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                       U.S. SECURITIES AND EXCHANGE COMMISSION
                                WASHINGTON, D.C. 20549

                                     FORM 10-QSB

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

                        FOR THE QUARTER ENDED August 31, 1998

                                          OR

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

                            COMMISSION FILE NUMBER 0-22720

                                CYCLO3PSS CORPORATION
             (Name of Small Business Issuer as specified in its charter)

              Delaware                                           87-0455642
    (State or other jurisdiction of                           (I.R.S. Employer
    Incorporation or organization)                           Identification No.)

        3646 West 2100 South
        Salt Lake City, Utah                                  84120-1202
 (Address of principal executive offices)                    (Zip Code)

            Issuer's telephone number, including area code: (801) 972-9090

     Securities registered pursuant to Section 12(b) of the Exchange Act: None

     Securities  registered pursuant to Section 12(g) of the Exchange Act: $.001
Par Value Common Stock

       Check  whether the Issuer (1) has filed all reports  required to be filed
by Section 13 or 15(d) of the  Exchange  Act 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 .



Common Stock  outstanding  at October 14, 1998 - 17,205,582  shares of $.001 par
value Common Stock.


                      DOCUMENTS INCORPORATED BY REFERENCE: NONE

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



<PAGE>





                                       FORM 10-QSB

                             Financial Statements and Schedules
                                    Cyclo3pss Corporation

                           For Three Months Ended August 31, 1998

       The following  financial  statements  and schedules of the registrant and
   its consolidated subsidiaries are submitted herewith:

                               PART I - FINANCIAL INFORMATION

                                                                 Page of
                                                             Form 10-QSB
   Item 1. Financial  Statements

           Condensed Consolidated Balance Sheets.......................3
           Condensed Consolidated Statements of Operations.............5
           Condensed Consolidated Statements of Cash Flow..............7
           Notes to Condensed Consolidated Financial Statements........8

   Item 2. Management's Discussion and Analysis or
           Plan of Operations.........................................12

                            PART II - OTHER INFORMATION

   Item 1. Legal Proceedings .........................................16

   Item 2. Changes in Securities......................................16

   Item 3. Defaults Upon Senior Securities............................16

   Item 4. Submission of Matters to a Vote of Security Holders........16

   Item 5. Other Information..........................................16

   Item 6. Exhibits...................................................16








                                      - 2 -

<PAGE>





   CYCLO3PSS CORPORATION
   Condensed Consolidated Balance Sheets
   (UNAUDITED)
 -------------------------------------------------------------------------------




                                                         August 31   February 28
                                                           1998          1998
                                                       ------------ ------------
  Assets

   Current assets:

      Cash                                                $149,961      $573,161
      Accounts receivable                                   75,880       113,090
      Inventories                                          158,630       152,026
      Prepaid expenses                                      61,938        75,526
  Total current assets                                     446,409       913,803

  Property and equipment, net                              211,701       236,780

  Other assets:
      Goodwill, net                                        197,644       311,887
      Acquired patents, net                                347,818       368,941
      Developed patents and other, net                     132,022       128,730
                                                        $1,335,594    $1,960,141
                                                       ============ ============







                                      - 3 -

<PAGE>




   CYCLO3PSS CORPORATION
   Condensed Consolidated Balance Sheets (continued)
   (UNAUDITED)
   -------------------------------------------------------------------------




                                                         August 31   February 28
                                                             1998        1998
                                                       -------------------------
   Liabilities and stockholders' equity

  Current liabilities:
      Accounts payable                                     $103,779    $668,834
      Accrued liabilities                                    78,188     112,789
      Current portion of capital lease obligations           15,106      24,663
  Total current liabilities                                 197,073     806,286


