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

                                  FORM 10-QSB

[X]  QUARTERLY  REPORT  UNDER  SECTION  13 OR 15(d) OF THE  SECURITIES
     EXCHANGE ACT OF 1934 for the quarterly period ended September 30,
     1998

[ ]  TRANSITION  REPORT UNDER SECTION 13 OR 15(d) OF THE  SECURITIES
     EXCHANGE  ACT OF 1934 for the  transition  period from _______ to
     _______

     COMMISSION FILE NUMBER   0-28348

                              DBS INDUSTRIES, INC.
        (Exact name of small business issuer as specified in its charter)

                   Delaware                           84-1124675
       (State or other jurisdiction of     (I.R.S. Employer Identification No.)
        incorporation or organization)


                        100 Shoreline Highway, Suite 190A
                              Mill Valley, CA 94946
                    (Address of principal executive offices)

                                 (415) 380-8055
                           (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 of Securities:  Common Stock, $.0004 Par Value

Shares Outstanding as of October 31, 1998:  8,487,841

Transitional Small Business Disclosure Format:  Yes ___   No X

<PAGE>ii



                                      INDEX


                                                                         PAGE

PART I - FINANCIAL INFORMATION............................................1

ITEM  1.   Financial Statements...........................................1

Condensed  Consolidated Balance Sheets:
As of September 30, 1998 (unaudited) and December 31, 1997 (audited) .....1

Condensed Consolidated Statements of Operations (unaudited):
For the Three Months and Nine Months Ended September 30, 1998
and September 30, 1997 and for the period from April 25, 1990 
(Inception)  to  September 30, 1998.......................................2

Condensed Consolidated Statements of Cash Flows (unaudited):
For the Nine Months Ended September 30, 1998 and September 30, 1997
and for the period from April 25, 1990 (Inception) to September 30, 1998..3

Notes to Condensed Consolidated Financial Statements......................4

ITEM  2.  Management's Discussion and Analysis of Financial Condition
          and Results of Operations.......................................6

PART II - OTHER INFORMATION...............................................10

ITEM  1.  Legal Proceedings...............................................10

ITEM  2.  Changes in Securities...........................................10

ITEM  3.  Defaults Upon Senior Securities.................................10

ITEM  4.  Submission of Matters to a Vote of Security Holders.............10

ITEM  5.  Other Information...............................................10

ITEM  6.  Exhibits and Reports on Form 8-K................................10



<PAGE>1



                      DBS INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                      CONDENSED CONSOLIDATED BALANCE SHEETS


                                                    September 30
                                                        1998       December 31,
                                                    (Unaudited)        1997
                                                    ------------   ------------
                                     ASSETS

Current assets:
    Cash and cash equivalents                       $  4,305,162   $   383,054
    Prepaid and other current assets                     134,522       119,265
                                                    ------------   -----------
       Total current assets                            4,439,684       502,319
                                                    ------------   -----------

Furniture and equipment (at cost)                         76,997        73,277
Less accumulated depreciation                             55,804        47,828
                                                    ------------   -----------
                                                          21,193        25,449
                                                    ------------   -----------

Other assets:
    Investments and advances                             851,490     1,248,649
    Goodwill, net of accumulated amortization 
       of $86,799 and $81,864, respectively                4,191         9,126
                                                    ------------   -----------
                                                         855,681     1,257,775

Total assets                                        $  5,316,558   $ 1,785,543
                                                    ============   ===========

                      LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
    Accounts payable                                $    380,550   $   152,485
    Customer advances                                    400,000       400,000
    Accrued liabilities                                  112,964       145,019
    Deferred compensation                                246,000       216,000
                                                    ------------   -----------
       Total current liabilities                       1,139,514       913,504
                                                    ------------   -----------

Stockholders' equity
    Preferred stock                                            -             -
    Common stock                                           3,556         2,373
    Capital in excess of par value                     9,214,019     4,681,295
    Warrants                                           1,085,500       112,500
    Deficit accumulated during the development 
       stage                                          (6,041,031)   (3,839,129)
    Treasury stock                                       (85,000)      (85,000)
                                                    ------------   -----------
       Total stockholders' equity                      4,177,044       872,039
                                                    ------------   -----------

         Total liabilities and stockholders' equity $  5,316,558   $ 1,785,543
                                                    ============   ===========



The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.


