UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION

                             WASHINGTON, D. C. 20549

                                   FORM 10-QSB
                                   (Mark one)

     (X) Quarterly  Report under Section 13 or 15(d) of the Securities  Exchange
         Act of 1934.


                FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
                ---------------------------------------------

     ( ) Transition Report under Section 13 or 15(d) of the Exchange Act.


                        FOR THE TRANSITION PERIOD FROM TO
                        ---------------------------------

                        Commission File Number: 000-21775

                              THINK NEW IDEAS, INC.
      (Exact name of small business issuer as specified in its charter)

             Delaware                                     95-4578104
     (State or other jurisdiction of                   (I.R.S. Employer
      incorporation or organization)                   Identification Number)

            45 West 36th Street, 12th Floor, New York, New York 10018
                   (Address of principal executive offices)

                                (212) 629-6800
                           (Issuer's telephone number)

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


TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE)  YES     NO  X




Number of shares of Common Stock outstanding at May 15, 1998: 7,528,668



<PAGE>


                              THINK NEW IDEAS, INC.

                                      INDEX

                                                                        PAGE NO.
Part I Financial Information

         Item 1.        Financial Statements

                   Condensed Consolidated Balance Sheets                  3

                   Condensed Consolidated Statements of Operations        4

                   Condensed Consolidated Statements of Cash Flows        5

                   Condensed Consolidated Statement of Shareholders'
                   Equity                                                 6

                   Notes to Condensed Consolidated Financial Statements   7

         Item 2.   Management's Discussion and Analysis of
                   Financial Condition and Results of Operations         10

Part II Other Information

         Item 1.  Legal Proceedings......................................14

         Item 2   Changes in Securities and Use of Proceeds..............14

         Item 3.  Defaults on Senior Securities..........................14

         Item 4.  Submission of Matters to a Vote of Security Holders....14

         Item 5.  Other Information......................................14

         Item 6.  Exhibits and Reports on Form 8-K.......................15

         Item 7.  Signatures.............................................16

         Item 8.  Index to Exhibits......................................17




                                       2
<PAGE>



                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

                              THINK NEW IDEAS, INC.

                      CONDENSED CONSOLIDATED BALANCE SHEETS
                                   (UNAUDITED)
                                    (000's )

                                            MARCH 31,1998       JUNE 30, 1997
                                            -------------       -------------
                              ASSETS
Current Assets:
Cash and cash equivalents                         $ 4,617         $3,451
Marketable securities                                 767          1,322
Accounts receivable, net of allowance for doubtful
    accounts of $354 and $614                      15,311          9,315
Unbilled receivables                                2,300          2,497
Prepaid expenses and other current assets           2,067            535
                                                    -----            ---
                                                   25,062         17,120

Property, plant and equipment, net                  4,867          2,286
Software development costs                            332            131
Goodwill, net of accumulated amortization of 
  $2,125 and $1,099                                 4,451          1,503
Other assets                                          663            362
                                                    -----            ---
Total assets                                      $35,375        $21,402
                                                   ======         ======

                  LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable                                   $5,839         $2,648
Accrued expenses                                    1,588          3,337
Media payable                                       8,184            954
Income taxes payable                                   66             40
Due to related party                                1,518          1,906
Current portion of obligations under capital
  leases                                              370            157
                                                      ---            ---
                                                   17,565          9,042

Obligations under capital leases                      757            264
Note payable to related party                                        516
Other long-term liability                                            206
Shareholders' Equity:
Preferred stock, $.0001 par value; 5,000,000
  shares authorized; none issued and none 
  outstanding                                           -              -
Common stock, $.0001 par value; 50,000,000 
  shares authorized; 7,012,650 shares issued 
  and outstanding                                       1              1
Additional paid in capital                         23,535         19,050
Accumulated deficit                                (6,483)        (7,677)
                                                    ------        -------
Total shareholders' equity                         17,053         11,374
Commitments
                                                  $35,375        $21,402

 See accompanying notes to condensed consolidated financial statements.



