months  ended  February 28, 1998  increased by 87% to
$197,158 from $105,523 for the comparable period in fiscal 1997. This was due to
the Company being able to close unprofitable production facilities and eliminate
certain contractual obligations due to the Chapter Eleven filing.

Selling and general administrative  expenses (reflected as operating expenses in
the accompanying  statements of operations).  These expenses were  significantly
changed from the same period in fiscal '1997 due to  decreased  consulting  fees
accrued.

Interest  Expense  decreased  from  $107,588  in fiscal  1997 to  $(1645) in the
comparable quarter ended February 1998 due to the Chapter 11 filing.

Gross profit (loss) in the quarter ended February 1998 was $(93,093) compared to
a loss of (1,113,583) in the fiscal 1997 period.  This was due to a reduction in
accrued liabilities for consulting fees.


Liquidity and Capital Resources

The Company has experienced  serious cash flow  difficulties over several years.
In April 1997 a group of dissident  stockholders called a special meeting of the
shareholders  with the intent of taking control and thru  management and capital
input returning the Company to profitability.  The existing  management  blocked
that move by placing the Company in Chapter 11 bankruptcy.  Petition was made by
the dissident  stockholders  to the bankruptcy  court to dismiss the dismiss the
bankruptcy  filing as unauthorized  and turn over control to the dissident group
which had  received  the  majority  vote at the  special  stockholders  meeting.
Instead the bankruptcy court remanded the matter to the Marion County,  State of
Florida for determination.

The Companies Board of Directors  requested that the Bankruptcy  Court allow the
Company to dismiss it's  Bankruptcy  Council,  Ronald  Bergwerk,  and retain now
council, the firm of Smith-Busey. The Court granted this request on December 16,
1997.  The Board  directed  it's new Council to  petition  the Court to have the
Bankruptcy dismissed. The Court granted the Motion to dismiss and the Bankruptcy
was dismissed on February 2, 1998.

The Companies Auditors ( BDO Seidman) will prepare the audited financial for the
May 31,  1997  year end.  It is  anticipated  that  they  will make  significant
adjustments  to the  Companies  accounts.  Those changes will affect the numbers
reported in the Company's  subsequent  10-QSB's in a material way. Therefore the
accuracy of numbers reported here in should be questioned.

                                       8

<PAGE>


                                    SIGNATURE
                                    ---------





     In accordance  with the  requirements  of the Exchange Act, the  registrant
caused  this to be  signed  on its  behalf by the  undersigned,  thereunto  duly
authorized.



                                          IMAGICA ENTERTAINMENT, INC.
                                          (registrant)


                                          By: /s/  Braxton P. Jones
                                             -----------------------------------
                                             Braxton P. Jones, President
Date:



                                       9

<PAGE>


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

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

                       SECURITIES AND EXCHANGE COMMISSION


                             WASHINGTON, D.C. 20549

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


                                   EXHIBITS TO

                                  10-QSB REPORT

                                       FOR

                                  QUARTER ENDED

                                FEBRUARY 28, 1998

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


                           IMAGICA ENTERTAINMENT, INC.


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