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: March 31, 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 May 12, 1999
----------------------------                       ----------------------------
Common Stock, $.01 par value                                  11,111,605








                                        1

<PAGE>




                          Part I. Financial Information
                                     Item 1.

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


                                             March 31, 1999    December 31, 1998
                                             --------------    ----------------
                                                        (unaudited)
                             ASSETS

Current assets:
  Cash and cash equivalents                    $ 7,915               $ 5,730
  Accounts receivable - less allowance
    for doubtful accounts of $547 and $453      14,386                15,505
  Inventory                                     19,510                15,335
  Prepaid expenses                               1,168                   816
  Other current assets                             286                   263
                                               -------               -------
     Total current assets                       43,265                37,649

Property and equipment - net                     6,251                 6,319
Excess of cost over fair value
  of assets acquired, less accumulated
  amortization of $2,180 and $2,053              7,461                 7,528
Other assets                                       272                   233
                                               -------              --------
                                               $57,249               $51,729
                                               =======               =======

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current maturities of long-term obligations  $16,670               $14,801
  Accounts payable                              16,249                15,933
  Accrued employee compensation and benefits     1,502                 1,353
  Deferred revenue                                 964                 2,970
  Accrued expenses                               1,351                 1,575
  Other current liabilities                        269                   213
                                               -------               -------
    Total current liabilities                   37,005                36,845

Pension obligation                               1,190                 1,147
Convertible debentures                             -                   2,160
Convertible notes                                5,000                   -
Promissory note                                  1,600                 1,600
Term loans                                         454                   491
Other long-term liabilities                        417                   418
                                               -------               -------
                                                45,666                42,661
                                               -------               -------
Stockholders' equity:
  Common stock, par value $0.01;
    50,000,000 shares authorized;
    11,083,205 and 9,329,205 shares
    issued and outstanding                         111                    93
  Additional paid-in capital                    37,301                35,335
  Accumulated deficit                          (25,829)              (26,360)
                                               -------               -------
                                                11,583                 9,068
                                               -------               -------
                                               $57,249               $51,729
                                               =======               =======


          See accompanying notes to consolidated financial statements.

                                        2

<PAGE>



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


                                                 Three Months Ended March 31,
                                                 ----------------------------
                                                 1999                  1998
                                                 ----                  ----

Net revenues                                    $19,502               $12,866
                                               
Cost of revenues                                 13,751                 8,892
                                                -------               -------
                                               
 Gross profit                                     5,751                 3,974
                                               
Selling, general and                           
  administrative expenses                         4,900                 3,368
                                                -------               -------
                                               
 Income from operations                             851                   606
                                               
Interest income                                      69                    77
                                               
Interest expense                                   (376)                 (370)
                                                -------               -------
                                               
 Income before provision                       
  for income taxes                                  544                   313
                                               
Provision for income taxes                           13                    11
                                                -------               -------
                                               
 Net income                                     $   531               $   302
                                                =======               =======
                                               
Basic earnings per share                       
  Net income per common shares                  $  0.05               $  0.03
                                                =======               =======
                                               
  Weighted average number of common
   shares outstanding                        10,360,383             8,924,150
                                             ==========             =========
                                               
Diluted earnings per share                     
  Net income per common and common             
  equivalent shares                             $  0.04               $  0.03
                                                =======               =======
                                               
  Weighted average number of common and        
   common equivalent shares                  12,637,864            11,162,471
                                             ==========            ==========
                                            













          See accompanying notes to consolidated financial statements.

                                        3

<PAGE>



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



                                                 Three Months Ended March 31,
                                                 ----------------------------
                                                 1999                  1998
                                                 ----                  ----


Cash flows from operating activities:
  Cash received from customers                  $18,606               $10,899
  Interest received                                  65                    60
  Cash paid to suppliers                        (17,962)              (11,231)
  Cash paid to employees                         (4,854)               (2,389)
  Income taxes paid                                 (15)                   (3)
  Interest paid                                    (365)                 (370)
                                                -------               -------
    Net cash used in operating
       activities                                (4,525)               (3,034)
                                                -------               -------

Cash flows from investing activities:
  Capital expenditures                             (160)                  (59)
                                                -------               -------
    Net cash used in investing
      activities                                   (160)                  (59)
                                                -------               -------

Cash flows from financing activities:
 Proceeds derived from the sale of
  convertible notes                               5,000
 Proceeds derived from a credit
    agreement, net                                1,869                 3,396
 Proceeds from exercise of stock options             38                   
 Principal payments of
    outstanding debt obligations                    (37)                  (47)
                                                -------               -------
    Net cash provided by
       financing activities                       6,870                 3,349
                                                -------               -------

Net increase in cash and
  cash equivalents                                2,185                   256

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

Cash and cash equivalents
  at March 31                                   $ 7,915               $ 6,695
                                                =======               =======











          See accompanying notes to consolidated financial statements.


