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, 1999
                                     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.

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

                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.
                              No               Yes
                                --------          --------

                                       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, 1999
----------------------------                      ------------------------------
Common Stock, $.01 par value                                  11,326,349








                                        1

<PAGE>




                          Part I. Financial Information
                                     Item 1.

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

<TABLE>

                                                                   June 30, 1999   December 31, 1998
                                                                   -------------   -----------------
                                                                    (unaudited)
                                        ASSETS

Current assets:
<S>                                                                <C>                     <C>
  Cash and cash equivalents ........................................    $ 5,190         $ 5,730
  Accounts receivable - less allowance
    for doubtful accounts of $642 and $453 .........................     16,981          15,505
  Inventory ........................................................     22,785          15,335
  Prepaid expenses .................................................      1,385             816
  Other current assets .............................................        323             263
                                                                        -------        --------
     Total current assets ..........................................     46,664          37,649

Property and equipment - net .......................................      7,323           6,319
Excess of cost over fair value
  of assets acquired, less accumulated
  amortization of $2,302 and $2,053 ................................      7,359           7,528
Other assets .......................................................        295             233
                                                                        -------        --------
                                                                        $61,641         $51,729
                                                                        =======         =======

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current maturities of long-term obligations ......................    $16,102         $14,801
  Accounts payable .................................................     19,433          15,933
  Accrued employee compensation and benefits .......................      1,615           1,353
  Deferred revenue .................................................      2,396           2,970
  Accrued expenses .................................................      1,354           1,575
  Other current liabilities ........................................        325             213
                                                                        -------         -------
    Total current liabilities ......................................     41,225          36,845

Pension obligation .................................................      1,182           1,147
Convertible debentures .............................................       --             2,160
Convertible notes ..................................................      5,000            --
Promissory note ....................................................      1,600           1,600
Term loans .........................................................        416             491
Other long-term liabilities ........................................        432             418
                                                                        -------         -------
                                                                         49,855          42,661
                                                                        -------         -------
Stockholders' equity:
  Common stock, par value $0.01; 50,000,000 shares
    authorized; 11,111,605 and 9,329,205 shares
    issued and outstanding .........................................        111              93
  Additional paid-in capital .......................................     37,394          35,335
  Accumulated deficit ..............................................    (25,719)        (26,360)
                                                                        -------         -------
                                                                         11,786           9,068
                                                                        -------         -------
                                                                        $61,641         $51,729
                                                                        =======         =======


                        See  accompanying  notes  to  consolidated  financial statements.
</TABLE>

                                        2

<PAGE>







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

<TABLE>

                                      Three Months Ended June 30,     Six Months Ended June 30,
                                      ---------------------------     -------------------------
                                          1999          1998             1999           1998
                                          ----          ----             ----           ----

<S>                                          <C>                <C>                       <C>             <C>
Net revenues ......................     $20,788       $16,549          $40,290        $29,415

Cost of revenues ..................      14,602        11,982           28,353         20,874
                                        -------       -------          -------        -------

 Gross profit .....................       6,186         4,567           11,937          8,541

Selling, general and
  administrative expenses .........       5,715         3,462           10,615          6,830
                                        -------       -------          -------        -------

 Income from operations ...........         471         1,105            1,322          1,711

Interest income ...................          73            71              142            148

Interest expense ..................        (433)         (412)            (809)          (782)
                                        -------       -------          -------        -------

 Income before provision
  for income taxes ................         111           764              655          1,077

Provision for income taxes ........          (1)          (64)             (14)           (75)
                                        -------       -------          -------        -------

 Net income .......................     $   110       $   700          $   641        $ 1,002
                                        =======       =======          =======        =======

Basic earnings per share
  Net income per common and
   common equivalent shares .......     $  0.01       $  0.08          $  0.06        $  0.11
                                        =======       =======          =======        =======

  Weighted average number of common
   and common equivalent
   shares outstanding .............  11,102,454     8,964,718       10,927,928      8,944,659
                                     ==========     =========       ==========      =========

Diluted earnings per share
  Net income per common and
   common equivalent shares
   and assumed conversions ........     $  0.01       $  0.07          $  0.05        $  0.10
                                        =======       =======          =======        =======

  Weighted average number of common
   and common equivalent shares
   and assumed conversions ........  13,988,273    11,446,256       13,531,607     11,290,156
                                     ==========    ==========       ==========     ==========