<PAGE>2



                      DBS INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                 CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                                   (Unaudited)


<TABLE>
<CAPTION>



                                               Three Months Ended          Nine Months Ended       April 25, 1990
                                                  September 30,               September 30,        (Inception) to
                                                                                                   September 30,

                                                1998          1997          1998         1997           1998
                                         -----------------------------------------------------------------------

<S>                                      <C>           <C>            <C>            <C>           <C>         
Revenue                                  $          -  $          -   $          -   $         -   $    161,420
                                         ------------  ------------   ------------   -----------   ------------
Cost and operating expenses:                                                               
    Cost of revenue                                 -             -              -             -        127,580
    General and administrative                688,424       374,033      1,339,069     1,078,219      7,802,057
    Research and development                  198,358        85,474        545,772       294,836      2,715,343
                                         ------------  ------------   ------------   -----------   ------------
                                              886,782       459,507      1,884,841     1,373,055     10,644,980
                                         ------------  ------------   ------------   -----------   ------------ 
       Loss from operations                  (886,782)     (459,507)    (1,884,841)   (1,373,055)   (10,483,560)
                                         ------------  ------------   ------------   -----------   ------------
Other income (expense):
    Interest, net                               9,211       (52,304)        11,405      (317,054)      (730,475)
    Equity in loss of investees, net           (6,733)      (39,974)      (100,143)      (39,974)      (512,920)
    Gain (loss) on sale of investments              -    (1,003,714)      (228,323)    5,217,556      5,829,218
    Other, net                                      -             -              -             -        (56,634)
                                         ------------  ------------   ------------   -----------   ------------
                                                2,478    (1,095,992)      (317,061)    4,860,528      4,529,189
                                         ------------  ------------   ------------   -----------   ------------  
Income (loss) before provision for
   income taxes and minority interest        (884,304)   (1,555,499)    (2,201,902)    3,487,473     (5,954,371)

Provision for income taxes                          -             -              -             -         95,235
                                         ------------  ------------   ------------   -----------   ------------     
    Income (loss) before minority
       interests                             (884,304)   (1,555,499)    (2,201,902)    3,487,473     (6,049,606)
                                         ------------  ------------   ------------   -----------   ------------
Minority interests in income of
    consolidated subsidiaries                       -             -              -             -          8,575
                                         ------------  ------------   ------------   -----------   ------------
    Net  income (loss)                   $   (884,304) $ (1,555,499)  $ (2,201,902)  $ 3,487,473   $ (6,041,031)
                                         ============  ============   ============   ===========   ============
Basic net income (loss) per share        $      (0.13) $      (0.26)  $      (0.35)  $      0.59
                                         ============  ============   ============   ===========
Diluted net income (loss) per share             (0.13)        (0.26)         (0.35)         0.53
                                         ============  ============   ============   ===========
Weighted average number of shares of
  common stock, basic                       6,857,472     5,891,747      6,220,861     5,872,416
                                         ============  ============   ============   ===========  
Weighted average number of shares of
  common stock, diluted                     6,857,472     5,891,747      6,220,861     6,635,102
                                         ============  ============   ============   =========== 

</TABLE>


The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.


<PAGE>3



                      DBS INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
                 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (Unaudited)



<TABLE>
<CAPTION>
                                                                                     April 25, 1990
                                                           Nine Months Ended         (Inception) to
                                                             September 30,            September 30,

                                                       1998               1997              1998
                                                   -------------     -------------     ------------- 

