UNITED STATES SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 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 SEPTEMBER 30, 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 __

Indicate the number of shares  outstanding  of each of the  issuer's  classes of
common stock, as of the latest practicable date.

Class                                           Outstanding at November 10, 1998
-----                                           --------------------------------
Common Stock, par value $.0001 per share                    8,442,906  shares

Transitional Small Business Disclosure Format (check one)  Yes     No  X


<PAGE>


                              THINK NEW IDEAS, INC.

                                   FORM 10-QSB

                                      INDEX


<TABLE>
<CAPTION>

                                                                                                        Page
                                                                                                        ----
<S>                                                                                                     <C>
PART I - FINANCIAL INFORMATION
   Item 1.  Consolidated Financial Statements
        Condensed Consolidated Balance Sheets as of September 30, 1998 (Unaudited)
        and June 30, 1998.................................................................................3
        Condensed Consolidated Statements of Operations for the three months ended
        and 1997 September 30, 1998 (Unaudited)...........................................................4
        Condensed Consolidated Statement of Shareholders' Equity as of
        September 30, 1998 (Unaudited) ...................................................................5
        Condensed Consolidated Statements of Cash Flows for the three months ended
        September 30, 1998 and 1997 (Unaudited) ..........................................................6
        Notes to Condensed Consolidated Financial Statements (Unaudited)..................................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........................................................................14
   Item 3.  Defaults Upon Senior Securities..............................................................14
   Item 4.  Submission of Matters to a Vote of Security Holders..........................................15
   Item 5.  Other Information and Subsequent Events......................................................15
   Item 6.  Exhibits and Reports on Form 8-K.............................................................15

</TABLE>


                                       2
<PAGE>


                         PART I - FINANCIAL INFORMATION

ITEM 1.  CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>

                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
                      CONDENSED CONSOLIDATED BALANCE SHEET

                                                            --------------   -----------
                                                             SEPTEMBER 30,     JUNE 30,
                                                                1998             1998
                                                            --------------   -----------
                                                              (unaudited)
<S>                                                         <C>             <C>
ASSETS
 Current assets:
      Cash and cash equivalents                             $  4,243,752    $  7,653,576
      Accounts receivable, net of allowance for doubtful
       accounts of $987,535 and $1,019,475                    14,862,006      14,431,288
      Unbilled receivables                                     3,046,944       3,455,181
      Prepaid expenses and other assets                        1,133,669         715,574
                                                            ------------    ------------
           Total current assets                               23,286,371      26,255,619

Property, plant and equipment, net                             5,532,747       5,682,059
Software development costs                                     1,772,365       1,858,370
Goodwill, net of accumulated amortization of
 $2,879,761 and $2,534,207                                    17,089,619      17,344,798
Other assets                                                   1,592,211       1,112,225
                                                            ============    ============
           Total assets                                     $ 49,273,313    $ 52,253,071
                                                            ============    ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
      Accounts payable                                      $  6,878,416    $  9,912,683
      Accrued expenses                                         1,360,003       3,414,977
      Accrued restructuring costs                                100,242         307,482
      Media payable                                            6,442,231       3,407,266
      Income taxes payable                                       237,154         566,578
      Bank payable                                             1,827,308         491,915
      Due to related party                                       612,867         591,946
      Current portion of obligations under capital leases        578,118         693,619
                                                            ------------    ------------
           Total current liabilities                          18,036,339      19,386,466

      Obligations under capital leases                            41,328         260,645
      Other long-term liability                                   82,703         102,548
                                                            ------------    ------------
           Total liabilities                                  18,160,370      19,749,659
                                                            ------------    ------------
Commitments and contingencies
Shareholders' equity:
      Preferred stock, $.0001 par value; 5,000,000 shares
       authorized; none issued and outstanding                        --              --
      Common stock, $.0001 par value; 50,000,000 shares
       authorized; 8,441,697 and 8,433,656 shares issued
       and outstanding                                               844             843
      Additional paid-in capital                              67,778,213      67,731,946
      Accumulated deficit                                    (36,664,892)    (35,229,377)
      Accumulated other comprehensive income                      (1,222)             --
                                                            ------------    ------------
           Total shareholders' equity                         31,112,943      32,503,412
                                                            ------------    ------------
           Total liabilities and shareholders' equity       $ 49,273,313    $ 52,253,071
                                                            ============    ============
</TABLE>

     See accompanying notes to condensed consolidated financial statements.

