UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                          WASHINGTON, D.C.   20549

                                 FORM 10-Q

(X)  QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
     ACT OF 1934

     For the quarterly period ended: June 30, 1998
                                     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:      0-13121
                             -------

                          HMG Worldwide Corporation
                          -------------------------
             (Exact name of registrant as specified in its charter)

          Delaware                                               13-3402432
-------------------------------------                        -------------------
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                               Identification No.)

 475 Tenth Avenue, New York, New York                              10018
 ------------------------------------                        -------------------
(Address of principal executive offices)                         (Zip Code)

Registrant's telephone number, including area code  (212) 736-2300
                                                    --------------

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 for such  shorter  period that the  registrant  was
required  to file  such  reports)  and  (2)  has  been  subject  to such  filing
requirements for the past 90 days.

                               Yes  X       No 
                                  -----       -----

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

Indicate  by check mark  whether  the  registrant  has filed all  documents  and
reports  required  to be filed by  Sections  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  X       No                             
                                  -----       -----  

                      APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

           Class                                  Outstanding at August 12, 1998
----------------------------                      ------------------------------
Common Stock, $.01 par value                               9,147,205








                                       1

<PAGE>



                            Part I. Financial Information
                                       Item 1.

                       HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
                              CONSOLIDATED BALANCE SHEETS
                           (in thousands, except share data)

                                                                   December 31, 
                                          June 30, 1998               1997
                                          -------------           --------------
                                           (unaudited)
                               ASSETS

Current assets:
  Cash and cash equivalents                 $ 6,352                  $ 6,439
  Accounts receivable - less
   allowance for doubtful
   accounts of $195 and $273                 12,427                    8,445
  Inventory                                  12,316                    6,671
  Prepaid expenses                              513                      414
  Other current assets                          250                      317
                                            -------                  -------
    Total current assets                     31,858                   22,286

Property and equipment - net                  4,821                    4,682
Excess of cost over fair market
   value of assets acquired,
   less accumulated amortization
   of $1,819 and $1,615                       6,340                    6,544
Other assets                                    135                      133
                                            -------                  -------
                                            $43,154                  $33,645
                                            =======                  =======

               LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current maturities of long-term
   obligations                              $15,410                  $10,942
  Accounts payable                           11,274                    8,729
  Accrued employee compensation 
   and benefits                               1,432                    1,418
  Deferred revenue                            2,229                      604
  Accrued expenses                              540                      673
  Other current liabilities                     295                      346
                                            -------                  -------
     Total current liabilities               31,180                   22,712

Pension obligation                            1,125                    1,175
Convertible debentures                        2,200                    2,200
Term loans                                      614                      678
Other long-term liabilities                     412                      410
                                            -------                  -------
                                             35,531                   27,175
                                            -------                  -------
Stockholders' equity:
  Common stock, par value $.01;
   50,000,000 shares
   authorized; 9,047,205 and 8,924,150
   issued and outstanding                        90                       89
  Additional paid-in capital                 34,798                   34,645
  Foreign currency translation 
   adjustments                                   (3)
  Accumulated deficit                       (27,262)                 (28,264)
                                            -------                  -------
                                              7,623                    6,470
                                            -------                  -------
                                            $43,154                  $33,645
                                            =======                  =======




             See accompanying notes to consolidated financial statements.




                                       2

<PAGE>


<TABLE>

<CAPTION>


                                             HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
                                               CONSOLIDATED STATEMENTS OF OPERATIONS
                                                 (in thousands, except share data)
                                                           (unaudited)



                                               Three Months Ended June 30,                 Six Months Ended June 30,
                                               ---------------------------                 -------------------------
                                                  1998            1997                         1998         1997
                                                  ----            ----                         ----         ----
<S>                                            <C>             <C>                          <C>          <C>

Net revenues                                   $16,549         $12,650                      $29,415      $22,850 

Cost of revenues                                11,982           9,444                       20,874       16,908
                                               -------         -------                      -------      -------

 Gross profit                                    4,567           3,206                        8,541        5,942

Selling, general and
  administrative expenses                        3,462           2,904                        6,830        5,730
                                               -------         -------                      -------      -------

 Income from operations                          1,105             302                        1,711          212