<S>                                                <C>               <C>               <C>           
Net cash used in operating activities              $  (1,205,423)    $  (2,063,438)    $  (8,991,716)
                                                   -------------     -------------     -------------
Cash flows from investing activities:
    Proceeds from sale of investment                     199,940                           1,099,940
    Proceeds from Loral settlement                             -         3,573,678         3,573,677
    Purchase of fixed assets                              (3,720)                -          (109,244)
    Organization costs                                         -                 -           (28,526)
    Advance to officer                                         -                 -           (31,187)
    Purchase of interest in Continental                        -                 -        (2,292,409)
    Investments and advances                            (407,292)                -        (1,208,726)
    Net assets of purchased subsidiaries                       -                 -          (147,500)
    Cash transferred from Fi-Tek IV, Inc. pursuant
       to the merger and reorganization                        -                 -           156,648
    Cash of divested subsidiary                                -                 -              (277)
    Purchase of patents                                        -                 -           (18,251)
    Proceeds from repayment of advances to affiliate           -                 -           152,500
    Restricted cash on credit line                             -           300,000           300,000
                                                   -------------     -------------     -------------
Net cash provided by (used in) investing 
     activities                                         (211,072)        3,873,678         1,446,645
                                                   -------------     -------------     -------------     
Cash flows from financing activities:
    Repayment of borrowing under credit line                   -          (295,000)        (300,000)
    Issuance of debentures                                     -                 -        4,817,501
    Issuance of common stock                           5,781,103                 -        8,934,619
    Redemption of common stock warrants                        -                 -          (19,490)
    Stock issue costs                                   (442,500)                -         (499,735)
    Purchase of shares                                          -                -           (5,000)
    Payment of debentures                                       -       (1,043,501)      (1,168,445)
    Proceeds from stockholders' loans                           -            2,000          442,750
    Payment of stockholders' loans                              -                -         (351,967)
                                                   --------------    -------------     ------------
Net cash provided by (used in) financing activities     5,338,603       (1,336,501)      11,850,233
                                                   --------------    -------------     ------------
Net increase in cash                                    3,922,108          473,739        4,305,162

Cash and cash equivalents, beginning of period            383,054          402,588                0
                                                   --------------    -------------     -------------
Cash and cash equivalents, end of period           $    4,305,162    $     876,327     $  4,305,162
                                                   ==============    =============     ============

</TABLE>



The  accompanying  notes are an integral  part of these  condensed  consolidated
financial statements.

<PAGE>4



                      DBS INDUSTRIES, INC. AND SUBSIDIARIES
                          (A Development Stage Company)
              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS



NOTE 1. UNAUDITED INTERIM FINANCIAL STATEMENTS

     The  information  presented  in  these  condensed   consolidated  financial
statements of DBS  Industries,  Inc. (DBSI or the Company) and its  wholly-owned
subsidiaries,  Global  Energy  Metering  Services,  Inc. and Newstar  Limited is
unaudited.  These condensed consolidated financial statements have been prepared
assuming the Company will  continue as a going  concern.  Since  inception,  the
Company has devoted substantially all of its efforts to developing its business.
The Company has therefore  incurred  substantial  losses and negative cash flows
from operating  activities.  To address financing needs, the Company is pursuing
various financing alternatives. During the nine month period ended September 30,
1998, the Company raised  approximately  $5.7 million from the sale of shares of
Common Stock.  However,  the Company will need a substantial  amount of at least
$90  million to  construct  its  proposed  E-SAT  satellite  constellation.  The
construction  of the first two of the six  planned  satellites  is  required  to
commence  by  April 1999  pursuant  to  the terms of the Federal  Communications
Commission  granted to E-SAT.  Non-compliance  with such terms may result in the
loss of the E-SAT  license.  These  factors  raise  substantial  doubt about the
Company's ability to continue as a going concern.  These financial statements do
not  reflect  any  adjustments  that  might  result  from  the  outcome  of this
uncertainty.

       The  financial  statements  include all  adjustments  consisting  of only
normal recurring adjustments which are, in the opinion of management,  necessary
to present  fairly the  condensed  consolidated  financial  position  of DBSI at
September 30, 1998,  and condensed  consolidated  results of operations and cash
flows for the  interim  periods  reported.  The  results of  operations  for the
interim period presented are not necessarily  indicative of expected results for
the full fiscal year.

       Certain  information  and  footnote  disclosures  normally  contained  in
financial  statements  prepared in accordance with generally accepted accounting
principles have been condensed or omitted. The condensed  consolidated financial
statements should be read in conjunction with the financial statements and notes
contained in DBSI's 1997 Annual Report to Shareholders.


