<PAGE>   1
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q


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


         For the Quarter Ended                         Commission File Number
         March 31, 1998                                         0-10737


                           Stuart Entertainment, Inc.
             ------------------------------------------------------
             (Exact name of registrant as specified in its charter)


                 Delaware                                 84-0402207
          ----------------------                    ---------------------
         (State of incorporation)                      (I.R.S. Employer
                                                    Identification Number)

  3211 Nebraska Avenue, Council Bluffs, IA                  51501
  -----------------------------------------                -------
  (Address of principal executive offices)                (Zip Code)


Registrant's Telephone Number, including Area Code: (712) 323-1488
                                                    ---------------

Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.

                                                             Yes  [X]    No  [ ]


As of May 11, 1998 there were 6,991,650 shares of the Registrant's common stock,
$.01 par value, outstanding.



<PAGE>   2


                   STUART ENTERTAINMENT, INC. AND SUBSIDIARIES


                                      INDEX

<TABLE>
<CAPTION>
 
                                                                                                 Page No.
                                                                                                 --------
<S>                                                                                                   <C>
PART I.  FINANCIAL INFORMATION:

  Item 1:

         Consolidated Statements of Operations for the
           Three Months Ended March 31, 1998 and 1997  .................................................3

         Consolidated Balance Sheets as of March 31, 1998 and
           December 31, 1997    ........................................................................4

         Consolidated Statements of Cash Flows for the
           Three Months Ended March 31, 1998 and 1997 ..................................................5

         Notes to Consolidated Financial Statements...................................................6-8

  Item 2:

         Management's Discussion and Analysis of Financial
          Condition and Results of Operations........................................................9-12

PART II. OTHER INFORMATION:............................................................................13

         Signatures....................................................................................14

         Exhibit Index.................................................................................15
</TABLE>





<PAGE>   3

                          PART I. FINANCIAL INFORMATION

Item 1.    FINANCIAL INFORMATION




STUART ENTERTAINMENT, INC.  AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Dollars in thousands, except per share data)
(UNAUDITED)

<TABLE>
<CAPTION>
                                                           1998             1997
<S>                                                     <C>              <C>
NET SALES                                               $   31,595       $   31,870

COST OF GOODS SOLD                                          20,919           22,512
                                                        ----------       ----------

GROSS MARGIN                                                10,676            9,358

OTHER EXPENSES:
  Selling, general and administrative expenses               8,955            8,592
  Interest expense, net                                      3,152            3,110
                                                        ----------       ----------
    Other expenses, net                                     12,107           11,702
                                                        ----------       ----------

LOSS BEFORE INCOME TAXES                                    (1,431)          (2,344)

INCOME TAX PROVISION (BENEFIT)                                 173             (922)
                                                        ----------       ----------

NET LOSS                                                $   (1,604)      $   (1,422)
                                                        ==========       ==========

LOSS PER SHARE - basic and diluted                      $    (0.23)      $    (0.21)
                                                        ==========       ==========

</TABLE>


Note: No dividends were paid or declared during the three months ended March 31,
      1998 and 1997.

See Notes to Consolidated Financial Statements.


                                       3

<PAGE>   4
STUART ENTERTAINMENT, INC.  AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 AND DECEMBER 31, 1997
(Dollars in thousands)

<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
                                                                            MARCH 31,         DECEMBER 31,
ASSETS                                                                        1998               1997
                                                                           (UNAUDITED)
<S>                                                                        <C>               <C>
CURRENT ASSETS:
  Cash and cash equivalents                                                $     8,123       $     7,099
  Trade receivables, net of allowance for doubtful accounts of $3,220
    and $3,091                                                                  26,441            23,085
  Current portion of notes receivable, less allowance for doubtful
     accounts of $234 and $233                                                   2,388             2,269
  Inventories                                                                   21,591            20,929
  Deferred income taxes                                                          3,008             3,008
  Prepaid expenses and other current assets                                      1,581             1,111
                                                                           -----------       -----------
           Total Current Assets                                                 63,132            57,501

PROPERTY, PLANT AND EQUIPMENT, net                                              26,200            26,471
GOODWILL, net of accumulated amortization of $3,639 and $3,244                  45,868            45,655
OTHER ASSETS, net                                                                8,334             8,197
                                                                           -----------       -----------

