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

                                    FORM 10-Q

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

      For the quarterly period ended October 2, 1998.

                                          or

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

      For the transition period from ________________ to ________________.


                       Commission File Number 000-24124

                             FRESH AMERICA CORP.
            (Exact name of registrant as specified in its charter)


               Texas                                     76-0281274
  (State or other jurisdiction of                     (I.R.S. Employer
   incorporation or organization)                    Identification No.)


                  6600 LBJ FREEWAY, SUITE 180, DALLAS, TX 75240
             (Address of principal executive offices and Zip Code)

      Registrant's telephone number, including area code: (972) 774-0575

                               ----------------

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

At November 10, 1998 the Registrant had 5,321,580 shares of its Common Stock
outstanding.

Total number of pages in this report, including the cover page is 16. Exhibit
index on page 16.

<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS

                      FRESH AMERICA CORP. AND SUBSIDIARIES
                      UNAUDITED CONSOLIDATED BALANCE SHEETS
               (In thousands, except share and per share amounts)

<TABLE>
<CAPTION>
                                                                 October 2,    January 2,
                                                                    1998          1998
                                                                ------------  -----------
                                     ASSETS
<S>                                                              <C>          <C>      
Current Assets:
  Cash and cash equivalents ..................................   $     381    $   2,725
  Accounts receivable, net ...................................      51,338       43,361
  Advances to growers ........................................       2,744         --
  Inventories ................................................       6,629        7,360
  Prepaid expenses and other .................................       3,680        1,550
  Deferred income taxes ......................................         834          362
                                                                 ---------    ---------
      Total current assets ...................................      65,606       55,358

Property, plant and equipment, net ...........................      20,231       13,581
Notes receivable from shareholders ...........................         166          166
Goodwill, net of amortization of $1,138 and $261, respectively      24,966        9,138
Other assets .................................................       1,930        1,721
                                                                 ---------    ---------
                                                                 $ 112,899    $  79,964
                                                                 =========    =========

                      LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
  Notes payable and current portion of long-term debt ........   $   5,143    $  10,750
  Accounts payable ...........................................      31,867       27,711
  Accrued salaries and wages .................................       1,610        3,434
  Other accrued expenses .....................................       1,918          920
  Income taxes payable .......................................       1,198        1,324
                                                                 ---------    ---------
      Total current liabilities ..............................      41,736       44,139

Long-term debt, less current portion .........................      23,934        6,193
Deferred income taxes ........................................         318          198
Other liabilities ............................................         199           99
                                                                 ---------    ---------
      Total liabilities ......................................      66,187       50,629
                                                                 ---------    ---------

Shareholders' Equity:
    Common stock $.01 par value. Authorized
          10,000,000 shares; issued 5,156,913
          and 4,483,983 respectively .........................          51           45
    Additional paid-in capital ...............................      30,974       16,508
    Foreign currency translation adjustment ..................        (277)        (179)
    Retained earnings ........................................      15,964       12,961
                                                                 ---------    ---------
      Total shareholders' equity .............................      46,712       29,335
                                                                 ---------    ---------
Commitments and contingencies
                                                                 ---------    ---------
                                                                 $ 112,899    $  79,964
                                                                 =========    =========
</TABLE>

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

                                       2
<PAGE>
                      FRESH AMERICA CORP. AND SUBSIDIARIES
                   UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
                    (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
                                                     QUARTER ENDED          NINE MONTHS ENDED
                                                ------------------------  ----------------------
                                                OCTOBER 2,    SEPT. 26,   OCTOBER 2,   SEPT. 26,
                                                   1998         1997        1998         1997
                                                ----------   -----------  ----------  ----------
<S>                                             <C>          <C>          <C>          <C>      
Net sales ...................................   $ 140,259    $ 102,009    $ 432,864    $ 303,082
Cost of goods sold ..........................     124,822       92,710      385,465      274,236
                                                ---------    ---------    ---------    ---------
            Gross profit ....................      15,437        9,299       47,399       28,846
                                                ---------    ---------    ---------    ---------
Selling, general and administrative expenses:
    Salaries and related costs ..............       7,963        4,653       23,006       14,175
    Rent, maintenance and related costs .....       2,707        1,787        7,698        4,455
    Insurance expense .......................         309          127          980          753
    Automobile, travel and related costs ....         516          273        1,279          806
    Communication expense ...................         380          317        1,076          767
    Depreciation and amortization ...........         876          470        2,494        1,298
    Nonrecurring transaction costs ..........        --           --          1,395         --
    Other ...................................       1,013          658        2,802        1,490
                                                ---------    ---------    ---------    ---------
                                                   13,764        8,285       40,730       23,744
                                                ---------    ---------    ---------    ---------
           Operating income .................       1,673        1,014        6,669        5,102
                                                ---------    ---------    ---------    ---------
Other income (expense):
    Interest expense ........................        (814)         (46)      (1,848)        (247)
    Interest income .........................          94          172          178          310
    Other, net ..............................          13          384         (152)         540
                                                ---------    ---------    ---------    ---------
                                                     (707)         510       (1,822)         603
                                                ---------    ---------    ---------    ---------

Income before income taxes ..................         966        1,524        4,847        5,705
Provision for income taxes ..................         377          711        1,844        2,236
                                                ---------    ---------    ---------    ---------
          Net income ........................   $     589    $     813    $   3,003    $   3,469
                                                =========    =========    =========    =========

