UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB
(Mark One)

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

                  For the quarterly period ended July 3, 1998

                                       OR

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

For the transition period from _______________ to _______________

                         Commission file number 0-27100

                          FIELDS AIRCRAFT SPARES, INC.
        (Exact name of small business issuer as specified in its charter)

           UTAH                                       95-4218263
(State or other jurisdiction of                   (I.R.S. Employer
incorporation or organization)                   Identification No.)

               4175 Guardian Street, Simi Valley, California 93063
                    (Address of principal executive offices)

                                 (805) 583-0080
                (Issuer's telephone number, including area code)

                2251-A Ward Avenue, Simi Valley, California 93065
             (Former name, former address and former fiscal year, if
                           changed since last report)

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Securities  Exchange  Act of 1934 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


                      APPLICABLE ONLY TO CORPORATE ISSUERS

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

      Class of Stock                              Amount Outstanding
      --------------                              ------------------
$.05 par value Common Shares                 2,443,781 Common Shares
                                                 at August 12, 1998

           TRANSITIONAL SMALL BUSINESS DISCLOSURE FORMAT (check one):
                                 Yes _____ No X


<PAGE>

                          FIELDS AIRCRAFT SPARES, INC.

                                TABLE OF CONTENTS

                                                                       Page No.

Part I - Financial Information

         Item 1.  Consolidated Financial Statements

                           Balance Sheet.....................................3
                           Statement of Operations...........................4
                           Statement of Cash Flows...........................6
                           Statement of Shareholders' Equity.................7
                           Notes to Financial Statements.....................8


         Item 2.  Management's Discussion and Analysis of
                           Financial Condition and Results of
                           Operations.......................................21


Part II. - Other Information

         Item 1.  Legal Proceedings.........................................25
         Item 2.  Changes in Securities.....................................25
         Item 3.  Defaults upon Senior Securities...........................25
         Item 4.  Submission of Matters to a Vote
                           of Security Holders..............................25
         Item 5.  Other Information.........................................25
         Item 6.  Exhibits and Reports on Form 8-K..........................25



<PAGE>
<TABLE>
<CAPTION>


                                              FIELDS AIRCRAFT SPARES, INC.

                                          UNAUDITED CONSOLIDATED BALANCE SHEETS
                                        AS OF JULY 3, 1998 AND DECEMBER 31, 1997

                                                        A S S E T S

                                                                  1998                    1997
                                                                  ----                    ----
CURRENT ASSETS:
<S>                                                           <C>                    <C>          
     Cash and cash equivalents                                $   1,788,000          $   6,071,000
     Accounts receivable, less allowance for doubtful
         accounts of $165,000 in 1998 and $100,000
         in 1997                                                  4,111,000              1,955,000
     Inventory                                                   15,251,000             11,058,000
     Prepaid expenses                                               791,000                191,000
                                                              -------------          -------------
                  Total current assets                        $  21,941,000          $  19,275,000
                                                              -------------          -------------

LAND, BUILDING AND EQUIPMENT:
     Land                                                     $     210,000          $     210,000
     Building and building improvements                           1,161,000              1,065,000
     Furniture and equipment                                      3,578,000                565,000
                                                              -------------          -------------
                  Totals                                      $   4,949,000          $   1,840,000
     Less accumulated depreciation and amortization               2,296,000                830,000
                                                              -------------          -------------
                      Land, building and equipment, net       $   2,653,000          $   1,010,000
                                                              -------------          -------------

OTHER ASSETS:
     Debt issuance costs, net of accumulated
         amortization                                         $   1,158,000          $   1,267,000
     Goodwill, net of accumulated amortization                    3,340,000
     Other assets                                                                          629,000
                                                              -------------          -------------
                  Total other assets                          $   4,498,000          $   1,869,000
                                                              -------------          -------------
                      Total assets                            $  29,092,000          $  22,181,000
                                                              =============          =============

                                          LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable                                         $   2,946,000          $  1,239,000
     Other accrued liabilities                                    2,093,000               241,000
     Current portion of notes and capital
         leases payable                                             158,000                55,000
                                                              -------------          ------------
                  Total current liabilities                   $   5,197,000          $  1,535,000
                                                              -------------          ------------

LONG-TERM LIABILITIES:                                        $  17,122,000          $ 15,047,000
                                                              -------------          ------------

SHAREHOLDERS' EQUITY:
     Common stock                                             $     369,000          $    351,000
     Additional paid-in capital                                   9,060,000             6,959,000
     Retained deficit                                            (2,656,000)           (1,711,000)
                                                              -------------          ------------
              Total shareholders' equity                      $   6,773,000          $  5,599,000
                                                              -------------          ------------
               Total liabilities and shareholders' equity     $  29,092,000          $ 22,181,000  
                                                              =============          ============
</TABLE>
                                      
                                       3
<PAGE>
<TABLE>
<CAPTION>

                          FIELDS AIRCRAFT SPARES, INC.

                 UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
            FOR THE THREE MONTHS ENDED JULY 3, 1998 AND JUNE 30, 1997



                                                 1998                    1997
                                                 ----                    ----
<S>                                       <C>                   <C>          
SALES                                     $  5,794,000          $   2,941,000

COST OF SALES                                3,790,000              1,753,000
                                          ------------          -------------

GROSS PROFIT                              $  2,004,000          $   1,188,000

OPERATING EXPENSES                           1,383,000                793,000
                                          ------------          -------------
INCOME FROM OPERATIONS                    $    621,000          $     395,000
                                          ------------          -------------

 OTHER EXPENSE                            $  1,672,000                278,000
                                          ------------          -------------

(LOSS) INCOME BEFORE PROVISION FOR 
    INCOME TAXES                          $ (1,051,000)         $     117,000

PROVISION FOR INCOME TAXES                       4,000                  2,000
                                          ------------          -------------

NET (LOSS) INCOME                         $ (1,055,000)         $     115,000 
                                          ============          =============

NET (LOSS) INCOME PER SHARE (primary)     $       (.32)         $         .05 
                                          ============          =============

NET (LOSS) INCOME PER SHARE 
    (fully-diluted)                       $       (.27)         $         .05 
                                          ============          =============
</TABLE>
                                       4
<PAGE>
<TABLE>
<CAPTION>
                                               FIELDS AIRCRAFT SPARES, INC.

