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 October 2, 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)


(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                  2,483,781 Common Shares
                                                 at November 6, 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 Shareholders' Equity..............6
                           Statement of Cash Flows........................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......................................26
         Item 2.  Changes in Securities..................................26
         Item 3.  Defaults upon Senior Securities........................26
         Item 4.  Submission of Matters to a Vote
                           of Security Holders...........................26
         Item 5.  Other Information......................................26
         Item 6.  Exhibits and Reports on Form 8-K.......................26



<PAGE>
<TABLE>
<CAPTION>


                                           FIELDS AIRCRAFT SPARES, INC.

                                       UNAUDITED CONSOLIDATED BALANCE SHEETS
                                    AS OF OCTOBER 2, 1998 AND DECEMBER 31, 1997
                                                    A S S E T S
                                                                                1998              1997
                                                                                ----              ----
CURRENT ASSETS:
<S>                                                                      <C>                      <C>              
     Cash and cash equivalents                                           $    626,000             $       6,071,000
     Accounts receivable, less allowance for doubtful
         accounts of $145,000 in 1998 and $100,000
         in 1997                                                            5,563,000                     1,955,000
     Inventory                                                             16,893,000                    11,058,000
     Prepaid expenses                                                         790,000                       191,000
                                                                         ------------              ----------------
              Total current assets                                       $ 23,872,000              $     19,275,000
                                                                         ------------              ----------------

LAND, BUILDING AND EQUIPMENT:
     Land                                                                $    210,000              $        210,000
     Building and building improvements                                     1,245,000                     1,065,000
     Furniture and equipment                                                4,172,000                       565,000
                                                                         ------------              ----------------
              Totals                                                     $  5,627,000              $      1,840,000
     Less accumulated depreciation and amortization                         2,386,000                       830,000
                                                                         ------------              ----------------
              Land, building and equipment, net                          $  3,241,000              $      1,010,000
                                                                         ------------              ----------------

OTHER ASSETS:
     Debt issuance costs, net of accumulated
         amortization                                                    $  1,061,000              $      1,267,000
     Goodwill, net of accumulated amortization                              3,286,000
     Other assets                                                                                           629,000
                                                                                                   ----------------
              Total other assets                                         $  4,347,000              $      1,869,000
                                                                         ------------              ----------------
                  Total assets                                           $ 31,460,000              $     22,181,000
                                                                         ------------              ----------------

                                          LIABILITIES AND SHAREHOLDERS' EQUITY

CURRENT LIABILITIES:
     Accounts payable                                                    $  3,454,000              $      1,239,000
     Other accrued liabilities                                              1,178,000                       241,000
     Current portion of notes and capital
         leases payable                                                        57,000                        55,000
                                                                         ------------              ----------------
              Total current liabilities                                  $  4,689,000              $      1,535,000
                                                                         ------------              ----------------

LONG-TERM LIABILITIES:                                                   $ 19,506,000              $     15,047,000
                                                                         ------------              ----------------

SHAREHOLDERS' EQUITY:
     Common stock                                                        $    371,000              $        351,000
     Additional paid-in capital                                             9,308,000                     6,959,000
     Retained deficit                                                      (2,414,000)                   (1,711,000)
                                                                         ------------              ----------------
              Total shareholders' equity                                 $  7,265,000              $      5,599,000
                                                                         ------------              ----------------
                  Total liabilities and shareholders'
                           equity                                        $ 31,460,000              $     22,181,000
                                                                         ------------              ----------------
</TABLE>


                                        3

<PAGE>
<TABLE>
<CAPTION>

                                               FIELDS AIRCRAFT SPARES, INC.


                                      UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                             FOR THE THREE MONTHS ENDED OCTOBER 2, 1998 AND SEPTEMBER 30, 1997






                                                                                     1998                               1997
                                                                                     ----                               ----

<S>                                                                            <C>                                <C>       
SALES                                                                          $6,120,000                         $3,414,000

COST OF SALES                                                                   4,028,000                          2,148,000
                                                                               ----------

GROSS PROFIT                                                                   $2,092,000                         $1,266,000

OPERATING EXPENSES                                                              1,263,000                            791,000
                                                                               ----------                         ----------

INCOME FROM OPERATIONS                                                         $  829,000                         $  475,000

OTHER EXPENSES                                                                    585,000                            307,000
                                                                               ----------                         ----------

INCOME BEFORE PROVISION FOR
INCOME TAXES                                                                   $  244,000                         $  168,000

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

NET INCOME                                                                     $  242,000                         $  161,000
                                                                               ==========                         ==========

NET INCOME PER SHARE (basic)                                                   $      .10                         $      .08
                                                                               ==========                         ==========

NET INCOME PER SHARE (diluted)                                                 $      .08                         $      .07
                                                                               ==========                         ==========
</TABLE>

                                        4
<PAGE>
<TABLE>
<CAPTION>

                                              FIELDS AIRCRAFT SPARES, INC.