Earnings per  share:
    Basic ...................................   $    0.12    $    0.19    $    0.62    $    0.80
                                                =========    =========    =========    =========
    Diluted .................................   $    0.11    $    0.18    $    0.59    $    0.76
                                                =========    =========    =========    =========
</TABLE>

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

                                       3
<PAGE>
                      FRESH AMERICA CORP. AND SUBSIDIARIES
                 UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOW
                                 (IN THOUSANDS)
<TABLE>
<CAPTION>
                                                                             NINE MONTHS ENDED
                                                                          ----------------------
                                                                         OCTOBER 2,    SEPT. 26,
                                                                            1998         1997
                                                                         ----------   -----------
<S>                                                                       <C>         <C>     
Cash flows from operating activities:
    Net income ........................................................   $  3,003    $  3,469
    Adjustments to reconcile net income to net cash provided by
     operating activities, excluding the effects of acquisitions:
          Depreciation and amortization ...............................      2,494       1,298
          Noncash transaction costs, net of tax .......................        519        --
          Deferred income taxes .......................................       (627)       --
          Other .......................................................        733        (168)
          Change in assets and liabilities:
              Accounts receivable .....................................      1,673       3,248
              Advances to growers .....................................     (1,718)       --
              Inventories .............................................      1,577       2,993
              Prepaid expenses ........................................         19        (827)
              Other assets ............................................       (588)       (627)
              Accounts payable ........................................     (1,982)      2,485
              Accrued expenses and other current liabilities ..........     (1,009)     (3,144)
                                                                          --------    --------
                   Total adjustments ..................................      1,091       5,258
                                                                          --------    --------
                   Net cash provided by operating activities ..........      4,094       8,727
                                                                          --------    --------
Cash flows from investing activities:
    Additions to property, plant and equipment ........................     (4,155)     (4,350)
    Proceeds from sale of property, plant and equipment ...............       --           354
    Cost of acquisitions, exclusive of cash acquired ..................    (11,200)     (3,280)
                                                                          --------    --------
                   Net cash used in investing activities ..............    (15,355)     (7,276)
                                                                          --------    --------
Cash flows from financing activities:
    Proceeds from revolving line of credit ............................     78,377       6,469
    Repayments of revolving line of credit ............................    (89,489)    (12,585)
    Additions to short-term indebtedness ..............................      5,048        --
    Payments of short-term indebtedness ...............................     (5,184)       --
    Proceeds from shareholder loans ...................................       --           954
    Additions to long-term indebtedness ...............................     20,363         154
    Payments of long-term indebtedness ................................       (233)       (291)
    Net proceeds from exercise of employee stock options ..............        143         199
    Other .............................................................       --           (89)
                                                                          --------    --------
                   Net cash provided by (used in) financing activities       9,025      (5,189)
                                                                          --------    --------
Effect of exchange rate changes on cash ...............................       (108)       --
                   Net increase (decrease) in cash and cash equivalents     (2,344)     (3,738)
Cash and cash equivalents at beginning of period ......................      2,725       4,247
                                                                          --------    --------
Cash and cash equivalents at end of period ............................   $    381    $    509
                                                                          ========    ========
Supplemental disclosures of cash flow information:
    Cash paid for interest ............................................   $    689    $    246
    Cash paid for income taxes ........................................   $  2,485    $  2,423
</TABLE>

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

                                       4
<PAGE>
                      FRESH AMERICA CORP. AND SUBSIDIARIES

                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                                   (Unaudited)

NOTE 1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES.

     Fresh America Corp. (together with its subsidiaries the "Company") is an
integrated food distribution management company engaged in the procurement,
processing, warehousing and delivery of fresh produce and other refrigerated
perishable products. The Company was founded in 1989 and distributes throughout
the United States and Canada through twenty-three distribution and processing
facilities.

     UNAUDITED INTERIM FINANCIAL INFORMATION - The consolidated balance sheet as
of October 2, 1998, the consolidated statements of income for the quarters and
nine month periods ended October 2, 1998 and September 26, 1997, the
consolidated statements of cashflows for the nine month periods ended October 2,
1998 and September 26, 1997, and related notes have been prepared by the Company
and are unaudited. In the opinion of the Company, the interim financial
information includes all adjustments (consisting of only normal recurring
adjustments) necessary for a fair statement of the results of the interim
periods.

     Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted from the interim financial information. The
interim financial information should be read in conjunction with the Company's
audited consolidated financial statements included in the Annual Report on Form
10-K for the fiscal year ended January 2, 1998. The results for the quarters and
the nine-month periods ended October 2, 1998 and September 26, 1997 may not be
indicative of operating results for the full year.

     The consolidated financial statements give retroactive effect to an
acquisition of an operating business consummated in the first quarter of 1998
which was accounted for as a pooling of interests (Note 3).

     The following are the significant accounting policies followed by the
Company in the preparation of the consolidated financial statements.

     PRINCIPLES OF CONSOLIDATION - The consolidated financial statements include
the accounts of Fresh America Corp. and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.

     EARNINGS PER SHARE - Basic earnings per share (EPS) is calculated by
dividing net income by the weighted average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. See Note 6.