                                       3
<PAGE>



                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (UNAUDITED)

                                                THREE MONTHS ENDED
                                                  SEPTEMBER 30,
                                          -------------------------------
                                               1998             1997
                                          --------------   --------------

Revenues                                    $ 11,369,742    $  6,956,480

Operating
expenses:
   Direct salaries and related expenses        4,195,050       3,440,264
   Other direct expenses                       2,997,876       1,565,687
   Selling,  general  and  administrative
expenses                                       4,606,665       1,456,322
   Depreciation and amortization               1,006,984         427,595
                                            ------------    ------------

Operating profit/(loss)                       (1,436,833)         66,612

Interest income/(expense) and other net           21,318          (1,197)

                                            ------------    ------------
Income/(loss) before provision for taxes      (1,415,515)         65,415

Provision for income taxes                        20,000           4,580
                                            ============    ============
Net (loss) income                           $ (1,435,515)   $     60,835
                                            ============    ============

Net income (loss) per share - basic         $      (0.17)   $       0.01
Weighted average shares outstanding            8,205,732       6,151,789

Net income per share - diluted                       $--    $       0.01
Weighted average shares outstanding                   --       7,257,489


     See accompanying notes to condensed consolidated financial statements.


                                       4

<PAGE>


                     THINK NEW IDEAS, INC. AND SUBSIDIARIES

            CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                                     Accumulated
                                                 Common Stock         Additional                        Other
                                          -------------------------     Paid-in     Accumulated     Comprehensive
                                             Shares         Amount      Capital       Deficit           Income            Total
                                          -----------   -----------   ----------    ------------    -------------     -----------

<S>                                         <C>         <C>           <C>           <C>             <C>               <C>
Balance at June 30, 1998                    8,433,656   $       843   $67,731,946   $(35,229,377)   $          --     $32,503,412
                                                                                                                      -----------

Comprehensive income
   Net loss                                        --            --            --     (1,435,515)              --      (1,435,515)
   Foreign currency translation
    adjustments                                    --            --            --             --            (1,222)        (1,222)
                                                                                                                       ----------
Comprehensive income                               --            --            --             --                --     (1,436,737)

   Issuance of common stock on exercise
    of stock options                            8,041             1        46,267             --                --         46,268
                                          ===========   ===========   ===========   ============    ==============    ===========
Balance at September 30, 1998               8,441,697   $       844   $67,778,213   $(36,664,892)   $       (1,222)   $31,112,943
                                          ===========   ===========   ===========   ============    ==============    ===========

</TABLE>


          See accompanying notes to condensed consolidated financial statements.

                                       5
<PAGE>




                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

                                   (UNAUDITED)
<TABLE>
<CAPTION>

                                                                       THREE MONTHS ENDED
                                                                          SEPTEMBER 30,
                                                                 --------------------------------
                                                                      1998             1997
                                                                 ---------------  ---------------
<S>                                                               <C>             <C>         
CASH FLOW FROM OPERATING ACTIVITIES:
Net (loss) income                                                 $ (1,435,515)   $     60,835
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
    Depreciation  and amortization                                     478,489          84,364
    Amortization of intangibles and deferred financing costs           528,495         343,231
    Consulting fees                                                         --          38,000
    Changes in assets and liabilities:
         Accounts receivable, net                                     (864,920)     (6,414,424)
         Unbilled receivables                                          408,237      (1,945,045)
         Accounts payable and accrued expenses                      (5,089,241)       (407,932)
            Accrued restructuring                                     (207,240)             --
         Media payable                                               3,034,965      10,935,583
         Other assets and liabilities                                 (846,496)     (1,273,438)
                                                                  ------------    ------------
Net cash (used in) provided by operating activities                 (3,993,226)      1,421,174
                                                                  ------------    ------------

CASH FLOW FROM INVESTING ACTIVITIES:
Purchases of marketable securities                                          --      (3,262,464)
Sales of marketable securities                                              --       4,221,140
Purchases of property and equipment                                   (329,177)       (214,685)
Other                                                                 (155,185)             --
                                                                  ------------    ------------
Net cash (used in) provided by investing activities                   (484,362)        743,991
                                                                  ------------    ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock                                                46,268              --
Net borrowings on short term debt                                    1,335,393              --
Proceeds from related party                                             20,921              --
Principal payments on capital leases                                  (334,818)        (30,546)
                                                                  ------------    ------------
Net cash provided by (used in) financing activities                  1,067,764         (30,546)
                                                                  ------------    ------------

