<PAGE>


                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549
                             ----------------------

                                    FORM 10-Q

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

                     FOR THE QUARTER ENDED DECEMBER 26, 1998

                         Commission File Number: 0-16002

                        ADVANCED MARKETING SERVICES, INC.
             (Exact name of registrant as specified in its charter)

               DELAWARE                                   95-3768341
     (State or other jurisdiction of                   (I.R.S. Employer
      incorporation or organization)                   Identification No.)

                          5880 OBERLIN DRIVE, SUITE 400
                           SAN DIEGO, CALIFORNIA 92121
                    (Address of principal executive offices)
                                   (Zip Code)

                                 (619) 457-2500
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
                                   YES  X     NO
                                       ---       ---

The number of shares of the Registrant's Common Stock outstanding as of 
December 26, 1998 was 8,470,409.

<PAGE>

                        ADVANCED MARKETING SERVICES, INC.

                               INDEX TO FORM 10-Q
                                December 26, 1998

                                                                            PAGE
                                                                            ----
                         PART I. FINANCIAL INFORMATION

ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS

         Consolidated Balance Sheets (Unaudited) .........................    3

         Consolidated Statements of Income (Unaudited) ...................    4

         Consolidated Statements of Cash Flows (Unaudited) ...............    5

         Notes to Consolidated Financial Statements (Unaudited) .........   6-9

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
        CONDITION AND RESULTS OF OPERATIONS. .............................10-13


                         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 .............   14

ITEM 5 - OTHER INFORMATION ...............................................   14

ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K ................................   14

SIGNATURES ...............................................................   14

                                       2

<PAGE>

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (See Note 1 for Basis of Presentation)

                        ADVANCED MARKETING SERVICES, INC.
                           CONSOLIDATED BALANCE SHEETS
                  (AMOUNTS IN THOUSANDS, EXCEPT FOR SHARE DATA)

<TABLE>
<CAPTION>
                                                                             DECEMBER 26,        MARCH 31,          DECEMBER 27,
                                                                                 1998              1998                 1997
                                                                             ------------        ---------          ------------
                                                                              (UNAUDITED)          (NOTE)            (UNAUDITED)
<S>                                                                          <C>                 <C>                <C>
ASSETS
CURRENT ASSETS:
Cash And Cash Equivalents                                                     $  35,080           $  28,982          $  54,857
Investments, Available-For-Sale                                                   3,509               8,068             10,492
Accounts Receivable - Trade, Net of Allowances for Uncollectible
   Accounts and Sales Returns of $3,872 at December 26, 1998,
   $4,012 at March 31, 1998 and $4,217 at December 27, 1997                     103,770              61,665             85,141
Vendor and Other Receivables                                                      4,665               2,408              2,249
Inventories, Net                                                                105,691              99,429             84,792
Deferred Income Taxes                                                             5,874               4,922              5,013
Prepaid Expenses                                                                  1,798               1,368              1,045
                                                                              ---------           ---------          ---------
      TOTAL CURRENT ASSETS                                                      260,387             206,842            243,589
                                                                              ---------           ---------          ---------

PROPERTY AND EQUIPMENT, AT COST                                                  15,314              11,964             10,854
Less - Accumulated Depreciation and Amortization                                  9,191               7,043              6,277
                                                                              ---------           ---------          ---------
     Net Property And Equipment                                                   6,123               4,921              4,577
                                                                              ---------           ---------          ---------
Investments, Available-For-Sale                                                      --                  --                 --
Goodwill and Other Assets                                                         6,748               6,709                786
                                                                              ---------           ---------          ---------
             TOTAL ASSETS                                                     $ 273,258           $ 218,472          $ 248,952
                                                                              ---------           ---------          ---------
                                                                              ---------           ---------          ---------
LIABILITIES
CURRENT LIABILITIES:
Accounts Payable                                                              $ 179,029           $ 142,203          $ 172,872
Accrued Liabilities                                                              11,379               8,141              7,412
Income Taxes Payable                                                              4,111                 380              2,515
                                                                              ---------           ---------          ---------
     TOTAL CURRENT LIABILITIES                                                  194,519             150,724            182,799
                                                                              ---------           ---------          ---------