   Long-term portion of capital lease obligations             9,735      13,278


  Commitments and contingencies

   Stockholders' equity:
    Preferred stock:
      Preferred stock issuable in series: par value $.01,
          4,500,000 authorized:
          Series "A" convertible preferred stock; 356,638       356         356
            shares authorized; 356,638 shares issued and
            outstanding
          Series "B" convertible preferred stock; 30,000         18          19
            shares authorized; and 1,932 shares issued and
             outstanding
      Class "A" preferred stock, par value $.01; 500,000
        shares authorized; none issued or outstanding          ---          ---
      Common stock, par value $.001;  55,000,000 shares
      authorized;  15,145,868 shares issued at February 28,
      1998 and 16,651,962 shares issued at August 31, 1998   16,652      15,146
      Additional paid-in capital                         17,545,900  16,034,785
      Accumulated deficit                               (15,932,595)(14,408,184)
      Less treasury stock, 264,000 common shares at cost   (501,545)   (501,545)
      Total stockholders' equity                          1,128,786   1,140,577
                                                         $1,335,594  $1,960,141
                                                       =========================



   See accompanying notes to condensed consolidated financial statements



                                      - 4 -

<PAGE>





   CYCLO3PSS CORPORATION
   Condensed Consolidated Statements of Operations
   (UNAUDITED)
   -----------------------------------------------------------------------------




                                                    For the three months ended
                                                            August 31,
                                                        1998           1997
                                                 -------------- --------------

   Net revenues                                        $265,273       $249,228

   Costs and expenses:
      Cost of sales                                     182,591        178,184
      Research and development                           91,716         74,159
      Selling and marketing                              93,490        116,822
      General and administrative                        482,634        386,760
      Depreciation and amortization                     104,250        108,328
                Total expenses                          954,681        864,253

  Loss from operations                                (689,408)      (615,025)
  Interest income                                         1,624          9,279
  Interest expense                                      (1,077)       (42,852)

  Net loss                                            (688,861)      (648,598)
   Preferred stock dividends                           (38,958)       (38,958)
                                                 -------------- --------------
   Net loss applicable to common stock               $(727,819)     $(687,556)

   Net loss per common share                              (.04)          (.05)
                                                 -------------- --------------
   Weighted average number of common shares
     issued and outstanding                          16,584,659     13,192,193
                                                 -----------------------------









   See accompanying notes to condensed consolidated financial statements




                                      - 5 -

<PAGE>







   Condensed Consolidated Statements of Operations
   (UNAUDITED)
   -----------------------------------------------------------------------------




                                                     For the six months ended
                                                            August 31,
                                                        1998           1997
                                                 -------------- --------------

   Net revenues                                        $588,664       $551,619

   Costs and expenses:
      Cost of sales                                     460,696        423,374
      Research and development                          206,538        152,023
      Selling and marketing                             203,650        164,274
      General and administrative                      1,035,698        657,867
      Depreciation and amortization                     207,921        217,159
                Total expenses                        2,114,503      1,614,697

  Loss from operations                              (1,525,839)    (1,063,078)
  Interest income                                         3,929         23,490
  Interest expense                                      (2,501)      (101,059)

  Net loss                                          (1,524,411)    (1,140,647)
   Preferred stock dividends                           (77,916)       (77,916)
                                                 -------------- --------------
   Net loss applicable to common stock             $(1,602,327)   $(1,218,563)

   Net loss per common share                              (.10)          (.09)
                                                 -------------- --------------
    Weighted average number of common shares
     issued and outstanding                         16,298,977      13,027,136
   ---------------------------------------------------------------------------











   See accompanying notes to condensed consolidated financial statement



                                      - 6 -

<PAGE>






   CYCLO3PSS CORPORATION
   Condensed Consolidated Statements of Cash Flow
   (UNAUDITED)
   -----------------------------------------------------------------------------