                                       3
<PAGE>




                              THINK NEW IDEAS, INC

               CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)
                                    (000's)

                                      THREE MONTHS ENDED    NINE MONTHS ENDED
                                           MARCH 31,            MARCH 31,
                                                 (restated)           (restated)
                                     1998         1997      1998       1997
                                     ----         ----      ----       ----

Revenues                             $10,969    $4,211     $27,993     $12,254

Operating expenses:
Direct salaries and related expenses   4,033     2,565      11,960       6,501
Other direct expenses                  2,363     1,248       6,497       3,564
Selling, general and administrative
  expenses                             3,221     1,737       6,683       3,695
Depreciation and amortization            706       385       1,662       1,060
Merger expenses                        -          -           -             57
                                   ---------  --------    --------      ------

Operating profit (loss)                  646    (1,724)      1,191      (2,623)

Interest income (expense) and 
  other, net                              87        63         188         (28)
                                          --        --         ---         --- 


Income (loss) before provision for 
  income taxes                           733    (1,661)      1,379      (2,651)
Provision for income taxes                73        40         185          28
                                         ---        --         ---          --

Net income (loss)                       $660   $(1,701)     $1,194     $(2,679)
                                         ===     =====       =====       =====

Per common share:
Net income (loss) - basic              $0.11   $(0.30)       $0.20      $(0.63)
Weighted average common shares 
  outstanding                          6,134    5,592        5,961       4,265

Net income (loss) - diluted            $0.10   $(0.30)       $0.18      $(0.63)
Weighted average common shares 
  outstanding                          6,870    5,592        6,530       4,265









See accompanying notes to condensed consolidated financial statements.





                                       4
<PAGE>



                              THINK NEW IDEAS, INC.

               CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)
                                          (000's)

                                                NINE MONTHS ENDED MARCH 31
                                                --------------------------
                                                        1998       1997
                                                                 (restated)
CASH FLOW FROM OPERATING ACTIVITIES:
Net income (loss)                                     $1,194     $(2,679)
Adjustments to reconcile net income (loss)
  to net cash provided by
(used in) operating activities:
   Depreciation                                          656         190
   Amortization of intangibles and deferred 
     financing costs                                   1,006         942
   Deferred income taxes                                   -         (12)
   Bad debt expense                                        -          82
Changes in assets and liabilities:
   Accounts receivable                                (5,008)     (1,579)
   Unbilled receivables                                  198      (1,015)
   Accounts payable and accrued expenses                 855         731
   Media payable                                       7,230        (356)
   Other assets and liabilities                       (2,837)       (529)
                                                       -----         ---

Net cash provided by (used in) operating activities    3,294      (4,225)
                                                       -----       -----

CASH FLOW FROM INVESTING ACTIVITIES:
Additions to software development costs                 (268)       (519)
Payment for BBG New Media Inc., net of cash acquired    (743)          -
Sales of marketable securities, net of purchases         359           -
Purchases of property and equipment                   (1,976)       (887)
                                                      -------       -----

Net cash used in investing activities                 (2,628)     (1,406)
                                                      -------      -----

CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of promissory notes                           (437)     (1,881)
Proceeds from issuance of common stock                   485      11,973
Proceeds from private placement                            -       4,948
Borrowings from operating lines of credit                  -         (36)
Due to shareholders                                      500        (500)
Principal payments on capital leases                     (48)          -
                                                          --       ------

Net cash provided by financing activities                500      14,504
                                                      ------      ------

Net increase in cash and cash equivalents              1,166       8,873
Cash and cash equivalents, beginning of period         3,451         430

Cash and cash equivalents, end of period              $4,617      $9,303
                                                      ======       =====

Cash paid during the period:
Income taxes                                            $193        $101
Interest                                                 $77        $125

See accompanying notes to condensed consolidated financial statements.



                                       5
<PAGE>



                              THINK NEW IDEAS, INC.

           CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
                                   (UNAUDITED)
                                    (000's)

                                                                        Total
                                                                        Share-
                                 Common Stock    Paid-in   Accumulated  holders'
                               Shares    Amount  Capital     Deficit    Equity
                               ------    ------  -------     -------    ------

Balance at June 30, 1997        6,537   $     1   $19,050   $(7,677)   $11,374
Issuance of common stock
   for acquisition                303               3,602                3,602
Issuance of common stock
   upon exercise of options       173                 845                  845
Other                              38                  38
Net income for the period                                     1,194      1,194
                              -------   -------   -------   -------    -------


Balance at March 31, 1998       7,013   $     1   $23,535   $(6,483)   $17,053
                              =======   =======   =======   =======    =======