          See accompanying notes to consolidated financial statements.
</TABLE>

                                        3

<PAGE>







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

<TABLE>


                                               Six Months Ended June 30,
                                               -------------------------
                                                  1999        1998
                                                  ----        ----


Cash flows from operating activities:
<S>                                                                      <C>                   <C>
  Cash received from customers ........          $38,222     $27,054
  Interest received ...................              150         166
  Cash paid to suppliers ..............          (34,648)    (25,745)
  Cash paid to employees ..............           (8,344)     (4,771)
  Income taxes paid ...................              (66)         (2)
  Interest paid .......................             (710)       (782)
                                                 -------     -------
    Net cash used in operating
       activities .....................           (5,396)     (4,080)
                                                 -------     -------

Cash flows from investing activities:
  Capital expenditures ................           (1,443)       (408)
                                                 -------     -------
    Net cash used in
     investing activities .............           (1,443)       (408)
                                                 -------     -------

Cash flows from financing activities:
 Proceeds derived from the sale of
    convertible notes .................            5,000
 Proceeds derived from a credit
    agreement, net ....................            1,301       4,498
 Proceeds from exercise of stock options              73
 Principal payments of
    outstanding debt obligations ......              (75)        (94)
                                                 -------     -------
    Net cash provided by
       financing activities ...........             6,299      4,404
                                                 -------     -------

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

Net decrease in cash and
  cash equivalents ....................             (540)        (87)

Cash and cash equivalents
  at beginning of year ................            5,730       6,439
                                                 -------     -------

Cash and cash equivalents
  at June 30 ..........................          $ 5,190     $ 6,352
                                                 =======     =======
</TABLE>






          See accompanying notes to consolidated financial statements.

                                        4

<PAGE>







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

<TABLE>


                                              Six Months Ended June 30,
                                              -------------------------
                                                  1999        1998
                                                  ----        ----


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

<S>                                                                        <C>                    <C>
Net income ...............................        $  641      $1,002

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

  Depreciation and amortization ..........           688         473

Decrease (increase) in assets:
  Accounts receivable ....................        (1,476)     (3,982)
  Inventory ..............................        (7,450)     (5,645)
  Prepaid expenses .......................          (569)        (99)
  Other assets ...........................          (122)         65

Increase (decrease) in liabilities:
  Accounts payable .......................         3,500       2,545
  Deferred revenue .......................          (574)      1,625
  Accrued expenses .......................          (164)       (133)
  Pension obligation .....................            35         (50)
  Other liabilities ......................            95         119
                                                  ------      ------

Net cash used in operating
  activities .............................       ($5,396)    ($4,080)
                                                  ======      ======

Non-cash financing activities:
 Common stock issued in connection
   with an employee benefit plan .........                    $  154
 Common stock issued in connection
   with the conversion of debentures .....        $2,160
</TABLE>









          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, 1999, and the  Consolidated
Statements  of  Operations  and Cash  Flows for the three  months and six months
ended June 30, 1999 and 1998,  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,  1999 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,  1998  annual  report  to
shareholders.  The results of operations  for the period ended June 30, 1999 are
not necessarily indicative of the operating results for the full year.

Note 2 - Acquisition of HMG Schutz Operations

     Effective  August 1, 1998, the Company  consummated  the acquisition of the
business of HMG Schutz, a Chicago based point-of-purchase company pursuant to an
Asset Purchase Agreement  ("Purchase  Agreement").  Pursuant to the terms of the
Purchase  Agreement,  the Company  issued a $1.6  million  Promissory  Note,  as
adjusted,  net of imputed interest of $278,000, and issued 100,000 shares of the
Company's  Common Stock,  valued at $1.10 per share,  in  consideration  for the
acquired assets.  The payments  required under the Promissory Note commence upon
the second  anniversary of the Purchase  Agreement  after which the Company will
make 20 equal quarterly  principal  installments,  plus accrued  interest at the
prime rate per annum,  over five years.  In addition,  the Company has agreed to
make certain future  contingent  payments  based upon revenues  generated by HMG
Schutz over the next three years.  To date,  the company has recorded  aggregate
contingent payments of $259,000 pursuant to the terms of the Purchase Agreement.
The  Company  also  acquired  an option to  purchase  at a future date yet to be
determined,  the office and  warehouse  facilities  and related  land  currently
occupied by HMG Schutz for approximately $2.3 million.

Note 3 - Inventory

     Inventory  consisted  of the  following  components  at June  30,  1999 and
December 31, 1998.

