U.S. SECURITIES AND EXCHANGE COMMISSION
                              Washington D.C. 20549



                                   FORM 10-QSB

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


For the quarter period ended October 31, 1997                  File #: 001-09703


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


         Delaware                                                13-3074492
 ------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
 incorporation or organization)                              Identification No.)


                  7755 E. Gray Road, Scottsdale, Arizona 85260
                -------------------------------------------------
               (Address of principal executive office) (Zip code)


                                 (602) 443-9640
                 ----------------------------------------------
                (Issuer's telephone number, including area code)


Securities registered under Section 12(g) of the Exchange Act:

                         COMMON STOCK, $ 0.001 PAR VALUE
         SERIES A CUMULATIVE CONVERTIBLE PREFERRED STOCK, $.01 PAR VALUE
            SKNS-M WARRANTS TO PURCHASE COMMON STOCK, $.001 PAR VALUE
                                (Title of Class)

Check  whether  the issuer  (1) has 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 [ ] NO [X]

Check whether the issuer filed all documents and reports required to be filed by
Section 12, 13, 15(d) of the Exchange Act after the  distribution  of securities
under a plan confirmed by a court YES [ ]  NO [ ]

The number of shares  outstanding of issuer's Common Stock,  $.001 par value per
share, as of July 31, 1998 was 9,328,176.

Transitional Small Business Disclosure Format (check one): YES [ ]   NO [X]
<PAGE>
                                 SKOLNIKS, INC.
                         QUARTERLY REPORT ON FORM 10-QSB
                     FOR THE QUARTER ENDED OCTOBER 31, 1997


                                TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION

       ITEM 1. Financial Statements

               Condensed Consolidated Balance Sheets - October 31, 1997
                 and July 31, 1997...........................................3

               Condensed Consolidated Statements of Operations -
                 Three Month Periods Ended October 31, 1997 and 1996.........4

               Condensed Consolidated Statements of Cash Flows -
                 Three Month Periods Ended October 31, 1997 and 1996.........5

               Notes to Consolidated Financial Statements....................6

       ITEM 2. Management's Discussion and Analysis of Financial Condition
               and Results of Operations.....................................8


PART II. OTHER INFORMATION

       ITEM 1. Legal Proceedings............................................11

       ITEM 2. Changes in Securities........................................11

       ITEM 3. Defaults Upon Senior Securities..............................11

       ITEM 4. Submission of Matters to a Vote of Securities Holders........11

       ITEM 5. Other Information............................................11

       ITEM 6. Exhibits and Reports of Form 8-K.............................12

               SIGNATURES...................................................13
<PAGE>
                                 SKOLNIKS, INC.
                      CONDENSED CONSOLIDATED BALANCE SHEET
                                OCTOBER 31, 1997
                                   (unaudited)


                                               October 31, 1997    July 31, 1997
                                                 (unaudited)
                                               ----------------    -------------
ASSETS
CURRENT ASSETS
  Cash                                           $         69      $         68
  Accounts Receivable, Net                            130,684           104,234
  Inventory, Net                                       52,742            41,397
  Other Current Assets                                 36,761            30,365
                                                 ------------      ------------

TOTAL CURRENT ASSETS                                  220,256           176,064

  Property & Equipment, Net                           282,160           301,931
                                                 ------------      ------------

TOTAL ASSETS                                     $    502,416      $    477,995
                                                 ============      ============



LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
  Accounts Payable and
  Accrued Liabilities                            $    358,660      $    394,129
  Notes Payable - Related Parties                   1,015,005           805,005
                                                 ------------      ------------

TOTAL CURRENT LIABILITIES                        $  1,373,665      $  1,199,134

  Commitments and Contingencies                             0                 0
                                                 ------------      ------------