                                       6
<PAGE>




                              THINK NEW IDEAS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

BASIS OF PRESENTATION

      The accompanying  unaudited condensed  consolidated  financial  statements
should  be  read  in  conjunction  with  the  Notes  to  Consolidated  Financial
Statements  contained in the Company's  restated Form 10-KSB for the fiscal year
ended June 30,  1997,  as filed with the  Securities  and  Exchange  Commission.
Certain items included in these statements are based on management's  estimates.
In the opinion of  management  all material  adjustments,  which are of a normal
recurring  nature,  necessary  for a fair  presentation  of the  results for the
interim  period  have been  included.  The results for the three and nine months
ended March 31, 1998 are not necessarily  indicative of the results expected for
the year.

RECLASSIFICATIONS

      Certain  prior year  amounts  have been  reclassified  to conform with the
presentation adopted in the current period.

RESTATEMENTS

      The  financial  statements  for the three and nine months  ended March 31,
1997 have been  restated  through the filing of an amended  Form  10-QSB/A.  The
restatement of the financial  statements increased other direct expenses by $0.2
million,  selling, general and administrative expenses by $0.3 million, and, the
net loss, and accounts payable, by $0.5 million,  for costs incurred in the late
stages of the  completion of contracts  completed in the third quarter of fiscal
1997 which were not  identified  and accrued until the  Company's  fourth fiscal
quarter  ended  June  30,  1997.  The  Company  identified  these  items  in the
preparation  of its financial  statements  for the year ended June 30, 1997, and
determined that the omission of their accrual in the originally issued March 31,
1997 financial statements resulted from failure of the production departments to
advise  accounting  and financial  functions of certain late stage expenses on a
basis timely enough to allow their  consideration when the contracts were closed
and billed to the  client.  In the first and second  quarters of fiscal 1998 the
Company implemented certain new job budgeting and closing systems and procedures
to improve the  control  over both the amount of costs  incurred  in  performing
client services and the timely  identification  and consideration of such items.
The  restatements  had the effect of increasing  the net loss per share by $0.09
and $0.12 for the three and nine months ended March 31, 1997, respectively.

RELATED PARTY NOTE PAYABLE

      The Company  entered  into a loan  agreement  with  Omnicom  Group Inc., a
principal  shareholder  of the Company,  on March 17, 1998 whereby,  the Company
borrowed  $0.5  million  at 8%.  The note is  payable  within  one  month of the
effective date, April 17, 1998.



                                       7
<PAGE>


ACQUISITIONS

      On November 3, 1997,  the Company  entered into an  agreement  and plan of
merger  ( the  "BBG  Agreement")  with  BBG New  Media,  Inc.,  a  Massachusetts
corporation ("BBG"),  which provides interactive marketing services, in exchange
for:  (i) the  issuance of 303,334  shares of Common Stock and $175,000 in cash;
and (ii) the  subsequent  issuance  of  shares  of  Common  Stock  based  upon a
percentage  of sales  growth of BBG  during  the period  from  November  1, 1998
through October 31, 1999. In connection  with the agreement,  the Company repaid
approximately $548,000 in outstanding debt of BBG subsequent to the closing. The
acquisition  has been accounted for using the purchase method of accounting and,
accordingly, the results of operations of BBG will be reflected in the Company's
financial  statements from the effective date of the merger. The initial portion
of the purchase price of $4,539,000  has been allocated to the assets  purchased
and the  liabilities  assumed based upon their estimated fair values at the date
of merger as follows:

                                                    (000'S)

     Value of shares issued                        $ 3,602
     Cash paid                                         175
     Estimated transaction costs                       762
                                                   -------
                                                     4,539
     BBG stockholders' equity - November 3, 1997      (567)
     Excess of cost over fair value                $ 3,972

      The Company is  amortizing  the excess of cost over fair value or goodwill
over thirty (30) years. Additional consideration is payable if BBG meets certain
sales targets, as discussed above, which would result in an increased balance of
goodwill and amortization related thereto.