                                     UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
                            FOR THE NINE MONTHS ENDED OCTOBER 2, 1998 AND SEPTEMBER 30, 1997



                                                                                     1998                               1997
                                                                                     ----                               ----

<S>                                                                           <C>                                 <C>       
SALES                                                                         $17,510,000                         $8,444,000

COST OF SALES                                                                  11,593,000                          5,136,000
                                                                              -----------                         ----------

GROSS PROFIT                                                                   $5,917,000                         $3,308,000

OPERATING EXPENSES                                                              3,881,000                          2,428,000
                                                                               ----------                         ----------

INCOME FROM OPERATIONS                                                         $2,036,000                         $  880,000

OTHER EXPENSES                                                                  2,730,000                          1,249,000
                                                                               ----------                         ----------

LOSS BEFORE PROVISION FOR
 INCOME TAXES                                                                  $ (694,000)                        $ (369,000)

PROVISION FOR INCOME TAXES                                                          9,000                              7,000
                                                                               ----------                         ----------

NET LOSS                                                                       $ (703,000)                        $ (376,000)
                                                                               ==========                         ==========

NET LOSS PER SHARE (basic)                                                     $     (.31)                        $     (.22)
                                                                               ==========                         ========== 

NET LOSS PER SHARE (diluted)                                                   $     (.15)                        $     (.19)
                                                                               ==========                         ==========
</TABLE>

                                        5
<PAGE>
<TABLE>
<CAPTION>

                                                FIELDS AIRCRAFT SPARES, INC.

                                         UNAUDITED STATEMENTS OF SHAREHOLDERS' EQUITY
                                FOR THE NINE MONTHS ENDED OCTOBER 2, 1998 AND SEPTEMBER 30, 1997



                                         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                    394,210              20,000          2,349,000                                2,369,000

Net loss                                                                                             (703,000)            (703,000)

                                   -----------------    ----------------  -----------------    ----------------    -----------------
BALANCES, OCTOBER 2, 1998                 2,473,781            $371,000         $9,308,000        $(2,414,000)           $7,265,000
                                   =================    ================  =================    ================    =================



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

Issuance of common stock                    605,749              30,000            142,000                                  172,000

Net loss                                                                                             (376,000)            (376,000)

                                   -----------------    ----------------  -----------------    ----------------    -----------------
BALANCES, SEPTEMBER 30, 1997              1,907,886            $342,000         $5,207,000        $(1,940,000)           $3,609,000
                                   =================    ================  =================    ================    =================
</TABLE>

                                        6
<PAGE>
<TABLE>
<CAPTION>



                                           Fields Aircraft Spares, Inc.
                                  Unaudited Consolidated Statements of Cash Flows
                                             For The Nine Months Ended
                                      October 2, 1998 and September 30, 1997





                                                                                1998               1997
                                                                         ------------------ ------------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S>                                                                           <C>                 <C>         
           NET LOSS                                                           $   (703,000)       $  (376,000)
           Adjustments to reconcile net loss to net cash
           used in operating activities:
           Depreciation and amortization                                           241,000             91,000
           Amortization of goodwill and debt issuance costs                        561,000            410,000
           Increase in accounts receivable                                      (3,608,000)          (753,000)
           Increase in inventory                                                (5,835,000)        (2,057,000)
           Increase in prepaid expenses                                           (599,000)           (21,000)
           Decrease (increase) in other assets                                     629,000           (138,000)
           Increase in accounts payable                                          2,215,000          1,119,000
           Increase in other accrued liabilities                                   937,000             90,000
           Increase in income taxes payable                                                             6,000
                                                                         ------------------ ------------------
                      Net cash used in operating activities                   $ (6,162,000)       $(1,629,000)
                                                                         ------------------ ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
           Purchase of equipment                                              $ (2,658,000)       $   (20,000)
           Acquisition of goodwill                                              (3,441,000)
                                                                         ------------------ ------------------
                      Net cash used in investing activities                   $ (6,099,000)       $   (20,000)
                                                                         ------------------ ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
           Net borrowings (payments) on line credit                           $  3,982,000        $(6,232,000)
           Principal payments on notes payable                                     (69,000)           (19,000)
           Borrowings on notes payable                                             635,000         18,810,000
           Costs associated with issuance of notes payable                        (200,000)        (1,881,000)
           Net proceeds from issuance of common stock                            2,872,000            352,000
           Costs associated with the issuance of common stock                     (404,000)          (147,000)
                                                                         ------------------ ------------------