     COMPREHENSIVE INCOME - In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards "SFAS" No. 130,
"Reporting Comprehensive Income." This statement establishes standards for
reporting and display of comprehensive income and its components. Components of
comprehensive income are net income and all other nonowner changes in equity
such as the change in the cumulative translation adjustment. This statement
requires that an enterprise: (a) classify items of other comprehensive income by
their nature in a financial statement and (b) display the accumulated balance of
other comprehensive income separately from retained earnings and additional
paid-in capital in the equity section of a balance sheet. SFAS No. 130 is
effective for financial statements issued for periods beginning after December
15, 1997, which for the Company is fiscal 1998. Presentation of comprehensive
income for earlier periods provided for comparative purposes is required and has
been presented in these financial statements (See Note 5).

                                       5
<PAGE>
     RECENT ACCOUNTING PRONOUNCEMENTS - The Company intends to adopt SFAS No.
131, "Disclosures About Segments of an Enterprise and Related Information" in
its fiscal year ended January 1, 1999 consolidated financial statements. This
statement requires a public business enterprise to report financial and
descriptive information about its reportable operating segments based on how
management measures performance and makes decisions about allocating resources.
The disclosures required by the statement are not required for interim financial
statements in the initial year of its application. The Company believes SFAS No.
131 will not have a material impact on its financial statements or accounting
policies.

     Effective January 3, 1998, the Company adopted Statement of Position
("SOP") 98-1, "Accounting for the Cost of Computer Software Developed or
Obtained for Internal Use," which was issued in March 1998. The SOP requires
that certain costs related to the development or purchase of internal-use
software be capitalized and amortized over the estimated useful life of the
software. The SOP also requires that costs related to the preliminary project
stage and post-implementation/operations stage of internal-use computer software
development be expensed as incurred. The adoption of SOP 98-1 did not have a
material effect on the Company's financial statements or accounting policies.


     In April 1998, the American Institute of Certified Public Accountants
issued SOP 98-5, "Reporting of the Costs of Start-up Activities" which is
effective for the financial statements issued for periods beginning after
December 15, 1998. The Company believes SOP 98-5 will not have a material impact
on its financial statements or accounting policies. The Company will adopt the
provisions of SOP 98-5 in the first quarter of 1999.

     The Company is also assessing the reporting and disclosure requirements of
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities.
This statement establishes accounting and reporting standards for fiscal years
beginning after June 15, 1999. The Company believes SFAS No. 133 will not have a
material impact on its financial statements or accounting policies. The Company
will adopt the provisions of SFAS No. 133 in the first quarter of 2000.

     FOREIGN CURRENCY TRANSLATION - The financial statements of all foreign
subsidiaries were prepared in their respective local currencies and translated
into U.S. dollars based on the current exchange rate at the end of the period
for the balance sheet and a weighted-average rate for the period for the
statement of income. Translation adjustments are reflected in the foreign
currency translation adjustments in Shareholders' Equity and, accordingly, have
no effect on net income. Exchange gains and losses for all foreign subsidiaries
are included in income for transactions denominated in currencies other than the
functional currency.

     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 reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

     FISCAL YEAR - The Company's fiscal year is a 52-week or 53 week period
ending on the first Friday in January. The quarters ended October 2, 1998 and
September 26, 1997 each consist of 13 weeks. The nine-month periods ended
October 2, 1998 and September 26, 1997 consist of 39 weeks and 38 weeks,
respectively.

                                       6

<PAGE>
NOTE 2.  AGREEMENT WITH SAM'S CLUB.

     In August 1995, the Company entered into a five-year distribution agreement
(the "Agreement") with Sam's Club. The Agreement, which began on December 1,
1995, replaced the Company's previously existing license agreement with Sam's
Club which expired on November 30, 1995. Under terms of the Agreement, the
Company expanded its distribution arrangement with Sam's into specified
exclusive new territories approximately doubling the number of Sam's clubs
serviced by the Company. As a result of this expansion, the Company commenced
operations from two new distribution centers in Chicago, Illinois and
Cincinnati, Ohio on January 2, 1997. For further information, see Note 2 to the
financial statements included in the Company's Annual Report on Form 10-K for
the fiscal year ended January 2, 1998.

     The Agreement provides Sam's the option to reduce the number of clubs
within the Company's exclusive territory by forty per year under certain
circumstances and to discontinue service for clubs in which Sam's elects not to
offer produce, if any. In February 1997, Sam's advised the Company that as a
result of opening certain new Wal-Mart Supercenter Distribution Centers, it
elected to exercise the existing option under the Agreement to distribute
produce directly with respect to forty clubs. Twenty-seven clubs were
transitioned in May 1997 and the remaining thirteen clubs were transitioned in
November 1997. In March 1998, Sam's began the transfer of an additional forty
clubs, which was completed in April 1998. The 1997 withdrawal of clubs did not
have a material adverse effect on the Company's financial position in 1997, and
the lost revenue attributable to the clubs withdrawn in 1998 is estimated to be
less than 3 percent of the Company's total fiscal 1998 revenues. The Company has
conducted its operations assuming that Sam's will withdraw forty clubs per year
for each of the remaining years of the Agreement.

NOTE 3.  ACQUISITIONS.