                                                                           $   143,534       $   137,824
                                                                           ===========       ===========
LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES:
  Current portion of long-term debt                                        $       121       $        89
  Trade payables                                                                13,000            10,929
  Accrued payroll and benefits                                                   2,562             2,087
  Other accrued liabilities                                                      8,990             3,180
  Restructuring charge reserve                                                   1,989             2,841
  Income taxes payable                                                             977               797
                                                                           -----------       -----------
           Total Current Liabilities                                            27,639            19,923

LONG-TERM DEBT                                                                 100,618           100,665
DEFERRED INCOME TAXES                                                              727               721
DEFERRED INCOME                                                                    226               143
COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY:
  Common stock $.01 par value;  30,000,000 shares authorized;
    6,927,488 and 6,920,140 shares outstanding                                      70                70
  Additional paid-in capital                                                    27,756            27,732
  Deficit                                                                      (11,663)          (10,059)
  Treasury stock (56,260 shares at cost)                                          (189)             (189)
  Accumulated other comprehensive income                                        (1,650)           (1,182)
                                                                           -----------       -----------
           Total Stockholders' Equity                                           14,324            16,372
                                                                           -----------       -----------

                                                                           $   143,534       $   137,824
                                                                           ===========       ===========
</TABLE>

See Notes to Consolidated Financial Statements.


                                       4

<PAGE>   5



STUART ENTERTAINMENT, INC.  AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Dollars in thousands)
(UNAUDITED)

<TABLE>
<CAPTION>

--------------------------------------------------------------------------------------------------------
                                                                                  1998           1997
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                             <C>           <C>      
  Net loss                                                                      $(1,604)      $ (1,422)
  Adjustments to reconcile net loss to net cash flows from
    operating activities:
    Depreciation and amortization                                                 1,896          1,634
    Provision for doubtful accounts                                                 202             --
    Equity in earnings of joint ventures                                             (8)            (4)
    Payments on restructuring charge                                               (852)          (504)
    Other non-cash expenses - net                                                (1,115)           435
    Change in operating assets and liabilities:
      Trade receivables                                                          (3,815)        (1,178)
      Inventories                                                                  (186)         2,780
      Trade payables                                                              1,954           (761)
      Other - net                                                                 5,992          1,680
                                                                                -------       --------
           Net cash flows from operating activities                               2,464          2,660

CASH FLOWS FROM INVESTING ACTIVITIES:
  Capital expenditures for property, plant and equipment                         (1,069)        (1,000)
  Acquisitions, net of cash acquired                                               (480)            --
  Capital expenditures for electronic bingo systems                                (312)            --
  Other                                                                             (38)           (83)
  Payments received on notes receivable                                             542            406
                                                                                -------       --------
           Net cash flows from investing activities                              (1,357)          (677)

CASH FLOWS FROM FINANCING ACTIVITIES:
  Cost of debt financing                                                            (41)          (152)
  Payments on long-term debt                                                        (15)           (38)
                                                                                -------       --------
           Net cash flows from financing activities                                 (56)          (190)

  Effect of currency exchange rate changes on cash of foreign subsidiaries          (27)            27
                                                                                -------       --------

NET CHANGE IN CASH AND CASH EQUIVALENTS                                           1,024          1,820
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                  7,099         13,732
                                                                                -------       --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD                                      $ 8,123       $ 15,552
                                                                                =======       ========

SUPPLEMENTAL CASHFLOW DISCLOSURES:
  Interest paid                                                                 $    19       $     60
  Income taxes paid                                                             $    --       $    132
</TABLE>


See Notes to Consolidated Financial Statements.


                                       5

<PAGE>   6


STUART ENTERTAINMENT, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(COLUMNAR AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------------------------------------------------

1.    NATURE OF BUSINESS - Stuart Entertainment, Inc. and its wholly-owned
      subsidiaries (collectively, the "Company") are primarily engaged in the
      manufacture and distribution of a full line of bingo and bingo-related
      products throughout the United States and Canada. Products include
      disposable bingo paper, pulltab tickets, ink dabbers, bingo hall
      equipment, electronic bingo systems, general merchandise and accessories.

2.    BASIS OF PRESENTATION - The accompanying unaudited consolidated financial
      statements of Stuart Entertainment, Inc. have been prepared in accordance
      with generally accepted accounting principles for interim financial
      statements and with the instructions to Form 10-Q and Article 10 of
      Regulation S-X. Accordingly, they do not include all of the information
      and notes required by generally accepted accounting principles for annual
      financial statements.