NOTE 2. EQUITY IN INCOME & LOSSES OF INVESTEES

        E-SAT Corporation

        In October 1994, the Company and EchoStar  Communications,  Inc.  formed
E-SAT for the purpose of filing with the Federal Communications Commission for a
license  to  operate  a low  earth  satellite  system.  E-SAT  filed  a  license
application with the Federal Communications  Commission on November 16, 1994. In
April 1998, the FCC formally approved E-SAT's  application.  The Company holds a
20% interest in E-SAT. The Company's total  investments in and advances to E-SAT
were  $127,265 as of September 30, 1998.  The  investment is accounted for using
the equity method.  The Company's  equity in losses of E-SAT for the nine months
ended  September 30, 1998 were  $100,143.  As of September 30, 1998, the Company
had a net  receivable of $724,225 from EchoStar  which  represents the excess of
advances  to date to E-SAT  in  excess  of its  proportionate  20%  share of its
investee's financing requirements.

<PAGE>5


NOTE 3. CUSTOMER ADVANCES

        The Company's wholly-owned subsidiary,  Global Energy Metering Services,
Inc. (GEMS), is party to a contract to deliver 10,000 satellite radio units. The
purchase  order is for $1.2 million and under the terms of the  purchase  order,
GEMS would  receive a total of  $500,000 in advance  payments  on the  contract,
based on certain milestone achievements. These milestone payments are refundable
if the contractee does not qualify GEMS'  automatic meter reading system.  As of
September 30, 1998,  this purchase  order had been suspended by both parties due
to the Company's  limited access to the Argos System.  The $400,000 in milestone
payments received are reported as customer advances on the accompanying  balance
sheet.


NOTE 4. NET INCOME (LOSS) PER SHARE

        In February  1997,  the  Financial  Accounting  Standards  Board  issued
Statement of Financial  Accounting Standards (SFAS) No. 128, Earnings Per Share,
which  establishes  standards for computing and presenting  earnings  (loss) per
share. Under the new standard, basic earnings per share is computed based on the
weighted average number of common shares  outstanding and excludes any potential
dilution. Diluted earnings per share reflects diluted effects of all outstanding
common stock equivalents.  The financial statements presented have been restated
to conform  with  current  year  presentation.  Options and warrants to purchase
6,018,531  shares of common stock with  exercise  prices from $.40 to $5.60 were
outstanding  as of September  30, 1998 and were excluded from the loss per share
calculation  for the quarter  and the nine month  period then ended as they have
the effect of  decreasing  loss per share.  Options  and  warrants  to  purchase
1,330,116  shares of common stock with  exercise  prices from $.40 to $5.60 were
outstanding  as of September  30, 1997 and were excluded from the loss per share
calculation  for the quarter  ended  September 30, 1997 but were included in the
earnings per share  calculation  for the nine month period ended  September  30,
1997.


NOTE 5. EQUITY TRANSACTIONS

        During the three months ended  September  30, 1998,  the Company  issued
2,800,000  units each  consisting of a share of common stock at a price of $2.00
per share and a warrant to purchase a share of common stock at an exercise price
of $3.00.  In  connection  with this stock  offering,  the Company  incurred the
following  stock  issuance  costs:  (i)  cash  payments  of  $442,500  and  (ii)
commitments to issue warrants to purchase 728,000 shares of the Company's common
stock at exercise  prices  varying  from $1.50 to $3.00.  The fair value of such
warrants  amounted to  $973,000  and was  recorded as a separate  element of the
Company's equity

        Under  the  terms  of a stock  purchase  agreement,  the  Company  is to
register a certain  number of shares and  warrants by  December 4, 1998.  In the
event that the related  registration  statement is not declared effective by the
Securities and Exchange  Commission by December 4, 1998, the Company is required
to pay certain  stockholders  the amount of $2,500 for each  subsequent  day the
registration statement is not declared effective.

        In September  1998, the Company issued 17,202 shares of its common stock
as a result of the exercises of the related options.


<PAGE>6




NOTE 6. OTHER MATTERS

        In July 1998, the Company agreed to a severance  package with one of its
former  employees which consists of $125,000 in cash payments to be made through
July 1999 and the  acceleration  of vesting of the  former  employee's  unvested
options.

        In July 1998,  the  Company's  president  was named as a defendant  in a
lawsuit filed by a firm  claiming  that it was promised  shares of the Company's
common stock valued at $100,000.