                                      UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                                  FOR THE SIX MONTHS ENDED JULY 3, 1998 AND JUNE 30, 1997






                                                          1998                    1997
                                                          ----                    ----

<S>                                               <C>                      <C>             
SALES                                             $       11,390,000       $      5,030,000
COST OF SALES                                              7,565,000              2,988,000
                                                  ------------------       ----------------

GROSS PROFIT                                      $        3,825,000       $      2,042,000

OPERATING EXPENSES                                         2,618,000              1,637,000
                                                  ------------------       ----------------
INCOME FROM OPERATIONS                            $        1,207,000       $        405,000
                                                  ------------------       ----------------

 OTHER EXPENSE                                    $        2,145,000       $        942,000
                                                  ------------------       ----------------

LOSS BEFORE PROVISION FOR INCOME TAXES            $         (938,000)      $       (537,000)

PROVISION FOR INCOME TAXES                                     7,000                  2,000
                                                  ------------------       ----------------

NET LOSS                                          $         (945,000)      $       (539,000)
                                                  ==================       ================

NET LOSS PER SHARE (primary)                      $             (.29)      $           (.24)
                                                  ==================       ================

NET LOSS PER SHARE (fully-diluted)                $             (.22)      $           (.24)
                                                  ==================       ================
</TABLE>

                                       5
<PAGE>
<TABLE>
<CAPTION>


                                            FIELDS AIRCRAFT SPARES, INC.

                                     UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 FOR THE SIX MONTHS ENDED JULY 3, 1998 AND JUNE 30, 1997


                                                                                       1998                   1997
                                                                                       ----                   ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                        <C>                    <C>               
     Net  loss                                                             $        (945,000)     $        (539,000)
     Adjustments to reconcile net loss to net
        cash used in operating activities:
     Depreciation and amortization                                                   154,000                 60,000
     Amortization of goodwill and debt issuance costs                                361,000                369,000
     Increase in accounts receivable                                              (2,156,000)              (407,000)
     Increase in inventory                                                        (4,193,000)            (1,106,000)
     Increase in prepaid expenses                                                   (600,000)               (81,000)
     Decrease (increase) in other assets                                             629,000                (91,000)
     Increase in accounts payable                                                  1,707,000                543,000
     Increase in other accrued liabilities                                         1,852,000                 62,000
     Increase in income taxes payable                                                                         2,000
                                                                           -----------------      -----------------
        Net cash used in operating activities                              $      (3,191,000)     $      (1,188,000)
                                                                           -----------------      -----------------

CASH FLOWS FROM INVESTING ACTIVITIES:
     Purchase of equipment                                                 $      (2,047,000)     $        (13,000)
     Acquisition of goodwill                                                      (3,441,000)
                                                                           -----------------      ----------------

        Net cash used in investing activities                              $      (5,488,000)     $        (13,000)
                                                                           -----------------      ----------------

CASH FLOWS FROM FINANCING ACTIVITIES:
     Net borrowings (payments) on line of credit                           $       1,879,000      $     (6,232,000)
     Principal payments on notes and capital leases
        payable                                                                      (60,000)              (41,000)
     Borrowings on notes and capital leases payable                                  359,000             8,401,000
     Costs associated with issuance of notes payable                                                      (470,000)
     Proceeds from issuance of common stock                                        2,609,000               180,000
     Costs associated with the issuance of common stock                             (391,000)             (147,000)
                                                                           -----------------      ----------------

        Net cash provided by financing activities                          $       4,396,000      $      1,691,000
                                                                           -----------------      ----------------

NET (DECREASE) INCREASE                                                    $      (4,283,000)     $        490,000

CASH AND CASH EQUIVALENTS, December 31,
     1997 and 1996                                                                 6,071,000                88,000
                                                                           -----------------      ----------------

CASH AND CASH EQUIVALENTS, July 3, 1998 and
     June 30, 1997                                                         $       1,788,000      $        578,000
                                                                           =================      ================
</TABLE>

                                       6
<PAGE>
<TABLE>
<CAPTION>
       
                                            FIELDS AIRCRAFT SPARES, INC.

                                 UNAUDITED STATEMENTS OF SHAREHOLDERS' EQUITY
                            FOR THE SIX MONTHS ENDED JULY 3, 1998 AND JUNE 30, 1997


                                                        COMMON STOCK
                                        -------------------------------------------------
                                         NUMBER OF                              ADDITIONAL                              TOTAL
                                          SHARES                                 PAID-IN             RETAINED       SHAREHOLDERS'
                                        OUTSTANDING           AMOUNT             CAPITAL             DEFICIT           EQUITY
                                        -----------           ------             -------             -------           ------
<S>                                       <C>              <C>                 <C>              <C>                 <C>          
BALANCES, December 31, 1997               2,079,571        $   351,000         $  6,959,000     $  (1,711,000)      $   5,599,000

Issuance of common stock                    352,092             18,000            2,101,000                             2,119,000

Net loss                                                                                             (945,000)           (945,000)
                                           ---------      ------------         ------------     -------------       -------------

BALANCES, July 3, 1998                     2,431,663      $    369,000         $  9,060,000     $  (2,656,000)      $   6,773,000
                                           =========      ============         ============     =============       =============

BALANCES, December 31, 1996                1,302,137      $    312,000         $  5,065,000     $  (1,564,000)      $   3,813,000

Issuance of common stock                     590,749            29,000              (30,000)                               (1,000)

Net loss                                                                                             (539,000)           (539,000)
                                          ----------      ------------          -----------     -------------       -------------

BALANCES, June 30, 1997                    1,892,886      $    341,000         $  5,035,000     $  (2,103,000)      $   3,273,000
                                          ==========      ============         ============     =============       =============
</TABLE>

                                       7
<PAGE>

                          FIELD AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1.       Summary of significant accounting policies

         a.       Principles of consolidation and company background

                  The  consolidated  Group  financial   statements  include  the
accounts of Fields Aircraft Spares,  Inc. (FASI),  a Utah  corporation,  and its
wholly-owned   subsidiaries  Fields  Aircraft  Spares  Incorporated   (FASC),  a
California corporation, Flightways Manufacturing, Inc. (FMI), Skylock Industries
and Fields Aero  Management,  Inc.  All  significant  intercompany  accounts and
activity have been eliminated.

