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: September 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 November 12, 1999
----------------------------                    --------------------------------
Common Stock, $.01 par value                              11,737,060








                                        1

<PAGE>



                          Part I. Financial Information
                                     Item 1.

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

<TABLE>
                                                    September 30, 1999      December 31, 1998
                                                    ------------------      -----------------
                                                      (unaudited)
                                     ASSETS

Current assets:
<S>                                                        <C>                  <C>
  Cash and cash equivalents ........................       $ 4,838              $ 5,730
  Accounts receivable - less allowance
    for doubtful accounts of $397 and $453 .........        18,145               15,505
  Inventory ........................................        22,724               15,335
  Prepaid expenses .................................           466                  816
  Other current assets .............................           511                  263
                                                           -------              -------
     Total current assets ..........................        46,684               37,649

Property and equipment - net .......................         9,690                6,319
Excess of cost over fair value
  of assets acquired, less accumulated
  amortization of $2,434 and $2,053 ................         8,691                7,528
Deferred financing costs ...........................         1,801                 --
Other assets .......................................           265                  233
                                                           -------              -------

                                                           $67,131              $51,729
                                                           =======              =======

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
  Current maturities of long-term obligations ........     $19,750              $14,801
  Accounts payable ...................................      18,033               15,933
  Accrued employee compensation and benefits .........         447                1,353
  Deferred revenue ...................................          35                2,970
  Accrued expenses ...................................       1,038                1,575
  Other current liabilities ..........................         336                  213
                                                           -------              -------
    Total current liabilities ........................      39,639               36,845

Pension obligation ...................................       1,103                1,147
Convertible debentures ...............................       2,000                2,160
Convertible notes ....................................       5,000                 --
Promissory note ......................................       1,600                1,600
Term loans ...........................................       3,100                  491
Other long-term liabilities ..........................         432                  418
                                                           -------              -------
                                                            52,874               42,661
                                                           -------              -------
Stockholders' equity:
  Common stock, par value $0.01; 50,000,000 shares
    authorized; 11,715,724 and 9,329,205 shares
    issued and outstanding ...........................         117                   93
  Additional paid-in capital .........................      39,022               35,335
  Accumulated deficit ................................     (24,882)             (26,360)
                                                           -------              -------
                                                            14,257                9,068
                                                           -------              -------
                                                           $67,131              $51,729
                                                           =======              =======
</TABLE>

          See accompanying notes to consolidated financial statements.

                                        2

<PAGE>






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

<TABLE>

                                              Three Months Ended September 30,       Nine Months Ended September 30,
                                              --------------------------------       -------------------------------
                                                   1999            1998                   1999           1998
                                                   ----            ----                   ----           ----

<S>                                               <C>             <C>                    <C>            <C>
Net revenues ...............................      $22,640         $22,463                $62,930        $51,878

Cost of revenues ...........................       16,360          17,010                 44,713         37,884
                                                  -------         -------                -------        -------

 Gross profit ..............................        6,280           5,453                 18,217         13,994

Selling, general and
  administrative expenses ..................        5,164           4,246                 15,779         11,076
                                                  -------         -------                -------        -------

 Income from operations ....................        1,116           1,207                  2,438          2,918

Interest income ............................           63              62                    205            210

Interest expense ...........................         (305)           (417)                (1,114)        (1,199)
                                                  -------         -------                -------        -------

 Income before provision
  for income taxes .........................          874             852                  1,529          1,929

Provision for income taxes .................          (37)            (36)                   (51)          (111)
                                                  -------         -------                -------        -------

 Net income ................................      $   837         $   816                $ 1,478        $ 1,818
                                                  =======         =======                =======        =======

Basic earnings per share
  Net income per common and
   common equivalent shares ................      $  0.07         $  0.09                $  0.13        $  0.20
                                                  =======         =======                =======        =======

  Weighted average number of common
   and common equivalent
   shares outstanding ......................   11,291,619       9,113,509             11,124,324      9,001,434
                                               ==========       =========             ==========      =========

Diluted earnings per share
  Net income per common and
   common equivalent shares
   and assumed conversions .................      $  0.06         $  0.08                $  0.11        $  0.17
                                                  =======         =======                =======        =======

  Weighted average number of common
   and common equivalent shares
   and assumed conversions .................   14,238,448      11,434,097             13,758,600     11,339,801
                                               ==========      ==========             ==========     ==========



</TABLE>




          See accompanying notes to consolidated financial statements.