Interest income                                     71              74                          148          147

Interest expense                                  (412)           (268)                        (782)        (488)

Other income                                         -               -                            -          267
                                               -------         -------                      -------      -------

 Income before provision
  for income taxes                                 764             108                        1,077          138

Provision for income taxes                         (64)             (5)                         (75)         (10)
                                               -------         -------                      -------      -------

 Net income                                    $   700         $   103                      $ 1,002      $   128
                                               =======         =======                      =======      =======

Basic earnings per share
  Net income per common and
   common equivalent shares                    $  0.08         $  0.01                      $  0.11      $  0.01
                                               =======         =======                      =======      =======

  Weighted average number of common
   and common equivalent
   shares outstanding                        8,964,718       8,531,183                    8,944,659    8,457,469
                                             =========       =========                    =========    =========

Diluted earnings per share
  Net income per common and
   common equivalent shares
   and assumed conversions                     $  0.07                                      $  0.10
                                               =======                                      =======

  Weighted average number of common
   and common equivalent shares
   and assumed conversions                  11,446,256                                   11,290,156

                                            ==========                                   ==========


</TABLE>

                    See accompanying notes to consolidated financial statements.





                                             3

<PAGE>




                       HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
                         CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    (in thousands)
                                      (unaudited)



                                                       Six Months Ended June 30,
                                                       -------------------------
                                                        1998              1997
                                                        ----              ----


Cash flows from operating activities:
  Cash received from customers                       $27,054           $19,828
  Interest received                                      166               147
  Cash paid to suppliers                             (25,745)          (16,756)
  Cash paid to employees                              (4,771)           (5,514)
  Income taxes paid                                       (2)               (4)
  Interest paid                                         (782)             (488)
                                                     -------           -------
    Net cash used in operating
     activities                                       (4,080)           (2,787)
                                                     -------           -------

Cash flows from investing activities:
  Proceeds from the sale of
    an investment                                                          356
  Capital expenditures                                  (408)             (279)
                                                     -------           -------
    Net cash provided by (used in)
     investing activities                               (408)               77
                                                     -------           -------

Cash flows from financing activities:
  Net proceeds from the sale of common
    stock as part of a private placement                                   352
  Proceeds derived from a credit
    agreement, net                                     4,498             2,614
  Principal payments of
    outstanding debt obligations                         (94)             (288)
                                                     -------           -------
    Net cash provided by
     financing activities                              4,404             2,678
                                                     -------           -------

Effect of exchange rate changes                           (3)               (5)
                                                     -------           -------

Net decrease in cash and
  cash equivalents                                       (87)              (37)

Cash and cash equivalents
  at beginning of year                                 6,439             6,950
                                                     -------           -------

Cash and cash equivalents
  at June 30                                         $ 6,352           $ 6,913
                                                     =======           =======





             See accompanying notes to consolidated financial statements.





                                       4

<PAGE>




                       HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF CASH FLOWS - continued
                                    (in thousands)
                                      (unaudited)



                                                       Six Months Ended June 30,
                                                       -------------------------
                                                        1998              1997
                                                        ----              ----


Reconciliation of net income 
 to net cash used in
 operating activities:

Net income                                            $1,002            $  128

Adjustments to reconcile net 
 income to net cash used in 
 operating activities:

  Depreciation and amortization                          473               460
  Other income                                                            (267)

Decrease (increase) in assets:
  Accounts receivable                                 (3,982)           (2,977)
  Inventory                                           (5,645)              474
  Prepaid expenses                                       (99)              (73)
  Other assets                                            65                 7

Increase (decrease) in liabilities:
  Accounts payable                                     2,545               497
  Deferred revenue                                     1,625               (41)
  Accrued expenses                                      (133)             (845)
  Pension obligation                                     (50)             (150)
  Other liabilities                                      119                 -
                                                      ------            ------

Net cash used in operating
  activities                                         ($4,080)          ($2,787)
                                                      ======            ======

Non-cash financing activities:
 Common stock issued in connection
  with an employee benefit plan                       $  154            $  160
     









             See accompanying notes to consolidated financial statements.