STOCKHOLDERS' DEFICIT:
  Preferred Stock, $0.01 par value,
    2,000,000 shares authorized; shares
    issued: October 1997 - 523,284 and
    July 1997 - 532,271                          $      5,233      $      5,323
  Common Stock, $0.001 par value,
    10,000,000 shares authorized; shares
    issued: October 1997 - 9,081,476 and
    July 1997 - 9,072,489                               9,081             9,072
  Additional Paid in Capital                       21,088,123        21,088,042
  Accumulated Deficit                             (21,071,145)      (20,921,035)
                                                 ------------      ------------
                                                       31,292           181,402
  Less Treasury Stock, at cost                       (902,541)         (902,541)
                                                 ------------      ------------
TOTAL STOCKHOLDERS' DEFICIT                      $   (871,249)     $   (721,139)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT      $    502,416      $    477,995
                                                 ============      ============

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

                                       3
<PAGE>
                                 SKOLNIKS, INC.
                   CONDENSED CONSOLIDATED STATEMENT OF INCOME

                                   (unaudited)


                                                    Three-Months Ended
                                             -----------------------------------
                                             October 31, 1997   October 31, 1996
                                             ----------------   ----------------

  Net Sales                                     $   367,715         $   348,992

EXPENSES:
  Operating Expenses                                434,544             385,024
  General & Administrative                           63,181              53,518
                                                -----------         -----------

Loss from Operations                            $  (130,011)        $   (89,549)

  Interest Income (Expense)                         (20,100)            (18,625)
                                                -----------         -----------

LOSS BEFORE EXTRAORDINARY ITEM                  $  (150,111)        $  (108,175)

EXTRAORDINARY ITEM - DEBT FORFIVENESS                     0                   0
                                                -----------         -----------

NET INCOME (LOSS)                               $  (150,111)        $  (108,175)
                                                ===========         ===========

Net Income per Share                                  (0.02)              (0.02)
Weighted Average Shares Outstanding               9,076,983           6,956,107



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

                                       4
<PAGE>
                                 SKOLNIKS, INC.
                 CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

                                   (unaudited)


                                                     Three-Months Ended
                                             -----------------------------------
                                             October 31, 1997   October 31, 1996
                                             ----------------   ----------------

CASH FLOWS FROM OPERATING ACTIVITIES
  Net Income (Loss)                              $(150,111)          $(108,175)
  Adjustments to reconcile net income to net
  cash used in operating activities:
    Depreciation and Amortization                   19,581              17,748
    Increase in Accounts Receivable                (26,450)             (5,453)
    Increase in Inventory                          (11,345)             (3,400)
    Increase in Other Current Assets                (6,396)
    Decrease in Other Current Assets                                     1,086
    Decrease in Accounts Payable and Accrued
      Liabilities                                  (34,719)
    Increase in Accounts Payable and Accrued
      Liabilities                                                        4,848
                                                 ---------           ---------

NET CASH USED IN OPERATING ACTIVITIES            $(209,439)          $ (93,346)


CASH FLOWS FROM INVESTING ACTIVITIES:
   Acquisition of property and equipment         $    (560)          $  (1,850)
                                                 ---------           ---------


NET CASH USED IN INVESTING ACTIVITIES            $    (560)          $  (1,850)


CASH FLOWS FROM FINANCING ACTIVITIES:
         Payments on Debt                        $       0           $  (3,661)
         Proceeds from Borrowing                   210,000             100,000
                                                 ---------           ---------

NET CASH PROVIDED BY FINANCING ACTIVITIES        $ 210,000           $  96,339


NET INCREASE (DECREASE) IN CASH                  $       1           $   1,143
CASH, BEGINNING OF PERIOD                               68              13,539
                                                 ---------           ---------

CASH, END OF PERIOD                              $      69           $  14,682
                                                 =========           =========


NON-CASH INVESTMENT/FINANCING ACTIVITIES:
  Preferred Stock Converted to Common Stock      $      90           $       0


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

                                       5
<PAGE>
                                 SKOLNIKS, INC.

              NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

                      FOR THE PERIOD ENDED OCTOBER 31, 1997


(a)  The  accompanying  unaudited  consolidated  financial  statements have been
     prepared  by  the  Company  without  audit,   pursuant  to  the  rules  and
     regulations  of the  Securities and Exchange  Commission.  These  financial
     statements reflect all adjustments (consisting of normal recurring accruals
     and  adjustments)  which are, in the opinion of  management,  necessary  to
     fairly  state  the  financial  position  as of  October  31,  1997  and the
     operating  results  and cash  flows for the  periods  presented.  Operating
     results for the interim periods presented are not necessarily indicative of
     the  operating  results  that may be expected  for the entire  year.  These
     financial  statements should be read in conjunction with the Company's July
     31, 1997 financial statements and accompanying notes thereto.

(b)  At a hearing held in bankruptcy court on March 20, 1995, the Company agreed
     to an order for relief  under  Chapter 11 of the United  States  Bankruptcy
     Code.  The Company  submitted  a plan to the  bankruptcy  court,  which was
     approved.  The plan was mailed to the  creditors  and  shareholders  May 2,
     1996. The Court confirmed the plan of  reorganization  at the  Confirmation
     Hearing held on July 10, 1996, at the United States Bankruptcy Court in the
     Western District of Oklahoma.  The Company raised the monies required under
     the plan.  The Company  raised  $1,000,000  by selling 1 million  shares of
     Common  Stock to fund  the Plan of  Reorganization.  The  creditor's  trust
     received  $800,000  and 500,000  shares of Common  Stock were issued to the
     Creditor's Trust. The Company completed all requirements  under the Plan of
     Reorganization  on December  18,  1996.  The Court issued a Final Decree in
     connection  with the Company's  Reorganization  in Bankruptcy on October 8,
     1998.

(c)  During 1997 and the first quarter of fiscal year 1998, the Company incurred
     operating losses of $480,408 and $130,111  respectively.  In addition,  the
     Company has a deficit in working capital of $1,023,070 at July 31, 1997 and
     $883,409 at October 31, 1997 and a deficit in equity for both time periods.
     The  significance  of the  combined  losses  with the  deficits  in working
     capital and equity raises  substantial doubt about the Company's ability to
     continue as a going concern

(d)  The financial  statements of the Company have been prepared on the basis of
     principles  applicable  to a continuing  business.  The basis  presumes the
     realization  of assets and the  settlement of  liabilities  in the ordinary
     course of  business.  The  Company's  ability to  operate  as a  continuing
     business is dependent upon the attainment of future  profitable  operations
     and/or the Company's ability to acquire  additional  capital or other forms
     of  financing.  The  accompanying  financial  statements do not reflect any
     adjustments  relating to the  recoverability and classification of recorded
     asset amounts or amounts or  classification  of  liabilities  that might be
     necessary should the Company be unable to continue as a going concern.

(e)  Management  is  pursuing  new  business  opportunities,  primarily  in  the
     geographic  Southwest,  with customers in the retail  grocery,  convenience
     store,  vending,  military,  food  service,  and club  store  segments.  In
     addition, new customers are being added for daily deliveries of fresh bread
     products  within the  Arizona  market.  While the  product  line  presently
     includes bagels,  breadsticks,  sub rolls, and Italian  specialty breads, a
     line of upscale,  European  Artesan  breads has been developed and is being
     introduced.  Management is also  considering  the  opportunity  to acquire,
     merge, or strategically  align with other  synergistic  baked goods or

                                       6
<PAGE>
     food manufacturers for enhanced product offerings, geographic coverage, and
     customer leverage.

(f)  At October  31,  1997,  the Company  had  approximately  $20 million of net
     operating loss  carryforwards  available for both  financial  statement and
     federal income tax purposes.  These  carryforwards  expire through the year
     2018.  No deferred tax asset has been  recorded as the  realization  of the
     benefit is in substantial doubt.

