U.S. Securities and Exchange Commission
                             Washington, D.C. 20549


                                   Form 10-QSB



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

     For the quarterly period ended September 30, 1998

     Commission file number   0-20468


                     ALTERNATIVE TECHNOLOGY RESOURCES, INC.
        (Exact name of small business issuer as specified in its charter)



           Delaware                                       68-0195770
(State or other jurisdiction of               (IRS Employer Identification No.)
  incorporation or organization)



                       629 J Street, Sacramento, CA 95814
                    (Address of principal executive offices)

                                 (916) 325-9370
                           (Issuer's telephone number)


                  (Former address if changed since last report)


Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act during the past 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

Number of shares of common stock outstanding as of October 31, 1998:  26,120,499


<PAGE>2


PART I.   FINANCIAL INFORMATION
Item 1.   Financial Statements



                     ALTERNATIVE TECHNOLOGY RESOURCES, INC.
                             Condensed Balance Sheet
                               September 30, 1998
                                   (Unaudited)


                                     Assets

Current assets:
  Cash                                                           $       92,295
  Accounts receivable, net                                              571,621
  Other current assets                                                  111,573 
                                                                ---------------

     Total current assets                                               775,489


                                                                  $     775,489



                      Liabilities and Stockholders' Deficit

Current liabilities:
  Notes payable to stockholders                                       4,006,565
  Notes payable to officers                                              38,849
  Accounts payable to stockholders                                      672,617
  Accounts payable                                                       91,707
  Accrued payroll and related expenses                                  354,063
  Accrued preferred stock dividends                                     520,626
  Other current liabilities                                              99,085
                                                               ----------------

     Total current liabilities                                        5,783,512

Commitments and contingencies

Stockholders' deficit:
  Preferred stock, $6.00 par value - 1,200,000 shares
    authorized, 204,167 Series D shares issued and 
    outstanding; liquidation preference value of $1,745,628           1,225,002
  Common stock, $0.01 par value - 100,000,000 shares
    authorized, 26,120,499 shares issued and outstanding                261,205
  Unearned compensation                                                 (38,672)
  Additional paid-in capital                                         28,816,067
  Accumulated deficit                                               (35,271,625)
                                                                 --------------

    Total stockholders' deficit                                      (5,008,023)
                                                                 -------------- 

                                                                 $      775,489
                                                                 ==============


See accompanying notes to condensed financial statements.


<PAGE>3



                     ALTERNATIVE TECHNOLOGY RESOURCES, INC.
                       Condensed Statements of Operations
                                   (Unaudited)


                                                            Three Months
                                                        Ended September 30,    
                                                      1998              1997
                                                      ----              ----

Contract programming:
  Contract programming revenue                   $   1,710,008     $    921,742
  Programmer costs                                  (1,271,258)        (709,925)
  Start-up and other costs                            (158,523)        (157,489)
                                                 ------------------------------
    Contract programming gross profit                  280,227           54,328
                                                 ------------------------------

Selling, general and administrative                   (340,194)        (333,785)
                                                 ------------------------------


Loss from operations                                   (59,967)        (279,457)

Other income (expense):
 Interest expense                                     (111,828)         (83,664)
                                                 ------------------------------
                                                      (111,828)         (83,664)

Net loss                                         $    (171,795)    $   (363,121)
                                                 ==============================


Preferred stock dividends in arrears                   (30,625)         (30,625)
                                                 ------------------------------
Net loss applicable to
  common stockholders                            $    (202,420)    $   (393,746)
                                                 ==============================

Basic and diluted net loss per share             $       (0.01)    $      (0.02)
                                                 ==============================

Shares used in per share calculations               26,120,499       25,325,408
                                                 ==============================



See accompanying notes to condensed financial statements.


<PAGE>4



                     ALTERNATIVE TECHNOLOGY RESOURCES, INC.
                       Condensed Statements of Cash Flows
                                   (Unaudited)


                                                             Three Months
                                                          Ended September 30,
                                                          1998          1997
                                                          ----          ----

Net cash provided by (used in) operating activities    $   1,669    $  (322,569)

Cash flows from financing activities:
  Proceeds from exercise of options and warrants               -         22,548
  Proceeds from notes payable to stockholders                  -        293,000
  Proceeds from notes payable to officers                    930              -
  Payments on notes payable and capital leases                 -        (11,972)
                                                        -----------------------
Net cash provided by financing activities                    930        303,576 
                                                        -----------------------

Net (decrease) increase in cash                            2,599        (18,993)
Cash at beginning of period                               89,696         59,743 
                                                        -----------------------

Cash at end of period                                   $ 92,295      $  40,750 
                                                        =======================





See accompanying notes to condensed financial statements.