        In August 1998,  the Company and Matra  Marconi  Space France SA ("MMS")
entered into a non-binding  memorandum of  understanding  to engage MMS as prime
contractor  for the  design  and  construction  of six  little  low earth  orbit
satellites.  Further,  in August  1998,  the Company  and SAIT Radio  Holland SA
("SAIT")  entered into a non-binding  letter of intent to explore an arrangement
with SAIT as the main contractor for the engineering,  development and provision
of hardware  and  software  for  E-SAT's  earth  station.  In the latter part of
September  1998,  the  Company  and  MMS  mutually  agreed  to  terminate  their
non-binding  memorandum  of  understanding.  The letter of intent with SAIT will
expire  under its terms on November  23,  1998.  The Company has engaged SAIT to
perform studies on antennas for the proposed satellite radios,  develop and test
satellite  radio  prototypes,  and  assist in radio  design in  anticipation  of
manufacturing  satellite radios for the Company.  No assurance can be given that
the  Company and SAIT will enter into a contract to  manufacture  the  satellite
radios.

NOTE 7. SUBSEQUENT EVENTS

        In October  1998, at the request of two  shareholders  due to changes in
their financial  condition,  the Company rescinded the stock purchase agreements
relating  to  400,000  units  and  refunded  $800,000  in  proceeds  to the  two
shareholders.

        In October  1998,  the Company paid its president the amount of $246,000
related to his deferred  compensation  through  June 1998.  The  president  also
received a cash bonus of $20,000 in connection  with his efforts in securing the
license granted to E-SAT by the FCC.

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

General

        The Company,  through its 20% interest in E-SAT,  proposes to construct,
launch,  and  operate a two-way,  low-cost  data  messaging  system  (the "E-SAT
System") utilizing six low-earth orbit ("Little LEO") satellites. E-SAT's Little
LEO satellites will orbit the earth at altitudes of approximately 550 miles, and
with the Company's  technology,  are capable of collecting and transmitting data
at  regular  intervals  from  fixed  devices  such as meters  in  hard-to-access
locations  and  at a  cost  substantially  less  than  manually  retrieving  and
transmitting the data. The Company intends to initially  provide automated meter
reading services collecting and providing data from  energy-related  meters such
as  electrical,  natural  gas,  water or  propane,  but may  provide  other data
collection services in the areas of vending machines and environmental meters.


<PAGE>7



Results of Operations

Three and Nine Months Ended September  30, 1998 Compared to September 30, 1997

Revenues

        The Company  remains in the  development  stage and did not generate any
revenues  in  either  the  three or nine  months  ended  September  30,  1998 or
September 30, 1997.

Cost and Operating Expenses

        Cost and  operating  expenses for the three months ended  September  30,
1998, were $886,782 as compared to $459,507 for the three months ended September
30, 1997.  During the three months ended  September 30, 1998, cost and operating
expenses  increased  primarily in research and  development  because the Company
devoted  substantial  amounts  of  its  financial  and  personnel  resources  on
developing  its  automatic  meter  reading  business.  In addition,  the Company
incurred substantial costs,  including travel,  relocation and housing costs, to
establish relationships with potential contractors to construct the E-SAT System
and  potential  strategic  alliances  with utility  companies to market E- SAT's
services  in Europe.  The  Company  also  recognized  approximately  $104,000 in
severance  expense and $106,000 in  consulting  expense in  connection  with the
grant of options for  services  rendered by  non-employees.  Cost and  operating
expenses  for the nine months  ended  September  30, 1998,  were  $1,884,841  as
compared to $1,373,055 for the nine months ended September 30, 1997. General and
administrative  expenses for the nine months ended September 30, 1998, increased
from the same  period  during the prior year  primarily  due to an  increase  in
research and  development  related to the  development  of its  automatic  meter
reading service and, as discussed  above, to establish  relationships in Europe.
The increase in general and  administrative  and research and development  costs
during the nine months ended  September  30,  1998,  as  discussed  above,  were
partially  offset by a decrease  in legal  fees.  During the nine  months  ended
September 30, 1997, the Company was involved in litigation over an interest in a
direct broadcast satellite license and incurred substantial legal fees.
This ligation was settled during 1997.

