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
                                 August 31, 1998

                                       OR

    TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE EXCHANGE ACT OF 1934
             FOR THE TRANSITION PERIOD FROM ___________TO___________
                         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 of          (I.R.S. Employer Identification Number)
 incorporation or organization)

                    1518 SW 12th Avenue, Ocala, Florida 34474
                         (Address of principal executive
                                    offices)
                                 (352) 867-7860
                           (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____  No  X

Number of common shares outstanding as of January 31, 1999 - 4,308,550.

                 Transitional Small Business Disclosure Format:
                                Yes _____  No  X


<PAGE>

Part I

Item 1 Financial Statements

Financial  statements for the first quarter of fiscal 1999 are included as pages
F-1 through F-4.

Item 2 Management Discussion and Analysis

The first quarter of fiscal 1999 saw the Company  moving  forward with increased
sales and profits.  The Company booked  $989,154.00 as non cash interest expense
in the period.  This was the difference  between the price the Company's  common
shares were issued at and the market price at the date of the transaction.  This
was a non cash amount. Further discussion of this will be found in the Company's
10K for the period of fiscal 1998. The Company's actual operating profit for the
period was $65,869.64. The Company ended the period with equity of $39,525.74.

The Company  during the first  quarter  experienced  considerable  difficulty in
producing  the  orders  received  on a  timely  basis.  In  order  to not  cause
difficulties  with  customers  the  Company  was forced to advise of  production
schedules  as far out as 45 days.  In most cases  customers  could not wait that
long and placed their business with other screen printers.  It became obvious to
the  Company's  management  and board that to meet it's  sales and profit  goals
investment  in a larger  facility  and the addition of  considerable  production
equipment was mandatory.  Management  believes that based on the level of quotes
and  potential  orders  that were  placed  with  other  manufacturers  that with
additional space and equipment that the Company can achieve a sales level of six
million  dollars  annually  in only a few  months  after  operations  are  fully
functional in the new facility.  Based on that premise the Company's  management
and board began the process of locating a suitable facility and determining what
equipment was necessary to meet it's goals.

The Company's  board is determined to see the Company move forward in the screen
print  industry  and  in  addition  to a  new  facility  will  seek  to  acquire
approximately $500,000 in new production equipment.

Since  the board has  elected  to not  purchase  or  continue  the lease on it's
current facility the new building and equipment must be in and fully operational
by the end of it's current building lease which is September 30, 1999.

Part II

Item 1 Legal Proceedings

There were no new  lawsuits  filed  against the Company in the first  quarter of
fiscal 1999. The Company believes that based on the opinion of counsel that what
minor suits exist will have no material effect on the Company's balance sheet.


<PAGE>


Item 2 Changes in Securities

During the first quarter of fiscal 1999 the following shares were issued without
registration.  They  were  issued  pursuant  to Item  701 of  Regulation  S-B to
accredited  investors  under Rule 501(a) and rule 144.  These  shares are voting
common stock with a par value of .001.

Shares sold at $.25 per share.

Date                       Shares                    Recipient

July 12, 1998              81,999                    William Diamond
July 12, 1998              82,353                    Lawrence Dimino
July 12, 1998              82,061                    Kim Fiorletta
July 12, 1998              81,332                    Ron & Dorothy Gray
July 12, 1998              82,436                    Rudy Lesso Jr.
July 12, 1998              82,291                    Rudy Lesso III
July 12, 1998              82,269                    David Moriarty
July 12, 1998              81,228                    Todd Rincon
July 12, 1998              81,999                    Herman S. Udasin
July 12, 1998              81,562                    David Wild
July 12, 1998              80,000                    Ron or Lois Baute

Shares sold at $.20 per share

July 28, 1998             767,630                    SE Investments, Inc.
July 28, 1998             400,000                    Jeffrey Sedacca

On June 23, 1998  employee  Sandra  Stewart  received  250 shares for 5 years of
service.

The money  received in these  transactions  went to fund the  Company's  general
operations.

Item 3 Default upon Senior Securities

None

Item 4 Submission of Matters to a Vote of Security Holders

On July 10, 1998 a Special Shareholders meeting was held. The meeting was called
by  Shareholders  Jeffrey  Sedacca,  Howard  Essenfeld,  and  Braxton  Jones who
represented  more  than 51% of the  outstanding  shares  of the  Company.  These
shareholders  voted to increase the size of the Board of  Directors  from two to
seven and voted to remove Mark  Tishman as a  Director.  The  Shareholders  then
voted to elect to the Board of Directors,  Jeffrey  Sedacca,  Howard  Essenfeld,
William  Klein,  and Jeffrey  Reed to fill the vacant  positions.  There were no
dissenting votes.