                  The Group  manufactures and distributes new aircraft parts and
equipment for use on international and domestic commercial and military aircraft
and purchases and sells parts on a brokerage basis.

         b.       Concentration of credit risk

                  Substantially  all of the Group's trade  accounts  receivables
are due from companies in the aviation  industry  located  throughout the United
States and  internationally.  The Group performs periodic credit  evaluations of
its  customers'  financial  condition  and does not require  collateral.  Credit
losses  relating to customers in the airline  industry  have  consistently  been
within management's expectations.

         c.       Concentration of sales

                  The Group had sales to foreign  companies that amounted to 13%
and 17% of total sales for the six months  ended July 3, 1998 and June 30, 1997,
respectively.

                  For the six months ended July 3, 1998, two customers accounted
for sales of $962,000  and  $1,350,000.  For the six months ended June 30, 1997,
two customers accounted for sales of $696,000 and $507,000.

          d.       Cash and cash equivalents

                  For  purposes  of the  statement  of  cash  flows,  the  Group
considers all highly liquid  investments  purchased with an original maturity of
three months or less to be a cash equivalent.

                  The Group  currently  maintains cash in bank deposit  accounts
which exceeds  federally  insured  limits.  The Company has not  experienced any
losses in such accounts and believes it is not exposed to any significant  risks
on  cash  in  bank  deposit  accounts.  Uninsured  balances  were  approximately
$1,609,000 as of July 3, 1998.

                                       8
<PAGE>

                          FIELD AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1.       Summary of significant accounting policies (continued)

         e.       Inventory

                  Inventory is valued at the lower of cost or market value using
the first-in,  first-out method.  Where a group of parts were purchased together
as a lot,  the  cost  of the  lot  was  allocated  to the  individual  parts  by
management  pro  rata  to the  list  selling  price  at the  time  of  purchase.
Consistent with industry  practice,  inventory is carried as a current asset but
all inventory is not expected to be sold within one year.

                  Inventory as of July 3, 1998 and  December 31, 1997  consisted
of the following:

                                            1998                     1997
                                            ----                     ----

        Raw materials              $        1,148,000     $
        Work-in-process                       332,000
        Finished goods                     13,771,000            11,058,000
                                   ------------------     -----------------

                     Total         $       15,251,000     $      11,058,000
                                   ==================     =================

         f.       Land, building and equipment

                  Land,   building   and   equipment   are   recorded  at  cost.
Depreciation  is computed  using the  straight-line  method  over the  estimated
useful lives of the assets which range from 3 to 25 years.

                  The cost and related accumulated depreciation and amortization
of assets sold or  otherwise  retired are  eliminated  from the accounts and any
gain or loss is included in the statement of operations. The cost of maintenance
and repairs is charged to income as incurred,  whereas significant  renewals and
betterments are capitalized.  Depreciation expense for the six months ended July
3, 1998 and June 30, 1997 amounted to $154,000 and $60,000, respectively.

                  Long-term  assets of the Company are  reviewed  annually as to
whether their  carrying  value has income  impaired,  pursuant to the guidelines
established  in Statement of Financial  Accounting  Standards  ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived  Assets and Long-Lived Assets to be
Disposed Of".  Management  considers assets to be impaired if the carrying value
exceeds the future projected cash flows from related operations. Management also
re-evaluates the periods of amortization to determine whether  subsequent events
and circumstances  warrant revised estimates of useful lives. As of July 3, 1998
management expects these assets to be fully recoverable.

                                       9
<PAGE>

                          FIELD AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1.       Summary of significant accounting policies (continued)

         g.       Debt issuance costs

                  Gross debt issuance costs of $1,459,000  less  amortization of
$452,000 at July 3, 1998 relate to the issuance of  financing.  Amortization  of
debt  issuance  costs for the six months  ended  July 3, 1998 and June 30,  1997
amounted to $260,000 and $369,000,  respectively.  The costs are amortized using
the straight-line method over the life of the respective loans.

         h.       Revenue recognition

                  The Group  recognizes  revenue  from all types  of sales under
the accrual method of accounting  when title  transfers.  Title transfers at the
Group's facilities.

         i.       Earnings per share

                  In March  1995,  FASI's  shareholders  authorized  the reverse
split of its  common  stock on the basis of fifty old  shares for one new share.
This reverse split was effective as of November 1995.  All references  herein to
the number of shares are after the reverse split.

                  Fully-diluted  earnings per share was computed using 3,560,064
and  2,280,920  shares for the six months  ended July 3, 1998 and June 30, 1997,
respectively.

         j.       Income taxes

                  The Group  files  consolidated  income tax  returns.  Deferred
income taxes relate to temporary  differences  between  financial  statement and
income tax reporting of certain  accrued  expenses,  bad debts,  inventory,  and
depreciation.

                  The Group adopted Statement of Financial  Accounting Standards
No. 109,  "Accounting  for Income Taxes".  SFAS 109 requires the  recognition of
deferred tax liabilities and assets for the expected future tax  consequences of
temporary  differences between tax basis and financial reporting basis of assets
and liabilities.  The income tax effect of the temporary  differences as of July
3, 1998 and December 31, 1997 consisted of the following:

                                                            1998         1997
                                                            ----         ----
           Deferred tax liability resulting from
             taxable temporary differences for
             accounting for inventory                 $  (314,000)   $ (314,000)
           Deferred tax liability resulting from
             taxable temporary differences for
             accounting for depreciation                  (19,000)

                                       10
<PAGE>

                          FIELD AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


1.       Summary of significant accounting policies (continued)

         j.       Income taxes (continued)


                                                            1998         1997
                                                            ----         ----
           Deferred tax asset resulting from
             deductible temporary differences
             for allowance for doubtful accounts      $    32,000    $    6,000
           Deferred tax asset resulting from
             deductible temporary differences for
             product warranty costs                         3,000
           Deferred tax asset resulting from 
             deductible temporary differences for 
             accrued expenses                               5,000
           Deferred tax asset resulting from
             deductible temporary differences
             for utilization of net operating loss
             carryforwards for income tax purposes      1,078,000     1,078,000
           Valuation allowance resulting from the
             potential nonutilization of net operating
             loss carryforwards for income tax
             purposes                                    (785,000)     (770,000)
                                                      -----------    ----------

                 Total deferred income taxes          $      -       $     -
                                                      ===========    ==========

         k.       Employee benefit plan

                  FASC has a 401(k) Plan under  Section  401(k) of the  Internal
Revenue Code.  The Plan allows all employees who are not covered by a collective
bargaining agreement to defer up to 25% of their compensation on a pre-tax basis
through  contributions  to the  Plan.  Contributions  to the  Plan by  FASC  are
discretionary  and are  determined by the Board of Directors.  No  contributions
were made to the Plan  during  the six  months  ended  July 3, 1998 and June 30,
1997.

         l.       Use of estimates

                  The  preparation  of financial  statements in conformity  with
generally accepted  accounting  principles requires management to make estimates
and assumptions that affect the amounts reported in the financial statements and
accompanying notes. Management believes that the estimates utilized in preparing
its financial statements are reasonable and prudent. Actual results could differ
from these estimates.