                                       5

<PAGE>




                       HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
                       NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                       (unaudited)

Note 1 - Consolidated Financial Statements

     HMG  Worldwide   Corporation   (the  "Company")   conducts  its  operations
principally   through  four   operating   wholly-  owned   subsidiaries   being,
respectively,  HMG Worldwide  In-Store  Marketing,  Inc. ("HMG"),  HMG Intermark
Worldwide Manufacturing, Inc. ("HMG Intermark"), Display Depot, Inc. ("DDI") and
HMG  Griffith  Worldwide  In-  Store  Marketing,   Inc.  ("HMG  Griffith")  with
facilities in New York, Illinois, Pennsylvania and Toronto, Canada.

     The  Consolidated  Balance Sheet as of June 30, 1998, and the Consolidated
Statements  of  Operations  and Cash  Flows for the three  months and six months
ended June 30, 1998 and 1997,  have been prepared by the Company  without audit.
In the  opinion of  management,  all  adjustments  (which  include only normal
recurring  adjustments)  necessary  to present  fairly the  financial  position,
results  of  operations  and cash  flows at June  30,  1998 and for all  periods
presented have been made.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting  principles
have been condensed or omitted.  These consolidated  financial statements should
be read in  conjunction  with the  consolidated  financial  statements and notes
thereto   included  in  the  Company's   December  31,  1997  annual  report  to
shareholders.  The results of operations  for the period ended June 30, 1998 are
not necessarily indicative of the operating results for the full year.

Note 2 - Inventory

     Inventory  consisted  of the  following  components  at June  30,  1998 and
December 31, 1997.

                                             June 30,           December 31,
                                              1998                  1997
                                              ----                  ----
                                                    (in thousands)
     Finished goods                        $ 4,320                $1,210
     Work-in-process                         2,983                 1,015
     Raw materials                           5,013                 4,446
                                           -------               -------
                                           $12,316                $6,671
                                           =======                ======

Note 3 - Income Taxes

     At December 31, 1997, the Company had net operating loss  carryforwards  of
approximately $27.6 million which expire during the years 2001 through 2012.

     Components of income tax expense for the six months ended June 30, 1998 and
1997 are as follows:
 
                                               Six Months Ended June 30,
                                               -------------------------
                                              1998                  1997
                                              ----                  ----
                                                    (in thousands)
     State and local
       income taxes                            $75                   $10
                                               ===                   ===











                                       6

<PAGE>




                       HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - continued
                                     (unaudited)

Note 4 - Convertible Debentures

     Effective   September  30,  1997,  the  Company  issued  $2.2  million  10%
Convertible  Debentures due September 30, 2000 ("Debentures")  through a private
placement ("Private Placement"). The Debentures bear interest at the rate of 10%
per annum and are  convertible,  at the option of the  holder at any time,  into
shares of the Company's  Common Stock  ("Conversion  Shares"),  $0.01 par value,
based upon the conversion  price of $1.25 per share.  The Company may prepay the
Debentures,  on 30 days prior notice,  at such time as the average closing price
of the Common Stock  exceeds $1.75 per share for a 30 day period prior to notice
of such  prepayment  provided that the  Conversion  Shares have been  registered
under the  Securities  Act at the time of such  prepayment.  The  Debentures and
Conversion  Shares which may be acquired  upon the  conversion  have been issued
without  registration by reason of the private offering  exemption under Section
4(2) of the Securities Act and Rule 506 of Regulation D promulgated  thereunder.
Accordingly,  the Debentures and the Conversion  Shares may not be resold absent
registration  under the  Securities  Act or the  availability  of an  applicable
exemption from such registration.


Note 5 - Subsequent Event

     On August 12, 1998, the Company announced that it completed its acquisition
of the business of Schutz  International Inc.  ("Schutz"),  pursuant to an Asset
Purchase Agreement ("Purchase Agreement"). Pursuant to the terms of the Purchase
Agreement, the Company will pay approximately $3.5 million in deferred payments,
subject  to  adjustment,  and  issued  100,000  shares  of its  Common  Stock in
consideration for the acquired assets.  The Company's deferred payments commence
upon the second  anniversary of the Purchase  Agreement  after which the Company
will make 20 equal quarterly principal installments, plus accrued interest, over
five  years.  In  addition,  HMG has agreed to make  certain  future  contingent
payments based upon revenues generated by Schutz over the next three years.






