<PAGE>5


PART I.   FINANCIAL INFORMATION
Item 1.   Financial Statements

                     ALTERNATIVE TECHNOLOGY RESOURCES, INC.
                     Notes to Condensed Financial Statements
                               September 30, 1998

                                   (Unaudited)

Note 1 - Basis of Presentation

The accompanying  unaudited condensed financial statements have been prepared in
accordance with generally accepted  accounting  principles for interim financial
information  and pursuant to the rules and  regulations  of the  Securities  and
Exchange Commission. Accordingly, they do not include all of the information and
footnotes  required by generally  accepted  accounting  principles  for complete
financial statements. For further information, refer to the financial statements
and footnotes thereto included in the Company's annual report on Form 10-KSB for
the fiscal year ended June 30, 1998.

In the opinion of  management,  the  unaudited  condensed  financial  statements
contain all  adjustments  considered  necessary to present  fairly the Company's
financial  position at September 30, 1998,  results of operations  for the three
month  periods ended  September 30, 1998 and 1997,  and cash flows for the three
months  ended  September  30, 1998 and 1997.  The  results for the period  ended
September 30, 1998 are not necessarily  indicative of the results to be expected
for the entire fiscal year ending June 30, 1999.

Certain  amounts  for the  three  months  ended  September  30,  1997  have been
reclassified to conform with the September 30, 1998 presentation.

The report of  independent  auditors on the  Company's  June 30, 1998  financial
statements  includes an explanatory  paragraph  indicating  there is substantial
doubt about the Company's ability to continue as a going concern.  The financial
statements do not include any adjustments to reflect the  uncertainties  related
to  the   recoverability  and  classification  of  assets  or  the  amounts  and
classification  of liabilities that may result from the inability of the Company
to  continue  as a going  concern.  Based on the steps the  Company has taken to
reduce its expenses and refocus its operations, the Company believes that it has
developed a viable plan to address the Company's  ability to continue as a going
concern  and that this plan will  enable  the  Company  to  continue  as a going
concern through the end of fiscal year 1999. However,  considering,  among other
things, the Company's  historical  operating losses and its short history in the
contract computer programming industry, there can be no assurance that this plan
will be successfully  implemented.  The Company began  generating  positive cash
flow from operations during fiscal 1999, but not at levels sufficient to pay off
current  obligations  and fund growth of its contract  computer  programming and
consulting  services;  therefore,  the  Company  contemplates  needing  to raise
additional financing during fiscal 1999, the receipt of which cannot be assured.

Note 2 - Financing Arrangements

See  Part I,  Item 2  "Management's  Discussion  and  Analysis  and  Results  of
Operations -- Liquidity and Capital Resources."


<PAGE>6


PART 1.   FINANCIAL INFORMATION
Item 2.   Management's Discussion and Analysis and Results of Operations

Management's Discussion and Analysis

The following  discussion  provides  information to facilitate the understanding
and  assessment  of  significant  changes  in trends  related  to the  financial
condition  of the Company and its  results of  operations.  It should be read in
conjunction  with the Company's  financial  statements and the notes thereto and
other financial information included elsewhere in the 10-KSB for the fiscal year
ended June 30, 1998.

Overview

Alternative  Technology  Resources,  Inc. ("ATR" or the  "Company"),  a Delaware
corporation,  was  founded  in 1989 to  develop  and  sell  computer  integrated
laboratory  systems  ("LIS").  The Company operated under the name 3Net Systems,
Inc. and was never successful in the LIS market.  Therefore, in fiscal 1996, the
Company stopped new system development and later decided to exit LIS entirely.

During  fiscal  1997,  the Company  changed its name to  Alternative  Technology
Resources,  Inc. It has since  focused its efforts  entirely  upon its  computer
programmer  placement  business,  whereby  it  recruits  experienced,  qualified
computer  programmers  primarily from the former Soviet Union, obtains necessary
visas,  and places  them for  assignment  in the United  States.  Recently,  the
Company has begun to recruit programmers from South Korea for future placement.

Year 2000 Issues

Management  has made an assessment of its computer  programs and has  determined
that it has no Year 2000 impairment in its computer systems  developed  in-house
and is relying on vendor  declarations  that their  systems and programs have no
impairment  related  to the Year  2000  issue.  Therefore,  management  does not
currently anticipate that the Company will incur significant  operating expenses
or be required to invest  heavily in computer  systems  improvements  to be Year
2000 compliant.

Results of Operation

Contract programming

Contract  Programming  Revenue.  Contract  programming revenue results primarily
from  sales  of  programmer  services.  During  fiscal  1998,  sales  of  custom
programming and software  development and acting as an intermediary in providing
such services are also  included in Contract  Programming  Revenue.  These sales
were immaterial in fiscal 1998 and expected to be immaterial in fiscal 1999.