                                                       For the six months ended
                                                                August 31,
                                                           1998            1997
                                                --------------------------------
  Cash flows from operating activities:
      Net loss                                       $(1,524,411)   $(1,140,646)
      Adjustments to reconcile net loss to net cash
       used in operating activities:
         Depreciation and amortization                    207,921        217,159
         Accrued interest on convertible debt issuance         --         69,360
         Issuance of warrant with convertible debt             --         27,380
         Common stock issued for services                      --        168,000
         Changes in assets and liabilities:
           Decrease in accounts receivable                 37,210         14,218
           Increase in inventories                        (6,604)       (28,669)
           Decrease in prepaid expense                     13,588         38,065
           Decrease in accounts payable and
             accrued liabilities                        (599,656)       (65,772)
  Net cash used in operating activities               (1,871,952)      (700,905)

  Cash flows from investing activities:
      Purchase of property and equipment                 (39,944)        (9,281)
      Addition to developed patents and other            (10,824)             --
  Net cash used in investing activities                  (50,768)        (9,281)

  Cash flows from financing activities:
      Proceeds from issuance of common stock            1,500,820             --
      Proceeds from exercise of stock options              11,800             --
      Principal payments under capital lease obligations (13,100)       (11,435)
  Net cash provided by (used in) financing activities   1,499,520       (11,435)

  Net decrease in cash                                  (423,200)      (721,621)

  Cash at beginning of period                             573,161      1,275,636

  Cash at end of period                                  $149,961       $554,015
  Supplemental schedule of non-cash financing activities
  Conversion of long term debt obligations to common stock    ---       $916,000
  Conversion of interest payable on long term obligations 
   to common stock                                            ---       $174,430




   See accompanying notes to condensed consolidated financial statements.





                                             - 7 -

<PAGE>




   CYCLO3PSS CORPORATION
   Notes to Condensed Consolidated Financial Statements (Unaudited)
  ------------------------------------------------------------------------------


   1.  Summary of Significant Accounting Policies

   Financial Statements

   The accompanying  interim condensed  consolidated  financial  statements have
   been prepared in accordance with generally accepted accounting principles for
   interim  financial  information and with the  instructions to Form 10-QSB and
   Regulation  S-B.  The balance  sheet at  February  28,  1998  represents  the
   Company's audited consolidated balance sheet at that date.

   In  the  opinion  of  management,  the  accompanying  condensed  consolidated
   financial  statements contain all normal recurring  adjustments  necessary to
   present fairly the financial position of Cyclo3pss Corporation ("Company") as
   of August 31, 1998,  and the results of its operations and its cash flows for
   the interim  periods ended August 31, 1998 and August 31, 1997. The operating
   results for the interim periods are not necessarily indicative of the results
   for a full year.  These  financial  statements  should be read in conjunction
   with the  Company's  audited  consolidated  financial  statements  and  notes
   thereto  included in the Company's Annual Report to Stockholders for the year
   ended February 28, 1998.

   Organization

   The  Corporation was formed in Delaware in 1927. In 1990, the Corporation was
   reorganized as Cyclo3pss  Medical Systems,  Inc. In 1995, the Company changed
   its name to Cyclo3pss  Corporation.  The Company is primarily  engaged in the
   design,  manufacture,  assembly,  sales and installation of ozone application
   technologies and processes.  The Company's  principal  technology provides an
   alternative  to address  food safety  concerns and laundry  disinfection  and
   efficiency.  Cyclo3pss  also  markets  sorting  and  counting  systems to the
   laundry industry and manufactures and sells specialty chemicals.  The Company
   holds  patents  for  medical  sterilization  processes  and  plans to  resume
   research and development activities in this field by the fiscal year 2000.

   Principles of Consolidation

   The consolidated financial statements include the accounts of the Company and
   its wholly-owned  subsidiaries.  All  intercompany  balances and transactions
   have been eliminated.

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




   CYCLO3PSS CORPORATION


                                    - 8 -

<PAGE>






   Notes to Condensed Consolidated Financial Statements (Unaudited)
------------------------------------------------------------------------------


   1.  Summary of Significant Accounting Policies (continued)

   Net Loss per Common Share

   Net loss per common share is calculated  after  deduction of preferred  stock
   dividends  divided by the weighted  average  number of shares of common stock
   issued and outstanding during the period. Loss per common share for preferred
   stock  dividends was immaterial  (less than one cent per share).  The Company
   excluded  2,556,249 options and 2,296,140  warrants from the weighted average
   shares outstanding computation as their effect would be anti-dilutive.