                                       7

<PAGE>




                       HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
                          MANAGEMENT'S DISCUSSION AND ANALYSIS
                    OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Recent Developments

     On August 12, 1998, the Company announced that it completed its acquisition
of the business of Schutz  International Inc.  ("Schutz"),  pursuant to an Asset
Purchase Agreement ("Purchase Agreement"). Pursuant to the terms of the Purchase
Agreement, the Company will pay approximately $3.5 million in deferred payments,
subject  to  adjustment,  and  issued  100,000  shares  of its  Common  Stock in
consideration for the acquired assets.  The Company's deferred payments commence
upon the second  anniversary of the Purchase  Agreement  after which the Company
will make 20 equal quarterly principal installments, plus accrued interest, over
five  years.  In  addition,  HMG has agreed to make  certain  future  contingent
payments  based upon  revenues  generated  by Schutz over the next three  years.
Schutz is anticipated to generate annualized  revenues of approximately  $18-$20
million, based upon Schutz's 1998 sales to date.

Three Months Ended June 30, 1998 as Compared to the
  Three Months Ended June 30, 1997

     Net revenues increased $3.9 million or 30.8% to $16.5 million for the three
months  ended June 30, 1998 as compared  to $12.6  million for the three  months
ended June 30, 1997.  The $3.9 million  increase in net revenues  from period to
period  was due  principally  to (i)  the  addition  of net  revenues  from  the
Company's new Toronto office of approximately  $893,000 and (ii) the shipment of
a new national  rollout of a  merchandising  system  developed by the Company of
approximately $3.2 million.

     Gross  profit for the three  months ended June 30, 1998 was $4.6 million as
compared to $3.2 million for the three months ended June 30, 1997.  The increase
in gross profit of $1.4 million was  principally a result of the increase in net
revenues  and an increase in gross  margin.  For the three months ended June 30,
1998 and 1997, the Company's gross margin was 27.6% and 25.3%, respectively. The
gross  margin  increase of 2.3% was due  principally  to the net effect of (i) a
favorable  production  revenue mix resulting in a 2.6% increase,  reflecting the
Company's  efforts of more  direct,  internal  production  of its  merchandising
systems,  lower  labor  costs and  increased  production  volume and  purchasing
efficiencies  and (ii)an  increase in factory  overhead  expenses  of 0.3%.  The
favorable  production  revenue mix was  principally the result of an increase in
the number of programs manufactured and assembled at the Company's  Pennsylvania
and  Brooklyn  facilities  and the  increased  operational  efficiencies  on the
specific programs shipped.

     Selling,  general and administrative expenses ("SG&A") for the three months
ended  June 30,  1998 was $3.4  million  as  compared  to $2.9  million  for the
comparable  period in 1997.  The  increase  in SG&A of  $558,000  from period to
period was  principally due to the addition of HMG Griffith SG&A of $302,000 and
increased spending in other general expenses of $256,000.

     For the three months ended June 30, 1998,  the Company  generated  interest
income of $71,000 as  compared to $74,000  for the three  months  ended June 30,
1997. The decrease was  principally  attributable to a decrease in cash and cash
equivalents  invested in interest-bearing  marketable  securities and commercial
paper from period and period.

     Interest  expense was  $412,000 for the three months ended June 30, 1998 as
compared to $268,000 for the three  months ended June 30, 1997.  The increase in
interest  expense was principally due to the increased  average  borrowings from
period to period.

     As a consequence of the foregoing factors, the Company generated net income
of $700,000,  or $0.08 basic  earnings per share for the three months ended June
30 1998 as compared to a net income of  $103,000,  or $0.01 basic  earnings  per
share, for the three months ended June 30, 1997.







                                       8

<PAGE>




                       HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
                         MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -continued

Six Months Ended June 30, 1998 as Compared to the
 Six Months Ended June 30, 1997

     Net revenues  increased  $6.6 million,  or 28.7%,  to $29.4 million for six
months ended June 30, 1998 as compared to $22.8 million for the six months ended
June 30, 1997.  The $6.6 million  increase in net revenues from period to period
was due  principally  to (i) the addition of net revenues from the Company's new
Toronto  office of  approximately  $1.8  million,  (ii) the shipment of four new
national  rollouts  of a  merchandising  system  developed  by  the  Company  of
approximately $4.4 million and (iii) a net increase in marketing expenditures of
the  Company's  clients  during  the  period.  Each  of the  four  new  national
merchandising  system  rollouts  were  new  merchandising  initiatives  with new
clients to the Company.