STOCKHOLDERS' EQUITY:
Common Stock, $.001 Par Value, Authorized 20,000,000 Shares, Issued 9,547,000
   Shares at December 26, 1998, 9,492,000 Shares at March 31, 1998 and 9,457,000
   Shares at December 27, 1997
                                                                                     10                   9                  9
Additional Paid In Capital                                                       27,556              27,142             26,841
Retained Earnings                                                                53,100              42,718             41,440
Unrealized Gain on Investments                                                        5                   8                 25
Foreign Currency Translation Adjustment                                             188                 (9)               (42)
Less: Treasury Stock, 1,076,000 shares at Cost                                  (2,120)              (2,120)           (2,120)
                                                                              ---------           ---------          ---------
TOTAL STOCKHOLDERS' EQUITY                                                       78,739              67,748             66,153
                                                                              ---------           ---------          ---------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY                                    $ 273,258           $ 218,472          $ 248,952
                                                                              ---------           ---------          ---------
                                                                              ---------           ---------          ---------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED BALANCE
SHEETS.

NOTE: THE BALANCE SHEET AT MARCH 31, 1998 HAS BEEN DERIVED FROM THE AUDITED
FINANCIAL STATEMENTS AT THAT DATE, BUT DOES NOT INCLUDE ALL OF THE INFORMATION
AND FOOTNOTES REQUIRED BY GENERALLY ACCEPTED ACCOUNTING PRINCIPLES FOR COMPLETE
FINANCIAL STATEMENTS.

                                       3
<PAGE>

                        ADVANCED MARKETING SERVICES, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
            (UNAUDITED - AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
                                                                  THREE MONTHS ENDED                     NINE MONTHS ENDED
                                                            --------------------------------       -----------------------------
                                                            DECEMBER 26,        DECEMBER 27,       DECEMBER 26,     DECEMBER 27,
                                                                1998               1997                1998             1997
                                                            -----------         ------------       ------------     ------------
<S>                                                         <C>                 <C>                <C>              <C>
NET SALES                                                      $168,183             $150,522           $381,047         $332,408
Cost Of Goods Sold                                              145,749              135,000            333,482          297,087
                                                            -----------            ---------         ----------        ---------
GROSS PROFIT                                                     22,434               15,522             47,565           35,321
Distribution and Administrative Expenses                         11,519                8,832             30,659           23,998
                                                            -----------            ---------         ----------        ---------
INCOME FROM OPERATIONS                                           10,915                6,690             16,906           11,323
Interest and Dividend Income                                        345                  611                806            1,271
                                                            -----------            ---------         ----------        ---------
INCOME BEFORE PROVISION FOR INCOME TAXES                         11,260                7,301             17,712           12,594
Provision for Income Taxes                                        4,417                2,738              6,908            4,723
                                                            -----------            ---------         ----------        ---------
NET INCOME                                                  $     6,843            $   4,563         $   10,804        $   7,871
                                                            -----------            ---------         ----------        ---------
                                                            -----------            ---------         ----------        ---------

COMPONENTS OF COMPREHENSIVE INCOME:
Foreign Currency Translation Adjustments                            (82)                  43                197               44
Unrealized Gain on Investments                                      (78)                 (26)                (3)              16
                                                            -----------            ---------         ----------        ---------

COMPREHENSIVE INCOME:                                       $     6,683           $    4,580         $   10,998        $   7,931
                                                            -----------            ---------         ----------        ---------
                                                            -----------            ---------         ----------        ---------

NET INCOME PER COMMON AND COMMON SHARE EQUIVALENT:
         Basic                                              $       .81            $     .55         $     1.28        $     .95
                                                            -----------            ---------         ----------        ---------
                                                            -----------            ---------         ----------        ---------
         Diluted                                            $       .79            $     .53         $     1.25        $     .92
                                                            -----------            ---------         ----------        ---------
                                                            -----------            ---------         ----------        ---------

NUMBER OF SHARES USED IN CALCULATION:
         Basic                                                   8,460                 8,365              8,441            8,319
                                                            -----------            ---------         ----------        ---------
                                                            -----------            ---------         ----------        ---------
         Diluted                                                 8,690                 8,593              8,677            8,514
                                                            -----------            ---------         ----------        ---------
                                                            -----------            ---------         ----------        ---------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.