                                       11
<PAGE>

                          FIELD AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



1.       Summary of significant accounting policies (continued)

          m. Change in accounting period

                  In March  1998,  the Company  elected to change its  reporting
year to a 52-53 week year ending on the Friday of the calendar  week  (beginning
on  Monday  and  ending on  Sunday)  which  includes  the last  business  day in
December,  with each quarter being reported in a similar  fashion.  Accordingly,
this  financial  statement  includes the balances and  activities for the second
quarter of 1998 ending on July 3.


2.       Shareholders' equity

                  FASI has  50,000  shares  authorized  of its  $.001  par value
preferred  stock. At July 3, 1998 and December 31, 1997, there were no shares of
preferred stock issued or outstanding.

                  FASI has the  following  common  stock as of July 3,  1998 and
December 31, 1997:
                                            1998             1997
                                            ----             ----

          Authorized                     5,000,000         5,000,000
          Issued and outstanding         2,431,663         2,079,571
          Par value                           $.05              $.05

                  In  February  1995,  the Group owed  $7,658,000  to  McDonnell
Douglas  Corporation  (MDC). MDC canceled the debt in exchange for $850,000 plus
586,862 shares of Series A convertible preferred stock of FASC. This constituted
full and complete  satisfaction of the MDC debt. The agreement  provided for the
mandatory  exchange of the Series A preferred stock of FASC for 25% of the total
outstanding  common stock of FASI within 10 days  following  the date the common
stock is  approved  for  quotation  on, and is quoted for trading on, the Nasdaq
Stock Market.

                  FASI's  common shares began  quotation on the Nasdaq  SmallCap
Market  on  March  26,  1997.  On April 4,  1997  the MDC  Series A shares  were
exchanged by MDC for 564,194 common shares of FASI.

                  In 1996,  FASI sold 317,785 shares of common stock and 158,893
warrants.  Each warrant  allows the holder to purchase one share of common stock
for $6.25.  The net proceeds were  $1,654,000  after deducting costs of $481,000
for  underwriting  and  issuance.  In April 1998,  warrants  were  exercised  to
purchase  93,413  shares of common  stock for $6.25 per share.  The net proceeds
were $450,000 after deducting accumulated offering costs of $134,000.

                                       12
<PAGE>

                          FIELD AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

2.       Shareholders' equity (continued)

                  In addition,  during 1997, FASI issued 31,574 shares of common
stock and 41,128 warrants.  Each warrant allows the holder to purchase one share
of  common  stock for  $6.25.  FASI  issued  another  15,000 of common  stock in
association with the issue of $10,000,000 at 8.50% subordinated debentures.

                  In April 1997, the Group's  wholly-owned  subsidiaries entered
into separate Loan and Security Agreements for an aggregate of up to $10,000,000
with NationsCredit  Commercial Funding  ("NationsCredit") at an interest rate of
prime plus 3%. In connection with the NationsCredit  loan facility,  FASI issued
NationsCredit  an option to acquire  40,000  common shares of FASI at a price of
$6.25 per share.

                  In September 1997,  FASI closed the sale of these  $10,000,000
Subordinated  Redeemable  Debentures  due 2000 issued  under an  Indenture  with
Etablissement  Pour le Placement  Prive as Trustee.  The Securities were sold in
reliance  on  Regulation  S of the  Securities  Act of  1933 to  entities  which
represented to FASI to be accredited non-U.S.
persons.

                  The  Debenture  holders  have a  one-time  right  at any  time
between December 29, 1997 and September 27, 2000, subject to prior redemption or
repurchase,  to  convert  up to 30% of the  principal  amount  of such  holder's
Debentures into Common Shares at a conversion  price equal to 85% of the average
closing price of the Common Shares  during the  20-trading  day period ending on
the date of notice of conversion, but in no event less than $12.00 per share. In
the event that during any 20-day trading  period,  the average  closing price of
the Common  Shares  equals or exceeds  $12.00 per share,  FASI may  require  the
conversion of up to 20% of the principal amount of outstanding Debentures at the
Conversion  Price.  Pursuant  to this,  in  November  1997,  FASI  required  the
conversion  of $2,000,000 of Debentures in exchange for 166,666 of common shares
at $12.00 per share.

                  The  Debentures  are  redeemable,  in whole or in part, at the
option  of the  Group,  at any time on or after  March  31,  1999 at 100% of the
principal amount plus accrued interest.

                  In  February  1998,  the  Group  entered  into a  Supplemental
Indenture  to the  Indenture  with  Etablissement  Pour le  Placement  Prive  as
trustee,  relating to the 8.5% Subordinated  Redeemable  Debenture due 2000. The
Supplemental  Indenture  provides that the Debenture  holders have the following
additional rights: at any time between February 20, 1998 and June 30, 1998, each
holder  may  convert  20% of the  original  principal  amount  of such  holder's
Debentures  into Common Shares at a conversion  price of $9.75 per share; at any
time between  February 20, 1998 and September 30, 1998,  each holder may convert

                                       13
<PAGE>

                          FIELD AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


2.        Shareholders' equity (continued)

an additional 20% of the original  principal amount of such holder's  Debentures
into  Common  Shares at a  conversion  price of $11.00  per  share;  at any time
between  February 20, 1998 and  December  31,  1998,  each holder may convert an
additional 20% of the original principal amount of such holder's Debentures into
Common Shares at a conversion price of $13.00 per share.

                  In February 1998, the Group received and accepted subscription
agreements  for the sale of 210,664  shares of common stock and 52,666  warrants
for  approximately  $2,055,000.  Each warrant  allows the holder to purchase one
share of common  stock for  $13.00.  The  Securities  were sold in  reliance  on
Regulation S of the Securities Act of 1933 to entities which represented to FASI
to be accredited non-U.S. persons.

                  In April  1998,  48,015  common  shares were issued to acquire
Skylock Industries.