                               June 30,    December 31,
                                1999           1998
                                ----           ----
                                   (in thousands)
     Finished goods           $ 3,908        $ 3,549
     Work-in-process            4,255          3,789
     Raw materials             14,622          7,997
                              -------        -------
                              $22,785        $15,335
                              =======        =======










                                        6

<PAGE>





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

Note 4 - Income Taxes

     At December 31, 1998, the Company had net operating loss  carryforwards  of
approximately $34.6 million which expire during the years 2001 through 2013.

     Components of income tax expense for the six months ended June 30, 1999 and
1998 are as follows:

                              Six Months Ended June 30,
                              -------------------------
                                 1999           1998
                                 ----           ----
                                     (in thousands)
     State and local
       income taxes              $14            $75
                                 ===            ===

Note 5 - Convertible Debentures

     In February 1999, the Company's  convertible  debenture  holders elected to
convert the then outstanding $2.2 million  debentures into Common Stock at $1.25
per share  pursuant  to the terms of the  debentures.  As a  consequence  of the
conversion,  the Company issued 1,728,000 shares of Common Stock and retired the
convertible debentures.

     On February 24, 1999, the Company issued $5.0 million 7% Convertible  Notes
Due  February  24,  2002  (the  "Notes")  to two  institutional  investors.  The
principal amount of the Notes is convertible into shares of the Company's Common
Stock at a conversion price of the lesser of $4.00 per share or a price based on
the prevailing  market price of the Common Stock,  subject to a maximum issuance
of 2,160,000 shares upon conversion of the Notes, taken together. The Notes were
issued through a private  placement;  however,  the Company has registered,  for
resale,  the shares which may be acquired upon the conversion of the Notes under
the Securities Act of 1933.



























                                        7

<PAGE>



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

General

     The Company  continued to expand  during the second  quarter of 1999 as its
strategy  to expand its  existing  client  base  through  organic  growth and to
strategically  acquire  complementary  businesses  has resulted in the Company's
tenth consecutive  quarterly profit. Net revenues increased 37% to $40.3 million
for the six months  ended June 30,  1999.  The Company  generated  net income of
$641,000,  or $0.06  basic  earnings  per  share,  in 1999 as  compared  to $1.0
million,  or $0.11 basic  earnings per share,  for the six months ended June 30,
1998.

     Effective  August 1, 1998, the Company  consummated  the acquisition of the
business  of  Schutz   International   Inc.  ("HMG  Schutz"),   a  Chicago-based
point-of-purchase  company  pursuant to an Asset Purchase  Agreement  ("Purchase
Agreement"). Pursuant to the terms of the Purchase Agreement, the Company issued
a $1.6 million Promissory Note, net of imputed interest of $278,000,  and issued
100,000  shares of the  Company's  Common Stock,  valued at $1.10 per share,  in
consideration  for  the  acquired  assets.   The  payments  required  under  the
Promissory Note commence upon the second  anniversary of the Purchase  Agreement
after which the Company  will make 20 equal  quarterly  principal  installments,
plus accrued interest at the prime rate per annum, over five years. In addition,
the Company has agreed to make certain  future  contingent  payments  based upon
revenues  generated  by HMG Schutz over the next three  years.  The Company also
acquired an option to purchase at a future date yet to be determined, the office
and warehouse  facilities and related land currently  occupied by HMG Schutz for
approximately $2.3 million.

     During the fourth quarter of 1998, the Company  engaged BNY Capital Markets
("BNY Capital"), a division of The Bank of New York and an independent financial
consultant,  to assist the Company in targeting  and  financing  new,  strategic
acquisitions. The Company, in conjunction with BNY Capital, is currently seeking
to  refinance  its existing  revolving  line of credit and term loans under more
favorable terms and to provide a source of acquisition  financing in the form of
debt. The Company is seeking a $35.0 million credit facility.

     In February 1999, the Company's  convertible  debenture  holders elected to
convert the  outstanding  $2.2 million of debentures  into Common Stock at $1.25
per share  pursuant  to the terms of the  debentures.  As a  consequence  of the
conversion,  the Company issued 1,728,000 shares of Common Stock and retired the
convertible  debentures.  In addition,  on February 24, 1999, the Company issued
$5.0 million 7%  Convertible  Notes Due  February 24, 2002 to two  institutional
investors.  The principal  amount of the Notes is convertible into shares of the
Company's Common Stock at a conversion price of the lesser of $4.00 per share or
a price based on the prevailing  market price of the Common Stock,  subject to a
maximum  issuance  of  2,160,000  shares  upon  conversion  of the Notes,  taken
together.  The Notes  were  issued  through a private  placement;  however,  the
Company has  registered,  for resale,  the shares which may be acquired upon the
conversion of the Notes under the Securities Act of 1933.