                      Net cash provided by financing activities               $  6,816,000        $10,883,000
                                                                         ------------------ ------------------

NET (DECREASE) INCREASE IN CASH:                                              $ (5,445,000)       $ 9,234,000
                                                                         ------------------ ------------------

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

CASH AND CASH EQUIVALENTS, October 2, 1998
           and September 30, 1997                                             $    626,000        $ 9,322,000
                                                                         ================== ==================
</TABLE>

                                        7
<PAGE>

                          FIELDS 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
(Skylock) and Fields Aero Management,  Inc. (FAM). 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 airline  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%
of total sales for each of the nine months ended  October 2, 1998 and  September
30, 1997.

                  For the nine  months  ended  October  2, 1998,  two  customers
accounted  for sales of  $3,355,000  and  $1,459,000.  For the nine months ended
September  30,  1997,  two  customers  accounted  for  sales of  $1,207,000  and
$1,063,000.

         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 $525,000
as of October 2, 1998.

         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

                                        8

<PAGE>


                          FIELDS AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


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  October  2,  1998  and  December  31,  1997
consisted of the following:

                              1998                     1997
                              ----                     ----

     Raw materials            $   743,000             $
     Work-in-process              689,000
     Finished goods            15,461,000              11,058,000
                              -----------             -----------
              Total           $16,893,000             $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 nine months  ended
October 2, 1998 and  September  30,  1997  amounted  to  $241,000  and  $91,000,
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 October 2,
1998 management expects these assets to be fully recoverable.

         g.       Debt issuance costs

                  Gross debt issuance costs of $1,509,000  less  amortization of
$448,000 at October 2, 1998 relate to the issuance of financing. Amortization of
debt issuance  costs for the nine months ended October 2, 1998 and September 30,
1997  amounted to $406,000 and $410,000,  respectively.  The costs are amortized
using the straight-line method over the life of the respective loans.

                                        9
<PAGE>

                          FIELDS AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



         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.

         The Group adopted Statement of Financial  Accounting Standards No. 128,
"Earnings Per Share." SFAS 128 requires the  presentation  of earnings per share
(EPS) as Basic EPS and Diluted  EPS.  Therefore,  the EPS for the periods  ended
September 30, 1997 have been restated to conform to SFAS 128. The reconciliation
of the basic and diluted EPS  components as of October 2, 1998 and September 30,
1997 is as follows:

                                                For the nine months ended,
                                               October 2,       September 30,
                                                  1998              1997
                                               ---------         ---------
Net Loss available to common stock             $(703,000)        $(376,000)

Interest on convertible debentures               163,000

Net Loss available to common stock             $(540,000)        $(376,000)


                                                For the three months ended,
                                               October 2,        September 30,
                                                  1998              1997
                                                  ----              ----

Net Income available to common stock            $ 242,000        $ 161,000

Interest on convertible debentures                 64,000

Net Income available to common stock            $ 306,000        $ 161,000


                                       10
<PAGE>

                          FIELDS AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


                                                 For the nine months ended,
                                             October 2,           September 30,
                                                1998                  1997
                                                ----                  ----

Number of common shares outstanding           2,473,781             1,907,886

Weighted averages                              (197,659)             (215,976)

Potential dilutive shares                     1,363,380               290,056
                                           ------------            ----------

Dilutive number of shares                     3,639,502             1,981,966

                                                 For the three months ended,
                                               October 2,         September 30,
                                                 1998                 1997

Number of common shares outstanding            2,473,781           1,907,886

Weighted averages                                (24,039)            (15,000)

Potential dilutive shares                      1,325,667             431,404
                                               ---------           ---------

Dilutive number of shares                      3,775,409           2,324,290
                                               =========           =========

         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 October 2,
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)
    Deferred tax asset resulting from
             deductible temporary differences
             for allowance for doubtful accounts          32,000          6,000

                                       11

<PAGE>

                          FIELDS AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




    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 nine months ended October 2, 1998 and September
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.