3.       Notes and capital leases payable

                  The  notes  and  capital  leases  payable  at July 3, 1998 and
December 31, 1997 consisted of the following:
<TABLE>
<CAPTION>

                                                                    1998               1997
                                                                    ----               ----
<S>                                                         <C>                 <C>
Subordinated debenture with fixed interest at 8.50%        
    per annum, payable semi-annually, due 2000                $      8,000,000  $       8,000,000

Note payable to NationsCredit, secured by all
    assets of the Group, interest at prime plus 3.0%
    (11.5% at March 31, 1998), payable monthly, due 2000             8,926,000          7,047,000

Notes and capital leases payable, secured by equipment,
    monthly payments of $7,350 including interest at rates
    ranging from 8.9% to 16.6%, due through August 2002                261,000

Other notes payable                                                     93,000             55,000
                                                              ----------------  -----------------

             Total notes and capital leases payable           $     17,280,000  $      15,102,000
Less current portion                                                   158,000             55,000
                                                              ----------------  -----------------

                Notes and capital leases payable, net of
                     current portion                          $     17,122,000  $      15,047,000
                                                              ================  =================
</TABLE>

                                       14
<PAGE>

                          FIELD AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



3.       Notes and capital leases payable (continued)

                  Principal  payment  requirements on all notes payable based on
terms explained above are as follows:

                    YEAR ENDING
                     JULY 3,                            AMOUNT

                       1999                       $        158,000
                       2000                             16,998,000
                       2001                                 72,000
                       2002                                 44,000
                       2003                                  8,000
                     Thereafter                              -


                  Total  interest  expense  including the  amortization  of debt
issuance  costs for the six months ended July 3, 1998 and June 30, 1997 amounted
to $995,000 and $942,000,  respectively.  Total interest paid for the six months
ended  July 3,  1998  and June 30,  1997  amounted  to  $765,000  and  $573,000,
respectively.

 4.       Other expense

                  During the quarter  ended July 3, 1998,  the Company  recorded
non-recurring  expenses  of  $1,200,000  to  reflect  the  acquisition  of a new
facility,  relocation  costs and the  initial  expansion  of the newly  acquired
manufacturing operations.

5.       Provision for income taxes

                  The  provision  for income taxes for the six months ended July
3, 1998 and June 30, 1997 consisted of the following:

                                                          1998         1997
                                                          ----         ----
                  CURRENT:
                     State                            $    7,000    $   2,000
                                                      ----------    ---------
                        Total provision for income
                          taxes                       $    7,000    $   2,000
                                                      ==========    =========

                  Total  income  taxes paid in 1998 and 1997  amounted to $7,000
and $3,000.  The Group has net  operating  loss  carryovers  available to offset
future taxable  income.  The amount and expiration date of the carryovers are as
follows:

                                       15
<PAGE>

                          FIELD AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


5.       Provision for income taxes (continued)


                  YEAR ENDING
                  DECEMBER 31,             FEDERAL          STATE

                         1998             $               $   750,000
                         1999                                 580,000
                         2000                                 126,000
                         2001                                 110,000
                         2008                942,000           70,000
                         2009              1,161,000
                         2010                255,000
                         2011                225,000
                         2012                140,000

6.       Commitments

                  The Group  leases  facilities  and  vehicles  under  operating
leases  expiring  through  October 31, 2008 and  subleases a facility to a third
party.  The minimum lease payments  required under the leases as of July 3, 1998
are as follows:

                    YEAR ENDING       OPERATING LEASE        OPERATING LEASE
                         JULY 3,           EXPENSE                 INCOME

                         1999         $        998,000       $      156,000
                         2000                  955,000               39,000
                         2001                  900,000
                         2002                  900,000
                         2003                  756,000
                     Thereafter              4,032,000

                  Lease  expense for the six months  ended July 3, 1998 and June
30, 1997 was $166,000 and $45,000, respectively. Lease income for the six months
ended July 3, 1998 was $78,000.


7.       Related party transactions

                  The Group leases a small overseas  office  facility on a month
to month basis from an entity owned by certain officers of the Group.

                                       16
<PAGE>

                          FIELD AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


 8.       Stock option plans

                  In November 1995, FASI adopted a Management  Stock Option Plan
("Management  Plan") and Employee Stock Option Plan ("Employee Plan").  Pursuant
to the Management Plan, FASI has issued options to five individuals  involved in
the  management  of FASI to  acquire  up to  69,025  common  shares of FASI at a
purchase  price of $3.00  per  share  subject  to  vesting  requirements,  which
includes FASI  obtaining  sales during a 12-month  period of  $7,500,000  and an
average  closing  price for FASI's  Common  Shares for a  three-month  period of
$6.00,  $9.00 and $12.00,  respectively,  for each  one-third  of the options to
vest. The options must vest by November 1998 and must be exercised  within three
years of vesting.  Pursuant to the  Employee  Plan,  FASI has issued  options to
acquire 13,500 common shares of FASI to 20 employees of FASI at a purchase price
of $3.00 per share subject to vesting requirements, which include FASI obtaining
sales during a 12-month  period of  $7,500,000  and at least one year  continued
employment after the grant of the option. The options must vest by November 1998
and must be exercised within two years of vesting.

                  In April 1997,  FASI issued options to employees  of the Group
to acquire up to 100,000 common shares of FASI at an exercise price of $6.25 per
share. Half of the options vested in April 1998 and the remaining half will vest
in April 1999. The options expire in April 2000.

                  In August 1997, FASI issued options to executives of the Group
to acquire up to 270,000  common  shares of FASI at an exercise  price of $10.00
per share.  The options will vest if the Group meets the  following  conditions;
the Group must raise at least  $7,500,000 in additional  debt or equity  capital
and the Group must have sales of at least  $14,000,000  in any  12-month  period
after the grant date.  Half of the options  vested  August 6,1998 with the other
half vesting no earlier than August 1999. The conditions must be met by June 30,
1999 and the options will expire three years after the vesting date.

                  In August 1997, FASI issued options to executives of the Group
to acquire up to 89,500 common shares of FASI at an exercise  price of $8.25 per
share.  Half of the options will vest in August 1998 and the remaining half will
vest in August 1999. The options expire in August 2002.

                  The Company granted share options to certain key employees and
executives on the following dates:


                                       17
<PAGE>


                          FIELD AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


 8.       Stock option plans (continued)

                  On January 16, 1998,  Group A: 10,000 common shares at a price
of $8.35 per share.  Half of the  options  will vest on January 15, 1999 and the
remainder  will vest on January 14, 2000.  The options  will expire  January 16,
2003 and Group B: 40,000  common shares at a price of $8.35 per share subject to
certain vesting requirements. Subject to satisfaction of performance conditions,
half of the options vest on January 15, 1999,  and the remainder vest on January
14, 2000. The options expire three years after vesting.