     Gross  profit for the six months  ended June 30,  1998 was $8.5  million as
compared to $5.9 million for the six months ended June 30, 1997. The increase in
gross  profit of $2.6  million was  principally  a result of the increase in net
revenues and an increase in gross margin. For the six months ended June 30, 1998
and 1997,  the  Company's  gross margin was 29.0% and 26.0%,  respectively.  The
gross  margin  increase of 3.0% was due  principally  to a favorable  production
revenue mix resulting in a 3.3% increase,  reflecting  the Company's  efforts of
more direct, internal production of its merchandising systems, lower labor costs
and  increased  production  volume and  purchasing  efficiencies.  The favorable
production  revenue mix was  principally the result of an increase in the number
of  programs  manufactured  and  assembled  at the  Company's  Pennsylvania  and
Brooklyn facilities and the increased  operational  efficiencies on the specific
programs shipped.

     Selling,  general and  administrative  expenses ("SG&A") for the six months
ended  June 30,  1998 was $6.8  million  as  compared  to $5.7  million  for the
comparable  period in 1997.  The increase in SG&A of $1.1 million from period to
period was  principally due to the addition of HMG Griffith SG&A of $502,000 and
increased spending in other general expenses of $598,000.

     For the six months  ended June 30,  1998,  the Company  generated  interest
income of $148,000 as  compared  to $147,000  for the six months  ended June 30,
1997. The increase was principally  attributable to an increase in cash and cash
equivalents  invested in interest-bearing  marketable  securities and commercial
paper from period and period.

     Interest  expense was  $782,000  for the six months  ended June 30, 1998 as
compared to $488,000  for the six months  ended June 30,  1997.  The increase in
interest  expense was principally due to the increased  average  borrowings from
period to period.

     As a consequence of the foregoing factors, the Company generated net income
of $1.0 million or $0.11 basic earnings per share, for the six months ended June
30, 1998 as compared to a net income of  $128,000,  or $0.01 basic  earnings per
share, for the six months ended June 30, 1997.

Stockholders' Equity

     Stockholders'  equity  increased  $1.1  million to $7.6 million at June 30,
1998 from $6.5  million at December  31,  1997.  The  increase in  stockholders'
equity was due to(i) net income of $1.0  million  and (ii) the  contribution  of
123,055 shares of common stock,  valued at $1.25 per share, to the HMG Worldwide
Corporation Capital Accumulation Plan.

Income Taxes

     At December 31, 1997, the Company had net operating loss  carryforwards  of
approximately $27.6 million which expire during the years 2001 through 2012.

     The  Company's  income tax provision for the six months ended June 30, 1998
was $75,000 as compared to $10,000 for the six months ended June 30,  1997.  The
income  tax  provision  for the six  months  ended  June  30,  1998 and 1997 was
comprised principally of state and local taxes.


                                       9

<PAGE>




                       HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
                         MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS -continued

Inflation

     The  effect  of  inflation  on  the  Company's   operations  has  not  been
significant to date.

Backlog

     At June 30, 1998, the Company's  aggregate backlog was approximately  $28.6
million as compared to $32.0  million and $13.3 million at December 31, 1997 and
June 30,  1997,  respectively.  Of such  aggregate  backlog  at June  30,  1998,
approximately  33.5% was  attributable to two clients.  The Company  anticipates
that  substantially  all such backlog at June 30, 1998 will be filled during the
next twelve months.  In addition to the $28.6 million  backlog at June 30, 1998,
the Company's supply contract with the Foster Grant Group L.P.  ("Foster Grant")
requires Foster Grant, subject to certain limitations,  to purchase at least 70%
of its in-store  merchandising  displays  from the Company  with average  annual
purchases to aggregate no less than $2.5  million.  The  aggregate  value of the
Foster Grant supply  contract at June 30, 1998 was $24.9  million,  of which the
Company  anticipates  that $2.5 million  will be shipped  within the next twelve
months. Due to quarter to quarter  fluctuations in the Company's backlog levels,
attributable to the timing, nature and size of its merchandising system programs
for its clients,  such backlog levels are not necessarily an indicator of future
net revenue levels.