         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 periods of 1998 ending on
October 2.

                                       12
<PAGE>


                          FIELDS AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


         2.       Shareholders' equity

         FASI has  50,000  shares  authorized  of its $.001 par value  preferred
stock.  At  October  2, 1998 and  December  31,  1997,  there  were no shares of
preferred stock issued or outstanding.

         FASI has the following  common stock as of October 2, 1998 and December
31, 1997: 1998 1997

         Authorized                     5,000,000           5,000,000
         Issued and outstanding         2,473,781           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 costs of $134,000 for underwriting and issuance.

         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.

         The  Group's  wholly-owned   subsidiaries  have  a  Loan  and  Security
Agreement for an aggregate of up to $15,000,000  with  NationsCredit  Commercial
Funding  ("NationsCredit")  at an interest  rate of prime plus 2%. 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  $10,000,000  Subordinated
Redeemable Debentures due 2000 issued under an Indenture with Etablissement Pour
le Placement

                                       13
<PAGE>

                          FIELDS AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


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 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. No additional debentures have been converted.

         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.  In April 1998, warrants were exercised to purchase 93,413 shares of
common stock at $6.25 per share.  The net proceeds were $450,000 after deducting
costs of $134,000 for underwriting and issuance.

         In July 1998,  warrants  were  exercised to purchase  12,118  shares of
common stock at $6.25 per share.  The net proceeds were $72,000 after  deducting
costs of $4,000 for  underwriting  and issuance.  In August 1998,  warrants were
exercised to purchase 30,000 shares of common stock at $6.25 per share.  The net
proceeds were $178,000  after  deducting  costs of $9,000 for  underwriting  and
issuance.

                                       14
<PAGE>

                          FIELDS AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS



3.       Notes and capital leases payable

                  The notes and  capital  leases  payable at October 2, 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
         2.0% (11.0% at October 2, 1998), payable
         monthly, due 2001                                11,029,000          7,047,000
Notes and capital leases payable, secured by equipment,
         monthly payments of $11,940 including
         interest at rates ranging from 8.9% to 16.6%,
         due through October 2002                            477,000

Other notes payable                                           57,000             55,000
                                                         -----------        -----------
         Total notes and capital leases payable          $19,563,000        $15,102,000
         Less current portion                                 57,000             55,000

         Notes and capital leases payable, net of
           current portion                               $19,506,000        $15,047,000
                                                         ===========        ===========
</TABLE>


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

         YEAR ENDING
         OCTOBER 2,                     AMOUNT

         1999                       $    57,000
         2000                         8,197,000
         2001                        11,090,000
         2002                           170,000
         2003                            49,000
         Thereafter


         Total  interest  expense  including the  amortization  of debt issuance
costs for the nine months ended  October 2, 1998 and September 30, 1997 amounted
to $1,530,000  and  $1,249,000,  respectively.  Total interest paid for the nine
months ended October 2, 1998 and  September 30, 1997 amounted to $1,114,000  and
$786,000, respectively.

                                       15
<PAGE>

                          FIELDS AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


         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 nine months  ended  October 2,
1998 and September 30, 1997 consisted of the following:

                                                      1998          1997
                                                      ----          ----
         CURRENT:
                  State                           $  9,000      $  2,000
                                                  --------      --------
                  Total provision for income
                  taxes                           $  9,000      $  2,000
                                                  ========      ========


         Total income taxes paid in 1998 and 1997 amounted to $9,000 and $3,000.
The Group has net operating loss  carryovers  available to offset future federal
and California  taxable income. The amount and expiration date of the carryovers
are as follows:

          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 October 2, 1998 are as
follows:

                                       16
<PAGE>


                          FIELDS AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


         YEAR ENDING           OPERATING LEASE         OPERATING LEASE
         OCTOBER 2,                 EXPENSE                 INCOME
         ----------                 -------                 ------
         1999                     $  998,000              $  156,000
         2000                        955,000                  39,000
         2001                        900,000
         2002                        900,000
         2003                        756,000
         Thereafter                3,654,000

         Lease  expense for the nine months ended  October 2, 1998 and September
30, 1997 was  $413,000  and  $98,000,  respectively.  Lease  income for the nine
months ended October 2, 1998 was $136,000.


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.