Net (decrease) increase in cash and cash equivalents                (3,409,824)      2,134,619
Cash and cash equivalents, beginning of period                       7,653,576       3,451,347
                                                                  ------------    ------------

Cash and cash equivalents, end of period                          $  4,243,752    $  5,585,966
                                                                  ============    ============

Supplemental cash flow information:
  Cash paid during the period
    Income taxes                                                  $      3,077    $      9,880
    Interest                                                            26,588           4,917

Non-cash investing and financing activities:
   Issuance of common stock to settle long-term liability                   --         206,250
   Receipt of marketable securities for payment of accounts
   receivable                                                     $    434,202              --
</TABLE>


          See accompanying notes to condensed consolidated financial statements.

                                       6
<PAGE>


                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)


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 Form 10-KSB for the fiscal year ended June
30, 1998, as filed with the  Securities and Exchange  Commission  (the "SEC") in
September  1998.  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
months ended September 30, 1998, are not  necessarily  indicative of the results
expected for the year.

PRO FORMA FINANCIAL DATA

      The following  unaudited pro forma  information for the three months ended
September 30, 1997 is presented as if the Company had completed the acquisitions
of  BBG  New  Media,  Inc.  ("BBG"),  Herring/Newman,  Inc.  ("Herring/Newman"),
Interweb, Inc. ("Interweb"), UbiCube Group, Inc. ("UbiCube") as of July 1, 1997.
These acquisitions were completed in the Company's fiscal year 1998.

               Revenue                     $ 10,852,000
               Net Loss                         (49,000)
               Net Loss per share - basic         (0.01)
               Weighted average shares
               outstanding - basic            6,151,789

      The pro forma  information  for the three months ended  September 30, 1997
above is not necessarily indicative of the results of operations that would have
occurred had the transactions actually been made as of July 1, 1997.

EARNINGS PER SHARE

      Statement of Financial  Accounting  Standards  ("SFAS") No. 128, "Earnings
per Share"  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 reflect the potential  dilution that could occur from
common shares issuable through stock options and other  convertible  securities.
Shares of common stock held in escrow related to the Company's  acquisitions are
not included in the calculation of  weighted-average  shares outstanding for the
periods presented, as the conditions required to release escrow shares for these
acquisitions were not fulfilled at the end of the applicable periods presented.

      A  reconciliation  of   weighted-average   common  shares  outstanding  to
weighted-average common shares outstanding assuming dilution follows:

                                       7
<PAGE>


                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)


                                                  September 30,
                                         ---------------------------
                                            1998           1997
                                         -----------   -------------
Weighted-average common shares
  outstanding                             8,205,732       6,151,789

Incremental common shares issuable               --       1,105,700
Weighted-average common shares
  assuming dilution                       8,205,732       7,257,489

      Incremental  common  shares were not included in the  computation  for the
quarter  ended  September  30, 1998 since their  inclusion  in periods  when the
Company reported a net loss would be anti-dilutive.

COMPREHENSIVE INCOME

      The Company adopted SFAS No. 130 "Reporting  Comprehensive Income," in the
first fiscal quarter of 1998. SFAS No. 130  establishes  standards for reporting
and  displaying  comprehensive  income  and  its  components  in  the  financial
statements.  Comprehensive  income  is  a  more  inclusive  financial  reporting
methodology that includes the disclosure of certain  financial  information that
has not been  recognized  in the  calculation  of net  income  or loss,  such as
foreign  currency  translations  and  changes  which are  recorded  directly  to
shareholders'  equity.  Accumulated  other  comprehensive  loss was comprised of
foreign  currency  translation  adjustments of $1,222 at September 30, 1998 as a
result of the Company's United Kingdom  operations in the United Kingdom,  which
were acquired in the fourth quarter 1998 acquisition of UbiCube.

RECLASSIFICATIONS

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

LEGAL PROCEEDINGS

      On September 25, 1998, a shareholder of the Company filed a putative class
action suit against the Company and current and former  officers of the Company.
The suit, filed in the United States District Court for the Southern District of
New York,  alleges  that the  Company  and  certain  of its  current  and former
officers and directors disseminated  materially false and misleading information
about the Company's financial position and results of operations through certain
public  statements and in certain  documents  filed by the Company with the SEC.
Plaintiff alleges that these statements and documents caused the market price of
the  Company's  common  stock to be  artificially  inflated.  Plaintiff  further
alleges  that he  purchased  his  shares  of common  stock at such  artificially
inflated prices and suffered damages as a result.