      In the opinion of the Company's management, the foregoing unaudited
      consolidated financial statements reflect all adjustments necessary for a
      fair presentation of the results of the Company for the periods shown.
      Operating results for the three months ended March 31, 1998 and 1997 are
      not necessarily indicative of the results that may be expected for the
      full year ending December 31, 1998. These financial statements should be
      read in conjunction with the audited consolidated financial statements and
      notes thereto for the year ended December 31, 1997, filed with the
      Securities and Exchange Commission on the Company's Annual Report on Form
      10-K.

      Certain reclassifications have been made to the 1997 financial statements
      to conform to those classifications used in 1998.

3.    EARNINGS PER SHARE - The Company has adopted Statement of Financial
      Accounting Standard Board No. 128, Earning Per Share ("SFAS 128"). Basic
      earnings (loss) per share is computed based upon net income (loss) divided
      by the weighted average number of shares of common stock outstanding
      during the period. Diluted earnings (loss) per share is computed based
      upon net income (loss) divided by the weighted average number of shares of
      common stock outstanding during the period after giving effect to stock
      options and warrants considered to be dilutive common stock equivalents.

4.    REPORTING COMPREHENSIVE INCOME - The Company has adopted Statement of
      Financial Accounting Standards No. 130 - Reporting Comprehensive Income
      ("SFAS 130") in the first quarter of 1998. This statement requires the
      reporting of comprehensive income in addition to net income from
      operations in annual statements of operations. Comprehensive income is a
      more inclusive financial reporting methodology that includes disclosure of
      certain financial information that historically has not been recognized in
      the calculation of net income. Comprehensive loss for the three months
      ended March 31, 1998 and 1997 were $2,072,000 and $1,760,000,
      respectively.


                                       6

<PAGE>   7



5. INVENTORIES - Inventories consisted of the following:

<TABLE>
<CAPTION>
                                                     MARCH 31,   DECEMBER 31,
                                                       1998         1997
<S>                                                  <C>          <C>    
        Raw materials                                $ 6,249      $ 5,159
        Work-in-process                                1,654        2,038
        Finished goods                                13,688       13,732
                                                     -------      -------

                                                     $21,591      $20,929
                                                     =======      =======
</TABLE>


6.    RESTRUCTURING CHARGE - During the fourth quarter of 1996, management
      authorized and committed the Company to undertake consolidation of its
      United States manufacturing operations producing pulltab tickets, bingo
      paper and ink dabbers. This restructuring plan involves closing or
      substantially closing five facilities and transferring operations to other
      manufacturing facilities. The consolidation decision was made to improve
      customer service, improve productivity and asset utilization and reduce
      costs. The restructuring charge included approximately $1,511,000 of
      recognized severance and termination benefits for approximately 400
      employees and $1,769,000 of facility closure and consolidation costs.

      In the fourth quarter of 1997, the company recorded a restructuring charge
      of $2,261,000 for a program related to workforce reductions and to
      complete the consolidation of United States consumables manufacturing
      operations. The Company evaluated competitive market conditions in its
      markets, reviewed future costs in line with anticipated levels of business
      in 1998 and beyond, and determined that a restructuring charge was
      required to cover the costs of reducing certain sectors of its workforce
      to levels more appropriate to meet current business requirements, thereby
      eliminating approximately 50 positions. As result, a charge of $1,229,000
      for severance costs and the buyout of certain employment contracts was
      recorded. The Company also aggressively continued its plan to consolidate
      its United States consumables manufacturing operations during 1997.
      Certain modifications to the original consolidations plan and
      unanticipated costs resulted in costs that were not originally charged.
      Management estimated that $1,032,000 of such additional costs will be
      incurred in the future and accordingly recorded an additional charge in
      1997.

      At March 31, 1998, $1,989,000 of restructuring charges remained in accrued
      liabilities. The balance was comprised of $1,301,000 for severance,
      termination benefits and contract buyout and $688,000 of facility closure
      and consolidation costs to be completed in 1998. A summary of the
      restructuring activity is presented below:


                                       7

<PAGE>   8

<TABLE>

<S>                                                            <C>    
        Balance at December 31, 1997                           $ 2,841

          Consolidation of U.S. Manufacturing Operations:
             - Severance and termination costs                    (580)
             - Facility closure and consolidation costs           (272)
                                                               -------

        Balance at March 31, 1998                              $ 1,989
                                                               =======
</TABLE>




7.    LONG-TERM DEBT - In November 1996, the Company completed a private
      placement in reliance on Rule 144A of the Securities Act of 1933, as
      amended, of $100 million aggregate principal amount of 12.5% Senior
      Subordinated Notes due November 15, 2004 (the Notes). Interest on the
      Notes are payable semi-annually on each May 15 and November 15.