     On February 2, 1998, the Company acquired substantially all of the net
operating assets and the business of Francisco Distributing Company, L.L.C.
("Francisco"), a produce marketing, distribution and repackaging company based
in Norwalk, California. The acquisition was accounted for using the purchase
method of accounting. As consideration for the net assets received, the Company
paid $5,575,000 in cash, 285,437 shares of Company common stock valued at $19.27
per share based on the market value of the stock at the time of the transaction,
and contingent consideration subject to a minimum of $2.5 million with a maximum
of $16.6 million based on the pre-tax earnings of the business of Francisco for
the 1998 and 1999 fiscal years subject to certain adjustments. The minimum
contingent payments have been recorded as a liability and are payable in cash or
a combination of cash and common stock.

            On March 4, 1998, the Company acquired Ontario Tree Fruits Limited
and its affiliated companies (collectively, "OTF") by exchanging 609,713 shares
of its common stock or exchangeable common stock for all of the capital stock of
OTF and certain residual equity interests. OTF imports and distributes fresh
produce to large retail chains and hundreds of independent grocers and
wholesalers in Canada and the Northeastern United States.

     The acquisition of OTF constituted a tax-free reorganization and has been
accounted for as a pooling of interests. Accordingly, all prior periods
consolidated financial statements presented have been restated to include the
combined results of operations, financial position and cash flows of OTF as
though it had always been a part of the Company.

                                       7

<PAGE>
     Prior to the acquisition, OTF's fiscal year ended on August 31. In
recording the business combination, OTF's prior period financial statements have
been restated to a year ended December 31, to conform to the Company's fiscal
year-end.

     There were no transactions between OTF and the Company prior to the
combination, and immaterial adjustments were recorded to conform OTF's
accounting policies to those of the Company. Certain reclassifications were made
to the OTF financial statements to conform to the Company's presentations.

     In connection with the acquisition of OTF, the Company incurred
nonrecurring transaction costs of approximately $1.4 million, which were
expensed in the first quarter of 1998. The nonrecurring transaction costs
included approximately $942,000 of non-cash expenses ($519,000, net of tax)
related to the issuance of 52,342 shares (which were included in the total
609,713 shares issued) of the Company's common stock to the financial advisors
of OTF.

     On August 14, 1998, the Company acquired by merger all of the capital stock
of Jos. Notarianni & Co. ("Notarianni"), a produce distribution and value-added
company based in Scranton, Pennsylvania. The acquisition was accounted for using
the purchase method of accounting. As consideration, the Company paid $5,390,000
in cash and issued 292,951 shares of Company common stock valued at $19.15 per
share based on the market value of the stock at the time of the transaction.

     In connection with the purchase of substantially all the net operating
assets of Lone Star Produce, Inc. ("Lone Star") in 1995, the Company issued a
convertible promissory note which allowed Lone Star (at Lone Star's option) to
convert the note into the Company's common stock at $6.49 per share. The note
was valued at approximately $1,459,000 and is included in current debt in the
Company's balance sheet at January 2, 1998. The conversion option had an
original expiration date of March 31, 1998. By mutual agreement, the conversion
deadline was extended and the note was subsequently converted into 80,225
shares.

     For those acquisitions accounted for using the purchase method of
accounting, only the results of operations of the acquired companies subsequent
to their respective acquisition dates are included in the consolidated financial
statements of the Company. At the acquisition dates, the purchase price was
allocated to assets acquired and liabilities assumed based on their relative
fair market values. The excess of total purchase price over fair values of the
net assets acquired was recorded as goodwill, which is being amortized over a 15
to 20 year period.

     The following unaudited pro forma financial information presents the
combined results of operations of the Company (including OTF), Francisco and
Notarianni as if the acquisitions occurred as of the beginning of 1997, after
giving effect to certain adjustments, including amortization of goodwill,
decreased interest income, increased interest expense and related income tax
effects. The pro forma financial information does not necessarily reflect the
results of operations that would have occurred had the Company and such
acquisitions constituted a single entity during such periods.


                                       8

<PAGE>
                                                      NINE MONTHS ENDED
  (In thousands, except per share amounts)          OCTOBER 2,   SEPT. 26,
                                                       1998        1997
                                                   -----------  -----------
        Net sales
                                                   $   483,138  $   418,410
                                                   ===========  ===========
        Net income                               
                                                   $     2,927  $     4,380
                                                   ===========  ===========
                                                 
        Earnings per share - diluted               $      0.55  $      0.84
                                                   ===========  ===========
                                     
NOTE  4.  DEBT.

      On February 2, 1998, the Company restructured its existing loan agreement
with a major bank to provide a revolving line of credit ("Revolver") of up to
$12 million and a bridge loan of $5 million (the "Bridge Loan"). On May 15,
1998, the Company amended the terms of the above referenced loan agreement and
increased the borrowing availability under the Revolver to $15 million. The
Revolver, which expires February 2, 2001, is subject to certain covenants and
borrowing base requirements and is collateralized by accounts receivable and
inventory of the Company and the capital stock of its subsidiaries. Outstanding
principal amounts under the Revolver ($1.75 million outstanding as of October 2,
1998) accumulate interest at the bank prime rate (8.25% as of October 2, 1998),
or at the Company's election, the eurodollar rate plus 1.75% (7.0% as of October
2, 1998).