(g)  Since  March  1995  through  July  1998,  certain  members  of the Board of
     Directors  and three  shareholders  have  loaned  the  Company  $1,291,005,
     including  $1,015,005  total loaned through October 31, 1997. In connection
     with these loans, the Board members have been issued warrants to purchase a
     total of 4,674,009 shares of Common Stock.

                   Number of Shares        Exercise Price
                          1,430,009............$0.500
                          1,524,000............$0.250
                            920,000............$0.125
                            800,000............$0.100
                         ---------
                         4,674,009
                         =========

     The Board  members  were issued  warrants to purchase  2,100,000  shares at
     $0.375 upon joining the Board.  Also, 350,000 warrants have been granted to
     certain  members of management:  200,000 shares at $1.00 and 150,000 shares
     $0.375.

     Holders of  warrants  to  purchase  7,409,000  shares of common  stock have
     agreed to  refrain  from  exercising  their  warrants  until the  Company's
     authorized shares capital is increased.

(h)  Net Income per share for the  periods  ended  October 31, 1997 and 1996 was
     determined by dividing net income  available to common  shareholders by the
     weighted-average number of common and common equivalent shares outstanding.
     Common stock  equivalents  recognize the potential  dilutive effects of the
     future  exercise of common stock  option.  The  weighted-average  number of
     common  equivalent  shares assumes the exercise of all outstanding  options
     and the corresponding  repurchase of shares using the treasury stock method
     as of the beginning of each period presented. The common stock warrants for
     the periods presented do not quality as common equivalents.

                                       7
<PAGE>
                ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                  FINANCIAL CONDITION AND RESULTS OF OPERATIONS


STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

The  statements  contained  in this  Report on Form  10-QSB  that are not purely
historical are  forward-looking  statements within the meaning of Section 27A of
the  Securities  Act of 1933 and Section 21E of the  Securities  Exchange Act of
1934,   including    statements   regarding   the   Company's    "expectations",
"anticipation",  "intentions",  "beliefs", or "strategies" regarding the future.
Forward-looking   statements  include  statements  regarding  revenue,  margins,
expenses, and earnings analysis for fiscal 1998 and thereafter;  future products
or  product  development;   the  Company's  product  development  strategy;  and
liquidity  and  anticipated  cash needs and  availability.  All  forward-looking
statements  included in this Report are based on  information  available  to the
Company on the date of this Report,  and the Company  assumes no  obligation  to
update any such  forward-looking  statement.  It is  important  to note that the
Company's   actual   results  could  differ   materially   from  those  in  such
forward-looking statements. Among the factors that could cause actual results to
differ  materially  are the  factors  discussed  in ITEM 1,  "Business - Special
Considerations" of the Company's Form 10-KSB for the year ended July 31, 1997.

BASIS OF PRESENTATION

The  following  discussion  should  be read in  conjunction  with the  condensed
consolidated  financial  statements  included  elsewhere  within this  quarterly
report.  Fluctuations in annual and quarterly  operating  results may occur as a
result  of  certain  factors  such as the size and  timing of  customer  orders,
competition,  and general  economic  conditions.  The  customer  base is located
primarily in Arizona,  which experiences an economic downturn in the hospitality
industry during the hot summer months due to decreased tourism.  Because of such
fluctuations,   historical   results  and  percentage   relationships   are  not
necessarily indicative of the results for any future period.

RESULTS OF OPERATIONS

Three Months Ended October 31, 1997 and 1996

The  following  table  summarizes  the  operating  results  of the  Company as a
percentage of revenue for the periods indicated.