      In November 1997, the Company entered into a credit facility which
      consists of two loan and security agreements, one between the Company and
      Congress Financial Corporation (the "US Facility") and one between Bingo
      Press & Specialty Limited, a wholly-owned subsidiary of the Company (the
      "Canadian Borrower") and Congress Financial Corporation (the "Canadian
      Facility") (collectively, the "Credit Facility"). The Credit Facility
      provides for maximum borrowings of up to $30.0 million, of which up to
      $20.0 million may be borrowed under the US Facility and up to US$10.0
      million may be borrowed under the Canadian Facility.

      The Company, and the Canadian Borrower (sometimes referred to collectively
      herein as the "Borrowers") are entitled to draw amounts under the Credit
      Facility, subject to availability pursuant to a borrowing base
      certificate. The borrowing base is based on the eligible accounts
      receivable, eligible inventory and equipment value levels of the Company
      and the Borrowers, respectively. At March 31, 1998 and December 31, 1997,
      $26.4 and $27.7 million, respectively, was available for borrowing under
      the Credit Facility. At March 31, 1998 and December 31, 1997, the Company
      had not yet drawn any amounts under the Credit Facility.
      The Company was not in violation of any covenants at March 31, 1998.

      Long-term debt consisted of the following:

<TABLE>
<CAPTION>

                                         MARCH 31,   DECEMBER 31,
                                           1998         1997

<S>                                      <C>           <C>     
      Senior Subordinated Notes          $100,000      $100,000
      Notes payable to others                 739           754
                                         --------      --------
                                          100,739       100,754
      Less current portion                    121            89
                                         --------      --------

                                         $100,618      $100,665
                                         ========      ========
</TABLE>

                                       8


<PAGE>   9


Item 2.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL 
CONDITION AND RESULTS OF OPERATIONS

The statements contained in this report that are not historical fact are
forward-looking statements (as such term is defined in the Private Securities
Litigation Reform Act of 1995), which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should," or "anticipates," or the negative thereof or other variations thereon
or comparable terminology, or by discussions of strategy that involve risks and
uncertainties. Management wishes to caution the reader that these
forward-looking statements such as the timing, costs and scope of its
acquisition of, or investments in, the bingo industry and new product
development, and other matters contained in this report or the documents
incorporated by reference regarding matters that are not historical facts, are
only predictions. No assurances can be given that the future results indicated,
whether expressed or implied, will be achieved. While sometimes presented with
numerical specificity, these projections and other forward-looking statements
are based upon a variety of assumptions relating to the business of the Company,
which, although considered reasonable by the Company, may not be realized.
Because of the number and range of the assumptions underlying the Company's
projections and forward-looking statements, many of which are subject to
significant uncertainties and contingencies that are beyond the reasonable
control of the Company, some of the assumptions inevitably will not materialize,
and unanticipated events and circumstances may occur subsequent to the date of
this report or the documents incorporated by reference. These forward-looking
statements are based on current expectations and the Company assumes no
obligation to update this information. Therefore, the actual experience of the
Company and results achieved during the period covered by any particular
projections or forward-looking statements may differ substantially from those
projected. Consequently, the inclusion of projections and other forward-looking
statements should not be regarded as a representation by the Company or any
other person that these estimates and projections will be realized, and actual
results may vary materially. There can be no assurance that any of these
expectations will be realized or that any of the forward-looking statements
contained herein will prove to be accurate.

RESULTS OF OPERATIONS

Comparison of Three Months Ended March 31, 1998 and 1997

Net Sales - Net sales were $31.6 million for the three months ended March 31,
1998, a decrease of $0.3 million or 0.9% from $31.9 million for the three months
ended March 31, 1997. The sales decrease is attributable to lower sales volumes
in the United States offset in part by increased sales in Canada. Domestically,
lower sales were experienced primarily in bingo paper and pulltab tickets.
However, the decrease was offset in part by sales generated from the Power Bingo
King(TM) hand-held electronic bingo systems. In Canada, a substantial increase
in pulltab ticket sales was offset in part by a decrease in bingo paper.