     Management  believes that HMG is well positioned as a leading,  innovative,
client service oriented company in the in-store marketing industry. Furthermore,
HMG will continue to seek to acquire strategic  businesses which will expand the
Company's  products  and  services,  provide  improved  distribution  and reduce
operating and manufacturing costs.

Three Months Ended June 30, 1999 as Compared to the
  Three Months Ended June 30, 1998

     Net revenues  increased  $4.2 million,  or 25.6%,  to $20.8 million for the
three  months  ended June 30, 1999 as  compared  to $16.6  million for the three
months ended June 30,  1998.  The $4.2  million  increase in net  revenues  from
period to period was due  principally  to (i) the addition of net revenues  from
HMG Schutz,  acquired August 1, 1998, of $5.2 million and (ii) a net decrease in
the Company's  clients'  scheduled  shipments during the period of approximately
$1.0 million.

     Gross  profit for the three  months ended June 30, 1999 was $6.2 million as
compared to $4.6 million for the three  months ended June 30 1998.  The increase
in gross profit of $1.6 million was  principally a result of the increase in net
revenues and an increase in gross  margin for the quarter.  For the three months
ended June 30, 1999 and 1998,  the  Company's  gross margin was 29.7% and 27.6%,
respectively.  The gross margin  increase of 2.1% was due principally to the net
effect of (i) a favorable  production  revenue mix resulting in a 3.1% increase,
reflecting the Company's  production of certain projects at lower margins due to
the larger production volumes, offset by (ii) a 1.0% increase in

                                        8

<PAGE>




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


factory overhead expense.  The favorable  production revenue mix was principally
the result of certain  programs  produced  by the  Company  during the period at
improved gross margin levels in light of the operational  efficiencies  realized
by the Company during the period.

     Selling,  general and administrative expenses ("SG&A") for the three months
ended  June 30,  1999 was $5.7  million  as  compared  to $3.5  million  for the
comparable  period in 1998.  The  increase in SG&A of $2.2 from period to period
was  principally  due to the  addition of the  operations  of HMG Schutz of $1.9
million and increased spending in other general expenses of $300,000.

     For the three months ended June 30, 1999,  the Company  generated  interest
income of $73,000 as  compared to $71,000  for the three  months  ended June 30,
1998. The increase was principally  attributable to an increase in cash and cash
equivalents  invested in interest-bearing  marketable  securities and commercial
paper from period to period.

     Interest  expense was  $433,000 for the three months ended June 30, 1999 as
compared to $412,000 for the three  months ended June 30, 1998.  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 $110,000,  or $0.01 basic earnings per share, for the three months ended June
30, 1999 as compared to a net income of  $700,000,  or $0.08 basic  earnings per
share, for the three months ended June 30, 1998.

Six Months Ended June 30, 1999 as Compared to the
 Six Months Ended June 30, 1998

     Net revenues  increased  $10.9 million,  or 37.0%, to $40.3 million for six
months ended June 30, 1999 as compared to $29.4 million for the six months ended
June 30, 1998. The $10.9 million  increase in net revenues from period to period
was due principally to (i) the addition of HMG Schutz,  acquired August 1, 1998,
of $9.9  million  and  (ii) a net  increase  in  marketing  expenditures  of the
Company's clients during the period of approximately $1.0 million.

     Gross  profit for the six months  ended June 30, 1999 was $11.9  million as
compared to $8.5 million for the six months ended June 30, 1998. The increase in
gross  profit of $3.4  million was  principally  a result of the increase in net
revenues and an increase in gross margin. For the six months ended June 30, 1999
and 1998,  the  Company's  gross margin was 29.6% and 29.0%,  respectively.  The
gross  margin  increase of 0.6% was due  principally  to a favorable  production
revenue  mix,  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, New York
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,  1999 was $10.6  million as  compared  to $6.8  million  for the
comparable  period in 1998.  The increase in SG&A of $3.8 million from period to
period was  principally  due to the  addition of HMG Schutz SG&A of $3.6 million
and increased spending in other general expenses of $200,000.