                                                  Three Months Ended
                                                       October 31,
                                               1997             1996
                                               ----             ----
      Revenue                                  100%             100%
      Operating Expenses                       118%             109%
      General and Administrative                17%              15%
                                              ----             ----
           Operating Income (Loss)             (35%)            (25%)
      Interest Expense                           6%               6%
                                              ----             ----
           Pre-Tax Income (Loss)               (41%)            (31%)
      Income Taxes                               0%               0%
                                              ----             ----
           Net Income (Loss)                   (41%)            (31%)


                                       8
<PAGE>
       REVENUE

Revenue was  $367,715  for the first three  months of 1997 and  $348,992 for the
first three months of 1996.  The increase of $18,723 or 5% can be  attributed to
the addition of a full-time sales  representative  and a more focused sales plan
directed at multiple-unit locations.  Also, a national sales broker organization
has been  retained to present the  breadstick  and bagel  product lines to major
retail grocery and foodservice accounts.

       OPERATING EXPENSES

Cost of Goods Sold was 118% of sales on October 31,  1997,  an 8% increase  from
October  31,  1996.  An  increase  in  repairs  and  maintenance  on  equipment,
additional  sales  resources,  and out of state  distribution  relating  to both
warehouse  club  and  pizza  chain  business  are the  major  components  of the
increase.

       GENERAL AND ADMINISTRATIVE

General and  administrative  expenses were $63,181 for the quarter ended October
31, 1997 and $52,877 for the quarter  ended October 31, 1996, or a 19% increase.
Increased payroll due to increased  staffing needs and accounting audit fees are
the major components of the general and administrative variance.

       INTEREST EXPENSE

Interest expense was $20,100 in the first quarter of 1998, an increase of $1,475
over the first quarter of 1997.  The increase is  attributable  to the increased
borrowings.

LIQUIDITY AND CAPITAL RESOURCES

At October 31, 1997,  the Company had a working  capital  deficit of  $1,153,409
compared to 1,023,070 at July 31, 1997.  The decrease of $130,339 in the deficit
resulted from increased borrowings of $210,000 offset by an increase in accounts
receivable, inventory, and other assets of $44,191 and decrease accounts payable
and accrued liabilities of $35,469.

Net cash used in operating  activities was $209,439 in the first quarter of 1998
compared to $93,346 in the first quarter of 1997.  The increase in net cash used
in  operating  activities  for the three  month  period  ended  October 31, 1997
resulted from increased  operating losses of approximately  $42,000 in the first
quarter of 1998  compared to the first  quarter of 1997,  increases  in accounts
receivable,  inventories,  and prepaid expenses of approximately  $44,000, and a
decrease  in  accounts  payable and  accrued  liabilities  of $35,000.  Net cash
provided  by  financing  activities  for the first  quarter  of fiscal  1998 was
$210,000 compared to $96,339 in the first quarter of fiscal 1997. The difference
resulted  primarily from increase  borrowings.  As of July 31, 1997, the Company
was in default on all payments to most of its trade  vendors and lenders.  As of
October 31, 1997, the Company has made progress towards eliminating the past due
accounts payable.  However, most trade vendors placed the Company on COD payment
terms in addition to requiring  payment of past  amounts.  All such  obligations
have been  classified  as  current as of July 31,  1997 and  October  31,  1997.
Furthermore  as of October 31, 1997,  the Company was in arrears on dividends on
its  Preferred  Stock in the amount of $518,051  payable in shares of  Preferred
Stock.

As of October 31,  1997,  the  Company's  sources of external  financing  remain
limited.  The Company does not expect that  internal  sources of liquidity  will
improve  until net cash is provided by  operating  activities,  and,  until such
time, the Company will rely upon external sources for

                                       9
<PAGE>
liquidity.  The  Company  has not  established  any lines of credit or any other
significant financing arrangements with any third party lenders. From March 1995
through  October 1998,  certain  members of the Company's Board of Directors and
three  shareholders  have  provided  operating  capital in exchange for interest
bearing notes  totaling an aggregate  amount of $1,291,005 and stock warrants in
the  aggregate  of 4,674,009  warrants.  The Company has been unable to identify
other sources regarding  securing working capital, a function of the involuntary
bankruptcy experienced in 1994 and continuing business losses.