                                       4
<PAGE>

                        ADVANCED MARKETING SERVICES, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                       (UNAUDITED - AMOUNTS IN THOUSANDS)

<TABLE>
<CAPTION>
                                                                             NINE MONTHS ENDED
                                                                       -----------------------------
                                                                       DECEMBER 26,     DECEMBER 27,
                                                                            1998           1997
                                                                       ------------     ------------
<S>                                                                    <C>              <C>
OPERATING ACTIVITIES:
   Net Income                                                            $ 10,804          $  7,871
   Adjustments to Reconcile Net Income to Net Cash Provided by
     Operating Activities:
          Depreciation and Amortization                                     1,619             1,057
          Provision for Uncollectible Accounts and Sales Returns              341               755
          Provision for Markdown of Inventories                             4,308             3,596

          Deferred Income Taxes                                              (952)              469
          Changes in Assets And Liabilities:
             Increase in Accounts Receivable - Trade                      (45,435)          (32,332)
             (Increase) Decrease in Vendor and Other Receivables           (2,407)              552
             (Increase) Decrease in Inventories                            (9,334)            3,357
             Increase Prepaid Expenses And Other Assets                      (469)             (515)
             Increase in Accounts Payable                                  38,744            53,365
             Increase in Accrued Liabilities                                3,253             2,094
             Increase in Income Taxes Payable                               3,963             1,626
                                                                         --------          --------
                   Net Cash Provided by Operating Activities                4,435            41,895
                                                                         --------          --------

   INVESTING ACTIVITIES:
     Purchase/Disposal of Property and Equipment, Net                      (2,809)           (1,873)
     Purchase of Investments, Available-For-Sale                          (32,006)           (5,533)
     Sale and Redemption of Investments, Available for Sale                36,562             6,297
                                                                         --------          --------
                   Net Cash Provided by (Used In) Investing Activities      1,747            (1,109)
                                                                         --------          --------

   FINANCING ACTIVITIES:
     Proceeds from Exercise of Options and Related Tax Benefits               415               525
     Purchase of Treasury Stock                                                --               (90)
     Dividends Paid                                                          (422)               --
                                                                         --------          --------
                   Net Cash Provided by (Used In) Financing Activities         (7)              435
                                                                         --------          --------

   EFFECT OF EXCHANGE RATE CHANGES ON CASH                                    (77)               44
                                                                         --------          --------

   INCREASE IN CASH AND CASH EQUIVALENTS                                    6,098            41,265

   CASH AND CASH EQUIVALENTS, Beginning of Period                          28,982            13,592
                                                                         --------          --------
   CASH AND CASH EQUIVALENTS, End of Period                              $ 35,080          $ 54,857
                                                                         --------          --------
                                                                         --------          --------
</TABLE>

THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED STATEMENTS.

                                       5
<PAGE>

                        ADVANCED MARKETING SERVICES, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (UNAUDITED)

1. BASIS OF PRESENTATION

The financial statements presented herein as of and for the three and nine 
months ended December 26, 1998 and December 27, 1997 have been prepared in 
accordance with generally accepted accounting principles and with 
instructions to Form 10-Q. These financial statements have not been examined 
by independent public accountants, but include all adjustments (consisting of 
normal recurring adjustments) which are, in the opinion of Management, 
necessary for a fair presentation of the financial condition, results of 
operations and cash flows for such periods.

The accompanying consolidated financial statements include the accounts of 
the Company and its wholly owned subsidiaries. All significant intercompany 
accounts and transactions have been eliminated.

Certain information and footnote disclosures normally included in financial 
statements in accordance with generally accepted accounting principles have 
been omitted pursuant to requirements of the Securities and Exchange 
Commission. Management believes that the disclosures included in the 
accompanying interim financial statements and footnotes are adequate to make 
the information not misleading. For further information, refer to the 
consolidated financial statements and notes thereto included in the Company's 
Annual Report on Form 10-K for the fiscal year ended March 31, 1998.