      On April 2, 1998,  the  Company  acquired  all the issued and  outstanding
shares of capital stock of Herring/Newman,  Inc., a Seattle based company, for a
cash price of $0.4 million and an aggregate of 127,799  shares of the  Company's
stock.  The Company issued an additional  77,220 shares of Common Stock which is
held in escrow, and shall be released from escrow on the one year anniversary of
the  closing  date,   subject  to  the  attainment  of  certain  conditions  and
performance objectives. This acquisition was accounted for as a purchase and the
excess  of  cost  over  net  assets   acquired  will  be  amortized   using  the
straight-line method.

EARNINGS PER SHARE

      The Company has adopted  Statement of Financial  Accounting  Standards No.
128, "Earnings Per Share" ("SFAS No. 128"), and all prior periods presented have
been  restated  to  conform  with  SFAS No.  128.  SFAS  No.  128  requires  the
presentation  of basic  earnings per share and diluted  earnings per share Basic
earnings per share is computed as net earnings  divided by the  weighted-average
number of common shares  outstanding for the period.  Diluted earnings per share
reflects the potential  dilution  that could occur from common  shares  issuable
through stock options and other  convertible  securities.  Shares held in escrow
are not included in the calculation of weighted  average shares  outstanding for


                                       8
<PAGE>




the periods  presented as the  conditions  required to release escrow shares was
not  fulfilled  at  the  end of  the  periods  presented,  (See  note  regarding
"Subsequent   Event"   for   further    information).    A   reconciliation   of
weighted-average  common shares  outstanding to  weighted-average  common shares
outstanding assuming dilution follows:


                      Three months Three months  Nine Months   Nine Months
                         ended        ended         Ended         Ended
                       March 31,    March 31,     March 31,     March 31,
                         1998         1997         1998          1997

Average common
shares outstanding      6,133,948    5,591,667     5,960,831     4,265,463

Incremental common
  shares issuable:
Stock options             724,916                    557,144
Other convertible          11,458                     11,980
securities

Average common
shares outstanding
Assuming dilution       6,870,321    5,591,667     6,529,955     4,265,463
                        =========    =========     =========     =========





                                       9
<PAGE>




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


CONSOLIDATED REVENUES

      Consolidated  revenues for the quarter ended March 31,1998,  which include
the  operations and the combined  results of the Company and it's  acquisitions,
Fathom  Advertising,  and BBG New Media  Inc.,  increased  160  percent to $11.0
million as compared  with $4.2 million for the 1997 third  quarter  period.  The
current year revenues of $11.0 million for the three months ended March 31, 1998
exceeded by 91% the proforma revenues of $5.7 million for the combined companies
for the three months ended March 31, 1997.  Revenues from  interactive  services
increased  167 percent to $5.6  million for the  three-month  period ended March
31,1998 from $2.1 million for the corresponding  prior year period. Of the total
$3.5 million  increase,  $1.9 million is a result of the inclusion of operations
from the  Company's  acquisition  of BBG New  Media,  Inc,  and an  increase  in
revenues from the  operations of the  Company's New York  interactive  division,
accounts  for $1.8  million.  The June 30, 1997 closure of Internet One caused a
$0.2 million decrease in revenues. Revenues from traditional strategic marketing
services  increased  154 percent to $5.4 million for the current  third  quarter
period from $2.1 million for the prior year third quarter  period.  The increase
in revenues from  traditional  strategic  marketing  services is a result of the
inclusion of operations  of Fathom  Advertising,  acquired in May 1997,  and the
synergy of Fathom  Advertising  with the  Company's  other  strategic  marketing
services,  which has  significantly  expanded  revenues  derived  from  Fathom's
clients.  Revenues  from both  interactive  services and  traditional  strategic
marketing as a percentage  of total  consolidated  revenue for the third quarter
ended March 31,1998 and March 31, 1997 were approximately equal.

      Consolidated  revenues  for the nine  month  period  ended  March  31,1998
increased 128 percent to $28.0 million from $12.2 million for the  corresponding
prior period.  Actual revenues of $28.0 million for the nine-month  period ended
March 31, 1998  exceeded by 68% the proforma  revenues of $16.6  million for the
combined  companies  for the  nine-months  ended March 31, 1997.  Revenues  from
interactive  services  increased  96  percent  to  $12.6  million  for the  1998
year-to-date  period as  compared  with $6.4  million  for the  comparable  1997
period.  This increase is primarily a result of increased revenue generated from
existing  clients and new business growth as well as the inclusion of operations
from the Company's  acquisition of BBG New Media,  Inc. in the second quarter of
fiscal 1998. Revenues from traditional  strategic marketing operations increased
164 percent to $15.4 million as compared with $5.8 million for the  year-to-date
1997  period.  The increase in revenues  from  traditional  strategic  marketing
services is a result of the inclusion of operations  from the acquisition in May
1997 of Fathom Advertising, and the synergies produced from that acquisition .

