<PAGE>

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


                                    Form 10-Q


(X)      Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
         Exchange Act of 1934, for the Quarter Ended December 31, 1997.

( )      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 1-9748

                        AMERICAN FILM TECHNOLOGIES, INC.
               ---------------------------------------------------
               (Exact name of registrant as specified its charter)


Delaware                                                            23-2359277
-------------------------------------------------------------------------------
(State or other jurisdiction of                    (IRS Employer Identification
incorporation or organization)                                Number)

                 4105 Sorrento Valley Blvd., San Diego, CA 92121
                 -----------------------------------------------
                    (Address of principal executive offices)

Registrant's telephone number including area code: (619) 623-0830

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or 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 REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS. Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court.  Yes       No   X
                                                   -----   -------

         As of December 30, 1997, there were 73,700,576 shares of common stock
outstanding.
<PAGE>

                          PART 1. FINANCIAL INFORMATION

                        American Film Technologies, Inc.
                      Condensed Consolidated Balance Sheets

<TABLE>
<CAPTION>
                                                                     December 31,            June 30,
                                                                         1997                  1997
                                                                     ------------         ------------
Assets                                                               (unaudited)          (unaudited)

<S>                                                                  <C>                  <C>
Current Assets:
  Cash                                                                $    51,578          $   159,730
  Other current assets                                                     90,344              122,787
                                                                      -----------          -----------
Total current assets                                                      141,922              282,517

Equipment and software, at cost, net                                      327,442              350,754
Film library, net                                                         112,500              187,500
                                                                      -----------          -----------

                                                                      $   581,864          $   820,771
                                                                      ===========          ===========
Liabilities and stockholders' equity:
Current Liabilities:
  Notes payable:
     Current portion of long-term notes payable                       $   405,307          $   405,307
     Other loans                                                                0               35,274
  Accounts payable and accrued expenses                                   382,093              549,869
  Accrued compensation                                                    137,280              134,580
                                                                      -----------          -----------
Total current liabilities                                                 924,680            1,125,030

Long-term notes payable                                                 1,580,954            1,250,213
Stock options & subscription subject to repurchase                        620,000              620,000
                                                                      -----------          -----------
Total liabilities                                                       3,125,634            2,995,243

Stockholders' equity:
Common stock, $.002 par value:
     Authorized shares - 225,000,000 at December 31, 1997 and
     June 30, 1997: issued and outstanding shares 73,700,576
     at December 31, 1997 and 73,700,644 at June 30, 1997                 147,402              147,402
Capital in excess of par value                                         16,051,185           15,879,186
Deferred compensation                                                  (1,222,000)          (1,342,000)
Accumulated deficit                                                   (17,520,357)         (16,859,060)
                                                                      -----------          -----------
Total stockholders' equity                                             (2,543,770)          (2,174,472)
                                                                      -----------          -----------
                                                                      $   581,864          $   820,771
                                                                      ===========          ===========
</TABLE>
See accompanying notes.

                                       1
<PAGE>

                        American Film Technologies, Inc.
                 Condensed Consolidated Statements of Operations

              For the Three months ended December 31. 1997 and 1996

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                            December 31,    December 31,
                                                               1997            1996
                                                            ------------   --------------
<S>                                                         <C>              <C>
Revenues:                                                             $0               $0
                                                            ------------   --------------
                                                                       0                0

Expenses:

  Compensation and benefits - administrative
    and officers                                                  83,105          100,818
  Selling, general and administrative                            162,244          219,076
  Interest expense                                                 2,601           30,774
  Depreciation and amortization                                   49,062          139,707
  Reorganization items:
    Professional fees                                                                   0
    U.S. Trustee fees                                                                   0
                                                            ------------     ------------
                                                                 297,012          490,375
                                                            -----------------------------

Net loss                                                        (297,012)        (490,375)
                                                            =============================


Net loss per share                                                 (0.00)           (0.01)


Shares used in per share computation                          72,008,051       72,567,311
                                                            -----------------------------
</TABLE>
See accompanying notes.