The results of operations for the three and nine month periods ended December 
26, 1998 are not necessarily indicative of the results to be expected for the 
fiscal year ending March 31, 1999. Net sales in the Company's third fiscal 
quarter have historically been, and are expected to be, significantly greater 
than in any other quarter of the fiscal year due to increased demand during 
the holiday season.

The preparation of financial statements in conformity with generally accepted 
accounting principles requires management to make estimates and assumptions 
that affect the reported amounts of assets and liabilities and disclosure of 
contingent assets and liabilities at the date of the financial statements and 
the reported amounts of revenues and expenses during the reporting period. 
Actual results could differ from those estimates.

2. INTERIM ACCOUNTING PERIODS

In accordance with wholesale distribution industry practice, net sales and 
cost of goods sold for interim periods are cut off on the Saturday nearest to 
the end of the calendar month. The cut-off for the fourth fiscal quarter is 
March 31. This practice may result in differences in the number of business 
days for which sales and cost of goods sold are recorded both as to 
quarter-to-quarter comparisons, and as to comparisons of quarters between 
years.

                                       6
<PAGE>

3. INVESTMENTS, AVAILABLE-FOR-SALE

"Investments, available-for-sale" consist principally of highly rated 
corporate and municipal bonds. The cost and estimated fair market value of 
investments at December 26, 1998, March 31, 1998 and December 27, 1997 are as 
follows (in thousands):

<TABLE>
<CAPTION>
                                                                                   December 26, 1998
                                                                ---------------------------------------------------------
                                                                                    Gross           Gross       Estimated
                                                                Amortized      Unrealized      Unrealized            Fair
                                                                     Cost           Gains          Losses           Value
                                                                ----------     -----------     ----------       ---------
<S>                                                             <C>            <C>             <C>              <C>
Debt Securities Issued by States of The U.S. And
  Political Subdivisions of The States                        $    3,504   $           8    $         3       $    3,509
                                                                ----------     -----------     ----------       ---------
                                                                ----------     -----------     ----------       ---------
</TABLE>


<TABLE>
<CAPTION>
                                                                                    March 31, 1998
                                                                ---------------------------------------------------------
                                                                                    Gross           Gross       Estimated
                                                                Amortized      Unrealized      Unrealized            Fair
                                                                     Cost           Gains          Losses           Value
                                                                ----------     -----------     ----------       ---------
<S>                                                             <C>            <C>             <C>              <C>
Debt Securities Issued by States of The U.S. And
  Political Subdivisions of The States                          $   8,060      $         8     $       --       $   8,068
                                                                ----------     -----------     ----------       ---------
                                                                ----------     -----------     ----------       ---------
</TABLE>

<TABLE>
<CAPTION>
                                                                                    December 27, 1997
                                                                ----------------------------------------------------------
                                                                                    Gross           Gross       Estimated
                                                                Amortized      Unrealized      Unrealized            Fair
                                                                     Cost           Gains          Losses           Value
                                                                ----------     -----------     ----------       ---------
<S>                                                             <C>            <C>             <C>              <C>
Debt Securities Issued by States of The U.S. And
    Political Subdivisions of The States                        $   10,467     $        25     $      --        $  10,492
                                                                ----------     -----------     ----------       ---------
                                                                ----------     -----------     ----------       ---------
</TABLE>

As of December 26, 1998, investments in debt securities issued by States of 
the U.S. and political subdivisions of the States in the amount of $3,509,000 
are scheduled to mature within one year.

Proceeds from the sale of investments aggregated $8,152,000 for the quarter 
ended December 26, 1998. There was a net gain of approximately $91,000 
realized on these sales. Proceeds from the sale of investments totaled 
$2,055,000 for the quarter ended December 27, 1997. There was a net gain of 
approximately $51,000 realized on these sales. The Company uses the specific 
identification method in determining cost on these investments. The net 
decrease in unrealized gain on investments was approximately $78,000 for the 
quarter ended December 26, 1998. The net decrease in unrealized gain on 
investments for the quarter ended December 27, 1997 was approximately $26,000.