OPERATING RESULTS

      Third quarter  operating  profit increased by $2.3 million to $0.6 million
for the three month period  ended March 31, 1998 from an operating  loss of $1.7
million for the restated  prior year period,  primarily as a result of increased


                                       10
<PAGE>




revenues.  Direct salaries and related expenses  consist  primarily of wages and
associated  payroll  taxes for full-time  and  temporary  employees,  as well as
recruiting fees and other personnel  related costs.  Direct salaries and related
expenses increased by $1.5 million to $4.0 million for the third quarter of 1998
from $2.5 million for the third  quarter of 1997.  The increase is the result of
increased  payroll  costs  due to the  expansion  of  the  Company's  marketing,
technology,  and creative departments required to meet increased assignments and
resultant  growth in revenues.  As a percentage of revenue  direct  salaries and
related  expenses  decreased  to 36.8  percent of revenues  for the three months
ended March 31,  1998 from 60.9  percent of  revenues  for the third  quarter of
fiscal 1997. The  percentage  relationship  between direct  salaries and related
costs and revenues  improved due to higher margin  projects in the third quarter
of  fiscal  1998,  specifically  in  strategic  marketing  consulting  and media
placement.  Certain specific or types of assignments may carry higher, or lower,
margins,  as a result of which  future  periods may not  reflect as  favorable a
relationship   between   revenues  and  direct  costs.   Selling,   general  and
administrative expenses include corporate expenses such as; insurance, personnel
costs for  finance and  administration,  accounting  and legal fees,  management
information systems, and employee benefits. The increase of $1.5 million to $3.2
million for the third quarter of 1998  compared with the restated  corresponding
prior  year  period  in  selling,   general  and  administrative  expenses  also
represents  the effects of  continued  expansion  of the  Company's  operations.
Selling,  general  and  administrative  expenses  declined  to 29.4  percent  of
revenues for the third  quarter of fiscal 1998 from 41.2 percent of revenues for
the three months  ended March 31, 1997.  The decrease is also a result of higher
margin  projects in the third  quarter of fiscal 1998 as compared with the third
quarter of fiscal 1997.

      Depreciation and amortization  increased by $300,000 for the third quarter
period  ended March 31, 1998 as compared  with the third  quarter  period  ended
March 31, 1997. This includes the amortization of goodwill and other intangibles
relating to the  purchase  method of  accounting  for  certain of the  Company's
acquisitions  of its  subsidiaries,  Fathom  Advertising in May 1997 and BBG New
Media Inc., in November 1997. The  amortization  of goodwill  recorded for these
acquisitions for the three months ended March 31, 1998 is approximately $90,000.
Depreciation  expense also  increased  from the 1997  comparable  quarter  third
quarter  as a result  of  increased  assets  gained  through  acquisitions.  The
increase in depreciation and amortization for the nine-month  period ended March
31, 1998 also reflects the Company's  acquisitions,  Fathom  Advertising and BBG
New Media,  including the relative  amortization of goodwill and depreciation of
assets gained through these acquisitions.

      Operating  profit  increased  by  $3.8  million  to $1.2  million  for the
nine-month period compared to an operating loss of $2.6 million for the restated
prior year period.  Direct salaries and related expenses  increased $5.4 million
to $11.9 million from $6.5 million in the restated  prior year period.  Selling,
general and administrative  expenses also increased for the nine-month period by
$3.0  million to $6.7  million  from $3.7  million for the  restated  prior year
period.  These  increases  result  from the same  factors  causing  the  similar
increase for the three months ended March 31, 1998.

INCOME TAXES

      The  effective  tax rate for 1998 on income  before  income taxes is lower
than the United States Federal  Statutory rate of 34%,  primarily as a result of


                                       11
<PAGE>




the Company's net operating loss carryforwards. Net operating loss carryforwards
have been applied against pre-tax profits for federal tax purposes.