                                        3

<PAGE>






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

<TABLE>


                                                     Nine Months Ended September 30,
                                                     -------------------------------
                                                           1999          1998
                                                           ----          ----


Cash flows from operating activities:
<S>                                                       <C>           <C>
  Cash received from customers .....................      $57,352       $48,490
  Interest received ................................          223           218
  Cash paid to suppliers ...........................      (55,747)      (41,923)
  Cash paid to employees ...........................      (12,564)       (7,802)
  Income taxes paid ................................          (52)           (3)
  Interest paid ....................................         (884)       (1,173)
                                                          -------       -------
    Net cash used in operating
       activities ..................................      (11,672)       (2,193)
                                                          -------       -------

Cash flows from investing activities:
  Capital expenditures .............................       (4,154)         (799)
                                                          -------       -------
    Net cash used in investing activities ..........       (4,154)         (799)
                                                          -------       -------

Cash flows from financing activities:
  Proceeds derived from a credit
    agreement, net .................................        7,633         3,671
  Proceeds derived from exercise of
    stock options ..................................          376          --
  Proceeds derived from the sale of
    convertible debentures .........................        2,000          --
  Proceeds derived from the sale of
    convertible notes ..............................        5,000          --
  Cash acquired pursuant to an acquisition .........         --             138
  Principal payments of
    outstanding debt obligations ...................          (75)         (141)
                                                          -------       -------
    Net cash provided by
       financing activities ........................       14,934         3,668
                                                          -------       -------

Net increase (decrease) in cash and
  cash equivalents .................................         (892)          676

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

Cash and cash equivalents
  at September 30 ..................................      $ 4,838       $ 7,115
                                                          =======       =======

</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>

                                                     Nine Months Ended September 30,
                                                     -------------------------------
                                                           1999          1998
                                                           ----          ----


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

<S>                                                       <C>           <C>
Net income .........................................      $ 1,478       $ 1,818

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

  Depreciation and amortization ....................        1,164           797

Decrease (increase) in assets:
  Accounts receivable ..............................       (2,640)       (4,153)
  Inventory ........................................       (7,389)       (7,365)
  Prepaid expenses .................................          129            31
  Other assets .....................................       (2,081)          (28)

Increase (decrease) in liabilities:
  Accounts payable .................................        2,100         6,517
  Deferred revenue .................................       (2,935)       (1,082)
  Accrued expenses .................................         (537)          835
  Pension obligation ...............................          (44)         (141)
  Other liabilities ................................         (917)          578
                                                          -------       -------

Net cash used in operating
  activities .......................................     ($11,672)     ($ 2,193)
                                                          =======       =======

Non-cash financing activities:
 Common stock issued in connection
   with an employee benefit plan ...................      $   152       $   155
                                                          =======       =======
 Common stock issued in connection
   with the conversion of debentures ...............      $ 2,160
                                                          =======
 Fair value of assets acquired in
   connection with an acquisition ..................      $   198       $ 4,111
                                                          =======       =======
 Fair value of liabilities assumed in
   connection with an acquisition ..................      $    87       $ 2,361
                                                          =======       =======
 Common stock issued in connection with
   acquisitions ....................................      $ 1,400       $   110
                                                          =======       =======
 Note payable, net of imputed interest,
    issued in connection with an acquisition .......                    $ 1,750
                                                                        =======

</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  September  30,  1999,  and  the
Consolidated  Statements of Operations  and Cash Flows for the nine months ended
September 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 September  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 September 30, 1999
are not necessarily indicative of the operating results for the full year.

Note 2 - Acquisition of Ego Media Inc.

     Effective  September 28, 1999, the Company  consummated  the acquisition of
80%  of  Ego  Media,  Inc.  ("Ego  Media"),  a  New  York-based,  leading  edge,
technology-based,  web-brand development and communications company. Pursuant to
the terms of the agreement, the Company issued an aggregate of 350,000 shares of
the Company's  Common Stock,  valued at $4.00 per share.  Ego Media has recently
emerged from the development stage, focusing upon developing web-brand marketing
strategies for clients seeking to engage in "e-commerce".  Pursuant to the terms
of the transaction,  the Company has recorded  approximately $1.4 million as the
excess cost over fair market value of assets acquired.