   New Accounting Standard

   As of January 1, 1998, the Company adopted Statement of Financial  Accounting
   Standards ("SFAS") No. 130,  "Reporting  Comprehensive  Income".  SFAS No.130
   establishes new rules for the reporting and display of  comprehensive  income
   and its components;  however, the adoption of this statement has no impact on
   the Company's net income (loss) or stockholders' equity.

   For  the  three  and six  months  ended  August  31,  1998  and  1997,  total
   comprehensive  loss  calculated in  accordance  to SFAS No. 130,  amounted to
   $727,819 and $1,602,327, and $687,556 and $1,218,563, respectively.

   SFAS No.  131,  "Disclosures  about  Segments  of an  Enterprise  and Related
   Information",  establishes  standards for reporting financial and descriptive
   information  about its reportable  operating  segments.  SFAS No. 131 changes
   current  practice under SFAS No. 14,  "Financial  Reporting for Segments of a
   Business  Enterprise",  by  establishing  a new  framework  on  which to base
   segment reporting (referred to as the management  approach) and also requires
   interim  reporting of segment  information.  The Company has elected to apply
   the Statement to its interim financial statements in the current year.

   2.  Basis of Presentation

   The accompanying  financial  statements have been prepared  assuming that the
   Company will continue as a going concern,  which contemplates the realization
   of assets and  satisfaction  of liabilities in the normal course of business.
   The Company has  sustained  significant  net losses which have resulted in an
   accumulated  deficit of $14,408,184  at February 28, 1998 and  $15,932,595 at
   August 31, 1998,  and  periodic  cash flow  difficulties,  all of which raise
   substantial doubt of the Company's ability to continue as a going concern.

   The net  loss  for the year  ended  February  28,  1998  was  $2,928,197  and
   $1,524,411 for the six months ended August 31, 1998. To date, the Company has
   funded its  operations  through the issuances of common and preferred  stock.
   The Company's  ability to accomplish its business  strategy and to ultimately
   achieve  profitable  operations  is  dependent  upon  its  ability  to  raise
   CYCLO3PSS CORPORATION




                                    - 9 -

<PAGE>




   Notes to Condensed Consolidated Financial Statements (Unaudited)
  ------------------------------------------------------------------------------


   2.  Basis of Presentation (continued)

   additional financing.

   The Company  believes that these  conditions  have resulted from the inherent
   risks associated with small technology companies. Such risks include, but are
   not limited to, the  ability to (a)  generate  sales of its product at levels
   sufficient to cover its costs and provide a return for investors, (b) attract
   additional  capital in order to  finance  growth,  (c)  further  develop  and
   successfully  market  commercial  products and (d) successfully  compete with
   other  technology  companies  having  financial,   production  and  marketing
   resources significantly greater than those of the Company.

   The Company is  attempting  to improve  these  conditions by way of financial
   assistance  through  collaborative   partnering   agreements,   issuances  of
   additional equity, debt arrangements, and product sales.

   3. Contingencies

   The Company is involved in certain  legal  actions and claims  arising in the
   ordinary course of business.  Management  believes,  based on advice of legal
   counsel,  that such litigation and claims will be resolved  without  material
   effect  on  the  Company's  consolidated   financial  position,   results  of
   operations or cash flows.  These matters are described in the Company's  Form
   10-KSB for the year ended February 28, 1998.