      On October 16, 1998, and October 19, 1998,  two additional  putative class
action suits were filed by shareholders of the Company.  These  subsequent suits
make similar  allegations  to those made in the first suit. The relief sought in
each of the three  lawsuits is  unspecified.  The Company is aware that at least
four  additional  putative  class  action  complaints  making  what appear to be
similar  allegations  against  the  Company  have been filed in the same  court,
although the Company has not yet been served with any complaints  other than the
three identified above.  See Part II: "Item 1. Legal Proceedings."

RECENT ACCOUNTING PRONOUNCEMENTS

      In June 1997, the Financial Accounting Standards Board issued Statement of
Financial  Accounting  Standards ("SFAS") No. 131, "Disclosure about Segments of
an Enterprise and Related  Information,"  which is effective for years beginning
after  December 15, 1997.  SFAS No. 131  establishes  standards for the way that
public  enterprises  report  information  about  operating  segments  in  annual
financial  statements  and  requires  that  those  enterprises  report  selected
information  about  operating  segments in interim  financial  reports.  It also
establishes  standards  for related  disclosures  about  products and  services,
geographic  areas,  and major  customers.  The Company  operates in one business
segment  that  provides  marketing  and  communication   services  that  include
traditional  services,  such as  advertising,  graphic design and development of
internet web sites and related tools.

      In June 1998,  the Financial  Accounting  Standards  Board issued SFAS No.
133,  "Accounting for Derivative  Instruments and Hedging  Activities." SFAS No.

                                       8
<PAGE>


                     THINK NEW IDEAS, INC. AND SUBSIDIARIES
        NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                                   (UNAUDITED)


133 must first be applied in the first  quarter of fiscal years that begin after
June 15, 1999, and in general,  requires that entities  recognize all derivative
financial  instruments  as assets or  liabilities,  measured at fair value,  and
include  in  earnings  the  changes  in  the  fair  value  of  such  assets  and
liabilities. SFAS No. 133 also provides that changes in the fair value of assets
or liabilities being hedged with recognized derivative instruments be recognized
and included in earnings.  The Company does not utilize derivative  instruments,
either  for  hedging  or other  purposes,  and  therefore  anticipates  that the
adoption of the  requirements of SFAS No. 133 will not have a material affect on
its consolidated financial statements.















                                       9
<PAGE>



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

RESULTS OF OPERATIONS

REVENUES

      Consolidated  revenues  for the three  months  ended  September  30,  1998
increased  sixty-three  percent (63%) or $4,414,000 to  $11,370,000  as compared
with  $6,956,000  for the three months ended  September 30, 1997.  This increase
reflects the  Company's  strategic  plan to grow both through  acquisitions  and
internally. Of the overall increase in revenues, approximately $4,300,000 is the
result  of the  Company's  fiscal  1998  acquisitions  of  BBG,  Herring/Newman,
Interweb  and UbiCube  (the "1998  Acquisitions")  which were  completed  in the
second  (BBG) and fourth  quarters  (Herring/Newman,  Interweb  and  UbiCube) of
fiscal 1998. The remaining increase  represents growth in the Company's existing
interactive  marketing  and  communications  services,  which  was  offset  by a
$555,000 loss of revenues  resulting  from the Company's  fourth  quarter fiscal
1998  closure  of its  Atlanta  graphic  design  department.  This  closure  was
reflected in the restructuring charge recorded in fiscal 1998.

OPERATING RESULTS

      The  operating  loss for the three  months  ended  September  30,  1998 of
$1,437,000  reflects a $1,370,000  change from an operating profit of $67,000 in
the  corresponding  prior year  period.  The  decrease in  operating  results is
primarily  due to the  $4,414,000  increase in revenue being more than offset by
increases in direct expenses and selling,  general, and administrative  expenses
of $5,337,000 for the three months ended September 30, 1998.