Note 3 - Inventory

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

                               September 30,    December 31,
                                 1999              1998
                                 ----              ----
                                       (in thousands)
     Finished goods             $ 2,969           $ 3,549
     Work-in-process              4,545             3,789
     Raw materials               15,210             7,997
                                -------           -------
                                $22,724           $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 nine months ended  September  30,
1999 and 1998 are as follows:

                               Nine months ended September 30,
                               -------------------------------
                                 1999                  1998
                                 ----                  ----
                                       (in thousands)
     State and local
       income taxes              $51                   $111
                                 ===                   ====

Note 5 - Long-term Obligations

     On August 26, 1999,  the Company  consummated  a $35.0  million,  five year
Revolving Credit,  Term Loan and Security Agreement ("Credit  Agreement") with a
financial  institution.  The Credit Agreement  provides for a secured  revolving
credit  facility  which  advances up to the sum of (i) 85% of eligible  accounts
receivable,  (ii)  60% of  eligible  inventory  and  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.

     Borrowings  under the Credit  Agreement bear interest at the  institution's
prime rate plus 0.25% per annum or, at the option of the Company, the Eurodollar
rate plus 2.5% per annum. The Company is required to pay a quarterly  commitment
fee at the rate of 0.25% 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) declaration or payment of
dividends,  (ii) the occurrence of additional indebtedness and (iii) the sale of
certain  assets.  The  Credit  Agreement  replaces  a prior $17  million  credit
facility.

     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 are  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 registered
for resale the underlying  shares which may be issued upon the conversion of the
Notes under the Securities Act of 1933.

     On August 26, 1999,  the Company  issued a $2.0  million,  10%  Convertible
Debenture Due August 26, 2002  ("Debenture") to an institutional  investor.  The
Debenture bears interest at the rate of 10% per annum and is 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 $4.00
per share. The Debenture was issued through a private  placement;  however,  the
Company registered for resale the underlying shares which may be issued upon the
conversion of the Debenture 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 third  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
eleventh  consecutive  quarterly profit.  Net revenues  increased 21.3% to $62.9
million for the nine months ended September 30, 1999. The Company  generated net
income of $1.5 million,  or $0.13 basic earnings per share,  in 1999 as compared
to $1.8 million,  or $0.20 basic  earnings per share,  for the nine months ended
September 30, 1998.

     Effective  September 28, 1999, the Company  consummated  the acquisition of
80%  of  Ego  Media,  Inc.  ("Ego  Media"),  a  New  York-based,  leading  edge,
technology-based,  web-brand development and communications company. Pursuant to
the terms of the agreement, the Company issued an aggregate of 350,000 shares of
the Company's  Common Stock,  valued at $4.00 per share.  Ego Media has recently
emerged from the development stage, focusing upon developing web-brand marketing
strategies for clients seeking to engage in "e-commerce".  Pursuant to the terms
of the transaction,  the Company has recorded  approximately $1.4 million as the
excess cost over fair market value of assets acquired.

     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.  On August 26, 1999, the Company consummated a $35.0 million, five
year Revolving Credit,  Term Loan and Security  Agreement  ("Credit  Agreement")
with a  financial  institution.  The  Credit  Agreement  provides  for a secured
revolving  credit  facility  which advances up to the sum of (i) 85% of eligible
accounts receivable, (ii) 60% of eligible inventory and 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.

     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 are 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 issued upon the
conversion  of the Notes under the  Securities  Act of 1933. On August 26, 1999,
the Company issued a $2.0 million, 10% Convertible Debenture Due August 26, 2002
("Debenture") to an institutional  investor. The Debenture bears interest at the
rate of 10% per annum and is  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 $4.00 per share.  The Debenture was
issued through a private placement;  however,  the Company registered for resale
the  underlying  shares which may be issued upon the conversion of the Debenture
under the Securities Act of 1933.

     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.