Revenues  increased  $788,000 or 86% in the quarter  ended  September  30, 1998,
compared  to the quarter  ended  September  30,  1997.  This  increase is due to
billing rate increases,  growth in the number of contract programmers working at
customer  sites in fiscal 1999  compared to fiscal 1998,  and the length of time
contract  programmers  were at customer  sites during each of the quarters ended
September 30.

Programmer  Costs.  Programmer costs are the salary,  and other wage and benefit
costs of ATR's  programmer  employees.  These costs  increased 79% for the three
months ended September 30, 1998,


<PAGE>7


compared to the same period last year.  This increase is primarily due to almost
doubling  the average  number of  programmers  working at customer  sites in the
current  quarter  compared to the  comparable  quarter in fiscal 1998 and due to
increasing salaries for more experienced programmers.

Start-up and Other Costs.  Start-up and other costs are the costs of recruiting,
training,  and travel for programmer  employees coming to the United States from
the Former Soviet Union for the first time,  relocation  costs within the United
States,  and  legal  and  other  costs  related  to  obtaining  and  maintaining
compliance with required  visas,  postings and  notifications.  Included in this
category of costs is compensation paid by ATR whenever programmer  employees are
hired and enter the United States or are relocated once in the United States but
before these  programmers  begin  working at a customer's  work site.  There are
sometimes  periods of several days when under immigration law, ATR, as employer,
must pay a programmer  employee at least 95% of prevailing  wages for his or her
specialty even when the programmer is not placed.

ATR  expenses  start-up  and other costs as  incurred,  which  results in timing
differences  between the  incurring  of expense  and  recognition  of  resulting
revenue.  Such differences may be particularly  evident in ATR's case because of
its  relatively  small  revenue  base  and  rapid  growth.  The  affect  may  be
particularly  noticeable  whenever  the timing of placement of employees is such
that the  major  start-up  costs  occur  late in one  reporting  period  and the
revenues appear in subsequent periods.

Start-up and other costs  increased  $1,000 or 1% in the quarter ended September
30, 1998, as compared to the same quarter in fiscal 1998. This small increase is
due to an $18,000 increase in recruiting and training efforts overseas offset by
a $17,000  decrease  in  placing  and  relocating  programmers  during the first
quarter of fiscal 1999 compared to the first quarter of fiscal 1998.

Contract  Programming  Gross  Profit.  The gross profit on contract  programming
revenue was 16% for the three months ended September 30, 1998, compared to 6% in
the same quarter of fiscal 1998.  This increase is primarily due to the increase
in the total number of programmers  generating  revenues at higher billing rates
during fiscal 1999 compared to fiscal 1998.

Selling, General and Administrative Expenses

Selling,  General and Administrative  Expenses ("SG&A"). SG&A expenses increased
$6,000 or 2% for the three months ended  September 30, 1998 compared to the same
quarter of fiscal 1998.  This small increase is due to  stabilizing  the size of
the administrative staff over the last year and a half.

Other Income (Expense)

Interest  Expense.  Interest expense increased $28,000 in the three months ended
September  30,  1998  compared  to the same  period in fiscal  1998 due to a net
increase in notes  payable and other debt of $0.9 million  since  September  30,
1997.

Income Taxes

As of June 30,  1998,  the Company had a net  operating  loss  carryforward  for
federal  and  state  income  tax  purposes  of  $24  million  and  $13  million,
respectively.  The federal net operating loss carryforward  expires in the years
2006 through 2013 and the state net operating loss carryforward


<PAGE>8


expires in 1998 through 2003. The Company expects that annual limitations on the
use of loss  carryforwards  generated  before  September 13, 1993 will result in
$3.6 million of net operating loss carryovers which may not be utilized prior to
the expiration of the carryover period.

Net Loss

Net loss decreased $191,000 or 53% for the three months ended September 30, 1998
compared to the same quarter in fiscal 1998.

Basic and Diluted Net Loss Per Share

The  Company's  net loss per share has been  computed by dividing net loss after
deducting  Preferred Stock dividends  ($30,625 in each of the three months ended
September 30, 1998 and 1997) by the weighted  average number of shares of Common
Stock  outstanding  during the quarters  presented.  Common stock  issuable upon
conversion of Preferred  Stock,  Common Stock options and Common Stock  warrants
have been excluded from the net loss per share  calculations  as their inclusion
would be  anti-dilutive.  Net loss per share  decreased as a result of a smaller
loss and only a slightly greater number of shares used in the calculation in the
quarter ended  September 30, 1998 compared to the  comparable  quarter of fiscal
1998.

Liquidity and Capital Resources

The Company has used a  combination  of equity and debt  financing  and internal
cash flow to fund  operations and finance  accounts  receivable but has incurred
operating losses since its inception.