      On May 15, 1998 the Company completed a $20 million, 12% subordinated debt
financing with a major national insurance company. The note has a final maturity
of May 1, 2003 with principal payments of $6,666,666 due on May 1, 2001 and May
1, 2002. Interest payments are due semi-annually in May and November. A total of
$15 million was funded on May 15, 1998 with the remaining $5 million funded on
August 3, 1998. A portion of the initial proceeds was used to prepay the Bridge
Loan in full and the remainder to pay off existing balances on the Revolver. In
connection with the subordinated note, the Company issued 116,612 warrants on
May 15, 1998 and 38,871 warrants on August 3, 1998 with a fair value of $953,000
and $289,000, respectively. The warrants become exercisable on May 1, 1999 at an
exercise price of $22.70 per share and expire on May 1, 2003.

      Additionally, OTF has a demand agreement with a Canadian bank to provide
revolving credit facilities (the "Canadian Revolver") of up to CDN $15 million
($9.7 million), subject to certain covenant and borrowing base requirements. The
Canadian Revolver is collateralized by substantially all assets of OTF. Interest
on borrowings accrue at U.S. prime plus 0.75% (9.0% at October 2, 1998) or
Canadian prime plus 0.75% (8.0%), depending on the denomination of the
borrowings. As of October 2, 1998, borrowings under the Canadian Revolver
amounted to CDN $6.0 million ($3.9 million).

NOTE 5. COMPREHENSIVE INCOME.

      The following table reconciles the Company's net income to its
comprehensive income (in thousands):

                                       9
<PAGE>
                                          QUARTER ENDED      NINE MONTHS ENDED
                                      --------------------  --------------------
                                      OCTOBER 2, SEPT. 26,  OCTOBER 2, SEPT. 26,
                                         1998      1997       1998       1997
                                      --------------------  --------------------
Net Income .........................   $   589    $   813    $ 3,003    $ 3,469

Other comprehensive loss-foreign
    currency translation
    adjustments ....................        (3)      (118)       (98)      (130)
                                       -------    -------    -------    -------
Comprehensive income ...............   $   586    $   695    $ 2,905    $ 3,339
                                       =======    =======    =======    =======

NOTE 6. EARNINGS PER SHARE.

  Shares used in calculating basic and diluted income per share (in thousands):

                                          QUARTER ENDED      NINE MONTHS ENDED
                                      -------------------  ---------------------
                                      OCTOBER 2, SEPT. 26, OCTOBER 2,  SEPT. 26,
                                         1998      1997      1998         1997
                                      ---------- --------- ----------  ---------

Weighted average common shares       
     Outstanding - basic ............   5,020     4,370     4,846        4,354
                                                                      
Dilutive securities:                                                  
                                                                      
     Common stock options ...........     126       198       168          192
     Contingent shares related to                                     
       acquisitions .................     184        42        79           42
                                        -----     -----     -----        -----
Weighted average shares common                                        
  outstanding -                                                       
     Diluted basis ..................   5,330     4,610     5,093        4,588
                                        =====     =====     =====        =====

     Options and warrants to purchase approximately 227 and 181 shares of common
stock at prices ranging from $14.45 to $25.50 and $19.75 to $25.50, respectively
were outstanding during the three and nine month periods ended October 2, 1998,
respectively, but were not included in the computation of diluted earnings per
share because the options and warrant exercise prices were greater than the
average market price of the common stock for the respective periods.
                                                                   
NOTE 7.  SUBSEQUENT EVENT.

     Effective October 3, 1998, the Company acquired substantially all of the
net operating assets and the business of King's Onion House, Inc. ("King"), a
produce distribution and value-added company based in Phoenix, Arizona. The
acquisition was accounted for using the purchase method of accounting. As
consideration for the net assets received, the Company paid $4,000,000 in cash,
164,667 shares of Company common stock valued at $14.57 per share based on the
market value of the stock at the time of the transaction, and a contingent
payment of 1.7 times King's average annual pretax profit over a three year term.

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

RESULTS OF OPERATIONS

     The following table presents the components of the consolidated statements
of income as a percentage of net sales for the periods indicated (including the
restatement to reflect the acquisition of OTF, which was accounted for as a
pooling of interests):

                                       10
<PAGE>
                                    QUARTER ENDED         NINE MONTHS ENDED
                               OCTOBER 2,   SEPT. 26,   OCTOBER 2,    SEPT. 26,
                                  1998        1997        1998          1997
                               ----------   ---------   ----------   ----------
Net sales ....................   100.0%       100.0%      100.0%       100.0% 
Cost of goods sold ...........    89.0         90.9        89.0         90.5
                                 -----        -----       -----        -----
Gross profit .................    11.0          9.1        11.0          9.5
Selling, general and                                                
   administrative expenses ...     9.8          8.1         9.2          7.8
Nonrecurring transaction costs    --           --           0.3         --
                                 -----        -----       -----        -----
Operating income .............     1.2          1.0         1.5          1.7
Other income (expense) .......    (0.5)         0.5        (0.4)         0.2
                                 -----        -----       -----        -----
Income before income taxes ...     0.7          1.5         1.1          1.9
Provision for income taxes ...     0.3          0.7         0.4          0.8
                                 -----        -----       -----        -----
Net income ...................     0.4%         0.8%        0.7%         1.1%
                                 =====        =====       =====        =====
                                                                 
      COMPARISON OF QUARTER ENDED OCTOBER 2, 1998 TO QUARTER ENDED SEPTEMBER 26,
1997

The Company's quarters ended October 2, 1998 and September 26, 1997 each include
13 weeks.