  


                                    - 10 -

<PAGE>





   CYCLO3PSS CORPORATION
   Notes to Condensed Consolidated Financial Statements (Unaudited)
  ------------------------------------------------------------------------------


   4. Segment Information

   During the three and six months ended August 31, 1998,  the Company  operated
   in three principal  industries;  development,  marketing and  installation of
   Eco-Pure  Food Safety  Systems for food  decontamination  in both aqueous and
   gaseous  forms  ("food  safety   products");   the   manufacture,   sale  and
   installation  of ozone washing and laundry  sorting and counting  systems for
   commercial  and  institutional   laundries  ("textile  products");   and  the
   manufacture and sale of specialty chemicals ("biochemical products").

   Operating profit is total revenue less operating expenses, excluding interest
   expense and general corporate expenses. Corporate assets consist primarily of
   cash, property, and equipment.

                                       For three months       For six months
                                    ended August 31, 1998  ended August 31, 1998
   Net revenues               
      Food Safety products              $118,436                 $274,436
      Textile products                    27,020                  129,914
      Biochemical products               119,817                  184,314
                                       ------------            --------------
      Total consolidated Revenue        $265,273                 $588,664
                                       ------------            --------------
   Operating loss (income)
      Food Safety products              $(73,078)                $(86,076)
      Textile products                  (345,134)                (673,084)
      Biochemical products                55,972                   46,226
      Total operating loss              (362,240)                (712,934)

      Corporate expenses                (327,168)                (812,905)
      Interest income                      1,624                    3,929
      Interest expense                    (1,077)                  (2,501)
      Consolidated net loss             (688,861)              (1,524,411)
                                        -----------            --------------

                                      August 31, 1998         February 28, 1998
   Identifiable assets
      Food Safety products                92,898                      --
      Textile products                   730,486                 1,100,191
      Biochemical products               278,168                   373,434

      General corporate assets           234,042                   486,516
      Total consolidated assets        1,335,594                 1,960,141
                                      -------------            --------------




                                    - 11 -

<PAGE>




                                 PART I - ITEM 2

                      MANAGEMENT'S DISCUSSION AND ANALYSIS
                               OR PLAN OF OPERATION

   General

   Cyclopss  Corporation is primarily engaged in ozone application  technologies
   and processes. The Company's main product lines offer an alternative for food
   safety,  particularly  microbial  reductions  on meat,  poultry,  fruits  and
   vegetables.  Additional products offered by the Company enable  manufacturers
   to eliminate  microbial build up in and on food processing  equipment,  while
   other  ozone-related  products  marketed  by the  Company to  commercial  and
   institutional laundry  markets enable users to reduce costs  associated  with
   labor, water, energy, chemicals, and wastewater disposal.

   The  Company  also  markets an  automated  sorting  and  counting  system for
   commercial  laundries.  Other  non-ozone  based products offer by the Company
   include more than 350 specialty chemicals and compounds.

   The Company has developed but not marketed two medical sterilization products
   to date.  Due to the demand for  alternative  disinfection  systems  for food
   safety and cost saving  equipment for the  commercial  laundry  markets,  the
   Company shifted its focus from medical sterilization, to more immediate, less
   or non-encumbered target markets -- food, laundry and chemical compounds.

   Results of Operations

   The Company's revenues were $588,664 for the six months ended August 31, 1998
   compared to $551,619 for the six months  ended August 31, 1997.  The revenues
   for the three months ended August 31, 1998 were $265,273 compared to $249,228
   for the three months ended August 31,  1997.  Three of the  Company's  wholly
   owned  subsidiaries  currently  contribute to the Company's  gross  revenues,
   Eco-Pure Food Safety Systems,  Inc. (EPFS),  Cyclopss  Laundry Systems,  Inc.
   (CLS) and Cyclopss Biochemical  Corporation (CBC). The Company's gross margin
   for the six months ended  August 31, 1998 was  $127,968  compared to $128,245
   for the six months  ended  August 31,  1997.  The gross  margin for the three
   months  ended  August 31, 1998 was $82,682  compared to $71,044 for the three
   months  ended  August 31, 1997.  The Company  expects  revenue to continue to
   increase.