                                       2
<PAGE>

                        American Film Technologies, Inc.
                 Condensed Consolidated Statements of Cash Flows
              For the Three months ended December 31, 1997 and 1996
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                 December 31       December 31
CASH FLOWS FROM OPERATION ACTIVITIES:                                1997              1996
                                                                -------------------------------
<S>                                                                <C>               <C>       
Net (loss)                                                         ($297,012)        ($490,372)
Adjustments to reconcile net (loss) to net cash
  (used) by operating activities:
    Depreciation and amortization                                     49,062           139,707
    Amortization of Deferred compensation                             60,000            60,000
    Changes in assets and liabilities:
        Restricted cash                                                    -                 -
        Other current assets                                           9,600          (179,912)
        Accounts payable and accrued expenses                       (150,945)          (18,439)
        Accrued compensation                                           1,500           (63,123)
                                                                -------------------------------
Net cash (used) by operating activities                             (327,795)         (552,139)

Cash Flows From Investing Activities:
                                                                           -                 -
                                                                -------------------------------
Net cash provided (used) by investing activities                           0                 0

Cash Flows From Financing Activities:
    Principal payments on notes payable - bank                             -                 -
    Principal payments on notes payable - other                      (12,300)          160,876
    Proceeds from notes payable - other                              296,461  
    Proceeds from sale of common stock                                     -           375,000
    Proceeds from common stock subscriptions                               -                 -
                                                                -------------------------------
Net cash provided by financing activities                            284,161           535,876

Net increase/(decrease) in cash                                      (43,634)          (16,263)
Cash, beginning of period                                             95,212           263,288
                                                                -------------------------------
Cash, end of period                                                  $51,578          $247,025

Supplemental disclosures of cash flow information:
  Cash paid during the period for interest                            $2,601           $61,748

  Reduction of Long term debt written down against
    Reorganization value in excess of identifiable assets                              $78,781
</TABLE>
See accompanying notes.

                                       3
<PAGE>

                        American Film Technologies, Inc.
                 Condensed Consolidated Statements of Operations

               For the Six months ended December 31. 1997 and 1996

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                   December 31,         December 31,
                                                                      1997                 1996
                                                               ------------------     --------------
<S>                                                             <C>                    <C>
Revenues:                                                                     $0                 $0
                                                               ------------------     --------------
                                                                               0                  0

Expenses:

  Compensation and benefits - administrative
    and officers                                                         153,807            200,418
  Selling, general and administrative                                    405,825            435,838
  Interest expense                                                         3,353             61,748
  Depreciation and amortization                                           98,312            279,414
  Reorganization items:
    Professional fees                                                                             0
    U.S. Trustee fees                                                                             0
                                                               ------------------     --------------
                                                                         661,297            977,418
                                                               -------------------------------------

Net loss                                                                (661,297)          (977,418)
                                                               =====================================


Net loss per share                                                         (0.01)             (0.01)


Shares used in per share computation                                  72,008,051         71,178,421
                                                               -------------------------------------
</TABLE>
See accompanying notes.

                                       4
<PAGE>

                        American Film Technologies, Inc.
                 Condensed Consolidated Statements of Cash Flows
               For the Six months ended December 31, 1997 and 1996
                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                    December 31          December 31
CASH FLOWS FROM OPERATION ACTIVITIES:                                  1997                 1996
                                                                   ----------------------------------
<S>                                                                  <C>                  <C>       
Net (loss)                                                            ($661,297)           ($977,417)
Adjustments to reconcile net (loss) to net cash
  (used) by operating activities:
    Depreciation and amortization                                        98,312              279,414
    Amortization of Deferred compensation                               120,000              120,000
    Changes in assets and liabilities:
        Restricted cash                                                       -                    -
        Other current assets                                             32,443             (130,002)
        Accounts payable and accrued expenses                          (167,776)             (30,604)
        Accrued compensation                                              2,700              (69,854)
                                                                   ----------------------------------
Net cash (used) by operating activities                                (575,618)            (808,463)

Cash Flows From Investing Activities:
                                                                              -                    -
                                                                   ----------------------------------
Net cash provided (used) by investing activities                              0                    0