      NET SALES. Net sales increased $38.3 million, or 37.5%, to $140.3 million
in the third quarter of 1998 from $102.0 million in the third quarter of 1997.
Of the total increase, approximately $35.8 million was due to acquisitions made
subsequent to the third quarter of 1997. As a percentage of net sales, Sam's
represented 39.0% in the third quarter of 1998 compared to 58.0% in the third
quarter of 1997.

      COST OF GOODS SOLD. Cost of goods sold increased $32.1 million, or 34.6%
to $124.8 million in the third quarter of 1998 from $92.7 million in the third
quarter of 1997, primarily reflecting the increase in net sales above. As a
percentage of net sales, cost of goods sold decreased to 89.0% from 90.9%, which
in turn increased the Company's gross profit percentage to 11.0% from 9.1%. The
increase in gross profit percentage is primarily due to acquisitions made
subsequent to the third quarter of 1997, which included retail/wholesale,
value-added and foodservice companies that have historically contributed higher
gross profit percentages than the Company's already existing operations. Such
acquisitions represented 25.5% of total net sales in the third quarter of 1998
and contributed gross profits of nearly 14%.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative ("SG&A") expenses increased by $5.5 million, or 66.1% to $13.8
million in the third quarter of 1998 from $8.3 million in the third quarter of
1997. The increase is primarily due to SG&A expenses related to acquired
businesses ($4.3 million) and, to a lesser extent, additional headcount and
other costs required to support the Company's increased acquisition, integration
and operating activities.

      OPERATING INCOME (EXPENSE). As a result of the foregoing factors,
operating income increased by $0.7 million, or 65.0%, to $1.7 million in the
third quarter of 1998 from $1.0 million in the third quarter of 1997.

      OTHER INCOME (EXPENSE). Interest expense increased $768,000 to $814,000 in
the third quarter of 1998 from $46,000 in the third quarter of 1997 due to
increased borrowings to help finance acquisitions that were made subsequent to
the third quarter of 1997. In addition, a Canadian subsidiary of the

                                       11
<PAGE>
Company recognized a gain of $322,000 on the sale of a leasehold interest in the
third quarter of 1997 that was included in other income.

      PROVISION FOR INCOME TAXES. The effective tax rate was 39.0% in the third
quarter of 1998 compared to 46.7% in the third quarter of 1997. During the third
quarter of 1997, OTF recorded approximately $130,000 in additional tax expense
as a result of Revenue Canada's review of 1993 and 1994 tax filings.

      NET INCOME. As a result of the foregoing factors, net income decreased
$224,000, or 27.6% to $589,000 in the third quarter of 1998 compared to $813,000
in the third quarter of 1997.

COMPARISON  OF  NINE  MONTHS  ENDED  OCTOBER  2,  1998 TO  NINE  MONTHS  ENDED
SEPTEMBER 26, 1997

      The nine month periods ended October 2, 1998 and September 26, 1997
include 39 weeks and 38 weeks, respectively. Therefore, when comparing the two
periods, it should be noted that the 1998 period includes on additional week of
operations compared to the 1997 period.

      NET SALES. Net sales increased $129.8 million, or 42.8% to $432.9 million
in the first nine months of 1998 from $303.1 million in the first nine months of
1997. Of the increase, approximately $111.5 million was due to acquisitions made
subsequent to the third quarter of 1997 and $7.7 million was due to the effect
of an additional week in the first nine months of 1998. As a percentage of net
sales, Sam's represented 39.2% in the first nine months of 1998 compared to
58.2% in the same period in 1997.

      COST OF GOODS SOLD. Cost of goods sold increased by $111.2 million, or
40.6% to $385.4 million in the first nine months of 1998 from $274.2 million in
the first nine months of 1997, primarily reflecting the increase in net sales
above. As a percentage of net sales, cost of goods sold decreased to 89.1% from
90.5%, which in turn increased the Company's gross profit percentage to 11.0%
from 9.5%. The increase in gross profit percentage is primarily due to
acquisitions made subsequent to the third quarter of 1997, which included
retail/wholesale, value-added and foodservice companies that have historically
contributed higher gross profit percentages than the Company's already existing
operations. Such acquisitions represented 25.9% of total net sales and
contributed gross profit of nearly 13%.

      SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased by $17.0 million, or 71.5% to $40.7 million in
the first nine months of 1998 from $23.7 million in the first nine months of
1997. Included in the 1998 period are nonrecurring transaction expenses of $1.4
million related to the acquisition of OTF. The remaining increase is primarily
due to SG&A expenses related to acquired businesses ($12.3 million) and, to a
lesser extent, additional headcount and other costs required to support the
Company's increased acquisition, integration and operating activities.