<PAGE>


Item 5 Other Information

None

Item 6 Exhibits and Reports on Form 8-K

1.  Lease agreement between FRL Enterprises, Inc. and the Company

2.  Reports on Form 8-K

On June 3, 1998 the Company reported on Form 8-K the following:

     Entering into the lease with FRL Enterprises, Inc.
     Issuance of 20,000 shares of stock to former board member Mark Tishman
     Issuance of shares of stock to certain key employees
     Return of stock from some employees which was held by Robert  Wormser,  the
       Company's former President in a voting trust
     Issuance of 250 shares of the  Company's  common stock to employees  with 5
       years of service or more


<PAGE>

                          Imagica Entertainment, Inc.
                                 Balance Sheet
                             As of August 31, 1998
                                   Unaudited


Assets
     Current Assets
          Cash                                                           21,808
          Accounts receivable                                           499,911
          Allowance for bad debts                                        (9,321)
          Inventory                                                     252,194
          Other receivables                                               9,281
          Prepaid expenses                                               40,512
                                                                     ----------
     Total Current Assets                                               814,384

     Fixed Assets
          Property, plant & equipment                                 1,122,137
          Accumulated depreciation                                     (959,287)
                                                                     ----------
     Total Fixed Assets                                                 162,850

     Other Assets
          Miscellaneous deposits                                         18,135
          Patents                                                         3,646
          Trademarks                                                        745
                                                                     ----------
   Total Other Assets                                                    22,526
                                                                     ----------
Total Assets                                                            999,760
                                                                     ==========
Liabilities & Equity
     Liabilities
          Current Liabilities
               Accounts payable                                         197,345
               Accrued expenses                                         103,860
               Notes payable                                             83,941
               Debentures - G. Parker                                    25,000
               Other payables                                           239,159
                                                                     ----------
          Total Current Liabilities                                     649,305

          Long Term Liabilities
               Note payable - SunTrust                                   93,973
               Note payable to related party                            216,957
                                                                     ----------
          Total Long Term Liabilities                                   310,930
                                                                     ----------

     Total Liabilities                                                  960,234
                                                                     ----------

          Redeemable common stock                                       100,000

     Capital Deficit
          Common stock, .001 par value, shares                            4,231
             authorized 50,000,000; issued 4,228,517
          Additional paid-in capital                                  8,838,534
          Accumulated deficit                                        (8,799,800)

          Less:  Treasury stock, at cost 27,250                        (103,440)
                                                                     ----------
     Total capital deficit                                              (60,474)
                                                                     ----------
Total Liabilities & Capital Deficit                                     999,760
                                                                     ==========

<PAGE>

                           Imagica Entertainment, Inc.
                                Profit and Loss
                            June through August 1998
                                   Unaudited


                                                                   Jun - Aug '98
                                                                     ----------
Ordinary Income/Expense
     Income
          Sales                                                         906,760
                                                                     ----------
     Total Income                                                       906,760

     Cost of Sales
        Contract labor - plant                                            4,409
        Equipment - leasing & rental                                      1,055
        Materials                                                       263,586
        Outside services                                                 50,248
        Wages - plant                                                   218,792
                                                                     ----------
     Total Cost of Sales                                                538,091
                                                                     ----------

   Gross Profit                                                         368,669

     Expense
        General & administrative                                        121,394
        Other manufacturing costs                                        42,319
        Selling & marketing                                             119,303
                                                                     ----------
     Total Expense                                                      283,016
                                                                     ----------

Net Ordinary Income                                                      85,653

Other Income/Expense
     Other Income
          Miscellaneous income                                            5,824
                                                                     ----------
     Total Other Income                                                   5,824

     Other Expense
          Depreciation                                                   18,088
          Financing costs                                                 7,520
          Interest (Stock differential)                                 989,154
                                                                     ----------
     Total Other Expense                                              1,014,761
                                                                     ----------

Net Other Income/Expense                                             (1,008,938)
                                                                     ----------

      Net Loss                                                         (923,284)
                                                                     ==========
--------------------------------------------------------------------------------

Basic loss per share                                                 $    (0.30)
--------------------------------------------------------------------------------

Weighted average common shares outstanding                            2,986,957
--------------------------------------------------------------------------------


<PAGE>
<TABLE>
<CAPTION>



                                                   Statement of Capital Deficit


                                                Common Stock         Additional      Treasury Stock
                                          -----------------------     Paid-In    -----------------------     Notes       Accumulated
                                            Shares       Amount       Capital      Shares       Amount     Receivable      Deficit
                                            ------       ------       -------      ------       ------     ----------      -------

<S>                                       <C>           <C>          <C>           <C>        <C>          <C>           <C>       
Balance, May 31, 1998                      2,161,357        2,162    7,566,484       27,250   $ (103,440)            0   (7,876,514)

Beneficial conversion feature on common
   stock issued for reduction in amounts
   due related party                       1,247,630        1,248    1,067,987      


Beneficial conversion feature on issuance
   of convertible notes payable              819,530          820      204,062      


Net Loss                                                                                                                   (923,284)

Balance, August 31, 1998                   4,228,517        4,230    8,838,534       27,250   $ (103,440)            0   (8,799,799)
                                          ==========   ==========   ==========   ==========   ==========    ==========   ==========



</TABLE>

<PAGE>


                                   SIGNATURES

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



                                                   Imagica Entertainment, Inc.
                                                   -----------------------------
                                                   (Registrant)


Date:  March 16, 1999                              /s/ Braxton Jones
                                                   -----------------------------
                                                   (Signature)
                                                   Braxton Jones
                                                   President