The Company expects weakness in consumable sales to continue in 1998 in the
United States due to the growth of electronics combined with continuing
competitive pressures from other sources of gaming and entertainment. At the
same time, the Company expects sales from its hand-held electronic bingo systems
to continue to increase, which the Company expects will partially offset the
decline in consumable products. Management expects pulltab ticket sales to
continue to increase modestly in Canada as a result of being awarded a five year
contract from the Ontario Gaming Commission to be the sole supplier of pulltab
tickets to all charity licensed retail locations in the Province of Ontario.


                                       9


<PAGE>   10

Beginning in the second half of 1998, the Company may also benefit from new
products, such as a new line of ink dabbers and its Gold Crown video enhanced
pulltab ticket dispenser. The Gold Crown machine is a self-contained pulltab
dispenser with real pulltab tickets and on-screen, interactive play. The Company
believes this machine is an innovative combination of a traditional ticket
dispenser and a video machine. The Company is licensed to manufacture and sell
the dispenser only in the state of Washington, a major market for pulltab ticket
sales. 

Cost of Goods Sold - Cost of goods sold, as a percentage of sales, was 66.2% for
the three months ended March 31, 1998 compared to 70.6% for the three months
ended March 31, 1997. Excluding the application of a $1.5 million purchase
accounting adjustment recorded in the first quarter of 1997 to the finished
goods inventory of Trade Products, cost of goods sold, as a percentage of sales,
was 66.1% for the three months ended March 31, 1997.

In Canada, the Company experienced an increase in the cost of goods sold, as a
percentage of sales, in the first quarter of 1998 compared to the first quarter
of 1997 due primarily to two factors i) higher manufacturing labor costs, and
ii) an increase in demand for higher cost products. Domestically, the Company
experienced lower cost of goods sold primarily due to lower pulltab production
costs resulting from the consolidation of its manufacturing operations completed
in the second quarter of 1997 (the "Consolidation") and the impact of the
acquisition of substantially all of the assets of Power Bingo Corp. ("Power
Bingo") in July 1997. These decreases were partly offset by higher paper and ink
production variances attributable to the consolidation of these operations at
the Texas border facilities.

The Company expects that U.S. pulltab production costs will decline throughout
1998 compared to 1997 as the Company more fully realizes the benefits of the
Consolidation. However, bingo paper and ink dabber production inefficiencies are
expected to unfavorably impact the second and third quarters of 1998 as a result
of the consolidation and start up of these operations at the Texas border
facilities. Bingo paper and ink dabber production costs are expected to decline
in the future in conjunction with completion of this consolidation.

Selling, General and Administrative Expenses - Selling, general and
administrative expenses were $9.0 million for the three months ended March 31,
1998 compared to $8.6 million for the three months ended March 31, 1997, an
increase of $0.4 million or 4.2%. Selling, general and administrative expense,
as a percentage of sales, was 28.3% for the three months ended March 31, 1998
compared to 27.0% for the period ended March 31, 1997. The increase is primarily
attributable to the impact of i) increased expenses involved due to the
acquisition of Power Bingo, ii) the acquisition of distributor and marketing
companies in Canada, and iii) the development of the Gold Crown video enhanced
pulltab ticket dispenser. These increases were partially offset with the
benefits realized by the workforce reduction program the Company announced in
the fourth quarter of 1997.

Interest Expense, Net - Interest expense, net was $3.2 million for the three
months ended March 31, 1998 compared to $3.1 million for the three months ended
March 31, 1997, an increase of $0.1 million. Interest expense is primarily
attributable to the Notes.

Income Tax Provision (Benefit) - The Company recorded an income tax provision of
$173,000 pertaining to income generated in Canada for the three months ended
March 31, 1998 compared to an income tax benefit reported on a consolidated
basis of $922,000 for the three months ended March 31, 1997. The effective tax
rate was 12.1% for the three months ended March 31, 1998 


                                       10

<PAGE>   11

compared to (39.3%) for the three months ended March 31, 1997. The increase in
the effective tax rate is primarily attributable to the recognition of a 
valuation allowance due to the uncertainty regarding realization of certain
long-term future tax benefits. Realization of future tax benefits related to the
deferred tax assets is dependent on many factors, including the Company's
ability to generate taxable income within the net operating loss carryforward
periods.