                                        4

<PAGE>



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



                                                 Three Months Ended March 31,
                                                 ----------------------------
                                                 1999                  1998
                                                 ----                  ----


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

Net income                                      $  531                $  302

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

  Depreciation and amortization                    355                   218

Decrease (increase) in assets:
  Accounts receivable                            1,119                (1,880)
  Inventory                                     (4,175)               (3,425)
  Prepaid expenses                                (352)                  (74)
  Other assets                                     (62)                  74

Increase (decrease) in liabilities:
  Accounts payable                                 316                 1,877
  Deferred revenue                              (2,006)                  (91)
  Accrued expenses                                (224)                  (52)
  Pension obligation                                43                   (33)
  Other liabilities                                (70)                   50
                                                ------                ------

Net cash used in operating
  activities                                   ($4,525)              ($3,034)
                                                ======                ======

Non-cash investing activities:
 Common stock issued in connection
 with the conversion of debentures              $2,160














          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"),  using its marketing  resources
and expertise, is engaged in the design, development, production and assembly of
in-store,  or point of purchase marketing and merchandising  fixture and display
systems. The Company conducts its operations  principally through five operating
wholly-owned subsidiaries being, respectively, HMG Worldwide In-Store Marketing,
Inc. ("HMG"),  HMG Intermark  Worldwide  Manufacturing,  Inc. ("HMG Intermark"),
Display Depot, Inc. ("DDI"),  HMG Griffith  Worldwide In-Store  Marketing,  Inc.
("HMG  Griffith")  and  HMG  Schutz   International  Inc.  ("HMG  Schutz")  with
facilities in New York, Illinois, Pennsylvania and Toronto, Canada.

     The  Consolidated  Balance Sheet as of March 31, 1999, and the Consolidated
Statements  of  Operations  and Cash Flows for the three  months ended March 31,
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 March 31, 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 March 31, 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 $239,000 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.




















                                        6

<PAGE>



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

Note 3 - Inventory

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

                                         March 31,     December 31,
                                          1999             1998
                                          ----             ----
                                              (in thousands)

     Finished goods                      $ 2,142          $ 3,549
     Work-in-process                       5,635            3,789
     Raw materials                        11,733            7,997
                                         -------          -------
                                         $19,510          $15,335
                                         =======          =======

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 three months ended March 31, 1999
and 1998 are as follows:

                                         Three Months Ended March 31,
                                         ----------------------------
                                             1999          1998
                                             ----          ----
                                               (in thousands)
     State and local
       income taxes                          $13            $11
                                             ===            ===

Note 5 - Convertible Debentures and Convertible Notes

     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  undertaken  to
register,  for  resale by the  holders of the  Notes,  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 first  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
ninth  consecutive  quarterly  profit.  Net  revenues  increased  51.6% to $19.5
million for the three  months ended March 31, 1999.  The Company  generated  net
income of $531,000,  or $0.05 basic  earnings per share,  in 1999 as compared to
$302,000,  or $0.03 basic  earnings per share,  for the three months ended March
31, 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 exsisting  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 undertaken to register,  for resale by the holders of the Notes, 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 March 31, 1999 as Compared to the
  Three Months Ended March 31, 1998

     Net revenues  increased  $6.6 million,  or 51.6%,  to $19.5 million for the
three  months  ended March 31,  1999 as compared to $12.9  million for the three
months ended March 31,  1998.  The $6.6  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, and HMG Griffith, acquired July 1, 1997, of
$5.2  million and a net  increase in  marketing  expenditures  of the  Company's
clients during the period of $1.4 million.

     Gross  profit for the three months ended March 31, 1999 was $5.8 million as
compared to $4.0 million for the three months ended March 31, 1998. The increase
in gross profit of $1.8 million was principally a result of the increase in




                                        8

<PAGE>



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


net  revenues,  net of a decline in gross margin for the quarter.  For the three
months ended March 31, 1999 and 1998,  the Company's  gross margin was 29.5% and
30.9%,  respectively.  The gross margin  decrease of 1.4% was due principally to
the net effect of (i) an unfavorable  production revenue mix resulting in a 2.1%
decrease,  reflecting  the  Company's  production  of certain  projects at lower
margins  due to the larger  production  volumes,  offset by (ii) a  decrease  in
factory overhead  expenses of 0.7%. The unfavorable  production  revenue mix was
principally the result of certain larger programs produced by the Company during
the period at reduced gross margin levels in light of the  operational  overhead
efficiencies realized by the Company during the period.