As a result,  the report of independent  auditors on the Company's June 30, 1998
financial  statements  includes an  explanatory  paragraph  indicating  there is
substantial  doubt about the Company's  ability to continue as a going  concern.
The  financial  statements  do  not  include  any  adjustments  to  reflect  the
uncertainties  related to the recoverability and classification of assets or the
amounts and  classification of liabilities that may result from the inability of
the Company to continue as a going  concern.  Based on the steps the Company has
taken to reduce its expenses and refocus its  operations,  the Company  believes
that it has developed a viable plan to address the Company's ability to continue
as a going  concern  and that this plan will enable the Company to continue as a
going concern through the end of fiscal year 1999. However,  considering,  among
other things, the Company's historical operating losses and its short history in
the contract computer programming industry,  there can be no assurance that this
plan will be successfully  implemented.  The Company began  generating  positive
cash flow from  operations  during fiscal 1999, but not at levels  sufficient to
pay off current obligations and fund growth of its contract computer programming
and consulting  services;  therefore,  the Company contemplates needing to raise
additional financing during fiscal 1999, the receipt of which cannot be assured.

The  Company  received  short-term,  unsecured  financing  in the  form of notes
payable of  approximately  $1.3 million,  $1.0 million,  and $0.7 million during
fiscal years 1998, 1997 and 1996,  respectively ($3.0 million in the aggregate),
from two stockholders,  Mr. James W. Cameron,  Jr. ("Cameron") and Dr. Max Negri
("Negri"),  to fund its  operations.  These notes bear  interest  at 10.25%.  In
December 1997, Cameron and Negri extended the maturity date on all notes payable


<PAGE>9


originally  maturing  December 31, 1997, to the earlier of December 31, 1998, or
such time as the Company obtains equity financing.

On April 21, 1997,  the Company  issued an unsecured note payable (the "Straight
Note") to Cameron for $1,000,000 in accordance with the Reimbursement  Agreement
the  Company  signed on  February  28,  1994.  Terms of the note  provide for an
interest rate of 9.5% and monthly interest payments.  No maturity date is stated
in the  note;  however,  under the terms of the  Reimbursement  Agreement,  upon
written  demand by Cameron,  the Straight Note will be replaced by a convertible
note (the  "Convertible  Note") in a principal amount equal to the Straight Note
and bearing  interest at the same rate. The conversion  ratio of the Convertible
Note is equal to 20%  multiplied  by the average  trading price of the Company's
common  stock over the period of ten trading days ending on the trading day next
preceding the date of issuance of such Convertible Note.

The Company must obtain additional funds during fiscal 1999 in order to meet its
obligations  while  attempting to grow revenues to a level necessary to generate
cash from  operations.  Although  the Company  has not entered  into any written
agreements with Cameron or Negri, management believes, based on discussions with
these two individuals, that they will continue to fund operations and extend the
maturity  dates of the various  notes  payable  until at least June 30, 1999, or
until such time as the  Company  can repay the notes.  However,  there can be no
assurance that events may arise which may affect these stockholders'  ability to
finance  the  Company  or  that  the  Company  may  experience  significant  and
unanticipated  cash flow  problems  which may cause  these two  stockholders  to
reconsider their investment.  Further,  if the Company  experiences  significant
cash flow  problems,  the  Company  may be  required  to reduce the level of its
operating  activities  or  be  forced  into  seeking  protection  under  federal
bankruptcy laws.

On December 31, 1996,  the Board of Directors  named Mr. W. Robert Keen as Chief
Executive  Officer of the  Company.  In  exchange  for his  services,  Mr.  Keen
initially  received  225,000  shares of common stock with a fair market value on
the date of issuance of  $168,750,  and on November  18, 1997 Mr. Keen  received
275,000  shares of common stock with a fair market value on the date of issuance
of  $154,688.  Both the  275,000  shares and the  225,000  shares are subject to
forfeiture in the event Mr. Keen voluntarily leaves the Company prior to January
1, 1999.

Effects of Inflation

The Company's most significant cost is personnel.  To the extent personnel costs
increase,  management of the Company believes that customer billing rates can be
increased to cover such personnel increases.

PART II.       OTHER INFORMATION

Items 1, 2, 3, 4, 5 and 6

None


<PAGE>10



                                   SIGNATURES



In accordance with 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.

ALTERNATIVE TECHNOLOGY RESOURCES, INC.
           (Registrant)





Dated: November 10, 1998                          W. ROBERT KEEN
                                            -------------------------------
                                            W. Robert Keen
                                            Chief Executive Officer
                                            (Principal Executive Officer)






Dated: November 10, 1998                          EDWARD L. LAMMERDING
                                            -------------------------------
                                            Edward L. Lammerding
                                            Chief Financial Officer
                                            (Principal Financial Officer)