Cash Flows From Financing Activities:
    Principal payments on notes payable - bank                                -                    -
    Principal payments on notes payable - other                            (994)             (65,025)
    Proceeds from notes payable - other                                 296,461              206,844
    Proceeds from sale of common stock                                  171,999              575,000
    Proceeds from common stock subscriptions                                  -                    -
                                                                   ----------------------------------
Net cash provided by financing activities                               467,466              716,819

Net increase/(decrease) in cash                                        (108,152)             (91,644)
Cash, beginning of period                                               159,730              338,669
                                                                   ----------------------------------
Cash, end of period                                                     $51,578             $247,025

Supplemental disclosures of cash flow information:
  Cash paid during the period for interest                               $3,353              $61,748

  Reduction of Long term debt written down against
    Reorganization value in excess of identifiable assets                                    $78,781
</TABLE>

See accompanying notes.

                                       5
<PAGE>

                        AMERICAN FILM TECHNOLOGIES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                          DECEMBER 31, 1997 (UNAUDITED)

1.  Reorganization Under Chapter 11

On October 15, 1993, the Company filed for protection from its creditors under
Chapter 11 of the United States Bankruptcy Code. The Chapter 11 filing was the
result of continuing defaults related to the Company's loans, recurring 
operating losses and cash flow problems. The filing of a Chapter 11 petition 
operates as a stay of, among other actions, the commencement or continuation of
a judicial administrative or other action or proceeding against a debtor that
was or could have been initiated before the commencement of a Chapter 11 case or
the enforcement against the debtor or against the property of the estate or a 
judgement obtained before the commencement of the case. Under Chapter 11,
substantially all prepetition liabilities of debtors are subject to settlement
under a plan of reorganization. The consummation of a plan of reorganization is 
dependent upon the satisfaction of numerous conditions, including, among other
things, the acceptance by several classes of interests and confirmation by the 
Bankruptcy Court.

On October 6, 1995, the Company's Plan of Reorganization (the "Plan") was 
approved by the Bankruptcy Court and became effective October 17, 1995.

                                       6
<PAGE>

2. Summary of Significant Accounting Policies

The Company's principal business is the production of color versions of motion
pictures and television programs originally produced in black-and-white. The
Company has produced colorized films for its own library and owns the copyrights
on eleven such films. These films are available for sale and or distribution.

Consolidation

The consolidated financial statements include the accounts of Midtech de Mexico,
S.A. de C.V., the Company's wholly-owned Mexican subsidiary. All intercompany
transactions have been eliminated in consolidation.

Depreciation and Amortization

Depreciation and amortization are provided over the estimated useful lives of
the underlying assets using primarily the straight line method over a five-year
period. Leasehold improvements are amortized over the life of the lease or the
estimated useful life of the assets. 

Film Library

Costs incurred in creating the Film Library include direct salaries and related
benefits of production personnel charged to specific coloring projects, an
allocation of overhead and costs of materials used in the coloring process.
Costs are charged to Film Library using the same system the Company maintains
for calculating cost of coloring films for customers. The Film Library is being
amortized using the straight line method over a three year period.

Loss per Share

Loss per share has been calculated by dividing the net loss applicable to common
stock by the weighted average number of common stock outstanding for the periods
indicated. For the quarters ended December 31, 1997 and December 31, 1996, no
exercise of stock options was assumed because the exercise of such equivalents
would be anti-dilutive.

Stock Options

The Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" (APB 25) and related interpretations
in accounting for its employee stock options.

                                       7
<PAGE>

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

         This discussion should be read in conjunction with the consolidated
financial statements, related notes and management's discussion and analysis of
financial conditions and results of operations included in the Company's annual
report on Form 10-K for the year ended June 30, 1997.

Overview and Reorganization.