   Research and  development  expenses  increased to $206,538 for the six months
   ended August 31, 1998 from $152,023 for the six months ended August 31, 1997.
   Research and development  expenses for the three months ended August 31, 1998
   were  $91,716,  a slight  increase  from  $74,159 for the three  months ended
   August 31, 1997. The Company believes it is necessary and intends to increase
   its research and development efforts in the current year in order to complete
   the development  process of food  processing  systems and to comply with USDA
   protocols to validate these systems.

   Selling and marketing expenses increased to $203,650 for the six months ended
   August 31,  1998 from  $164,274  for the six months  ended  August 31,  1997.
   Selling and  marketing  expenses  for the three  months ended August 31, 1998
   were  $93,490,  compared to $116,822  for the three  months  ended August 31,
   1997. The Company placed its advertising in a variety of general business and


                                    - 12 -

<PAGE>






   food-related  trade  publications,  to maximize its  exposure  during what is
   continuing  to be a period of  increased  scrutiny  over food safety  issues.
   Management  believes  that  it  is  critical  to  periodically   support  and
   supplement its sales efforts through advertising,  public relations campaigns
   and trade- show participation.

   General and  administrative  expenses  increased  to  $1,035,698  for the six
   months  ended  August 31, 1998 from  $657,867 for the six months ended August
   31, 1997, due to an increase in management employment,  shareholder relations
   and legal fees. General and administrative expense for the three months ended
   August 31, 1998 were  $482,634,  an increase to $386,760 for the three months
   ended August 31, 1997 for the same reasons.  Management  took steps to reduce
   general and administrative costs to help conserve cash in August, 1998.

   Interest  expense declined to $2,501 for the six months ended August 31, 1998
   compared  to  $101,059  for the six  months  ended  August 31,  1997,  and it
   declined to $1,077 for the three  months  ended  August 31, 1998  compared to
   $42,852 for the three months ended August 31, 1997,  due to the conversion of
   long-term debt to common stock.

   The Company believes that three of its divisions, namely Eco-Pure Food Safety
   Systems, Inc., Cyclopss Laundry Systems, Inc., and Cyclopss Biochemical, Inc.
   will be the major  contributors to the Company's  future revenue  stream.  In
   order to achieve  sales growth  acceptable  to  management,  the Company will
   primarily focus on these three areas of the Company.

   Liquidity and Capital Resources

   As of August 31, 1998 the Company had insufficient  funds on hand to continue
   its  operations  for the entire fiscal year ending  February 28, 1999.  Under
   direction from the Board of Directors, in August, 1998 the Company eliminated
   several non-essential positions,  reducing the number of employees by roughly
   half and  overhead by 80%.  Also,  on  September  1, 1998  chairman/CEO  Gary
   Bratcher  resigned to help the Company conserve cash and reduce overhead.  On
   September 10, 1998 the board of directors  authorized  issuance of Series "C"
   convertible  preferred  stock  with a $.01 par  value  and a stated  value of
   $1,000 per share.  These shares are convertible  into common shares at 70% to
   90% of the average stock price.  The shares provide for payment of cumulative
   dividends at 10% annually,  paid in stock. The offering was opened on October
   1, 1998.  The  Company is  currently  in  process of closing  this  offering.
   Despite  the  additional  funds  that  may be  raised  from the  issuance  of
   preferred stock,  currently in progress,  the Company under it's present plan
   of operations,  does not have sufficient  liquidity and capital  resources to
   continue in operation through February 28, 2000.

   On October  2, 1998 the  Company  was  de-listed  from the Nasdaq  Small-Cap
   Market, since it did not meet the new quantitative  maintenance  requirements
   for continued listing on the Nasdaq Stock Market. This decision was made by a
   Nasdaq Listing  Qualification Panel and the Company appealed this decision on
   October 12, 1998.  Because the Company has funded its operations  through the
   sale of its  securities,  the failure to be listed on Nasdaq will likely have
   an adverse effect on the ability of the Company to raise additional capital.