LIQUIDITY AND CAPITAL RESOURCES

The Company's long-term debt at March 31, 1998, including the current portion
thereof, totaled $100.7 million compared to $100.8 million at December 31, 1997
(see Note 7 of Notes to Consolidated Financial Statements). Cash payments on
long-term debt for the first three months ended March 31, 1998 totaled $15,000
compared to $38,000 for the three months ended March 31, 1997.

In November 1997, the Company entered into the Credit Facility which provides
for maximum borrowings of up to $30.0 million, of which up to $20.0 million may
be borrowed under the US Facility and up to US$10.0 million may be borrowed
under the Canadian Facility. At March 31, 1998 and December 31, 1997, the
Company had not yet drawn any amounts under the Credit Facility and $26.4 and
$27.7 million, respectively, was available for borrowing based on its borrowing
base certificates (see Note 7 to the Consolidated Statements).

The Company's capital expenditures for property, plant and equipment were $1.1
million during the first quarter of 1998 compared with $1.0 million the first
quarter of 1997. Historically, the Company's capital expenditure program has
focused on the purchase of equipment designed to increase production capacity
and improve manufacturing efficiencies. Beginning in 1996, and continuing into
1997 and 1998, however, a greater portion of the Company's capital expenditures
were allocated to the upgrading and development of management information
systems and communication systems. During 1998, the Company's capital
expenditure program will focus on i) the upgrading and development of management
information systems, ii) the purchase of equipment designed to improve
manufacturing efficiency and iii) the consolidation of United States
manufacturing operations.

Capital expenditures for electronic bingo systems consist of Power Bingo
King(TM) and System 12(TM) electronic bingo systems placed in the market on a
lease or revenue sharing basis. The Company's capital expenditures for
electronic bingo systems were $312,000 in the first quarter of 1998 compared to
no capital expenditures in the first quarter of 1997, due to the acquisition of
Power Bingo in July 1997.

The Company believes that with its current operating plan, cash flow from
operations, excess cash on hand and the Credit Facility, it will have sufficient
cash to meet its financial obligations including interest on the Notes,
operating expenses, capital expenditures, expenses related to consolidation of
operations and working capital requirements. In addition, with the acquisition
of Power Bingo, the Company expects the electronics portion of its business to
generate additional cash flow.

The Company's business plan includes pursuing selective business acquisitions
and strategic alliances. The Company will continue to evaluate additional
opportunities and, as attractive opportunities develop, the Company will
consider additional acquisitions. The Company expects to 


                                       11

<PAGE>   12

meet additional capital needs with the proceeds from sales or issuance of equity
securities, the Credit Facility and other borrowings. There can be no assurance,
however, that the Company will be successful in raising sufficient additional
capital on terms acceptable to the Company, if at all. In addition, the
Company's ability to raise additional funds through the issuance of equity
securities could be adversely effected if the Company's common stock is delisted
from the Nasdaq SmallCap Market. Moreover, the Company is restricted in its
ability to incur additional indebtedness pursuant to the terms of the Indenture.
The failure to raise and generate sufficient funds may require the Company to
delay or abandon some of its planned future expansion, which could have a
material adverse effect on the future growth of the Company.

Management does not believe that inflation has had or is expected to have any
significant adverse impact on the Company's financial condition or results of
operations for the periods indicated.



                                       12


<PAGE>   13



                           PART II. OTHER INFORMATION

Item 6.     Exhibits and Reports on Form 8-K:

            a.   EXHIBITS:

                 Exhibit 11       Statement Regarding Computation of Per Share
                                  Earnings

                 Exhibit 27       Financial Data Schedule

                 
            b.   Reports on Form 8-K:

                 There were no reports on Form 8-K filed during the period
                 covered by this report.     




                                      13



<PAGE>   14


                                   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.

                           STUART ENTERTAINMENT, INC.



Date: May 15, 1998         /s/ Timothy R. Stuart
                           ------------------------------------
                           Timothy R. Stuart
                           President and Chief Operating Officer



Date: May 15, 1998         /s/ Paul C. Tunink
                           ------------------------------------
                           Paul C. Tunink
                           Vice President and Chief Financial Officer






                                       14


<PAGE>   15






                                  EXHIBIT INDEX


The following Exhibits are filed herewith.

Exhibit No.               Description
-----------               -----------

 11                       Statements Regarding Computation
                          of Per Share Earnings


 27                       Financial Data Schedule

 

                                     15