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

                                       17

<PAGE>


                          FIELDS AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


$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 and the other half will vest in 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  employees  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  vested 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:

         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 nine months
ended October 2, 1998 and September 30, 1997:

                                       18

<PAGE>
<TABLE>
<CAPTION>


                                              FIELDS AIRCRAFT SPARES, INC.

                                NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


                                                            1998                       1997
                                                            ----                       ----

<S>                                                  <C>                       <C>            
         Net loss 
                          As reported                $        (703,000)        $     (376,000)
                                                     =================         ==============
                          Pro forma                  $      (2,175,000)        $     (639,000)
                                                     =================         ==============

         Basic loss per share
                          As reported                $            (.31)        $         (.22)
                                                     =================         ==============
                          Pro forma                  $            (.95)        $         (.38)
                                                     =================         ==============

         Diluted loss per share    
                          As reported                $            (.15)        $         (.19)
                                                     =================         ==============
                          Pro forma                  $            (.55)        $         (.32)
                                                     =================         ==============
</TABLE>

         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 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.


                                       19

<PAGE>


                          FIELDS AIRCRAFT SPARES, INC.

            NOTES TO THE UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS


         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  October  2, 1998 and for the nine
months then ended.

         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 nine months ended  October 2, 1998 amounted to
$135,000.

         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 October 2, 1998 and for the nine 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 nine months ended  October 2, 1998 amounted to
$20,000.


                                       20

<PAGE>



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



QUARTERS ENDED OCTOBER 2, 1998 AND SEPTEMBER 30, 1997


          On March 30, 1998 the Company changed its fiscal year to a 52- 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 third
quarter of the fiscal year consisting of the period from July 4, 1998 to October
2, 1998. The comparable  period for the prior year is the calendar quarter ended
September 30, 1997.

          The Company and its subsidiaries for the quarter ended October 2, 1998
generated  income from operations of $829,000,  compared to operating  income of
$475,000 for the comparable  period of 1997, an increase of  approximately  75%.
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  October  2,  1998 were  $6,120,000
compared to $3,414,000 for the comparable  period of 1997.  This increase in net
sales of  $2,706,000  or  approximately  79%,  was across the broad range of the
Company's  products  including  approximately  $1,532,000  as a  result  of  the
inclusion  of  sales  of  Flightways   Manufacturing,   Inc  ("Flightways"),   a
wholly-owned  company acquired in January 1998, and approximately  $521,000 as a
result of the  inclusion of sales of Skylock  Industries,  Inc.  ("Skylock"),  a
wholly-owned company acquired in April 1998.

         Cost of sales for the quarters  ended October 2, 1998 and September 30,
1997 were  $4,028,000 and  $2,148,000  respectively  (approximately  66% and 63%
respectively).  The reduction in gross margin percentage is 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  $1,263,000  for the  quarter  ended
October 2, 1998 from $791,000 for the quarter ended September 30, 1997. This was
principally  attributable  to the inclusion of the results of the newly acquired
companies.

         Interest  expense  increased to $585,000  from $307,000 in the quarters
ended  October  2,  1998  and  September  30,  1997,   respectively.   This  was
attributable  to interest on increased debt amounts  outstanding to finance both
growth and the acquisitions of Flightways and Skylock.

         As a result  of the  foregoing,  the  Company  had net  income  for the
quarter  ended October 2, 1998 of $242,000 as compared to net income of $161,000
for the  comparable  period in 1997, an increase of $81,000.  Net income for the
current period was $.08 per share diluted ($.10 per share basic)  compared to an
income of $.07 per share diluted ($.08 per share basic) in the comparable period
of 1997.


                                       21

<PAGE>



NINE MONTHS ENDED OCTOBER 2, 1998 AND SEPTEMBER 30, 1997


         On March 30,  1998,  the  Company  changed its fiscal year to a 52- 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 nine months of the fiscal year  consisting  of the period from  January 1,
1998 to October 2, 1998.  The  comparable  period for the prior year is the nine
months ended September 30, 1997.

           Operations  of the Company and its  subsidiaries  for the nine months
ended  October 2, 1998  generated  income of  $2,036,000,  compared to operating
income of $880,000 for the  comparable  period of 1997, an increase of 131%. The
increase in income for the current nine months is attributable to an increase in
sales resulting in an increase in the dollar amount of gross profit.