Liquidity and Capital Resources

     Cash and cash equivalents at June 30, 1998 and December 31, 1997 aggregated
$6.4 million and $6.4 million,  respectively. The Company's decrease in cash and
cash equivalents of approximately $87,000 for the six months ended June 30, 1998
was due  principally  to the net effects of (i) net cash used in  operations  of
$4.1 million, (ii) capital expenditures of $408,000 and (iii) reductions of debt
obligations  of  $94,000,  offset by (iv)  proceeds  from  borrowings  under the
Company's  revolving  line of credit with its bank lender of $4.5  million.  The
Company's  negative cash flows from operations for the six months ended June 30,
1998  resulted  principally  from (i) an  increase in  accounts  receivable  and
inventory of $9.6 million  offset by (ii) an increase in general  liabilities of
$4.1 million.

     The Company has secured a $13.0 million  Credit  Agreement with a financial
institution in the form of a revolving credit and term loan facility. The Credit
Agreement  provides for a secured revolving credit facility which advances up to
the sum of (i) 85% of eligible  accounts  receivable,  (ii) the lesser of 60% of
eligible finished goods inventory or $750,000 and (iii) the Company's cash, cash
equivalents and marketable securities. The Credit Agreement is secured by a lien
on and a security interest in the Company's cash, cash  equivalents,  marketable
securities, accounts receivable, inventory, and equipment and all other tangible
and intangible  assets and a pledge of the common stock of each of the Company's
wholly-owned  subsidiaries.  Due to the  Company's  increase in working  capital
needs to meet its increased production requirements,  the Company has obtained a
temporary  increase in its secured line of credit to $16.0 million from its bank
lender as of June 30,  1998.  The Company  and its bank lender will  continue to
periodically review the working capital financing requirements of the Company to
determine  if the secured  line of credit  should be  permanently  increased  to
finance the Company's working capital growth.

     Borrowings  under the Credit  Agreement bear interest at the  institution's
prime  rate plus 1% per  annum.  The  Company  is  required  to pay a  quarterly
commitment  fee at the rate of one half of 1% per  annum  of the  average  daily
unused amount of funds available.  Additionally,  the Credit Agreement  contains
certain customary  affirmative and negative  covenants which require the Company
to maintain certain financial ratios, and, among other things restrict,  (i) the
declaration  or  payment  of  dividends,   (ii)  the  incurrence  of  additional
indebtedness  and (iii) the sale of certain  assets.  As of June 30,  1998,  the
Company was in compliance with all financial  covenants of the Credit Agreement,
as amended.







                                       10

<PAGE>




                       HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
                         MANAGEMENT'S DISCUSSION AND ANALYSIS
               OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - continued

     Pursuant to the terms of the Credit Agreement, the lender can advance up to
$1.6 million in the form of a term loan  collateralized by the Company's current
and  future  real  estate  and  equipment.  The term loan  portion of the Credit
Agreement is amortized on a sixty month basis with a final  payment due upon the
termination  of the Credit  Agreement  and bears  interest at the  institution's
prime rate plus 1% per annum.  At June 30, 1998, the balance  outstanding on the
term loan component of the Credit Agreement was approximately $772,000.

     Effective   September  30,  1997,  the  Company  issued  $2.2  million  10%
Convertible  Debentures due September 30, 2000 ("Debentures")  through a private
placement ("Private Placement"). The Debentures bear interest at the rate of 10%
per annum and are  convertible,  at the option of the  holder at any time,  into
shares of the Company's  Common Stock  ("Conversion  Shares"),  $0.01 par value,
based upon the conversion  price of $1.25 per share.  The Company may prepay the
Debentures,  on 30 days prior notice,  at such time as the average closing price
of the Common Stock  exceeds $1.75 per share for a 30 day period prior to notice
of such  prepayment  provided that the  Conversion  Shares have been  registered
under the Securities Act at the time of such prepayment.  The Debentures and the
Conversion  Shares which may be acquired  upon the  conversion  have been issued
without registration by reason of the private offering exemption under Section 4
(2) of the Securities  Act and Rule 506 of Regulation D promulgated  thereunder.
Accordingly,  the Debentures and the Conversion  Shares may not be resold absent
registration  under the  Securities  Act or the  availability  of an  applicable
exemption from such registration.