      Although the Company's revenues increased by sixty-three  percent (63%) in
the  quarter  ended  September  30,  1998,   revenues  were  below  management's
expectations as a result of which the increase in expenses, although at budgeted
levels,  was not offset and caused the Company to incur an operating  loss.  The
Company's  operating  expenses increased both in anticipation of new assignments
and higher revenues in the current  quarter and to support the Company's  future
growth.  Revenues  for the  quarter  were below  projected  levels due mainly to
decisions  by clients  to delay new  projects  or to  postpone  decisions  as to
undertaking  new  projects,  which the Company  believes were in reaction to the
economic uncertainties in the quarter ended September 30, 1998.

      Direct  salaries  and  related  expenses  consist  primarily  of wages and
associated  payroll costs and benefits for  permanent  and temporary  employees.
Direct salaries and related expenses  increased  $755,000 or twenty-two  percent
(22%)  to  $4,195,000  in  the  three  months  ended  September  30,  1998  from
$3,440,000,  in the corresponding  prior year period. Of the overall increase in
direct  salaries  and related  expenses,  the 1998  Acquisitions  accounted  for
approximately $1,939,000.  Excluding the effect of these acquisitions, there was
a decrease of $1,184,000 over the same period in 1997. The Company's disposal of
its  traditional  graphic  design  departments  in  fiscal  1998  accounted  for
approximately $230,000 of this reduction.  The remaining decrease of $954,000 is
due to better  utilization of  multi-skilled  employees and higher profit margin
projects in the three  months  ended  September  30,  1998  compared to the same
period in 1997. This is evidenced by the decline in direct salaries and related


                                       10
<PAGE>




expenses as a percentage of revenues from forty-nine percent (49%) for the three
months ended  September  30, 1997 to  thirty-seven  percent  (37%) for the three
months ended September 30, 1998.

      Other direct  expenses  consist of contract  labor,  travel and production
expenses  associated with providing  services to clients.  Other direct expenses
increased $1,432,000 to $2,998,000 for the three months ended September 30, 1998
from  $1,566,000  for the same  period  in  1997.  This  increase  is due to the
inclusion   of  the   operations   of  the   1998   Acquisitions   as   well  as
production-related   costs  associated  with  the  Company's  higher  levels  of
revenues.

      Selling,   general  and  administration   expenses  consist  of  marketing
expenses,  technology  costs  (hardware and software  purchases and leasing) and
telecommunications   costs   for   Internet   access.   Selling,   general   and
administration  expenses  also include  corporate  expenses  such as  insurance,
personnel  costs for  finance  and  administration,  accounting  and legal fees,
management  information  systems,  and employee benefits.  Selling,  general and
administration  expenses  increased by $3,151,000  to  $4,607,000  for the three
months  ended  September  30, 1998 from  $1,456,000  for the three  months ended
September 30, 1997. Of this increase,  $1,821,000 is due to the inclusion of the
1998 Acquisitions.  The remaining net increase of $1,330,000  reflects increases
in  salary  expenses  for  additional  management  at the  executive  level  and
increased  financial  and  administrative  personnel at the  corporate  level to
support the  Company's  growth.  In  addition,  there was  increased  technology
spending  required  to support  the  Company's  infrastructure  and the  growing
workforce.

INCOME TAXES

      The  effective  tax rate for 1998 on income  before  income taxes is lower
than the United States federal statutory rate of thirty-four  percent (34%) as a
result of the Company's net operating  loss  carryforwards.  The Company did not
record an income tax  benefit  in the three  months  ended  September  30,  1998
because the  realization of available net operating loss  carryforwards  was not
assured. The Company recorded $20,000 of income tax expense for the three months
ended September 30, 1998 relating to state and local taxes.

LIQUIDITY AND CAPITAL RESOURCES

      Net cash used in operating  activities of $3,993,000  for the three months
ended  September  30, 1998  reflects  the net loss of  $1,436,000  in the period
combined principally with a decrease in accounts payable and accrued expenses of
$5,089,000,  offset in part, by an increase in media payable of $3,035,000.  The
decrease in accounts  payable and accrued  expenses at September 30, 1998, which
was funded with the cash on hand at June 30,  1998,  is the result of the timing
of vendor  payments.  The level of media  payables will vary with the volume and
timing of client media advertising  expenditures,  and the increase at September
30, 1998 reflects increased media placements for clients.  Amortization  expense
related  to  goodwill  for  the  three  months  ended  September  30,  1998  was
approximately  $345,000.  Of this  expense,  $290,000  is  related  to the  1998
Acquisitions.  Accrued  restructuring  costs  represent the charges  recorded in
fiscal 1998 related to the  Company's  disposition  of its  traditional  graphic
design departments. The reduction of the accrued restructuring charge reflects