                                       7

<PAGE>

4. SALES RETURNS

In accordance with industry practice, a significant portion of the Company's 
product is sold to customers with the right of return. The Company has 
provided allowances of $2,734,000 as of December 26, 1998, $2,334,000 as of 
March 31, 1998 and $2,490,000 as of December 27, 1997 for the gross profit 
effect of estimated future sales returns.

5. INVENTORIES

Inventories consist primarily of books and, to a lesser extent, music CD's 
and prerecorded audio and videocassettes purchased for resale and are stated 
at the lower of cost (first-in, first-out) or market.

6. LINE OF CREDIT

The Company had available at December 26, 1998 an unsecured bank line of 
credit with a maximum borrowing limit of $10 million. The interest rate on 
bank borrowings is based on the prime rate and "Libor" rates. The line of 
credit expires July 31, 2000. As of December 26, 1998, March 31, 1998 and 
December 27, 1997, there were no outstanding borrowings on the line of credit.

7. INCOME TAXES

The Company provides currently for taxes on income regardless of when such 
taxes are payable. Deferred income taxes result from temporary differences in 
the recognition of income and expense for tax and financial reporting 
purposes. Income taxes paid in the nine months ended December 26, 1998 
totaled $3,859,000. Income taxes paid during the same period of the previous 
year totaled $ 2,282,000.

8. PER SHARE INFORMATION

Basic earnings per share information is based on the weighted average number 
of common shares and diluted earnings per share includes common share 
equivalents outstanding during the periods. The effects of all anti-dilutive 
common share equivalents are excluded from the calculation of earnings per 
share. The Company's only potential dilutive common share equivalents are 
stock options.

In February 1997, the Financial Accounting Standards Board issued SFAS No. 
128 "Earnings Per Share", which has been adopted by the Company. The 
statement specifies the computation, presentation and disclosure requirements 
for earnings per share ("EPS"), and is effective for periods ending after 
December 15, 1997. Prior year per share information is presented in 
accordance with the statement.

9. EMPLOYEE STOCK OPTION AND PURCHASE PLANS

Nonqualified options to purchase an aggregate of 851,625 shares of common 
stock were outstanding as of December 26, 1998. The outstanding options were 
at prices ranging from $2.83 to $9.77 per share.

Effective October 1, 1998, the Company adopted an Employee Stock Purchase 
Plan to provide qualified employees an opportunity to purchase shares of its 
common stock at a 15 percent discount from the market price. The maximum 
number of shares that may be purchased under the Plan is 150,000 shares, 
subject to adjustment under certain conditions. The Plan is intended to 
satisfy the requirements of Section 423 of the Internal Revenue Code.

10. RECENT ACCOUNTING PRONOUNCEMENTS

SFAS No. 130, "Reporting Comprehensive Income," was issued in June 1997 and 
establishes standards for reporting and display of comprehensive income and 
its components (revenue, expenses, gains and

                                       8

<PAGE>

losses) in a full set of general-purpose financial statements. The Company 
adopted SFAS No. 130 in its first quarter of fiscal year 1999.

SFAS No. 131, "Disclosure about Segments of an Enterprise and Related 
Information," which, based on the management approach to segment reporting, 
establishes requirements to report entity-wide disclosures about products and 
services, major customers, and material countries in which the entity holds 
assets and reports revenue. SFAS No. 131 requires limited segment data on a 
quarterly basis. The Company will adopt SFAS No. 131 for its fiscal year 
ended March 31,1999.

11. SUBSEQUENT EVENT

On January 19, 1999 the Board of Directors declared a three for two stock 
split. The effective date of the stock split will be February 15, 1999 to 
shareholders of record at the close of business February 1, 1999. Additional 
shares resulting from the split will be distributed February 15, 1999. The 
Company's current annual dividend rate of $0.10 per share will be adjusted in 
accordance with the three for two stock split to $0.067 per share. All 
applicable share and per share data in the accompanying financial statements 
have been adjusted for the stock split. On a pre-split basis, diluted 
earnings per share for the three month period ended December 26, 1998 was 
$1.18 and for the nine month period was $1.87.