                                    - 13 -

<PAGE>





   Cash used in operating  activities  was  $1,871,952  for the six months ended
   August 31,  1998  compared to $700,905  for the six months  ended  August 31,
   1997.  The Company's use of cash has been more  aggressive  this year, as the
   Company  experienced  significant  general and  administrative  and marketing
   expenses  associated  with the development and promotion of its Eco-Pure Food
   Safety Systems.

   Cash  expenditures  for property and  equipment and other assets were $50,768
   for the six months  ended  August  31,  1998  compared  to $9,281 for the six
   months  ended August 31,  1997.  This  increase was the result of the Company
   increasing purchases of research equipment, patent fees and certain leasehold
   improvements.

   During the period of March 9, 1998 to June 15, 1998,  the Company  authorized
   and  offered its  restricted  common  shares to  accredited  investors  in an
   offering  made  pursuant to a Board  Resolution  on February 27, 1998 through
   First Financial Investment Securities Inc. Subscribers purchased 1,395,140 of
   such shares in this offering for a total of  $1,743,925  or $1,500,820  after
   costs.  These  shares  were  sold for  $1.25  each and each  share  carries a
   warrant. This redeemable warrant entitles the holder to purchase one share of
   common  stock  at a price of $3.75  per  share.  This  offering  resulted  an
   increase in net cash  provided  by  financing  activities  for the six months
   ended  August  31,  1998 to  $1,499,520  compared  to cash used in  financing
   activities of $11,435 for the six months ended August 31, 1997.

   Total assets decreased to $1,335,594 for the six months ended August 31, 1998
   from  $1,960,141  for the year ended  February 28, 1998, due to a decrease in
   the  Company's  cash  position  and a decrease  in accounts  receivable  from
   $113,090 at February 28, 1998 to $75,880 at August 31, 1998.

   Total  current  liabilities  decreased  to  $197,073  at August 31, 1998 from
   $806,286 at February 28, 1998, a decrease of $609,213.  Long term liabilities
   decreased  to $9,735 for the three  months ended August 31, 1998 from $13,278
   for  the  year  ended   February   28,  1998.   This   decrease  was  due  to
   reclassification  of long term lease  obligations to current  obligations and
   reflects the efforts of  management  to reduce the debt burden of the Company
   and pay down existing obligations.


   Plan of Operation

   The  Company's  Plan  of  Operation  is  subject   to  the  availability   of
   additional capital, of which there can be no  assurance. As stated  elsewhere
   in the Form 10-QSB,  the Company continues to  operate at a  significant loss
   and continues to have insufficient capital for its operations.

   Food Safety Systems

   In June of 1997,  ozone was granted the status as  "generally  recognized  as
   safe" or "GRAS",  allowing food  processors to use ozone in the processing of
   certain food items.  This,  together with a period of increased scrutiny over
   food safety  issues,  created a groundswell  of demand for  alternative  food
   decontamination  technologies.  One Cyclo3pss  designed food safety system is
   already in the  process of being  installed  for a major  food  company.  The
   Company believes this sale will result in further opportunities with this and
   other food related companies.



                                    - 14 -

<PAGE>




   One  major challenge  that the Company faces is that of educating government,
   industry  and  the  end  consumer  about the  benefits  of ozone.  Ozone is a
   naturally-occurring    phenomenon    that    is   usually   associated   with
   photochemical smog or an eroding level of  protection  in our atmosphere.  It
   is the Company's  intent to provide this  education and  show  the beneficial
   side of ozone:  decontamination  without residual chemicals.   For  industry,
   ozone  is  a  cost  competitive  and   environmentally-friendly   answer   to
   microbial   decontamination.   For  the   consumer,   ozone   kills   harmful
   microorganisms quickly and leaves behind no chemical residue.