The Company's independent accountants have issued an opinion with an explanatory
paragraph with respect to the Company's financial statements for the years ended
July 31, 1997 and 1996 to reflect recurring losses from operations and a working
capital  deficit and deficit in equity  that raise  substantial  doubt about the
ability of the  Company to  continue  as a going  concern.  See "Part I, ITEM 1,
Notes to Consolidated Financial Statements, Note (e)."


                                       10
<PAGE>
                           PART II - OTHER INFORMATION

ITEM 1   LEGAL PROCEEDING
                A complaint  was filed in the  Maricopa  County  Superior  Court
         (Civil  Action No.  CV98-03169)  against  the  Company's  wholly  owned
         subsidiary R & B Quality Foods for  non-payment of trade debt. On April
         13,  1998,  a settlement  agreement  was reached  whereby R & B Quality
         Foods paid a lump sum of $50,000.00.

ITEM 2   CHANGES IN SECURITIES
                From March 1995 through July 1998,  the Company  issued notes in
         an aggregate  amount of $1,291,005  and granted  warrants in connection
         therewith, to purchase an aggregate of 4,674,009 shares of Common Stock
         in  exchange  for cash in the  amount of  $1,291,005  to members of the
         Company's Board of Directors and to three  shareholders of the Company.
         The Company issued the notes and warrants  without  registration  under
         the  Securities  Act in reliance  on  Sections  4(2) and/or 4(6) of the
         Securities Act.

                In January 1997 through August 1998, the Company issued warrants
         to purchase  2,550,000 shares of Common Stock to officers and directors
         of the  Company.  The  Company  issued the notes and  warrants  without
         registration  under the  Securities  Act in reliance  on Sections  4(2)
         and/or 4(6) of the Securities Act.

ITEM 3   DEFAULTS UPON SENIOR SECURITIES
         Not applicable.

ITEM 4   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
         Not Applicable.

ITEM 5   OTHER INFORMATION
         Not applicable.

                                       11
<PAGE>

ITEM 6   EXHIBITS AND REPORTS ON FORM 8-K

         (a)  Exhibits

               2    Certificate of Owner and Merger (1)

               2.1  Second  Amended  Plan  of   Reorganization   and  Disclosure
                    Statement

               2.2  Modification of Second Amended Plan of Reorganization

               3.1  Certificate of Incorporation, as amended, (included as annex
                    to Exhibit 2); Amendment to Certificate of Incorporation (1)
                    Bylaws, as amended (1)

               3.2  Bylaws, as amended (1)

               4    Amended Certificate of Designations, Preferences, and Rights
                    of Series A Convertible Preferred Stock (2)

               4.6  Warrant  Agreement  covering  506,250  Common Stock Purchase
                    Warrants (M Warrants) (3)

              27.1  Financial Data Schedule

----------
(1)  Filed as exhibit to  Registrant's  Form S-18  Registration  Statement  (No.
     33-16869) which is incorporated herein by reference.

(2)  Incorporated by reference to the Registration  Statement on Form S-1 of the
     Registrant as filed with the SEC on March 8, 1993 (File No. 33-59116)

(3)  Incorporated by reference to the Registration  Statement on Form S-1 of the
     Registrant as filed with the SEC on March 1, 1993 (File No. 33-58858).

         (b)  Exhibits Reports on Form 8-K

              The Company filed a Form 8-K on March 13, 1996.

                                       12
<PAGE>
                                   SIGNATURES

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


                                 Skolniks, Inc.


Dated: 10/28/98                     /s/ Russell K. Swartz
                                    --------------------------------------------
                                    Russell K. Swartz
                                    President and Chief Executive Officer
                                    (Principle Executive Officer)


Dated: 10/28/98                     /s/ Gary D. Mallery
                                    --------------------------------------------
                                    Gary D. Mallery
                                    Chief Financial Officer
                                    (Principle Financial and Accounting Officer)



                                       13