                  On February  13,  1998,  119,600  common  shares at a price of
$10.00 per share subject to vesting  requirements.  Subject to  satisfaction  of
performance  conditions,  half of the options vest on February 12, 1999, and the
remainder vest on February 11, 2000. The options expire on February 13, 2003.

                  On March 16, 1998,  5,000  options of which half vest on March
15, 1999 and the remainder vest on March 15, 2000,  subject to  performance  and
expire March 16, 2003.

                  The Group  accounts for stock  options  under the provision of
APB Opinion 25  "Accounting  for Stock  Issued to  Employees".  Accordingly,  no
compensation  cost  has  been  recognized  for  its  stock  option  grants.  Had
compensation  cost for the Group's stock option grants been determined  based on
the fair value at the grant dates  consistent  with the method of FASB Statement
123 "Accounting for Stock-Based Compensation", the Group's net loss and loss per
share would have been increased to the pro forma amounts indicated below for the
six months ended July 3, 1998 and June 30, 1997:

                                                1998               1997

Net loss                  As reported       $    (945,000)      $     (529,000)
                                            =============       ==============

                          Pro forma         $  (1,901,000)      $     (575,000)
                                            =============       ==============

Primary earnings
 (loss) per share         As reported       $        (.29)      $         (.24)
                                            =============       ==============

                          Pro forma         $        (.59)      $         (.25)
                                            =============       ==============

Fully-diluted earnings
 (loss) per share         As reported       $        (.22)      $         (.24)
                                            =============       ==============

                          Pro forma         $        (.49)      $         (.25)
                                            =============       ==============


                                       18
<PAGE>

                          FIELD AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


 8.       Stock option plans (continued)

                  The fair value of each option grant was  estimated on the date
of grant  using  the  Black-Scholes  option-pricing  model  with  the  following
assumptions  for the April  1997,  August 7, 1997 and  August 28,  1997  grants,
respectively: risk-free interest rates of 6.4%, 5.7% and 6.0%; expected lives of
two years for all three grants;  and volatility of 78% for all three grants. For
all the 1998 grants,  risk-free  interest  rates  ranging from 5.3% to 5.6% were
used, with expected lives of two years and volatility of 73% for all grants.

                  The first  condition  for vesting of the August 7, 1997 option
grant was met in September  1997. The Group met the second vesting  condition of
sales of  $14,000,000  in any 12-month  period after the grant date on August 6,
1998.  Accordingly,  it is  assumed  these  options  will  vest at the  earliest
possible date.

                  The  fair  value  of  the  November   1995  option  grant  was
determined to be immaterial.  Accordingly, the effect of these options on income
is not included in the above pro forma amounts.


9.       Contingency

                  In the  event of the death of a  Director  or  Officer  of the
Group,  the Group is obligated to pay up to 100% of the  Director's or Officer's
annual  compensation to their beneficiary within the twelve months subsequent to
their death.


10.      Acquisitions

                  In  January  1998,  the Group  completed  the  acquisition  of
Flightways  Manufacturing,   Inc.  (FMI).  FMI  is  a  manufacturer  of  plastic
replacement components for commercial aircraft seats and interiors.

                  Each share of FMI tendered  into the offer was  exchanged  for
cash.  The total  cost of the  acquisition  excluding  liabilities  assumed  was
approximately  $2,866,000.  The acquisition was accounted for as a purchase. The
purchase  price was allocated to the assets  acquired  based on their  estimated
fair values and  liabilities  assumed.  The assets,  liabilities  and results of
operations  for FMI are included  with those of the Group as of July 3, 1998 and
for the six months then ended.

                                       19
<PAGE>

                          FIELD AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

10.      Acquisitions (continued)

                  The excess of the purchase price over the net assets  acquired
and  liabilities  assumed,  of  $2,767,000,  is being  amortized  over 15 years.
Amortization  of  goodwill  for the six months  ended July 3, 1998  amounted  to
$90,000.

                  In April  1998,  the Group  acquired  100% of the  issued  and
outstanding shares of Skylock  Industries  (Skylock) by paying $956,000 in cash,
retiring  $101,000 in Skylock debt and issuing  60,019 common shares of FASI. In
April 1998,  $756,000 of the cash amount was paid and 48,015  common shares were
issued at closing.  The remainder will be paid in one year, with the cash amount
to be paid and the  number of shares to be issued  based on  Skylock's  customer
order volume between April 28, 1998 and April 27, 1999.

                  The total cost of acquisition  was  approximately  $1,556,000.
This  acquisition  was  accounted  for as a  purchase.  The  purchase  price was
allocated  to the  assets  acquired  based  on  their  fair  market  values  and
liabilities  assumed.  The assets,  liabilities  and results of  operations  for
Skylock  are  included  with  those of the  Group as of July 3, 1998 and for the
three months then ended.

                  The excess of the purchase price over the net assets  acquired
and  liabilities  assumed of  approximately  $674,000 is being amortized over 15
years.  Amortization  of goodwill for the six months ended July 3, 1998 amounted
to $11,000.

                                       20
<PAGE>

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

Quarters Ended July 3,1998 and June 30, 1997

         On March 30,  1998 the  Company  changed  its  fiscal  year to a 52- or
53-week year ending on the Friday of the calendar week  (beginning on Monday and
ending on Sunday) which contains the last business day of December.  This report
contains  financial  information  for the  second  quarter  of the  fiscal  year
consisting  of the period  from April 4, 1998 to July 3,  1998.  The  comparable
period for the prior year is the calendar quarter ended June 30, 1997.

         Operations  of the Company and its  subsidiaries  for the quarter ended
July 3, 1998  generated  income of  $621,000,  compared to  operating  income of
$395,000 for the comparable  period of 1997, an increase of  approximately  57%.
The increase in income for the current quarter is attributable to an increase in
sales resulting in an increase in the dollar amount of gross profit.

         Net sales for the quarter ended July 3, 1998 were  $5,794,000  compared
to $2,941,000  for the  comparable  period of 1997, an increase of $2,853,000 or
approximately  97%.  This  increase  in sales  included  an increase of $836,000
across the broad range of the Company's products and approximately $1,470,000 as
a  result  of  the   inclusion  of  sales  of  Flightways   Manufacturing,   Inc
("Flightways"),   a   wholly-owned   company   acquired  in  January  1998,  and
approximately  $547,000  as a  result  of the  inclusion  of  sales  of  Skylock
Industries, ("Skylock"), a wholly-owned company acquired in April 1998.