   Laundry Systems

      The Company will  continue to market its ozone  laundry  washing  systems,
   Eco-Wash.  The  Company  will also  continue to upgrade  existing  customers'
   sorting  and  counting  system,   (VAC  Soil  Counting  System)  with  recent
   technological  changes.  The Company  believes  the  products  developed  and
   marketed by this subsidiary will enjoy increased  market  potential in coming
   years due to:

   *  Competitive  laundry  markets  will create a need for cost  reduction  and
      increased  productivity;  
   *  Further  environmental  restrictions  placed  on discharge water quality;
   *  Increased emphasis on sanitation and disinfection in the laundry industry;
      and 
   *  Increased  concern  regarding  environmental issues associated with the 
      laundry industry.

   Specialty Chemicals

   The Company's Biochem  subsidiary will be provided  additional  marketing and
   promotional  assistance in order to increase  sales and product  development.
   Current sales activities will be evaluated and alternatives sought to improve
   profit  margins.  Joint efforts will continue  with Foster  Miller,  Inc., to
   market Biochem's monomer to the aerospace industry.

   The focus for the fiscal  year 1999 will be sales in the three  target  areas
   and the Company will apply the resources  necessary to accomplish  this.  The
   Company anticipates a spending level of approximately  $1,000,000 on research
   and development  activities  required to continue with product validation and
   food trials. Sales and marketing activities will be budgeted at $1,500,000 to
   allow  for  sales   staff,   advertising   and  trade   shows.   General  and
   administrative expenses should be in the $2,000,000 range for the year.

   The Company had 11 full time  employees  as of August 31,  1998.  The Company
   anticipates  additional  employees will be required in engineering  and sales
   during the next twelve months.  The impact of the above will be determined by
   the  market  demand  for  food  safety  and  textile  systems  and  specialty
   chemicals.

   The information  set forth herein as to anticipated  research and development
   costs,  equipment  purchases and increase in employees are management's  best
   estimates  based upon current plans.  Actual  expenditures  may be greater or
   less than such estimates depending on many factors including, but not limited
   to the availability of new technologies, the completion or lack of completion
   of certain strategic alliances,  and the timing and successful  completion of
   the Company's stated requirement to acquire  additional  operating and growth
   capital, industry




                                    - 15 -

<PAGE>




   initiatives, success of the Company's research and development efforts, and 
   other factors.

   From time to time, the Company publishes forward-looking  statements relating
   to such matters as anticipated  financial  performance,  business  prospects,
   technological developments, new products, research and development activities
   and similar matters.  The private  Securities  litigation  Reform Act of 1995
   provides  a safe  harbor for such  forward  looking  statements.  In order to
   comply with the terms of the safe harbor, the Company notes that a variety of
   factors could cause the  Company's  actual  results and  experience to differ
   materially from the anticipated  results or other  expectations  expressed in
   the Company's forward looking  statements.  The risks and uncertainties  that
   may  affect  the  operations,  performance,  development  and  results of the
   Company's business include, but are not limited to, the following:

   1.   Market acceptance of the Company's products;
   2.   Obtaining sufficient additional operating capital in the form of debt or
        equity;
   3.   The existence of an orderly market in the Company's securities; 
   4.   Increased sales of the various products of the Company;  
   5.   Continued success in the  Company's research and development activities;
        and 
   6.   Successful completion of strategic alliances.

   PART II - OTHER INFORMATION

      Item 1.     Legal Proceedings.  None.

      Item 2.     Changes in Securities.  None.

      Item 3.     Defaults Upon Senior Securities.  None.

      Item 4.     Submission of Matters to a Vote of Security Holders.  None.

      Item 5.     Other Information.  None

      Item 6.     Exhibits and Reports on Form 8-K.  None.















                                    - 16 -

<PAGE>









                                   SIGNATURES

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



                                          CYCLO3PSS CORPORATION


   Date: October 14, 1998                 By/s/ William R. Stoddard
                                          William R. Stoddard
                                          Chief Executive Officer
                                          Principal Executive Officer



   Date: October 14, 1998                 By/s/ Mondis Nkoy
                                          Mondis Nkoy
                                          Controller, Corporate Secretary
                                          Principal Financial Officer





                                    - 17 -