                                        8

<PAGE>




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

     Management  believes that HMG is well positioned as a leading,  innovative,
marketing solutions company providing innovation wherever purchase decisions are
made.  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 September 30, 1999 as Compared to the
  Three Months Ended September 30, 1998

     Net revenues  increased  $200,000,  or 0.8%, to $22.6 million for the three
months  ended  September  30, 1999 as  compared  to $22.5  million for the three
months ended  September  30, 1998.  The $200,000  increase in net revenues  from
period to period was due  principally to  fluctuations  in the Company's  client
shipping schedule from period to period

     Gross profit for the three months ended September 30, 1999 was $6.3 million
as compared to $5.4 million for the three months ended  September 30, 1998.  The
increase in gross profit of $900,000 was  principally a result of an increase in
gross margin for the quarter.  For the three months ended September 30, 1999 and
1998, the Company's  gross margin was 27.7% and 24.3%,  respectively.  The gross
margin increase of 3.4% was due principally to the net effect of (i) a favorable
production  revenue mix resulting in a 5.0%  increase,  reflecting the Company's
production of certain  programs at higher  margins due to the larger  production
volumes,  offset  by (ii) a 1.6%  increase  in  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  September  30, 1999 was $5.2  million as compared to $4.2 million for the
comparable  period in 1998.  The  increase  in SG&A of  $900,000  from period to
period was  principally  due to the addition of the  operations of HMG Schutz of
$700,000 and increased spending in other general expenses of $200,000.

     For the three months ended  September 30, 1999, the Company earned interest
income of $63,000 as compared to $62,000 for the three  months  ended  September
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 $305,000 for the three months ended September 30, 1999
as compared to $417,000  for the three  months ended  September  30,  1998.  The
decrease  in interest  expense  was  principally  due to the  decreased  average
borrowings from period to period.

     As a consequence of the foregoing factors, the Company generated net income
of  $837,000,  or $0.07 basic  earnings  per share,  for the three  months ended
September  30,  1999 as  compared  to a net income of  $816,000,  or $0.09 basic
earnings per share, for the three months ended September 30, 1998.

Nine months ended September 30, 1999 as Compared to the
 Nine months ended September 30, 1998

     Net revenues  increased $11.0 million,  or 21.2%, to $62.9 million for nine
months ended September 30, 1999 as compared to $51.9 million for the nine months
ended September 30, 1998. The $11.0 million increase in net revenues from period
to period was due principally to (i) the addition of HMG Schutz, acquired August
1, 1998,  of $9.4 million and (ii) a net increase in marketing  expenditures  of
the Company's clients during the period of approximately $1.6 million.

     Gross profit for the nine months ended September 30, 1999 was $18.2 million
as compared to $14.0 million for the nine months ended  September 30, 1998.  The
increase  in gross  profit  of $4.2  million  was  principally  a result  of the
increase in net  revenues and an increase in gross  margin.  For the nine months
ended  September  30, 1999 and 1998,  the  Company's  gross margin was 28.9% and
27.0%, respectively.  The gross margin increase of 1.9% was due principally to a
favorable  production  revenue mix,  reflecting  the  Company's  efforts of more
direct, internal production of its

                                        9

<PAGE>



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

     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 nine months
ended  September 30, 1999 was $15.8 million as compared to $11.1 million for the
comparable  period in 1998.  The increase in SG&A of $4.7 million from period to
period was  principally  due to the  addition of HMG Schutz SG&A of $4.3 million
and increased spending in other general expenses of $300,000.

     For the nine  months  ended  September  30,  1999,  the  Company  generated
interest  income of $205,000 as compared to $210,000  for the nine months  ended
September 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 $1.1 million for the nine months ended  September 30,
1999 as compared to $1.2 million for the nine months ended  September  30, 1998.
The decrease 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 $1.5  million or $0.13 basic  earnings  per share,  for the nine months ended
September 30, 1999 as compared to a net income of $1.8  million,  or $0.20 basic
earnings per share, for the nine months ended September 30, 1998.