         Cost of sales for the  quarters  ended  July 3, 1998 and June 30,  1997
were  $3,790,000  and  $1,753,000   respectively   (approximately  65%  and  60%
respectively).  The  reduction  in gross margin  percentage  is as a result of a
change in the product mix of the Company and also the  inclusion  of the results
of Flightways and Skylock which, as manufacturing  entities,  have a higher cost
of goods sold percentage than parts distribution.

         Operating  expenses  increased to $1,383,000 for the quarter ended July
3, 1998 from $793,000 for the quarter ended June 30, 1997.  This was principally
attributable to the inclusion of the results of the newly acquired companies.

         Interest  expense  increased to $522,000  from $278,000 in the quarters
ended July 3, 1998 and June 30, 1997,  respectively.  This was  attributable  to
interest on increased  debt amounts  outstanding  to finance both growth and the
acquisitions of Flightways and Skylock.

         The Company took a non-recurring  charge to income in the quarter ended
July 3, 1998 of $1,200,000  to reflect  non-recurring  expenses  relating to the
acquisition of a new facility, relocation costs and the initial expansion of the
newly acquired manufacturing operations.

         As a  result  of the  foregoing,  the  Company  had a net  loss for the
quarter  ended July 3, 1998 of  $1,055,000 as compared to net income of $115,000
for the comparable  period in 1997, a decrease of $1,170,000.  This decrease was
attributable  to the one-time  charge of $1,200,000.  On a per share basis,  net
loss for the  current  period was $.27 per share fully  diluted  ($.32 per share
primary)  compared to an income of $.05 per share fully  diluted ($.06 per share
primary) in the comparable period of 1997.

                                       21
<PAGE>

Six Months Ended July 3 1998 and June 30 1997


         On March 30,  1998,  the  Company  changed  its fiscal year to a 52- or
53-week year ending on the Friday of the calendar  week which  contains the last
business day of December.  This report  contains  financial  information for the
first six months of the fiscal year  consisting  of the period  from  January 1,
1998 to July 3, 1998. The comparable period for the prior year is the six months
ended June 30, 1997.

         Operations of the Company and its subsidiaries for the six months ended
July 3, 1998  generated  income of $1,207,000,  compared to operating  income of
$405,000 for the comparable period of 1997, an increase of 198%. The increase in
income  for the  current  six months is  attributable  to an  increase  in sales
resulting in an increase in the dollar amount of gross profit.

         Net  sales for the six  months  ended  July 3,  1998  were  $11,390,000
compared  to  $5,030,000  for the  comparable  period of 1997,  an  increase  of
$6,360,000 or approximately  126%.This increase in sales included an increase of
approximately  $2,780,000  across the broad range of the Company's  products and
approximately  $3,033,000  as a result of the inclusion of sales of  Flightways,
and approximately $547,000 as a result of the inclusion of sales of Skylock.

         Cost of sales for the six months  ended July 3, 1998 and June 30,  1997
were $7,565,000 and $2,988,000 respectively  (approximately 66% and 59% of sales
respectively).  The reduction in gross margin percentage is a result of a change
in the product mix of sales of the Company and also the inclusion of the results
of Flightways and Skylock which, as manufacturing  entities,  have a higher cost
of goods sold percentage than parts distribution.

         Operating  expenses  increased to  $2,618,000  for the six months ended
July 3, 1998 from  $1,637,000  for the six months ended June 30, 1997.  This was
principally  attributable  to the  inclusion  of the results of  Flightways  and
Skylock.

         Interest expense  increased to $995,000 from $942,000 in the six months
ended  July  3,  1998  and  June  30,  1997  respectively.   This  increase  was
attributable  to interest on increased debt amounts  outstanding to finance both
growth  and the  acquisitions  of  Flightways  and  Skylock  and was offset by a
reduction in overall  interest rates and a  non-recurring  $340,000  accelerated
write-off of loan costs and other fees in the 1997 period.

         The  Company  took a  non-recurring  charge to income in the six months
period  ended  July 3, 1998 of  $1,200,000  to  reflect  non-recurring  expenses
relating to the acquisition of a new facility,  relocation costs and the initial
expansion of the newly acquired manufacturing operations.

         As a result of the  foregoing,  the  Company had a net loss for the six
months  ended July 3, 1998 of $945,000 as compared to a net loss of $539,000 for
the  comparable  period in 1997,  an increase in net loss of $406,000.  This was
attributable  to the one-time charge of $1,200,000.  On a per-share  basis,  the
net loss for the current period was $.22 per share fully diluted ($.29 per share
primary)  compared to a loss of $.24 fully diluted  ($.28 per share  primary) in
the comparable period of 1997.

                                       22
<PAGE>

Liquidity

         As at July 3, 1998, the Company had working capital  (current assets in
excess of current  liabilities)  of $16,744,000  compared to working  capital of
$17,740,000 at December 31, 1997. Although the net result was a relatively small
reduction of $996,000, there were factors of substantial amounts affecting this,
the largest being the acquisitions of Flightways and Skylock.

         The cost of the acquisition of Flightways was approximately  $2,866,000
with  a  further  approximately  $1,100,000  being  used  to  retire  debt.  The
acquisition  was  partially  funded by an issue of common  shares  (see  Capital
Resources)  which  produced  net cash  proceeds  of  $1,798,000,  an increase in
borrowing under the Company's line of credit with Nationscredit of approximately
$1,000,000 and cash. The total cost of acquisition of Skylock was  approximately
$1,556,000 which was financed by a combination of cash of approximately $950,000
drawn from the  Company's  credit  line with  Nationscredit,  an issue of common
stock (see  Capital  Resources)  and a vendor  deferred  note  conditional  upon
certain targets being met.

         Operating  activities  used  $3,191,000 and $1,188,000 of the Company's
cash flow for the six months ended July 3, 1998 and June 30, 1997, respectively.
There were increases in all non-cash current assets. These increases were mostly
as a result of the two acquisitions. Accounts receivable increased by $2,156,000
entirely as a result of the acquisitions while inventory increased by $4,193,000
of which  $1,853,000  was  represented by the  acquisitions.  The balance of the
increase  in  inventory  was  as a  result  of an  expansion  in  the  Company's
after-market aircraft inventory management and supply program,  first introduced
in 1997.