Other Income (Expense)

        Other income for the three months ended  September 30, 1998,  was $2,478
as compared to other expense of $1,095,992 for the three months ended  September
30, 1997.  During the three months ended  September 30, 1998, the Company earned
interest income of $9,211,  which was offset by net equity in losses of E-SAT of
$6,733.  Interest income was earned on cash received in connection with the sale
of  approximately  2.8 million units of the Company at $2.00 per unit. Each unit
consists  of one share of Common  Stock and a warrant to  purchase  one share of
Common Stock at $3.00 per share. The interest income earned of $9,211 during the
three months ended  September 30, 1998  compared to interest  expense of $52,304
for the three months ended  September  30,  1997.  During 1997,  the Company had
debentures outstanding upon which it paid interest. The debentures were paid off
during the third quarter of 1997. In connection with the retirement  during 1997
of  debentures  due to EchoStar  in  exchange  for  EchoStar  Common  Stock that
EchoStar held as collateral against the debentures,  the Company incurred a loss
of approximately $1 million. In addition, during the three

<PAGE>8


months  ended  September  30,  1997,  the  Company  incurred  a loss of  $39,974
attributed to its equity investment in E-SAT and Seimac.

        Other expense for the nine months ended September 30, 1998, was $317,061
as compared to other income of $ 4,860,528  for the nine months ended  September
30, 1997.  During the nine months ended September 30, 1997, the Company incurred
net interest expense of $317,054 due to debentures  outstanding and recognized a
gain of approximately $6.2 million on the sale of marketable  securities,  which
was offset by a loss of  approximately  $1 million  related to the retirement of
the  debentures  due to EchoStar  in exchange  for  EchoStar  Common  Stock that
EchoStar  held as  collateral  against the  debentures.  No similar net interest
expense or gain occurred during the nine months ended September 30, 1998.

Net Loss and Income

        The  Company's  net loss for the three month period ended  September 30,
1998,  was  $884,304  compared to a net loss of  $1,555,499  for the three month
period ended  September 30, 1997.  Net loss for the nine months ended  September
30, 1998, was $2,201,902 compared to net income of $3,487,473 for the nine month
period ended  September 30, 1997.  During the nine month period ended  September
30, 1997,  the  Company's  net income was due  primarily  to a one-time  gain on
marketable equity  securities of approximately  $6.2 million offset by operating
and interest expenses.


LIQUIDITY AND CAPITAL RESOURCES

Liquidity and Capital Resources

        The Company has been in the  development  stage since its  inception and
has not recognized any significant  revenues or capital  resources.  The Company
anticipates monthly expenses to average  approximately  $170,000 to $200,000 per
month for the  remaining  calendar  year which  includes  $125,000 per month for
operating,  legal and consulting expenses,  and $45,000 to $75,000 per month for
GEMS & E-SAT research & development. However, expenses will continue to increase
with the demands of developing the E-SAT license and business  applications  and
additional capital will be necessary to expand operations.

        Traditionally,  the Company has relied on equity and debt  financings to
finance its  operations.  This financing was  supplemented  from the sale of the
Company's  interest in entities that held direct broadcast  satellite  licenses.
The Company no longer has any interest in direct broadcast satellite  licensees.
Currently,  the  Company  is  offering  to  accredited  investors  in a  private
placement up to 3 million units for $6 million in the  aggregate  with each unit
consisting of one share of Common Stock and one warrant to purchase one share of
Common Stock at $3.00 per share.  As of September 30, 1998, the Company had sold
approximately 2.8 million units for gross proceeds of approximately $5.6 million
before  finder's  fees and  commissions  of $442,500.  In October  1998,  at the
request of two  shareholders  due to changes in their financial  condition,  the
Company  rescinded the stock purchase  agreements  relating to 400,000 units and
refunded $800,000 in proceeds to the two shareholders. The Company believes that
it has sufficient operating working capital for the next twelve months. However,
the Company will need a substantial  amount of at least $90 million to construct
the E-SAT

<PAGE>9


System. Further, the construction of the first two of the six planned satellites
is required  to commence by April 1999  pursuant to the terms of the FCC license
granted to E-SAT.

        The Company had cash and cash  equivalents of $4,305,162 and $383,054 as
of  September  30, 1998 and December  31,  1997,  respectively.  The Company had
working  capital of $3,300,170 as of September 30, 1998, as compared to negative
working  capital of $411,185 as of December 31, 1997.  Until the Company is able
to  develop,  construct  and  operate  its  E-SAT  System  and  derive  revenues
therefrom,  the  Company  will  continue  to use  cash  for its  operations  and
development of the E-SAT System.