     The Company's working capital at June 30, 1998 was approximately  $678,000,
inclusive  of  borrowings  of $15.4  million  pursuant  to the three year Credit
Agreement.  For the six  months  ended June 30,  1998,  the  Company's  accounts
receivable  and inventory  levels have increased $9.6 million during the period,
principally due to the revenue growth of the Company and the current  production
demands required by the Company's clients and related shipment schedules. Due to
the working  capital  position,  the  Company  experiences  temporary  liquidity
problems  from time to time due to the timing of cash flows while the Company is
in production  and building  inventory.  However,  management  believes that its
current cash and cash equivalents,  its backlog,  anticipated  future cash flows
from  operations  and  its  availability  under  its  Credit  Agreement  will be
sufficient  to support its debt service  requirements  and its other capital and
operating  needs for the next fiscal year.  Management  believes that  continued
focus upon strategic cost reductions and  efficiencies,  an expanded client base
and future  cash flows  from  operations  developed  and/or  implemented  by the
Company  provide an  important  basis for future  profitability  and  liquidity,
however,  there can be no  assurance  that such belief will prove to be correct,
that additional financing will not be required,  or that any such financing will
be available on commercially reasonable terms or otherwise.

     The  above  statements  and  certain  other  statements  contained  in this
quarterly report on Form 10-Q are based on current expectations. Such statements
are forward looking statements that involve a number of risks and uncertainties.
Factors  that could  cause  actual  results  to differ  materially  include  the
following (i) general economic  conditions at retail,  (ii)  competitive  market
influences,  (iii)  client  budgetary  restrictions,  (iv) delays in shipment of
scheduled programs to clients, (v) delay in or inability to expand the Company's
client  base  and/or  (vi) the loss of or  reduction  in  spending  of  existing
clients.
















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                           Part II Other Information

Item 6. Exhibits and Reports of Form 8-K

The following financial statement exhibits are files as part of this Report:

                           INDEX TO FINANCIAL STATEMENT EXHIBITS


                                                               Page
                                                               ----
Exhibit 11 - Computation of Per Share Earnings                  14



































                                       12

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                                  SIGNATURES



Pursuant  to 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.



                                                  HMG Worldwide Corporation
                                                  -------------------------
                                                  (Registrant)





Date: August 14, 1998                             /S/ Robert V. Cuddihy, Jr.
      ---------------                             --------------------------
                                                  Robert V. Cuddihy, Jr.
                                                  Chief Operating Officer and
                                                  Chief Financial Officer
                                                  (Principal Accounting Officer)























                                       13

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                       HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
                                       EXHIBIT 11
                            COMPUTATION OF PER SHARE EARNINGS
                     FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1998
                         (in thousands, except per share data)
                                      (unaudited)


                                        For the Three Months Ended June 30, 1998
                                        ----------------------------------------
                                        Income            Shares       Per Share
                                     (Numerator)      (Denominator)      Amount
                                     -----------      -------------      ------

Basic earnings per share:
   Income available to
      common stockholders               $700              8,964           $0.08
                                                                          =====

Effect of dilutive securities:
 10% convertible debentures               55              1,760
 Stock options and warrants                                 722
                                        ----             ------

Diluted earnings per share:
   Income available to common
      stockholders' and assumed
      conversions                       $755             11,446           $0.07
                                        ====             ======           =====




                                        For the Six Months Ended June 30, 1998
                                        --------------------------------------
                                        Income            Shares       Per Share
                                     (Numerator)      (Denominator)      Amount
                                     -----------      -------------      ------

Basic earnings per share:
   Income available to
      common stockholders             $1,002              8,944           $0.11
                                                                          =====

Effect of dilutive securities:
 10% convertible debentures              109              1,760
 Stock options and warrants                                 585
                                      ------             ------

Diluted earnings per share:
   Income available to common
      stockholders' and assumed
      conversions                     $1,111             11,289           $0.10
                                      ======             ======           =====


























                                       14

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