The declaration and payment of dividends by the Company in the future will be 
subject to the discretion of the Board of Directors and, although it 
currently intends to do so, no assurance can be given that the Company will 
declare and pay any further dividends. The determination as to the payment of 
dividends will depend upon, among other things, general business conditions, 
the Company's financial conditions and results of operations, contractual, 
legal and regulatory restrictions relating to the payment of dividends by the 
Company and such other factors the Board of Directors may deem relevant.

                                       9
<PAGE>

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

A.    RESULTS OF OPERATIONS

THREE MONTH PERIODS ENDED DECEMBER 26, 1998 AND DECEMBER 27, 1997:

During the three month period ended December 26, 1998, the Company reported 
net income of $6,843,000, or $0.79 per diluted share, compared with a net 
income of $4,563,000, or $0.53 per diluted share, for the corresponding 
period of the previous fiscal year.

Net sales for the three month period ended December 26, 1998 increased 12 
percent to $168,183,000 compared to $150,522,000 in the corresponding period 
of the previous fiscal quarter. The growth in net sales can be attributed 
primarily to an increase in gross shipments within the basic reference and 
children's book categories to core customers as well as sales from the 
Company's U.K. subsidiary, Aura Books, PLC, acquired in March 1998. In 
addition, customer return rates for the three month period ended December 26, 
1998 remained at 19 percent, consistent with the corresponding period last 
year.

During the three month period ended December 26, 1998, gross profit increased 
45 percent to $22,434,000 from $15,522,000 in the corresponding period of the 
previous fiscal year. Gross profit as a percentage of net sales increased to 
13.3 percent from 10.3 percent in the same period last fiscal year. This 
increase was primarily due to stronger sales in higher margin book categories 
as well as increased sales from international subsidiaries, which typically 
achieve higher gross margins. The strong sales of basic reference and 
children's books offset lower sales of bestseller and cookbooks.

Distribution and administrative expenses for the three month period ended 
December 26, 1998 increased to $11,519,000 and represented 6.8 percent of net 
sales compared to $8,832,000, or 5.9 percent of net sales, in the 
corresponding period of the previous fiscal year. This increase primarily 
reflects the addition of Aura Books, PLC as well as estimated non-recurring 
costs associated with exiting the Company's retail activities. The retail 
outlets were originally established as cost recovery vehicles for 
non-returnable residual product from the Company's purchasing and publishing 
activities. In fiscal 1998, the Company continued its effort to increase the 
efficiency of the disposition of non-returnable product and began to utilize 
a small team of associates dedicated to just selling the remainder product. 
Based on the success of this relatively low cost, low overhead effort, 
management decided to phase out the retail stores. Management's estimate of 
the non-recurring costs associated with exiting the retail operations is 
approximately $1,000,000 which has been included in the distribution and 
administrative costs for the fiscal 1999 third quarter.

Interest and dividend income decreased to $345,000 in the three month period 
ended December 26, 1998 from $611,000 in the corresponding period of the 
previous fiscal year due to reduced investment balances which were primarily 
a result of the Company's acquisition of Aura Books, PLC and an increase in 
the net investment in inventory.

                                      10
<PAGE>

NINE MONTH PERIODS ENDED DECEMBER 26, 1998 AND DECEMBER 27, 1997:

During the nine month period ended December 26, 1998, the Company reported 
net income of $10,804,000, or $1.25 per diluted share, compared with net 
income of $7,871,000, or $0.92 per diluted share, for the corresponding nine 
month period of the prior fiscal year.

Net sales for the nine month period ended December 26, 1998 increased 15 
percent to $381,047,000 from $332,408,000 in the corresponding period of the 
prior fiscal year. This increase was primarily due to increases in gross 
shipments within the basic reference, gift books (art and coffee table books) 
and children's book categories to core customers as well as additional sales 
from the Company's U.K. subsidiary, Aura Books, PLC, acquired in March 1998.

During the nine month period ended December 26, 1998, gross profit increased 
35 percent to $47,565,000 from $35,321,000 in the corresponding nine month 
period of the previous fiscal year. Gross profit as a percentage of net sales 
increased to 12.5 percent from 10.6 percent in the corresponding period in 
the last fiscal year. This increase was primarily due to stronger sales in 
higher margin book categories as well as increased sales from international 
subsidiaries, which typically achieve higher gross margins.

