<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 September 30, 1997.
                                       or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange
    Act of 1934, for the Transition Period from ________ to ________

Commission file number 1-9748


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

Delaware                                                    23-2359277
------------------------------------------------------------------------------
(State or other juridiction 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 September 30, 1997, there were 72,008,051 shares of common
stock outstanding.


<PAGE>

                         PART 1. FINANCIAL INFORMATION

                       American Film Technologies, Inc.
                     Condensed Consolidated Balance Sheets


<TABLE>
<CAPTION>
                                                                   September 30,
                                                                       1997          June 30,
Assets                                                              (unaudited)        1997
                                                                   ------------    ------------
<S>                                                                <C>             <C>         
Current Assets:
  Cash                                                             $     95,212    $    159,730
  Other current assets                                                  184,044         122,787
                                                                   ------------    ------------
Total current assets                                                    279,256         282,517

Equipment and software, at cost, net                                    129,325         350,754
Film library, net                                                        71,220         187,500
                                                                   ------------    ------------

                                                                   $    479,801    $    820,771
                                                                   ============    ============

Liabilities and stockholders' equity/(deficit):
Current Liabilities:
  Notes payable:                                                              0         405,307
     Other loans                                                         12,300          35,274
  Accounts payable and accrued expenses                                 352,925         549,869
  Accrued compensation                                                  134,276         134,580
                                                                   ------------    ------------
Total current liabilities                                               499,501       1,125,030

Long-term notes payable                                               1,721,228       1,250,213
Stock options & subscriptions subject to repurchase                           0         620,000
                                                                   ------------    ------------
Total liabilities                                                     2,220,729       2,995,243

Stockholders' equity/(deficit):
Common stock, $.002 par value:
  Authorized shares - 225,000,000: issued and outstanding shares
72,008,051 and 69,567,310 at September 30, 1997
and  June 30, 1997  respectively                                        147,084         147,402
Capital in excess of par value                                       15,808,186      15,879,186
Deferred compensation                                                (1,342,000)     (1,342,000)
Accumulated deficit                                                 (17,313,800)    (16,859,060)
                                                                   ------------    ------------
Total stockholders' equity/(deficit)                                 (2,700,530)     (2,174,472)
                                                                   ------------    ------------
                                                                   ($   479,801)   $    820,771
                                                                   ============    ============
</TABLE>

See accompanying notes 



                                       1
<PAGE>


                       American Film Technologies, Inc.
                Condensed Consolidated Statements of Operations
            For the Three months ended September 30, 1997 and 1996
                                  (Unaudited)





                                               September 30,   September 30,
                                                   1997            1996
                                               ------------    ------------

Revenues:                                      $          0    $          0
                                               ------------    ------------
                                                          0               0

Expenses:

  Compensation and benefits - administrative
    and officers                                     70,702          99,600
  Selling, general and administrative               243,581         216,764
  Interest expense                                      752          30,974
  Depreciation and amortization                     139,705         139,707
                                               ------------    ------------
                                                    454,740         487,045
                                               ------------    ------------

Net loss                                           (454,740)       (487,045)
                                               ============    ============


Net loss per share                                    (0.01)          (0.01)


Shares used in per share computation             72,008,051      69,789,532
                                               ------------    ------------


See accompanying notes.


                                       2

<PAGE>



                       American Film Technologies, Inc.
                Condensed Consolidated Statements of Cash Flows
            For the Three months ended September 30, 1997 and 1996
                                  (Unaudited)



<TABLE>
<CAPTION>

                                                          September 30,     September 30, 
CASH FLOWS FROM OPERATION ACTIVITIES:                          1997              1996 
                                                            ---------         ---------

<S>                                                         <C>               <C>       
Net (loss)                                                  ($454,740)        ($487,045)
Adjustments to reconcile net (loss) to net cash
  (used) by operating activities:
    Depreciation and amortization                             139,705           139,707
    Amortization of Deferred compensation                      60,000            60,000
    Changes in assets and liabilities:
        Other current assets                                  (61,257)           49,910
        Accounts payable and accrued expenses                (196,944)          (12,165)
        Accrued compensation                                        0            (6,731)
                                                            ---------         ---------
Net cash (used) by operating activities                      (556,647)         (256,324)



Cash Flows From Financing Activities:
    Principal payments on notes payable - other               405,307           (19,057)
    Proceeds from  sale of common stock                          --             200,000
                                                            ---------         ---------
Net cash provided by financing activities                     405,307           180,943

Net increase/(decrease) in cash                               (64,518)          (75,381)
Cash, beginning of period                                     159,730           338,669
                                                            ---------         ---------
Cash, end of period                                         $  95,212         $ 263,288

Supplemental disclosures of cash flow information:
  Cash paid during the period for interest                  $     752         $   4,708

  Reduction of Long term debt written down against
    Reorganization value in excess of identifiable assets                     $  13,176
</TABLE>

See accompanying notes.





                                       3


<PAGE>

                       AMERICAN FILM TECHNOLOGIES, INC.
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                        SEPTEMBER 30, 1997 (UNAUDITED)

1.  Reorganization Under Chapter 11

H. J. Meyers Agreement
The Company agreed to grant a one-time demand and piggy back registration
right. For a period of two years from the effective date, (upon demand by at
least 25% of the new stockholders) the new stockholders can demand the Company
file a registration statement with the SEC covering the reoffer and resale of
its shares (up to 38,982,508). Notwithstanding the foregoing, if at any time
prior to exercise of the demand registration right the Company receives a
Letter of Intent from an underwriter for a public equity offering of at least
$5,000,000 of the Company's securities, then the demand registration right
shall terminate. On March 28, 1996, the Company entered into a letter of
intent with H. J. 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 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.