      OPERATING INCOME. As a result of the foregoing factors, which include $1.4
million of nonrecurring transaction costs in the first nine months of 1998,
operating income increased $1.6 million, or 30.7% to $6.7 million in the first
nine months of 1998 from $5.1 million in the first nine months of 1997. The
following table summarizes the effect of the nonrecurring transaction costs on
operating income in the first nine months of 1998 (in thousands):

                                       12
<PAGE>
                                                   NINE MONTHS ENDED
                                           -----------------------------------
                                                        %                   %
                                          OCTOBER 2, OF NET   SEPT. 26,  OF NET
                                             1998     SALES     1997      SALES
                                          ---------- -------  ---------  -------
Operating income as reported ............    6,669      1.5%   5,102       1.7%
Nonrecurring transaction costs ..........    1,395      --       --        --
                                          ----------  ------  ---------  -------
Operating income before nonrecurring
     transaction cost ...................   $8,064      1.9%  $5,102       1.7%
                                          ==========          =========


      OTHER INCOME (EXPENSE). Interest expense increased $1.6 million to $1.8
million in the first nine months of 1998 from $0.2 million in the comparable
1997 period due to increased borrowings to help finance acquisitions that were
made subsequent to the third quarter of 1997. In addition, OTF recognized a gain
of $322,000 on the sale of a leasehold interest in the first nine months of 1997
that was included in other income.

      PROVISIONS FOR INCOME TAXES. The effective income tax rate decreased to
38% in the first nine months of 1998 from 39% in the first nine months of 1997.
During the third quarter of 1997, OTF recorded approximately $130,000 in
additional tax expense as a result of Revenue Canada's review of 1993 and 1994
tax filings.

      NET INCOME. As a result of the foregoing factors, net income decreased
$466,000, or 13.4% to $3,003,000 in the first nine months of 1998 compared to
$3,469,000 in the first nine months of 1997. The following table summarizes the
effect of the nonrecurring transaction costs on the net income and earnings per
share in the first nine months of 1998 (in thousands, except per share amounts):

                                                     NINE MONTHS ENDED
                                                  ------------------------
                                                  OCTOBER 2,    SEPT. 26,
                                                    1998          1997
                                                  ----------    ----------
Net income as reported                        
                                                 $   3,003      $   3,469
Nonrecurring transaction costs,
    net of tax ...............................   $     789           --
                                                 ---------      ---------
Net income before effect of
    nonrecurring transaction costs ...........   $   3,792      $   3,469
                                                 =========      =========
Earning per share as reported:
      Basic ..................................   $    0.62      $    0.80
      Diluted ................................   $    0.59      $    0.76
                                                               
Effect of nonrecurring transaction costs:                      
      Basic ..................................   $    0.16      $    --
      Diluted ................................   $    0.16      $    --
                                                               
Earnings per share before                                      
    effect of nonrecurring                                     
    transaction costs:                                         
      Basic ..................................   $    0.78      $    0.80
      Diluted ................................   $    0.75      $    0.76
                                                            


                                       13
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES

      Cash provided by operating activities was $4.1 million for the first nine
months of 1998 compared to $8.7 million in the first nine months of 1997. The
difference is primarily due to increased use of working capital to support the
growth in the business.

      Cash used in investing activities increased $8.1 million to $15.4 million
in the first nine months of 1998 from $7.3 million in the first nine months of
1997. Cash expended in the first nine months of 1998 was primarily due to the
acquisition of Francisco and Notarianni (see Note 3 to the accompanying
unaudited consolidated financial statements) and, to a lesser extent,
expenditures related to the Company's computer system implementation, which
began in the second quarter of 1998. Cash used for investing activities in the
same period in 1997 consisted primarily of the purchase of a processing and
distribution center in Richmond, Indiana and the acquisition of other
businesses.

      Cash provided by financing activities was $9.0 million in the first nine
months of 1998 compared to cash used in financing activities of $5.2 million in
the first nine months of 1997. The increase in cash flows from financing
activities compared to the prior year is primarily due to borrowings used to
finance the cash portion of the Francisco and Notarianni acquisitions. The $20
million in funds borrowed under the Company's subordinated debt agreement (see
Note 4 to the accompanying unaudited consolidated financial statements) were
used primarily to pay off indebtedness under its credit facility and for
expenditures related to the Company's computer system.

      At October 2, 1998, the Company had working capital of $23.9 million
compared to $11.2 million at January 2, 1998. On February 2, 1998, the Company
entered into a new $17 million revolving line of credit and bridge loan bank
facility to be used for general corporate purposes, including acquisitions. In
May 1998, the $5.0 million bridge loan portion of the facility was prepaid and
the revolving line of credit was increased from $12 million to $15 million. As
of October 2, 1998, there were $7.6 million in borrowings outstanding under the
facility. The Company also has revolving credit facilities of up to CDN $15
million ($9.7 million), through its Canadian subsidiaries. Such facilities have
an outstanding balance of CDN $6.0 million ($3.9 million), as of October 2,
1998. In May 1998, the Company completed a $20 million, 12% subordinated debt
financing that matures in May 2003 (see Note 4 to the accompanying unaudited
consolidated financial statements). Fifteen million dollars were borrowed on May
15, 1998 with the remaining $5 million borrowed on August 3, 1998.

      Management believes that the combination of cash generated from operating
activities, availability under its bank lines of credit, the proceeds generated
from its subordinated debt financing and the use of operating leases where
appropriate is sufficient to meet its needs for operations, computer system
implementations and near-term debt service requirements. The Company intends to
continue its expansion activities and most likely will require additional debt
or equity capital to meet such requirements. The Company believes it has access
to the capital markets and can also obtain additional credit from financial
institutions in order to raise the capital necessary to fund such expansion
activities. See "Outlook and Uncertainties" below.