     Selling,  general and administrative expenses ("SG&A") for the three months
ended  March 31,  1999 was $4.9  million as  compared  to $3.4  million  for the
comparable  period in 1998.  The  increase in SG&A of $1.5 from period to period
was  principally  due to the  addition of the  operations  of HMG Schutz of $1.7
million and decreased spending in other general expenses of $144,000.

     For the three months ended March 31, 1999, the Company  generated  interest
income of $69,000 as compared to $77,000  for the three  months  ended March 31,
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 to period.

     Interest  expense was  $376,000 for the three months ended March 3, 1999 as
compared to $370,000 for the three months ended March 31, 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 $531,000, or $0.05 basic earnings per share, for the three months ended March
31, 1999 as compared to a net income of  $302,000,  or $0.03 basic  earnings per
share, for the three months ended March 31, 1998.

Stockholders' Equity

     Stockholders'  equity  increased $2.5 million to $11.6 million at March 31,
1999 from $9.1  million at December  31,  1998.  The  increase in  stockholders'
equity was due to (i) net income of  $531,000,  (ii) the  issuance of  1,728,000
shares of Common Stock and the  retirement  of the the  outstanding  convertible
debentures of $2.0 million,  net of expenses,  and (iii) net proceeds of $38,000
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 March 31,
1999 was $13,000 as compared  to $11,000  for the three  months  ended March 31,
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 March 31, 1999, the Company's  aggregate backlog was approximately $40.4
million as compared to $48.8  million and $24.7 million at December 31, 1998 and
March 31,  1998,  respectively.  Of such  aggregate  backlog at March 31,  1999,
approximately 15% was attributable to one client.  The Company  anticipates that
substantially  all such backlog at March 31, 1999 will be filled during the next
twelve months.  In addition to the $40.4 million  backlog at March 31, 1999, the
Company's  supply  contract  with the Foster Grant Group L.P.  ("Foster  Grant")
requires Foster Grant, subject


                                       9

<PAGE>



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


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
March 31, 1999 was $22.6  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  March  31,  1999  and  December  31,  1998
aggregated $7.9 million and $5.7 million,  respectively.  The Company's increase
in cash and cash equivalents of approximately  $2.2 million for the three months
ended March 31, 1999 was due principally to the net effects of (i) net cash used
in operations of $4.5 million,  (ii) capital  expenditures of $160,000 and (iii)
reductions of debt obligations of $37,000,  offset by (iv) proceeds derived from
the sale of $5.0 million, 7% Convertible Notes and (v) proceeds from exercise of
stock options of $38,000.  The Company's negative cash flows from operations for
the three  months  ended  March 31,  1999  resulted  principally  from (i) a net
increase in accounts  receivable  and  inventory  of $3.1 million and (ii) a net
decrease in general liabilities of $1.9 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 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 March 31, 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 March 31, 1999, the balance  outstanding on the
term loan component of the Credit Agreement was approximately $641,000.

     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 bore interest at the rate of 10%
per annum and were converted in full in February 1999 at the conversion price of
$1.25  per  share.  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 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  undertaken  to
register,  for  resale by the  holders of the  Notes,  the  shares  which may be
acquired upon the conversion of the Notes under the Securities Act of 1933.




                                       10

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

     The Company's working capital at March 31, 1999 was $6.3 million, inclusive
of borrowing of $16.7 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,  during the
fourth quarter of 1998 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.

     As of  March  31,  1999,  the  Company  believes  that it has  successfully
remediated its client/server  business  applications for the millennium  change.
During the second  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 by mid-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.






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                            Part II Other Information

Item 6. Exhibits and Reports of Form 8-K

     (b) On March 24, 1999, the Company filed Form 8-K dated March 22, 1999.

          (i)  Pursuant to item 5 of Form 8-K, the Company reported the issuance
               of $5.0 million, 7% Convertible Notes Due February 24, 2002 to
               two institutional investors.

          (ii) Pursuant to item 7 of Form 8-K, the Company  filed as exhibits
               to the Form 8-K (i) Form of Securities  Purchase  Agreement,
               (ii) Form of  Convertible Note and (iii) Form of Registration
               Rights Agreement.

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



















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

























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                   HMG WORLDWIDE CORPORATION AND SUBSIDIARIES
                                   EXHIBIT 11
                        COMPUTATION OF PER SHARE EARNINGS
                      (in thousands, except per share data)
                                   (unaudited)


                                      For the Three Months Ended March 31, 1999
                                      -----------------------------------------
                                      Income            Shares       Per Share
                                    (Numerator)     (Denominator)      Amount
                                    -----------     -------------     --------

Basic earnings per share:
   Income available to
      common stockholders              $531             10,360          $0.05
                                                                        =====

Effect of dilutive securities:
 Stock options and warrants             -                2,278
                                       ----             ------

Diluted earnings per share:
   Income available to common
      stockholders                     $531             12,638          $0.04
                                       ====             ======          =====












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