Distribution and administrative expenses for the nine month period ended 
December 26, 1998 increased 28 percent to $30,659,000 and represented 8.0 
percent of net sales compared to $23,998,000, or 7.2 percent of net sales, in 
the corresponding period of the previous fiscal year. The increase primarily 
reflects the addition of Aura Books, PLC as well as estimated non-recurring 
costs associated with exiting the Company's retail activities.

Interest and dividend income decreased to $806,000 in the nine month period 
ended December 26, 1998 from $1,271,000 in the corresponding period of the 
previous fiscal year due to reduced investment balances which were primarily 
a result of the Company's acquisition of Aura Books, PLC and an increase in 
the net investment in inventory.

B. LIQUIDITY AND SOURCES OF CAPITAL

For the nine month period ended December 26, 1998, $4,435,000 of net cash was 
provided by operating activities, primarily as a result of increased net 
income. Net cash provided by operating activities in the corresponding period 
of the prior year was $41,895,000. The Company's cash and investments at 
December 26, 1998 totaled $38,589,000, compared to $65,349,000 and 
$37,050,000 as of December 27,1997 and March 31, 1998, respectively. This 
change reflects the acquisition and funding of Aura Books, PLC, as well as an 
increase in the net investment in inventories due to increased sales levels 
as well as the timing of certain vendor payments. Trade accounts receivable 
at December 26, 1998 increased $18,629,000 and $42,105,000 compared to 
December 27, 1997 and March 31, 1998 respectively. The increase is primarily 
due to the timing of customer remittances (payments approximating $21 million 
were received shortly after closing the period ended December 26, 1998) and 
the seasonal increase in sales when compared to the March 31, 1998 balance. 
Inventories at December 26, 1998 increased $20,899,000 compared to December 
27, 1997 and increased $6,262,000 compared to March 31, 1998 due, in part, to 
shipments from publishers in the mass market category that were subsequently 
shipped to customers in January 1999, and the addition of Aura Books, PLC, as 
well as to support increased sales activity. The increases in inventory were 
offset, in part, by increases in accounts payable of $6,157,000 and 
$36,826,000

                                      11

<PAGE>

compared to December 27, 1997 and March 31, 1998 respectively. Accounts 
payable at December 26, 1998 increased $6,157,000 compared to December 27, 
1997 due to the timing of certain vendor payments. Accounts payable at 
December 26, 1998 increased $36,826,000 compared to March 31, 1998 due to 
increased inventory purchases to support expected seasonal increases in third 
quarter sales.

Working capital was $65,868,000 as of December 26, 1998, which increased from 
the December 27, 1997 balance of $60,790,000 and from the March 31, 1998 
balance of $56,118,000. The increase compared to December 27, 1997 is 
primarily the result of net operating income offset, in part, by the impact 
of the Aura Books acquisition in March 1998. The increase compared to March 
31, 1998 is primarily a result of net income generated during the nine-month 
period ended December 26, 1998.

The Company had available at December 26, 1998 an unsecured bank line of 
credit with a maximum borrowing limit of $10 million. The interest rate on 
bank borrowings is based on the prime rate and "Libor" rates. The line of 
credit expires July 31, 2000. As of December 26, 1998 and December 27, 1997, 
there were no outstanding borrowings on the line of credit.

The Company believes that its existing working capital, cash flows from 
operations, trade credit traditionally available from its vendors and its $10 
million line of credit will be sufficient to finance its current and 
anticipated level of operations.