        Net cash used in operating activities was $1,333,827 for the nine months
ended  September 30, 1998,  as compared to $2,063,438  for the nine months ended
September 30, 1997. Net cash used in operating activities during the nine months
ended  September 30, 1998,  decreased from the same period during the prior year
primarily related to the payment of outstanding liabilities during 1997.

        Net cash used in  investing  activities  for the nine month period ended
September 30, 1998,  was $8,628.  This net cash used  represents  the difference
between  the  proceeds  from the  divestiture  of  Seimac of  $199,940  less the
Company's net  investment  in E-SAT of $204,848.  Net cash provided by investing
activities  for the nine month period ended  September  30, 1997 was  $3,873,678
primarily related to the proceeds from Loral Aerospace Holdings, Inc. settlement
involving the Company's equitable interest in Continental Satellite Corporation.

        Net cash  provided by  financing  activities  for the nine month  period
ended September 30, 1998, was $5,264,563 compared to cash used of $1,336,501 for
the nine months  ended  September  30,  1997.  Net cash  provided  by  financing
activities during the nine months ended September 30, 1998,  consisted  entirely
of the issuance of Units  representing  gross proceeds of $5.7 million offset by
issuance  costs of $442,500.  Net cash used in financing  activities  during the
nine months ended  September 30, 1997,  consisted  primarily of the repayment of
the  debentures  and  line  of  credit  of  approximately  $1.3  million  in the
aggregate.

        In July 1996, the Company began to receive milestone  payments under the
terms of a $1.2 million purchase order for 10,000  satellite radio units.  Under
this  agreement,  the  Company was  eligible  to receive up to $500,000  towards
development costs upon meeting the milestone  requirements of the contract.  The
Company met the first four milestones of the contract and has received  $400,000
in cash.  Currently,  the Company and ABB Power T&D Company,  Inc.  ("ABB") have
suspended  their  development  under this agreement due to the expiration of the
Company's agreement for the use of the Argos system on December 31 1997, and the
proposed limit placed on future  commercial use of the Argos system.  Therefore,
such milestone payments could be subject to refund, in whole or in part.

Impact of the Year 2000 Issue

        The Year 2000 Issue is the result of  computer  programs  being  written
using two digits  rather  than four to define the  applicable  year.  Any of the
Company's,  or  its  suppliers'  and  customers'  computer  programs  that  have
date-sensitive  software may recognize a date using "00" as the year 1900 rather
than the year 2000.  This could  result in system  failures  or  miscalculations
causing  disruptions of operations  including,  among other things,  a temporary
inability to process transactions, send invoices,


<PAGE>10



or engage in similar normal business  activities.  In the Company's  assessment,
because the  Company  and its  subsidiaries  information  systems are  primarily
comprised of recently  purchased  personal  computers and software,  the Company
does not believe that the Year 2000 Issue will materially affect its operations.

        In addition, in developing the E-SAT System, the Company will be relying
on vendors to, among other things, manufacture the Little LEO satellites, launch
the  Little   LEO   satellites,   manufacture   the  RTU  and  build  the  E-SAT
infrastructure  including  the ground  station.  The Company has not yet entered
into contracts with any vendors to develop the E-SAT System, and, therefore,  no
assessment  has  been  made as to their  Year  2000  compliance.  As part of the
contract negotiations,  the Company will request and determine the vendor's Year
2000 readiness. In the event that it is determined that a key vendor will not be
Year 2000 compliant,  this may have an adverse effect on the Company's  business
plans.


PART II.  OTHER INFORMATION

Item 1.   Legal Proceedings.

        None

Item 2.   Changes In Securities.

        None

Item 3.   Defaults Upon Senior Securities.

        None

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

        None

Item 5.   Other Information.

        None

Item 6.   Exhibits and Reports on Form 8-K

        Exhibit 27.1  Financial Data Schedule



<PAGE>11



                                   SIGNATURES

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

                                           DBS INDUSTRIES, INC.


                                             FRED W. THOMPSON
DATE:    November 23, 1998                -------------------------------------
                                           Fred W. Thompson
                                           President and Chief Financial Officer