     For the six months  ended June 30,  1999,  the Company  generated  interest
income of $142,000 as  compared  to $148,000  for the six months  ended June 30,
1998. 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  $809,000  for the six months  ended June 30, 1999 as
compared to $782,000  for the six months  ended June 30,  1998.  The increase in
interest  expense was principally due to the increased  average  borrowings from
period to period.


                                        9

<PAGE>



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


     As a consequence of the foregoing factors, the Company generated net income
of $641,000 or $0.06 basic earnings per share, for the six months ended June 30,
1999 as compared to a net income of $1.0  million,  or $0.11 basic  earnings per
share, for the six months ended June 30, 1998.

Stockholders' Equity

     Stockholders'  equity  increased  $2.7 million to $11.8 million at June 30,
1999 from $9.1  million at December  31,  1998.  The  increase in  stockholders'
equity was due to (i) net income of  $641,000,  (ii) the  issuance of  1,728,000
shares  of  Common  Stock  and the  retirement  of the  outstanding  convertible
debentures of $2.0 million,  net of expenses,  and (iii) net proceeds of $73,000
derived from the exercise of stock options pursuant to a plan.

Income Taxes

     At December 31, 1998,  the Company had net operating loss carryforwards of
approximately $34.6 million which expire during the years 2001 through 2013.

     The Company's income tax provision for the three months ended June 30, 1999
was $1,000 as compared to $64,000 for the three months ended June 30, 1998.  The
income tax provisions were comprised principally of state and local taxes.

Inflation

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

Backlog

     At June 30, 1999, the Company's  aggregate backlog was approximately  $46.7
million as compared to $48.8  million and $28.6 million at December 31, 1998 and
June 30,  1998,  respectively.  Of such  aggregate  backlog  at June  30,  1999,
approximately 33% was attributable to four clients. The Company anticipates that
substantially  all such backlog at June 30, 1999 will be filled  during the next
twelve  months.  In addition to the $46.7 million  backlog at June 30, 1999, 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, 1999 was  approximately  $21.6 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, 1999 and December 31, 1998 aggregated
$5.2 million and $5.7 million,  respectively. The Company's decrease in cash and
cash  equivalents  of  $540,000  for the six months  ended June 30, 1999 was due
principally  to the net  effects  of (i) net  cash  used in  operations  of $5.4
million,  (ii) capital expenditures of $1.4 million and (iii) reductions of debt
obligations  of $75,000,  offset by (iv) proceeds  derived from the sale of $5.0
million,  7% Convertible  Notes,  (v) proceeds from exercise of stock options of
$73,000 and (vi) proceeds  derived from the Company's  Credit  Agreement of $1.3
million.  The Company's  negative cash flows from  operations for the six months
ended June 30, 1999  resulted  principally  from (i) a net  increase in accounts
receivable  and  inventory  of $8.9  million and (ii) a net  increase in general
liabilities of $3.1 million.

     The Company  maintains a $17.0 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

                                       10

<PAGE>



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


by a lien on and a security  interest in the Company's cash,  cash  equivalents,
marketable  securities,  accounts receivable,  inventory,  equipment and certain
real estate and all other  tangible  and  intangible  assets and a pledge of the
common stock of each of the Company's wholly-owned subsidiaries.

     Borrowings  under the Credit  Agreement bear interest at the  institution's
prime  rate plus 3/4% 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,  1999,  the
Company was in compliance with all financial  covenants of the Credit Agreement,
as amended.

     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, 1999, the balance  outstanding on the
term loan component of the Credit Agreement was approximately $585,000.

     On February 24, 1999, the Company issued $5.0 million 7% Convertible  Notes
Due February 24, 2002 to two  institutional  investors.  The principal amount of
the  Notes  is  convertible  into  shares  of the  Company's  Common  Stock at a
conversion  price of the  lesser  of  $4.00  per  share or a price  based on the
prevailing  market price of the Common Stock,  subject to a maximum  issuance of
2,160,000  shares upon conversion of the Notes,  taken together.  The Notes were
issued through a private  placement;  however,  the Company has registered,  for
resale,  the shares which may be acquired upon the conversion of the Notes under
the Securities Act of 1933.

     The Company's working capital at June 30, 1999 was $5.4 million,  inclusive
of borrowings of $16.1 million pursuant to the three-year Credit Agreement. From
time to time, the Company  experiences  temporary  liquidity problems 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,  availability under its
Credit Agreement and the proceeds derived from the issuance of Convertible Notes
will be  sufficient  to  support  its debt  service  requirements  and its other
capital and operating needs for the next fiscal year.  Furthermore,  the Company
engaged BNY Capital to assist the Company in refinancing  its current  revolving
line of credit and term loans under more favorable terms and to provide a source
of  acquisition  financing  in the form of debt.  The Company is seeking a $35.0
million credit facility.  Management believes its pending financing, an expanded
client  base and future  cash flows from  operations  developed  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.