The new stockholders also have a right to register their shares in any
offering of the Company stock (a "piggy-back" right). The amount of stock the
new shareholders may register and sell is subject to pro-rata reduction or
elimination at the sole discretion of the underwriter. The existence of these
rights could adversely impact the future price of the common stock or the
ability of the Company to raise additional equity capital.

To enable the Company to fund certain obligations prior to the effective date
of the Plan, on July 28, 1995 Meyers arranged a $500,000 bridge loan to the
Company with interest at 8% plus common stock at the rate of one half share
for every dollar of bridge loan. The loans were convertible into common stock
at the same rate as the private placement to the accredited investors. On the
effective date, $300,000 of the bridge loan was converted into the Company's
common stock and the remaining $200,000 was repaid. The $500,000 bridge loan
is included in Class 4 - Secured Claims mentioned above.
  
                                      4

<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. Reorganization value in
excess of identifiable assets is being amortized over twenty years.

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 September 30, 1997 and 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.

                                      5

<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. For a detailed discussion of the
bankruptcy proceedings, see Note 1 in the Notes To Condensed Consolidated
Financial Statements.

         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.

         Since emerging from bankruptcy, the Company has actively pursued new
product development and opportunities, as well as strategic alliances,
partners and other sources of financing. Related to those efforts, during the
quarter ended September 30, 1996 the Company issued 1,333,334 shares of its
Common Stock for an aggregate cash purchase price of $200,000. No shares were
issued during the quarter ended September 30, 1997.

                                      6
<PAGE>




         The Company is in discussions with other potential investors
regarding the purchase of equity securities or other investments in the
Company, however, there can be no assurance that any transaction can be
negotiated or, if negotiated, that such a transaction can be consummated.

         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.

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 ending September 30, 1997 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 September 30, 1997 the Company recorded net
interest expense of approximately $1,000 as compared to $31,000 for the period
ended September 30, 1996.

         For the quarters ended September 30, 1997 and 1996 the Company
recorded compensation and benefits for its administration and officers of
approximately $70,702 and $99,600 respectively.

         For the quarters ended September 30, 1997 and 1996, the Company
recorded selling, general and administrative expenses of approximately
$243,581 and $216,764 respectively.

                                      7
<PAGE>


         For the quarters ended September 30, 1997 and 1996, the Company
recorded depreciation and amortization expense of approximately $139,705 and
$139,707 respectively. Depreciation expense for the period ended September 30,
1996 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 quarters ended September 30, 1997 and 1996, the Company had a
net loss of approximately $454,740 and $487,045 respectively, or $0.01 cent
per share for each period.

Liquidity and Capital Resources.

          In connection with the Plan, the Company completed a private
placement of $3.46 million. During the fiscal year ended June 30, 1996, the
Company entered into a stock option agreement with Gerald Wetzler, its
Chairman and CEO, whereby Mr. Wetzler purchased for a fee of $200,000 (which
was deemed fair value) an option to acquire the Company's common stock, or in
the alternative, preferred stock convertible into common stock.

         During the quarter ended September 30, 1996, the Company issued
1,333,334 shares of its Common Stock for an aggregate cash purchase price of
$200,000. During the quarter ended September 30, 1997 the Company issued no
stock.

         The Company believes that the funds received subsequent to the
quarter ended September 30, 1997 will be sufficient to last through February,
1998. The Company is in discussions with other potential investors regarding
the purchase of convertible debentures or other investments in the Company,
however, there can be no assurance that any transaction can be negotiated or,
if negotiated, that such a transaction can be consummated.

                          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 response to the
complaint is planned and the response should be issued on or before February
28, 1998.

                                      8

<PAGE>

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. 

Item 3.  Defaults Upon Senior Securities

         None.

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

         None.

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 it reorganization value,
which approximates it 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.

                                      9

<PAGE>






                          PART II : OTHER INFORMATION


Item 6.  Exhibits and Reports on Form 8-K

                  (a)      Exhibits

                           The following exhibits are filed with this report:

                           4.1      Senior Secured Convertible Promissory
                                    Note, dated as of October 14, 1997, issued
                                    to Gerald M. Wetzler by the Company.

                           10.1     Senior Secured Note Purchase Agreement,
                                    dated as of October 14, 1997, between
                                    American Film Technologies, Inc., on the
                                    one hand, and York Capital Management,
                                    L.P., Neil Flanzraich, Gerald M. Wetzler,
                                    Robert L. Frome, Robert Eide Family Trust,
                                    and Howard M. Lorder Irrevocable Trust, on
                                    the other hand.

                           10.2     Security Agreement, dated as of October
                                    14, 1997, between American Film
                                    Technologies, Inc., on the one hand, and
                                    York Capital Management, L.P., Neil
                                    Flanzraich, Gerald M. Wetzler, Robert L.
                                    Frome, Robert Eide Family Trust, and
                                    Howard M. Lorder Irrevocable Trust, on the
                                    other hand.

                  (b)      Reports on Form 8-K.

                           None.


<PAGE>



                                  Signatures

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

AMERICAN FILM TECHNOLOGIES, INC.



Date: February 24, 1998           By: /s/  Gerald M. Wetzler,
     --------------------            -------------------------
                                          Gerald M. Wetzler,
                                          Chairman, Chief Executive Officer and
                                          Acting Chief Financial and Accounting
                                          Officer