                                       11
<PAGE>




the payment of certain  severance  and other  costs  included in the fiscal 1998
accrual,  and the  adjustment  of  $80,000  reflecting  the  cancellation  of an
equipment lease.  The Company financed the negative  operating cash flow for the
first  quarter of fiscal 1998  through the use of cash on hand at June 30, 1998.
Additionally, the Company borrowed $1,564,000 under its line of credit with Bank
of New York to allow it to maintain  adequate cash reserves,  which totaled $4.2
million at September 30, 1998. At September 30, 1998, the Company had $3,436,000
available for borrowing under its line of credit.

      Net cash  provided by  operating  activities  for the three  months  ended
September 30, 1997 of $1,421,000  reflects net income of $61,000 which  includes
non cash charges of $428,000 for depreciation and amortization,  and $38,000 for
consulting fees. Media payables increased  $10,936,000,  however,  this increase
was offset by the increases in accounts  receivable and unbilled  receivables of
$6,414,000 and $1,945,000, respectively, and an increase in accounts payable and
accrued expenses of $408,000.  The increase in unbilled receivables at September
30, 1997 is principally due to specific Website development  projects undertaken
by the Company for which  significant  work has been performed in advance of the
dates billings are permitted under the applicable contracts. Accounts receivable
increased  primarily due to pass-through media costs billed to clients of Fathom
Advertising, which was acquired in May 1997, and increased the volume of work.

      Net cash  used in  investing  activities  totaled  $484,000  for the three
months  ended  September  30, 1998 as compared  with cash  provided by investing
activities of $744,000 in the corresponding  prior year period. Net cash used in
investing activities for the three months ended September 30, 1998 is the result
of  additions  to property  and  equipment  and  software  development  costs of
$394,000.  Additions  to software  development  costs of $65,000 are included as
other investing activities.  Cash provided by investing activities for the three
months ended September 30, 1997 resulted  primarily from net sales of marketable
equity  securities  of  $959,000,  offset  in part by  capital  expenditures  of
$215,000.

      Net cash provided by financing  activities  was  $1,068,000  for the three
months ended September 30, 1998 compared with cash used in financing  activities
of $31,000 for the  corresponding  prior year period ended  September  30, 1997.
Cash provided by financing  activities for the three months ended  September 30,
1998 relates primarily to the increase of $1,300,000 in borrowings on short term
debt which was used to finance capital  expenditures  and operating  activities,
offset  slightly  by  payments  on capital  leases.  Net cash used in  financing
activities  for the three months ended  September  30, 1997 of $31,000  resulted
from principal payments on long-term capital leases.

      The Company  believes that cash generated from its operations in 1999 will
be  sufficient  to fund its  operations,  pay  required  debt and capital  lease
obligations,  and continue the Company's  strategy growth through  acquisitions.
However,  there can be no assurance  that such cash  requirements  can be funded
totally from operations,  and in particular,  the cash required for acquisitions
that cannot be  structured  solely with common stock or deferred  payments.  The
Company  may be  required to seek  additional  sources of capital to  facilitate
transactions that require  significant cash payments.  There can be no assurance


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that such additional  capital would be available when needed,  and the inability
to obtain such financing  could  adversely  affect the Company's  pursuit of its
strategies.

IMPACT OF YEAR 2000

      The Year 2000 issue is a 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. The Company's assessment of its systems will be completed during fiscal
1999.  Additionally,  the Company has  provided its clients and vendors with the
tools  needed to perform  their  Year 2000  compliance  initiatives.  Due to the
Company having state of the art computer  systems,  no hardware  upgrade will be
required.  The Company's primary focus is the state of readiness of the Internet
infrastructure and is working with the Internet Engineering Task force ("IETF"),
of which  the  Company  is a  member,  Cisco  Systems  and  Worldcom  to  ensure
mitigation  of risk  with  redundant  and Year  2000  compliant  infrastructure.
Additionally,  the  Company is working  with and  seeking  Year 2000  compliance
statements from its software  vendors,  such as Microsoft,  Sun Microsystems and
Apple. The Company  estimates the total direct amount to remediate the Year 2000
issue to be  immaterial  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

      Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of the federal
securities laws. All 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 expansion,  strategic plans,  growth of
the Company's business and operations, Year 2000 related actions, and other such
matters are forward-looking statements. The forward-looking statements are based
on many  assumptions  and factors  including  effects of currency  fluctuations,
consumer preferences and economic conditions  worldwide,  and the ability of the
Company to implement,  in a timely manner,  the programs and actions  related to
the Year 2000 issue.  Any changes in such  assumptions  or factors could produce
significantly different results.