LIQUIDITY AND CAPITAL RESOURCES

      Net cash provided by operations was $3.3 million for the nine-month period
ended March 31, 1998, compared to $4.2 million used in the comparable prior-year
period.  The  increase in cash  provided  during the nine months ended March 31,
1998 reflects improved operating results.

      Working  capital  decreased  from $8.1  million  at June 30,  1997 to $7.5
million at March 31, 1998, a decrease of $0.6 million, principally as the result
of the  expenditure  of $2.6  million  for  capital  additions  and  acquisition
payments offset by $1.2 million of net income and $0.5 million received from the
issuance of common stock.  The principal  changes in working  capital items were
increases in media payables and accounts  receivable.  Media payables  represent
amounts  payable to media  providers  for  advertising  placed by the  Company's
clients,  which costs are  re-billed  to the  clients  and  included in accounts
receivable.  Both  amounts  increased  from  June 30,  1997 to March  31,  1998,
reflecting  the increase in the level of the Company's  advertising  assignments
for clients, which results from both the acquisition of Fathom Advertising, Inc.
and growth in the Company's other operations.  At March 31, 1998 the Company has
established a reserve  related to these  receivables of $0.3 million,  which the
Company  believes is sufficient to adjust the carrying amount of its receivables
to an amount which approximates net realizable value.

      Net cash used in  investing  activities  amounted to $2.6  million for the
nine-month  period  ended  March 31,  1998  compared  with  cash used  investing
activities of $1.4 million during the corresponding period in 1997. The increase
in cash used in  investing  primarily  resulted  from  capital  expenditures  of
approximately  $2.0  million  as well as net cash  paid in  connection  with the
acquisition  of BBG New Media Inc., of  approximately  $0.7 million  offset,  in
part, by net sales of marketable securities of $0.4 million.

      Net cash  provided by  financing  activities  amounted to $0.5  million at
March 31, 1998 compared  with cash  provided of $14.5 million in the  comparable
prior year period.  During the third quarter of 1998 the Company  entered into a
loan  agreement  with  Omnicom,  a  shareholder  in the Company.  The  agreement
provided for the Company to borrow $0.5 million at 8% per year.

      The change in net cash  provided by financing  activities  reflects  prior
year  transactions  by the Company in regard to its initial public  offering and
other financing activities.  In March 1996, the Company raised $0.3 million in a
private  offering,  pursuant  to which the  Company  issued six 10%  convertible
promissory  notes.  The Company  raised an  additional  $1.8 million in a second
private offering in April 1996, pursuant to which the Company issued several 12%
notes. In August 1996, the Company received net proceeds of $4.9 million through
the issuance of 938,667  shares of Common Stock to Omnicom.  Proceeds  from this
transaction were used by the Company to retire the nonconvertible portion of the
outstanding  principal  and  accrued  interest  under  the  10%  and  12%  notes
aggregating approximately $1.9 million.



                                       12
<PAGE>




      Also, in connection with the Company's initial public offering in November
1996,  the Company  issued  2,150,000  shares of Common  Stock and  received net
proceeds of approximately $12.0 million.

SUBSEQUENT EVENTS

      In connection  with the initial public  offering,  certain  holders of the
Company's common stock placed,  on a pro rata basis,  825,000 shares into escrow
(the "Escrow Shares")  pursuant to an escrow agreement  between such holders and
Continental  Stock Transfer & Trust Company,  as escrow agent. The Escrow Shares
are not transferable or assignable;  however,  the Escrow Shares may be voted by
the beneficial  holders  thereof.  The Escrow Shares are to be released to these
shareholders  if attainment of certain  performance  measures by the Company are
achieved,  including,  the closing price of the Company's Common Stock averaging
in excess of $20 per share for any forty  consecutive  business  days during the
period from November 1996 through November 1999.

      In the Company's  fourth  quarter of fiscal 1998 the  condition  specified
above was  fulfilled  and the Escrow  Shares were  released.  The  Company  will
recognize a non-cash  charge to earnings of  approximately  $20 million equal to
the fair market  value of such shares on the date of their  release.  Management
believes  that the  release of these  shares  may have a material  effect on the
Company's operations for the fiscal year end June 30, 1998.