         Increases  in  accounts  payable  of  $1,707,000  were  also due to the
acquisitions, which accounted for $1,121,000 of this figure. Accrued liabilities
increased by $1,852,000  which was mostly as a result of the one-time  charge of
$1,200,000 taken in this period.

Capital Resources

         On February  20,  1998,  the Company  completed a private  placement to
non-United  States  persons  pursuant to Regulation S of the  Securities  Act of
1933, as amended.  The Company issued 26,333 units  consisting of 210,664 common
shares  and  warrants  to  acquire  52,666  common  shares at $13 per share (the
"Warrants"). The units were sold for $2,053,974. The warrants are exercisable at
any time prior to the second  anniversary of their issuance.  Etablissement Pour
le  Placement  Prive,  Zurich,  Switzerland,  ("EPP")  acted  as  the  Company's
placement  agent in connection  with the offering.  After brokerage and issuance
costs,  the  sale  resulted  in a  net  infusion  of  capital  of  approximately
$1,798,000.  For financial accounting purposes an additional $600,000 was offset
against the proceeds of the placement as additional costs in connection with the
issuance of securities.

         In April 1998, the Company  acquired 100% of the issued and outstanding
shares  of  Skylock  by  paying   approximately   $950,000  in  cash,   retiring
approximately  $100,000 in Skylock debt and issuing  60,019 common shares of the
Company. Of these amounts $200,000 in cash and 12,004 common shares remain to be
paid over in one year,  with the cash amount to be paid and the number of shares
to be issued based on Skylock's customer order volume between April 1, 1998, and
March 31, 1999.

                                       23
<PAGE>

         In April 1998,  warrants,  originally  issued in 1996, were utilized to
purchase  93,413  shares of common  stock for $6.25 per share.  The net proceeds
were $450,000 after deducting accumulated offering costs of $134,000.

         The Company will continue to actively  seek debt and/or equity  capital
infusions.  The Company  intends to use a substantial  portion of any additional
capital to pursue potential acquisitions and the purchase of inventory. There is
no assurance the Company will be successful in securing additional capital.

Year 2000 Issue

         The Year 2000 problem is the result of computer  programs being written
using two digits rather than four to define the applicable  date. The Company is
addressing  liabilities  related to this issue on its computer systems by making
system  changes  now and does not expect any  material  financial  impact to its
consolidated financial position, results of operations or cash flows as a result
of making these changes.

         There can be no assurance that the Company's  suppliers or vendors will
be  Year  2000  compliant  and  that  their  failure  or any  other  third-party
enterprise  with which the Company  interacts to achieve that  compliance  could
have a material  adverse  effect on the Company,  its  financial  condition  and
results of operations.

Forward-Looking Statements

         Statements  regarding  the  Company's  expectations  as to its  capital
resources,  its use of additional  capital raised and certain other  information
presented in this Form 10-QSB constitute  forward looking  statements within the
meaning of Section 27A of the  Securities  Act of 1933, as amended,  and Section
21E of the  Securities  Act of 1934, as amended.  Although the Company  believes
that its expectations are based on reasonable  assumptions  within the bounds of
its  knowledge of its business and  operations,  there can be no assurance  that
actual  results  will not differ from its  expectations.  In addition to matters
affecting the economy and the Company's industry  generally,  factors that could
cause actual results to differ from  expectations  include,  but are not limited
to, the following:  (i) the Company's  ability to obtain future financing may be
adversely  affected by its past technical defaults on its debt financing and its
uncertainty of future profitability; (ii) the Company's ability to acquire other
businesses  in similar or allied  businesses  may be  adversely  affected if the
Company  is not  able to raise  additional  capital  or  locate  other  suitable
businesses and obtain any necessary debt financing;  (iii) the Company's ability
to raise  additional  capital may be  adversely  affected by its lack of trading
volume and the Company's uncertainty of future profitability; (iv) regulation by
governmental  authorities,  (v)  growth  or lack  of  growth  of the  commercial
aviation  industry,  (vi) the price and availability of aircraft parts and other
materials,  (vii) the Company's  ability to maintain existing customer or vendor
relationships,  (viii)  successful  execution of the Company's  expansion plans,
(ix) the Company's ability to service its debt financing and (x) competitive and
pricing pressures.

                                       24
<PAGE>

                           PART II. OTHER INFORMATION

ITEM 1.           LEGAL PROCEEDINGS.

         The Company is currently not a party to any material known litigation.


ITEM 2.           CHANGES IN SECURITIES.

Issuance of Shares Without Registration

         During the quarter  ended July 3, 1998,  the Company  issued the follow
securities without registration under the Securities Act of 1933:

         In April  1998,  warrants,  originally  issued in the  Company's  Units
offering in 1996 and 1997,  were exercised to purchase  93,413 common shares for
$6.25 per share.  The warrants  were  exercised  by  non-United  States  persons
pursuant to Regulation S of the  Securities Act of 1933. The net proceeds to the
Company were $450,000 after  deducting  accumulated  offering costs of $134,000.
These costs include  underwriting  commissions of approximately  $29,200 paid to
Etablissement Pour le Placement Prive, Zurich, Switzerland.


ITEM 3.           DEFAULTS UPON SENIOR SECURITIES.

                  None

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

         No  matters  were  submitted  to a vote of the  Company's  shareholders
during the quarter ended July 3, 1998.


ITEM 5.           OTHER INFORMATION.

                  None

ITEM 6.           EXHIBITS AND REPORTS ON FORM 8-K

                  (a)      Exhibits

                           Those exhibits  previously  filed with the Securities
                           and  Exchange  Commission  as required by Item 601 of
                           Regulation S-K, are incorporated  herein by reference
                           in accordance with the provisions of Rule 12b-32.

                           Exhibit 11       Statement re computation of per 
                                            share earnings
                           Exhibit 27       Financial Data Schedule

                                       25

<PAGE>

                  (b)      Reports on Form 8-K

                           The  Company  filed no reports on Form 8-K during the
                           quarter ended July 3, 1998.



                                       26

<PAGE>

                                    SIGNATURE


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



Date: August 17, 1998


                                     FIELDS AIRCRAFT SPARES, INC.



                                     By: /s/ Alan M. Fields
                                        ---------------------------------------
                                        Alan M. Fields, President and Principal
                                        Executive Officer



                                     By: /s/ Lawrence J. Troyna
                                        ---------------------------------------
                                        Lawrence J. Troyna, Principal Financial
                                        Officer


                                       27