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                            PART II-OTHER INFORMATION

ITEM 1.  LEGAL PROCEEDINGS

      On September 25, 1998,  Michael R. Farrell,  a shareholder of the Company,
filed a putative  class action suit,  styled  Farrell v. Think New Ideas,  Inc.,
Scott Mednick,  Melvin Epstein and Ronald Bloom,  No. 98 Civ. 6809,  against the
Company,  Ronald  Bloom and Melvin  Epstein  (both  officers of the Company) and
Scott  Mednick  (a former  officer  of the  Company).  The suit was filed in the
United States District Court for the Southern  District of New York on behalf of
all persons who purchased or otherwise  acquired shares of the Company's  common
stock in the class period from November 14, 1997 through September 21, 1998. The
complaint  alleges  that the  Company  and  certain  of its  current  and former
officers and directors disseminated  materially false and misleading information
about the Company's financial position and results of operations through certain
public  statements and in certain  documents  filed by the Company with the SEC.
Plaintiff alleges that these statements and documents caused the market price of
the  Company's  common  stock to be  artificially  inflated.  Plaintiff  further
alleges  that he  purchased  his  shares  of common  stock at such  artificially
inflated prices and suffered damages as a result.

      Subsequently,  on October 16, 1998,  and October 19, 1998,  two additional
putative  class action suits,  styled Saint Ours v. Think New Ideas,  Inc.,  et.
al., No. 98 Civ. 7306; and Henzel v. Think New Ideas, Inc., et. al., No. 98 Civ.
7362, respectively,  were filed by shareholders of the Company. These subsequent
suits,  which have  substantially  similar  class  periods  (the class period in
Henzel v.  Think New  Ideas,  Inc.,  et. al. is from  November  5, 1998  through
September 21, 1998), make similar  allegations to those made in Farrell v. Think
New Ideas, Inc., et. al. with only minor differences.  The relief sought in each
of the three  lawsuits  is  unspecified,  but  includes  pleas for  compensatory
damages and  interest,  punitive  damages (the  plaintiff in Henzel v. Think New
Ideas,  Inc., et. al. has not sought  punitive  damages),  reasonable  costs and
expenses  associated  with the action  (including  attorneys'  fees and experts'
fees) and such other relief as the court may deem proper.

      Management  believes  that the Company has  meritorious  defenses to these
actions  and  intends  to  contest  them  vigorously.  Although  there can be no
assurance as to the outcome of these matters,  unfavorable resolution could have
a  material  adverse  effect  on the  results  of  operations  and/or  financial
condition of the Company in the future.  

      The Company is aware that at least four  additional  putative class action
complaints making what appear to be similar allegations against the Company have
been filed in the same court,  although the Company has not yet been served with
any complaints other than the three identified in the preceding paragraphs.

ITEM 2.  CHANGES IN SECURITIES

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

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES

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



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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 September 30, 1998.

ITEM 5.  OTHER INFORMATION AND SUBSEQUENT EVENTS

      There is no other  information or subsequent events to report at September
30, 1998.

ITEM 6.  EXHIBITS AND REPORTS ON FORM 8-K

(a)  EXHIBITS. 

     Exhibit 27     Financial Data Schedule

(b)  Reports on Form 8-K. The Company filed a current  report on Form 8-K during
     the period ended  September 30, 1998 relating to the acquisition of UbiCube
     Group,  Inc.  on  June  29,  1998.  Financial  statements  relating  to the
     acquisition of UbiCube Group,  Inc. were filed by amendment to the Form 8-K
     on September 14, 1998. In addition,  Financial  Statements  relating to the
     acquisition of Interweb, Inc. were filed by the Company by amendment to the
     Form 8-K relating to the acquisition on August 14, 1998.



                                       15
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                                   SIGNATURES

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

November 14, 1998                   THINK New Ideas, Inc.

                                    By:  /s/ Melvin Epstein
                                         ---------------------------------------
                                         Melvin Epstein, Chief Financial Officer