C. IMPACT OF YEAR 2000

During fiscal 1998, the Company developed a plan to address anticipated Year 
2000 issues in connection with its data processing and other activities, 
including non-information technology based systems. It is currently estimated 
that the net cost for review, analysis, modification and testing of existing 
computer programs for both internal and external software will be 
approximately $600,000. The Company has incurred approximately 80 percent of 
such expenses through the quarter ended December 26, 1998 and it is 
anticipated that the remaining portion of the estimated cost will be incurred 
during calendar 1999. The Company has completed the remediation portion of 
the Year 2000 project and will be entering its testing phase during the 
fourth quarter of fiscal 1999. Although there can be no assurances, 
management believes that the Year 2000 project, including a documented 
contingency plan, will be completed by September 1999. The Company has budgeted
for such Year 2000 compliance related work in its fiscal 1999 and fiscal 2000 
budgets and has expensed these costs as incurred. Due to the fact that the 
Company has primarily employed outside consultants for Year 2000 related 
work, there has not been any deferral of other information technology related 
projects nor has there been a requirement to hire additional personnel solely 
for Year 2000 compliance issues. In contemplation of the possibility that the 
Company's vendors and customers may experience Year 2000 related difficulties 
that may effect the Company's operations, a committee of information 
technology and other departmental managers has been formed to consider and 
develop a contingency plan. It is expected that this contingency plan will be 
developed over the next six months. Although, based on a review of its data 
processing, operating, and other computer based systems, the Company does not 
currently believe that it will experience any significant adverse effects or 
material unbudgeted costs resulting therefrom, there can be no assurance in 
that regard.

The failure to correct a material Year 2000 problem could result in an 
interruption in or a failure of certain normal activities or operations. Such 
interruptions or failures could materially and adversely affect the Company's 
results of operations, liquidity and financial condition. Because there is 
general uncertainty

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<PAGE>

about the Year 2000 problem, including uncertainty about the Year 2000 
readiness of suppliers and customers, it is not possible to predict whether 
Year 2000 problems will occur or what consequences such problems will have on 
results of operations, liquidity or financial condition. However, the 
Company's plan to address Year 2000 issues is intended to minimize, to the 
extent feasible, the possibility of interruptions of normal operations. There 
can, however, be no assurance that the Company will be successful in doing so.

D. STATEMENT OF PURPOSE OF THE "SAFE HARBOR" PROVISIONS OF THE PRIVATE
   SECURITITES LITIGATION REFORM ACT OF 1995

In December 1995, the Private Securities Litigation Reform Act of 1995 (the 
"Act") was enacted. The Act contains amendments to the Securities Act of 1933 
and the Securities Exchange Act of 1934 which provide protection from 
liability in private lawsuits for "forward-looking" statements made by 
persons specified in the Act. The Company desires to take advantage of the 
"safe harbor" provisions of the Act.

The Company wishes to caution readers that, with the exception of historical 
matters, the matters discussed in this Quarterly Report on Form 10-Q are 
forward-looking statements that involve risks and uncertainties, including 
but not limited to factors related to the highly competitive nature of the 
publishing industry as well as the warehouse club and retail industries and 
their sensitivity to changes in general economic conditions, the Company's 
concentration of sales and credit risk with two customers, the Company's 
ability to impact customer return rates, continued successful results from 
the VMI program, currency and other risks related to foreign operations, the 
Company's expansion plans, the results of financing efforts, risks and 
uncertainties associated with the failure of the Company or its suppliers or 
customers to be Year 2000 compliant with regard to its computer and other 
systems and other factors discussed in the Company's other filings with the 
Securities and Exchange Commission. Such factors could affect the Company's 
actual results during fiscal 1999 and beyond and cause such results to differ 
materially from those expressed in any forward-looking statement made by or 
on behalf of the Company.

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<PAGE>

PART II.  OTHER INFORMATION

ITEMS 1-5.
         None

ITEM  6.  EXHIBITS AND REPORTS ON FORM 8-K.

(a) The following exhibits are included herein or incorporate by reference:
         (11.0) Statement re Computation of Per Share Earnings
         (27.0) Financial Data Schedule

(b) No reports on Form 8-K were filed for the three month period ended 
    December 26, 1998.

                                 SIGNATURES

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

                                     ADVANCED MARKETING SERVICES, INC.
                                     REGISTRANT


     February 5, 1999                By: /s/ Michael M. Nicita
     ----------------                    ---------------------------------
          Date                           Michael M. Nicita
                                         Chief Executive Officer
                                         (Principal Executive Officer,
                                         Financial and Accounting Officer)

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