Stockholders' Equity

     Stockholders'  equity  increased $5.2 million to $14.3 million at September
30, 1999 from $9.1 million at December 31, 1998.  The increase in  stockholders'
equity was due to (i) net income of $1.5 million, (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,  (iii) the  issuance of 350,000
shares  of  Common  Stock,  valued  at $1.4  million,  in  connection  with  the
acquisition  of Ego Media and (iii) net  proceeds of $376,000  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 and nine months
ended September 30, 1999 was $37,000 and $51,000,  respectively,  as compared to
$36,000 and $111,000,  respectively,  for the three months and nine months ended
September 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 September 30, 1999, the Company's  aggregate  backlog was  approximately
$46.6  million as compared to $48.8  million and $34.4  million at December  31,
1998  and  September  30,  1998,  respectively.  Of such  aggregate  backlog  at
September  30, 1999,  approximately  43% was  attributable  to two clients.  The
Company  anticipates that  substantially  all such backlog at September 30, 1999
will be filled during the next twelve months to eighteen months.  In addition to
the $46.6 million  backlog at September 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
September 30, 1999 was approximately $21.3 million, of which

                                       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  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  September  30, 1999 and  December  31, 1998
aggregated $4.8 million and $5.7 million,  respectively.  The Company's decrease
in cash and cash equivalents of $900,000 for the nine months ended September 30,
1999 was due  principally  to the net effects of (i) net cash used in operations
of $11.7 million, (ii) capital expenditures of $4.2 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,  and  $2.0  million,   10%  Convertible
Debentures,  (v) proceeds  from  exercise of stock  options of $376,000 and (vi)
proceeds  derived  from the  Company's  Credit  Agreement of $7.6  million.  The
Company's  negative  cash  flows  from  operations  for the  nine  months  ended
September  30, 1999  resulted  principally  from (i) a net  increase in accounts
receivable  and  inventory  of $10.0  million and (ii) a net increase in general
liabilities of $2.2 million.

     On August 26, 1999,  the Company  consummated  a $35.0  million,  five year
Revolving Credit,  Term Loan and Security Agreement ("Credit  Agreement") with a
financial  institution.  The Credit Agreement  provides for a secured  revolving
credit  facility  which  advances up to the sum of (i) 85% of eligible  accounts
receivable,  (ii)  60% of  eligible  inventory  and  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.

     Borrowings  under the Credit  Agreement bear interest at the  institution's
prime rate plus 0.25% per annum or, at the option of the Company, the Eurodollar
rate plus 2.5% per annum. The Company is required to pay a quarterly  commitment
fee at the rate of 0.25% 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) declaration or payment of
dividends,  (ii) the occurance of additional  indebtedness and (iii) the sale of
certain assets. As of September 30, 1999, the Company was in compliance with all
financial  covenants of the Credit Agreement.  The Credit Agreement  replaces an
existing $17 million credit facility.

     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 are  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 registered
for resale the underlying  shares which may be issued upon the conversion of the
Notes under the Securities Act of 1933.

     On August 26, 1999,  the Company  issued a $2.0  million,  10%  Convertible
Debenture Due August 26, 2002  ("Debenture") to an institutional  investor.  The
Debenture bears interest at the rate of 10% per annum and is 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 $4.00
per share. The Debenture was issued through a private  placement;  however,  the
Company registered for resale the underlying shares which may be issued upon the
conversion of the Debenture under the Securities Act of 1933.

     The  Company's  working  capital at  September  30, 1999 was $7.0  million,
inclusive  of  borrowings  of $19.7  million  pursuant to the  five-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 new 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.
Management  believes its current  financing,  an expanded client base and future
cash flows from operations developed by the

                                       11

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

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 September 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  installed  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.

     The  Company's  Year 2000 project is complete as of September  30, 1999. To
date, we have incurred  expenses of approximately  $425,000 in hardware upgrades
and software enhancements.

     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                               15


                                       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: November 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 NINE MONTHS ENDED SEPTEMBER 30, 1999
                      (in thousands, except per share data)
                                   (unaudited)


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

Basic earnings per share:
   Income available to
      common stockholders            $  837           11,292            $0.07
                                                                        =====

Effect of dilutive securities:
 Stock options and warrants             --             2,947
                                     ------            -----

Diluted earnings per share:
   Income available to common
      stockholders and assumed
      conversions                    $  837           14,239            $0.06
                                     ======           ======            =====




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

Basic earnings per share:
   Income available to
      common stockholders            $1,478           11,124            $0.13
                                                                        =====

Effect of dilutive securities:
 Stock options and warrants            --              2,634
                                     ------           ------

Diluted earnings per share:
   Income available to common
      stockholders and assumed
      conversions                    $1,478           13,758            $0.11
                                     ======           ======            =====












                                       15

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