         On October 15, 1993, the Company filed for protection under Chapter 11
of the Bankruptcy Code in the Bankruptcy Court for the District of Delaware. On
October 6, 1995, the Company's Plan of Reorganization (the "Plan") was approved
by the Bankruptcy Court and became effective October 17, 1995 (the "Effective
Date"). In connection with the Plan, the Company raised $3.46 million in new
capital in exchange for the issuance of common stock representing approximately
56% if its total outstanding common stock. The Company emerged from bankruptcy
under Fresh Start Reporting as promulgated by Statement of Position No. 90-7,
Financial Reporting by Entities in Reorganization under the Bankruptcy Code.

         Success of the Company will, among other things, depend upon the
resumption of production in Mexico. That will require reemployment of selected
former Mexican employees. Since the Mexican operation was suspended in October
1993, the Company believes most of the former employees have found other jobs.
If Midtech is unable to rehire certain former employees, it will have to recruit
and train a new work force. That would delay the resumption of production and
increase the cost of production. As such, it could have a materially adverse
effect on the Company. Although the Company expects to benefit from the
devaluation of the peso, there is no assurance of how long those expected
benefits will last.

         On March 28, 1996, the Company entered into a letter of intent with
Meyers (the "Meyers Letter of Intent") under which Meyers confirmed its interest
in underwriting on a firm commitment basis a public offering of shares of the
Company's common stock. The Meyers Letter of Intent contemplates the negotiation
and execution of formal agreements relating to the proposed offering and
provides, among other things, that the Company will apply for listing on the
NASDAQ Small Cap Market and use its best reasonable efforts to maintain such
listing for not less than five years; that the Company, if requested, obtain
"key man" life insurance on the lives of designated executive officers of the
Company; and that the Company shall have entered into a joint venture, business
alliance or business combination with an owner of content on terms acceptable to
Meyers.

                                       8
<PAGE>

         The Company is engaged in discussions with potential strategic partners
and investors in connection with their providing funding sufficient to enable
the Company to become operational again. There can be no assurance as to when,
if ever, the Company will be able to negotiate a transaction for funding or, if
negotiated, that such a transaction can be consummated.

Results of Operations.

         The financial results of the Company for each of the periods addressed
by this report do not reflect the earnings capacity of the Company. The
financial data for the period ended December 31, 1997 and for the period
September 30, 1996 to December 31, 1996 reflects the adoption of Fresh Start
Accounting. As such, the financial data is considered that of a Successor
Company and is not comparable to prior periods.

         Since the filing under Chapter 11 in October, 1993, the Company has not
generated any income from film colorization, animation or fee for service
orders. For the quarter ended December 31, 1997 the Company recorded net
interest expense of approximately $2,601 as compared to $30,774 for the period
September 30, 1996 to December 31, 1996. For the six month period ended December
31, 1997, the Company recorded net interest expense of $3,353.

         For the quarter ended December 31, 1997, the Company recorded
compensation and benefits for its administration and officers of approximately
$83,105 as compared to $100,818 for the period September 30, 1996 to December
31, 1996. For the six month period ended December 31, 1997, compensation and
benefits for its administration and officers totaled approximately $153,807
including $120,000 of amortization expense related to the deferred compensation
under Gerald Wetzler's compensation agreement.

         For the quarter ended December 31, 1997, the Company recorded selling,
general and administrative expenses of approximately $162,244 as compared to
$219,076 for the period September 30, 1996 to December 31, 1996. For the six
month period ended December 31, 1997, selling, general and administrative
expenses totaled approximately $405,825.

         For the quarter ended December 31, 1997, the Company recorded
depreciation and amortization expense of approximately $49,062 as compared to
$139,707 for the period September 30, 1996 to December 31, 1996. For the six
month period ended December 31, 1997, depreciation and amortization expense
totaled approximately $98,312. Depreciation and amortization expense for these
periods is based on Fresh Start Accounting, which among other things, includes a
restatement of all assets and liabilities to approximate their fair value as of
the date of reorganization.

         For the quarter ended December 31, 1997 the Company had a net loss of
approximately $297,000, or less than $0.01 per share, as compared to a net loss
of $490,375 or $0.01 per share for the period September 30, 1996 to December 31,
1996. For the six month period ended December 31, 1997, the Company had a net
loss of approximately $661,000, or $0.01 per share.