      Pursuant to the terms of a letter  agreement  dated 15, 1998,  the Company
has reached an agreement in  principal  with Scott A. Mednick  pursuant to which
Mr.  Mednick has agreed to  continue  to work with the  Company as a  consultant
while pursuing personal business and philanthropic opportunities. It is intended
that Mr. Mednick's position as Chief Executive Officer and Chairman of the Board
of Directors will be filled by Ronald Bloom,  currently the Company's  President
and Chief Operating Officer. Pursuant to the terms of the agreement, Mr. Mednick
will be  entitled  to receive  the  balance of his salary  under his  employment
agreement over a period of twenty-four  months and certain other benefits as set
forth in his existing employment agreement. Accordingly, the Company will accrue
approximately $900,000 in the fourth fiscal quarter of 1998 relating thereto.

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<PAGE>


IMPACT OF YEAR 2000

      The Year 2000 issue is the result of computer programs being written using
two digits, rather than four, to define the applicable year. Accordingly, any of
the  Company's  computer  programs that have date  sensitive  software may cause
system  failures or  miscalculations  if data entry of "00" is recognized as the
year  1900  rather  than  2000.  The  Company  is  addressing  this  risk to the
availability and integrity of its financial systems. The Company has established
processes for evaluating and managing the risks and costs  associated  with this
problem.  Additionally,  the Company has  provided  it's  clients with the tools
needed to perform their Year 2000 compliance initiatives.  The Company estimates
the total direct  amount to remediate  the Year 2000 issue is not expected to be
material to the  Company's  results of operations  or financial  condition.  All
costs will be expensed as incurred,  unless new software is purchased which will
be capitalized.

DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS

      This report,  including Management's  Discussion and Analysis of Financial
Conditions and Results of Operations contains forward-looking  statements within
the  meaning  of  the  federal  securities  laws.  All  statements,  other  than
statements of historical facts, which address activities, events or developments
that the  Company  expects  or  anticipates  will or may  occur  in the  future,
including  such  things as future  capital  expenditures,  expansion,  strategic
plans,  expansion and growth of the Company's  business and operations and other
such matters are forward-looking  statements.  These forward-looking  statements
are  based  on  many  assumptions  and  factors   including  effects  of  timely
development  and market  acceptance  of new  products  and  upgrades to existing
products and pricing.  Any changes in such  assumptions or factors could produce
significantly different results.


                  PART II: OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

      The Company is not a party to any pending or ongoing  litigation  required
to be disclosed pursuant to this item.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

      There have been no changes in the securities of the Company required to be
disclosed pursuant to this item.

ITEM 3. DEFAULT ON SENIOR SECURITIES

      There have been no material  defaults with respect to any  indebtedness of
the Company required to be disclosed pursuant to this item.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

      There have been no matters  submitted to a vote of security holders during
the period ended March 31, 1998.

ITEM 5. OTHER INFORMATION AND SUBSEQUENT EVENTS

      See  Management's  Discussion  and  Analysis of  Financial  Condition  and
Results of Operations.


                                       14
<PAGE>






ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)   EXHIBITS
   An index of exhibits that are required by this item,  and which are furnished
   in accordance with Item 601 of Regulation S-B, appear on page 17.

(b)   REPORTS ON FORM 8-K
   The Company  filed a Current  Report on Form 8-K dated  April 2, 1998,  which
   reported the acquisition of all the issued and outstanding  shares of capital
   stock of Herring/Newman, Inc.




                                       15
<PAGE>




                                 SIGNATURES

Pursuant to requirements of the Securities  Exchange Act of 1934, the Registrant
has duly  caused  this  report  to be signed  on its  behalf by the  undersigned
hereunto duly authorized.


                                          THINK NEW IDEAS, INC.   May 21, 1998



     Date: MAY 21, 1998                               /s/ Ron Bloom
           ------------                               -------------
                                                      Ron Bloom
                                                      President and
                                                      Chief Operating Officer


                                                      /s/ Melvin Epstein
                                                      ------------------
                                                      Melvin Epstein
                                                      Chief Financial Officer




                                       16
<PAGE>



Exhibits filed with this Form 10-QSB:



EXHIBIT NO.
10.1               Amendment to Employment Agreement of Ron Bloom
10.2               Amendment to Employment Agreement of Susan Goodman
10.3               Amendment to Employment Agreement of Adam Curry
10.4               Letter  of  Agreement  between  the  Company  and  Scott  A.
                   Mednick
27                 Financial Data Schedule





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