           Net sales for the nine months ended October 2, 1998 were  $17,510,000
compared to $8,444,000 for the comparable  period of 1997.  This increase in net
sales of $9,066,000  or  approximately  107%,  was across the broad range of the
Company's  products  including  approximately  $4,520,000  as a  result  of  the
inclusion of sales of Flightways,  and  approximately  $1,023,000 as a result of
the inclusion of sales of Skylock.

           Cost of sales for the nine months ended October 2, 1998 and September
30, 1997 were $11,593 000 and $5,136,000 respectively (approximately 66% and 61%
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 $3,881,000 for the nine months ended
October 2, 1998 from  $2,428,000  for the nine months ended  September 30, 1997.
This was principally  attributable to the inclusion of the results of Flightways
and Skylock.

           Interest expense,  including the amortization of debt issuance costs,
increased to $1,530,000 from $1,249,000 in the nine months ended October 2, 1998
and September 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 nine months
period ended  October 2, 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 nine
months  ended  October 2, 1998 of $703,000 as compared to a net loss of $376,000
for the comparable period in 1997, an increase in net loss of $327,000. This was
entirely attributable to the one-time charge of $1,200,000. The net loss for the
current period

                                       22

<PAGE>



was $.15 per share  diluted  ($.31 per share  basic)  compared to a loss of $.19
diluted ($.22 per share basic) in the comparable period of 1997.



LIQUIDITY

      As at October 2, 1998, the Company had working capital  (current assets in
excess of current  liabilities)  of $19,183,000  compared to working  capital of
$17,740,000 at December 31, 1997. Although the net result was a relatively small
reduction of  $1,443,000,  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 $6,162,000 and $1,629,000 of the Company's cash
flow  for the  nine  months  ended  October  2,  1998 and  September  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 $3,608,000 entirely as a result of the acquisitions while inventory
increased by $5,835,000 of which $1,889,000 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.

       There were  increases  in  accounts  payable of  $2,215,000  of which the
acquisitions  accounted for $881,000.  Accrued liabilities increased by $937,000
which was 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

                                       23

<PAGE>



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.

      In April, July and August 1998, warrants,  originally issued in 1996, were
exercised to purchase 93,413, 12,118 and 30,000 shares of common stock for $6.25
per share. The net proceeds were $450,000,  $72,000 and $178,000 after deducting
costs of $134,000, $4,000 and $9,000 respectively for underwriting and issuance.

     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  debt and/or
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  rule. The Company is
addressing any possible  liability 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

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<PAGE>



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.

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<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 October 2, 1998, the Company issued the follow
securities without registration under the Securities Act of 1933:

         In July and August 1998,  warrants,  originally issued in the Company's
Units offering in 1996 and 1997, were exercised to purchase 42,118 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 $250,000  after  deducting  accumulated  offering costs of $13,000.
These costs  include  underwriting  commissions  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 October 2, 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 10.1     Sublease,  dated    for    reference
                                            purposes  April  28,  1998,  between
                                            Sunrise    Medical   HHG   Inc.,   a
                                            California      corporation,      as
                                            Sublandlord   and  Fields   Aircraft
                                            Spares,  Incorporated,  a California
                                            corporation, as Subtenant,

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<PAGE>



                                            including Consent of Master Landlord
                                            and First Amendment to Sublease, and
                                            Master  Lease,  dated for  reference
                                            purposes  only,  September 15, 1992,
                                            by and between La Canada  Flintridge
                                            Development Corporation,  LCF Income
                                            Group, Jerve M. Jones and Peppertree
                                            Corporate  Business  Park,  Ltd., as
                                            landlord,   and  Guardian  Products,
                                            Inc., as tenant, as amended by First
                                            Amendment  to Lease  dated March 31,
                                            1993.  Exhibits  referred  to in the
                                            Master   Lease  are   omitted.   The
                                            Company     agrees    to     furnish
                                            supplementally  a copy  of any  such
                                            Exhibit  to  the   Commission   upon
                                            request.

                           Exhibit 10.2     Guaranty  of   Sublease,   made  and
                                            effective as of April 28,  1998,  by
                                            Fields Aircraft Spares, Inc., a Utah
                                            corporation,  in  favor  of  Sunrise
                                            Medical  HHG   Inc.,  a   California
                                            corporation.

                           Exhibit 27       Financial Data Schedule

                  (b)  Reports on Form 8-K

                           The  Company  filed no reports on Form 8-K during the
                           quarter ended October 2, 1998.



                                       27

<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: November 16, 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



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