Year 2000

     The Company is aware of the issues  associated with the programming code in
existing computer systems as the millennium ("Year 2000")  approaches.  The Year
2000 problem is pervasive and complex as virtually every computer operation will
be affected  in some way by the  rollover of the two digit year value to 00. The
issue is  whether  computer  systems  will  properly  recognize  date  sensitive
information  when  the  year  changes  to  2000.  Systems  that do not  properly
recognize such  information  could generate  erroneous data or cause a system to
fail.

     The Company is utilizing both internal and external  resources to identify,
correct  or  reprogram  and  test the  systems  for Year  2000  compliance.  The
Company's  Year 2000 strategy  includes the  evaluation of all critical  Company
software applications, client/server applications, PC's and workstations, vendor
supplied  software,  equipment  and  clients and  suppliers.  An  inventory  and
assessment  of all areas have been  completed  and the  Company  has  inspected,
remediated  and  performed  testing  of  each  of  its  systems  for  Year  2000
compliance.



                                       11

<PAGE>



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


     As of  June  30,  1999,  the  Company  believes  that  it has  successfully
remediated its client/server  business  applications for the millennium  change.
During the third  quarter of 1999,  the Company is scheduled to bring HMG Schutz
and HMG Griffith on line with its client/server  business applications such that
all  Company  operations  will be tied  together  and data can be  accessed  and
exchanged through a common shared technology  platform.  The Company's suppliers
are also engaged in their Year 2000 testing and the Company is monitoring  their
progress.  In  addition,  in the event that a supplier  is unable to become Year
2000 compliant,  the Company's supplier network is sufficient,  and material and
services  are  available  to the  Company to adjust to a change in a  production
supply  without  compromising  the  manufacturing  schedule  established  by the
Company.  However, there can be no assurance that the systems of other companies
on which the  Company's  systems rely also will be timely  converted or that any
such failure to convert by another  company would not have an adverse  effect on
the Company's systems.

     It is anticipated  that the Year 2000 project will be completed  during the
third  quarter  of  1999.  To  date,  the  Company  has  incurred   expenses  of
approximately  $375,000 in hardware  upgrades  and  software  enhancements.  The
Company  projects that the total cost of the Year 2000 project will  approximate
$475,000 to $550,000.

     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.

































                                       12

<PAGE>



                            Part II Other Information

Item 6. Exhibits and Reports of Form 8-K

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


                      INDEX TO FINANCIAL STATEMENT EXHIBITS


                                                                            Page
Exhibit 11 - Computation of Per Share Earnings                               14


                                       13

<PAGE>






                                   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 12, 1999                         By: /S/ Robert V. Cuddihy, Jr.
      ---------------                             ----------------------------
                                                  Robert V. Cuddihy, Jr.
                                                  Chief Operating Officer and
                                                  Chief Financial Officer
                                                  (Principal Accounting Officer)

                                       14

<PAGE>



                   HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
                                   EXHIBIT 11
                        COMPUTATION OF PER SHARE EARNINGS
                FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
                      (in thousands, except per share data)
                                   (unaudited)


                                      For the Three Months Ended June 30, 1999
                                      ----------------------------------------
                                        Income          Shares      Per Share
                                      (Numerator)    (Denominator)    Amount
                                      -----------    -------------   --------

Basic earnings per share:


   Income available to
      common stockholders                $110            11,102        $0.01
                                                                       =====

Effect of dilutive securities:
 Stock options and warrants               -               2,886
                                         ----             =====

Diluted earnings per share:
   Income available to common
      stockholders and assumed
      conversions                        $110            13,988        $0.01
                                         ====            ======        =====




                                       For the Six Months Ended June 30, 1999
                                      Income            Shares       Per Share
                                      (Numerator)    (Denominator)    Amount

Basic earnings per share:
   Income available to
      common stockholders                $641            10,928        $0.06
                                                                       =====

Effect of dilutive securities:
 Stock options and warrants               -                2,604
                                         ----              =====

Diluted earnings per share:
   Income available to common
      stockholders and assumed
      conversions                        $641            13,532        $0.05
                                         ====            ======        =====












                                       15

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