YEAR 2000

      The Year 2000 will have a broad impact on the business environment in
which the Company operates due to the possibility that many computerized systems
across all industries will be unable to process information containing dates
beginning in the Year 2000. Due to its growth and expansion, the Company is in
the process of implementing a new enterprise-wide management information system
which better meets its diverse and long-term needs. The Company has received
assurances from the provider of the system that it meets requirements for Year
2000 compliance. In October 1998, the Company completed its first phase of the
implementation, which included a significant portion of its operations, and
expects that all significant remaining phases of the implementation will be
completed prior to the end of the 1999 calendar year.

                                       14

<PAGE>
      The nature of the Company's business is such that the business risks
associated with the Year 2000 can be reduced by working closely with and
assessing the vendors supplying the Company's produce, and with the Company's
customers to ensure that they are aware of the Year 2000 business risks and are
appropriately assessing and addressing them.

      Because third party failures could have a material impact on the Company's
ability to conduct business, the Company is in the process of sending out
questionnaires to all of the Company's significant suppliers and customers to
obtain reasonable assurance that plans are being developed to address the Year
2000 issue. The returned questionnaires are being assessed by the Company, and
are being categorized based upon readiness for the Year 2000 issues and
prioritized in order of significance to the business of the Company. To the
extent that suppliers do not provide the Company with satisfactory evidence of
their readiness to handle Year 2000 issues, contingency plans will be developed
to obtain qualified replacement suppliers by the end of the 1999 calendar year.

      The Company's decision to implement a new management information system
relates directly to the Company's efforts to integrate its recent acquisitions
and growth activities. The timing of the implementation has not been accelerated
and management does not anticipate the need to accelerate the implementation due
to the Year 2000. Accordingly, the Company does not consider the cost of
implementation to be a Year 2000 cost. In addition, the Company has not
identified any costs, whether internal or external, related to the Company
addressing its Year 2000 issues which it considers to be material to its
financial position or results of operations. However, unanticipated failures by
critical suppliers or customers, as well as the failure by the Company to
execute its own Year 2000 plan, could have a material adverse effect on the cost
related to the Year 2000 issue.

QUARTERLY RESULTS AND SEASONALITY

      The Company's business is seasonal, with its greatest quarterly sales
volume historically occurring in the fourth quarter. A substantial portion of
the Company's produce sales consists of staple items such as apples, oranges,
grapefruit, potatoes, onions, lettuce and tomatoes which are generally strongest
during the fall, winter and spring. The supply of certain of these items
declines during the summer, although lost sales are replaced to some extent by
more seasonal products such as peaches, plums, nectarines, grapes, strawberries
and melons. Sales of imported fresh fruit such as Clementine oranges,
tangerines, grapes, and refrigerated, pre-packaged products, such as vegetable
trays, are strongest during the fourth quarter holiday season. Because the
Company's results of operations depend significantly on sales generated during
the fourth quarter, any adverse development affecting the Company's operations
during this period, such as the unavailability of high quality produce, harsh
weather conditions, or product costs, could have a disproportionate impact on
the Company's results of operations for the full year.


INFLATION

      Although the Company cannot determine the precise effects of inflation,
management does not believe inflation has had a material effect on the Company's
sales or results of operations. However, independent of normal inflationary
pressures, the Company's produce products are subject to fluctuating prices
which result from factors discussed in "Quarterly Results and Seasonality"
above.

                                       15
<PAGE>
OUTLOOK AND UNCERTAINTIES

      Certain information in this Quarterly Report on Form 10-Q may contain
"forward-looking statements" within the meaning of Section 21E of the Securities
Exchange Act of 1934, as amended. All statements other than statements of
historical fact are "forward-looking statements" for purposes of these
provisions, including any projections of earnings, revenues or other financial
items, any statements of the plans and objectives of management for future
operations, any statements concerning proposed new products or services, any
statements regarding future economic conditions or performance, and any
statement of assumptions underlying any of the foregoing. Although the Company
believes that the expectations reflected in its forward-looking statements are
reasonable, it can give no assurance that such expectations or any of its
forward-looking statements will prove to be correct, and actual results could
differ materially from those projected or assumed in the Company's
forward-looking statements. The Company's future financial condition and
results, as well as any forward-looking statements, are subject to inherent
risks and uncertainties, including, without limitation, potential limitations on
the Company's ability to pursue its acquisition strategy and successfully
integrate acquired operations, dependence on its primary customer, significant
competition, limitations arising from the Company's indebtedness, government
regulation, seasonality and dependence on key management. Additional information
concerning these and other risk factors is contained in the Company's Annual
Report on Form 10-K for the fiscal year ended January 2, 1998, a copy of which
may be obtained from the Company upon request.


PART II - OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON 8-K


        (a)  Exhibits

             Exhibit 27.1 - Financial Data Schedule.

             Exhibit 27.2 - Financial Data Schedule - Restated.


        (b)  Reports on Form 8-K

             NONE

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


FRESH AMERICA CORP.
  (Registrant)

 /s/ JOHN GRAY                              Date:    NOVEMBER 13, 1998
     Executive Vice President and
     Chief Financial Officer

                                       16