                                       9
<PAGE>


Liquidity and Capital Resources
         On or after October 10, 1997, AFT received commitments from a new group
of Lenders, including Gerald Wetzler, the Company's Chairman of the Board and
Chief Executive Officer, pursuant to which such investors committed to provide
at least $710,000, up to an aggregate amount of $1,000,000 of new financing to
AFT through the purchase of two-year Senior Secured Convertible Notes bearing no
interest and convertible to Common Stock of the Company at a rate of three cents
($.03) per share (the "October 1997 Financing"). The initial phase of the
funding of this offering aggregating to $500,000 was completed on October 14,
1997. The proceeds of the October 1997 Financing were principally utilized to
make the principal and interest payments due on the Company's Bankruptcy Notes
and to fund the Company's working capital requirements.

         Since December the Company has sold another $157,000 in senior secured
debentures. Of this amount, $100,000 was purchased by Mr. Wetzler. The Company
expects the current funding to be sufficient to June, 1998.

         The Company is engaged in discussions with potential strategic partners
and investors in connection with their providing funding sufficient to enable
the Company to become operational again. There can be no assurance as to when,
if ever, the Company will be able to negotiate a transaction for funding or, if
negotiated, that such a transaction can be consummated.

                                       10
<PAGE>

                           PART II : OTHER INFORMATION

Item 1. Legal Proceedings

         Subsequent to the end of the first quarter, in December, 1997,
plaintiff, Robert Frankel, the owner of approximately 0.1% of the outstanding
stock of American Film Technologies, Inc. ("AFT"), brought an action in the
Monroe County Supreme Court of the State of New York against AFT and its then
current Board of Directors. The plaintiff alleges that the board of AFT
improperly allowed the Chairman and CEO, Gerald Wetzler, to purchase options and
to receive convertible notes as security for loans made to AFT. The complaint
seeks to have Mr. Wetzler's options and convertible notes voided, an accounting
of all transactions between Gerald Wetzler and AFT and other damages in an
unspecified amount. AFT and the Board have retained the law firm of Philips,
Lytle, Hitchcock, Blaine & Huber LLP, Rochester, New York, to defend their
interests in the action and intend to aggressively seek the dismissal of the
claim. AFT does not believe the claim is viable as it fails to state a claim
pursuant to New York or Delaware law. A motion to dismiss was filed on February
28, 1998.

Item 2.  Changes In Securities

         Sale of Unregistered Securities - In September 1996, the Company issued
1,333,334 shares of its Common Stock (the "Shares") in a private placement to
two investors for an aggregate purchase price of $200,000. The Shares were
issued without the benefit of an effective registration statement under the
Securities Act of 1933, as amended (the "Act") in reliance upon the private
placement exemptions under Section 4(2) of the Act. During the quarter ended
December 31, 1996, the Company issued in a private placement an additional
2,500,000 shares of Common Stock to two investors for an aggregate purchase
price of $375,000. These sales were also consummated without the benefit of an
effective registration statement under the Act based upon the private placement
exemptions issued under Section 4(2) of the Act.

Item 3.  Defaults Upon Senior Securities

         None.

Item 4.  Submission of Matters to a Vote of Security Holders

         None.

                                       11
<PAGE>

Item 5.  Other Information

         As a result of the Plan, as of the Effective Date of the Plan, the
Company adopted "fresh start" accounting, which reflects the payment or
discharge of certain debts in accordance with the Plan. "Fresh start accounting"
allows a reorganized entity to reflect its reorganization value, which
approximates its fair value at the date of reorganization. In addition, the
accumulated deficit of the Company is eliminated and its capital structure is
recast in conformity with the Plan.

Item 6.  Exhibits and Reports on Form 8-K
         None



















                                       12
<PAGE>

                                   Signatures

In accordance with the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed n its behalf by the
undersigned, thereunto duly authorized.

AMERICAN FILM TECHNOLOGIES, INC.




Date:  April 24, 1998                  By: /s/ Gerald M. Wetzler
                                           -----------------------------------
                                           Gerald M. Wetzler
                                           Chairman, Chief Executive Officer